The Uber “virus” scrutinized by Fabernovel
Created in 2009, Uber is today the best valued start-up in the world with 68 billion dollars in valuation. This is 1.5 times more than the manufacturer General Motors, which was created in 1908, according to the annual study “Uber, the transportation virus“, produced by Fabernovel and published this Tuesday, July 12. Last year, the digital agency focused on four main types of strategies implemented by GAFA.
Beyond its spectacular valuation, it is the speed at which it has developed that challenges the experts of the study. It took just over two years for Uber to become a unicorn (a company valued at more than a billion dollars, ndlr), while Facebook, despite being considered a model of exponential growth, will have taken five years to reach this level of valuation.
How has the company managed to achieve these levels of performance in a few years?
The authors schematized Uber’s development model, which they describe as similar to the development of a virus, which replicates by itself and grows very quickly.
1. The starting point: a “triangle of incompatibility” made in France
The story behind the creation of Uber is well known: coming to Paris to attend the LeWeb conference in 2008, the two co-founders of Uber were struck by the functioning of the Parisian taxi services. The two entrepreneurs put their finger on what Fabernovel calls a “triangle of incompatibility”: if it was possible to get around Paris thanks to a taxi, it was not possible to have both a competitive price , reliable service, and a good experience as users. The two entrepreneurs therefore recreated the experience of booking a taxi on a mobile application, thanks to which they were able to improve the overall experience.
First point differentiating the offer imagined by the two partners: the transport company has not chosen to build up a fleet of vehicles of its own. Based on the observation that in the United States, a vehicle does not travel 96% of the time, Uber has indeed decided to allow drivers to use their own cars.
Another structuring element of Uber’s offer is the driver rating system that has been put in place, thus creating a bond of trust between users and drivers, a condition sine qua non to agree to get into the car with a stranger.
By automating as many steps as possible in the taxi booking process, the company has also succeeded in building a model that allows it to grow at zero marginal cost once its critical mass of users is reached.
Finally, the real-time data processing enabled by the application is a real asset to guarantee a good level of service, and especially to adapt the pricing in real time according to the demand. Uber’s strength is therefore to have succeeded in building a network of drivers and users, connected to each other in real time. The very principle of a network being to gain value as it grows, the more users and drivers there are registered on the platform, the more efficient the Uber service becomes.
2. To win, you have to achieve a large volume of transactions
After its standard offering was defined and tested on a small scale, Uber began to grow. In these markets in which the GAFAs, as well as companies like Uber, are developing, the challenge is not to be the first to get started, but to be the first to have sufficient “liquidity”, ie. that is, to process a large volume of transactions.
While its offer is by nature easy to replicate, Uber has nevertheless opted for development in stages, recreating local networks of drivers and users in each of the cities in which its service is offered. Uber thus relies on locally recruited business developers whose mission is to “open” a city in less than eight weeks.
Beyond its commercial strategy, the company has not hesitated to invest heavily to cover its operating costs, which are very high at the start, to the detriment of its own profitability. For the first three quarters of 2015, the company indeed posted losses of $ 1.7 billion, as the authors of the study recall.
Finally, to ensure that it is the first company to achieve this liquidity so much sought after by all market players, Uber has chosen to prioritize the recruitment of its drivers. It has thus set up a number of financial incentives to attract the latter: bonuses for drivers who abandon other platforms in favor of Uber, a guaranteed hourly income in the new cities covered by the service, or even partnerships negotiated with car dealers to allow drivers to benefit from advantageous rates. Once its network of drivers is built, Uber promotes its service to its community of early adopters, counting on them to convince other categories of users.
3. Create virality thanks to its users
In a model like Uber’s, it is the users who are the brand’s first ambassadors, whether they are the drivers or the users. True to its strategy which focuses on the community of drivers, the company has thus set up a sponsorship system allowing them to increase their income if they bring new drivers to the platform. In addition, the interface developed by Uber is the same, regardless of the city considered. 20% of Uber drivers have already offered rides in a city other than their home city.
The company has also taken advantage of the virality of social networks to make people talk about it at a lower cost. The additional offers that it has successively tested are all stories to tell its users, which they can share and comment on (such as its Uber Ice Cream campaign tested in 2014 and relaunched this year, which proposes to be have ice cream delivered to your home for free, and in a few minutes).
Finally, assuming that its future users were probably customers of other digital services, the company has opened a set of APIs to integrate its services with other applications, such as Trip Advisor or even Startbucks.
4. A culture of permanent change
True to its DNA as an agile start-up, Uber has changed its corporate mission (and therefore its revenue model) three times since its creation, while maintaining its raison d’être: to offer an alternative to owning its own vehicle. The launches of new services such as UberEATS (meal delivery service) or UberPOOL (which allows you to share a ride with another user) are just some of the examples.
And the company has not finished evolving its model, as evidenced by the launch of its Uber Top Experiences offer which, by allowing its users to use their favorite applications during their Uber run, makes the company a new medium. . Its ultimate ambition is to transport its users in autonomous vehicles.
5. A virus that defends itself against foreign bodies
The exceptional growth that Uber has experienced since its inception has not left indifferent, and many voices are raised to criticize its development model. In order to continue to grow in this way, the company must therefore face a number of threats.
The first threat that spontaneously comes to mind, and certainly the most critical for society, is to manage pressure from governments seeking to protect their taxi networks. Uber responds to this in different ways depending on the city (adapting its offer, committing to set up a head office there, or quite simply giving up setting up there). Faced with government resistance, the best card to play for the firm is to convert its users into defenders of a cause: the right to individual initiative.
The second threat affecting the platform concerns its ability to preserve its community of drivers, and to take into account their demands (in particular in terms of maintaining their level of remuneration).
Finally, with the market today being “evangelized”, Uber must now face increased competition. Other companies are entering this transport niche, developing complementary service offers to those of Uber (like Caltrain for example), or in direct competition (as a private driver in France). Other players have taken the bet to join forces with Uber, to combine their forces (Fiat Chrysler would work with Uber for example on an autonomous car project).
The question remains to know which development strategy will adopt Uber in the future: a strategy similar to that of Apple, centered on the development of OS for autonomous cars, or a strategy similar to that of Google, centered on the development of an OS for autonomous cars made available to manufacturers of autonomous cars?
1 million Uber drivers around the world
1 billion races completed since 2010
Every day, Uber drivers cover the equivalent of 80 trips to the moon in distance
Uber is present in 470 cities, and in 70 different countries.
The company has raised $ 14 billion since its inception; it completed 16 different financing rounds.
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