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Uber the transportation virus 160711161601-1

The document discusses Uber's innovative business model, detailing its rapid growth and valuation, which has surpassed many traditional companies. It highlights how Uber leverages technology to optimize its services and adapt to different markets while maintaining low costs and high reliability. By creating a network of drivers and riders, Uber has changed personal transportation dynamics, making rides accessible 'at the tap of a button.'

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2 It is licensed under the Creative Commons BY-NC-SA license to allow for further contributions by experts and users in the coming months. You are free to share and remix/adapt the work. You must cite this document: FABERNOVEL, Uber: The Transportation Virus, July 2016 You may distribute a modified work under the same or similar license. Why do we release this kind of work for free? Our job is to help large organizations think and act like startups. We believe this can only be achieved by encouraging people to innovate and explore new business models. We aim to inspire you by giving you the keys to understand new markets, new business drivers like APIs or successful companies like Apple, Amazon, Facebook or LinkedIn. This work was made for you to share, reuse, remix, rework… You may not use this work for commercial purposes.
3 A lot has already been said about Uber. Indeed it seems that a new article about the half- fascinating, half-scary young giant is published every hour on the internet. So why a study? It seemed to us that most of current discussions about Uber are driven by ideologies and belief systems. We wanted to take a step back and just look at it from a business perspective. What are its secrets? How did it grow so fast? Of course it has unlimited cash, but isn’t there more to it? Very bright people have already shared a vast amount of food for thought on the social and legal impacts of Uber so we won’t be going over these topics here. Anyhow, whether you want to support Uber, fight it or just understand the world we’re living in, there is much to learn about this spectacular “coup d’état” in the transportation world. It’s up to you to make use of this information to serve what you believe is best for all of us. Enjoy the ride! We’re only talking business here. Stéphane Distinguin CEO of FABERNOVEL Foreword
Uber: faster, higher, stronger Sources: The Verge, Reuters, The Washington Post, Uber. Number of trips per day as of December 2015; number of drivers as of June 2015; the billion trips threshold was crossed on December 30th, 2015.
5 Uber is available in 470 cities across 70 countries, competing directly with local transportation actors. Its biggest market is China, with one third of its total rides. Sources: Uber, National Post Eating the world - one city after the other London UK 15,000 20,000 1000 UBER DRIVERS 1000 TAXIS
6 Uber’s valuation is the largest for a private startup in the world – and in history. In total Uber raised $14bn over 16 rounds in 7 years from banks (Goldman Sachs…) & VCs (Benchmark, fidelity…) , tech giants (Google, Baidu…) and tech stars like Amazon’s CEO Jeff Bezos. MARKETCAP TO A BILLION The most valued startup In the world Uber reached a $50Bn valuation in 5 years (with $1.5Bn in revenue at the time). Along Facebook, it is the only startup to have reached such a valuation. Xiaomi $46Bn Airbnb $25.5Bn Uber $68Bn Sources: Exponential Organizations (by Salim Ismail), The Wall Street Journal Fastest metabolism so far
7 • Uber is worth more than 85% of S&P 500 companies. • Valued at 6x more than the size of the taxi & limo market in the US before Uber entered the market. • GM has 32x more employees than Uber despite a lower valuation. • Yet Uber’s driver network far exceeds GM head count. In less than 7 years of existence, Uber has already surpassed the valuation of the 108 year old carmaker General Motors. NUMBEROFEMPLOYEES MARKETCAP/VALUATION Sources: Bloomberg, The Wall Street Journal, Barrons, Business Insider, General Motors, TechCrunch, The Washington Post. Growing higher than historical actorsUber: the transportation virus
But how ? WHAT ARE THE YOUNG GIANT’S SECRETS ? HOW DID IT GROW SO FAST TO TAKE OVER THE WORLD ?
Since its beginning Uber has been behaving like a virus. Wikipedia defines a virus as “a sub-microscopic infectious agent that replicates only inside the living cells of other organisms.” A virus isn’t necessarily harmful, it is only defined by its ability so self-replicate and spread fast. In Uber’s case the host organisms are the millions of cars flooding our cities. Uber is infectinghundredseveryday and taking control of transportation in our growing metropolises. 01. Synthesize it Identify a poorly-served market and develop a platform to serve it 10 times better. 03. Become contagious Leverage youruser base and make partnerships to increase virality 04.Mutate fast Never stop innovating to enlarge yourmarket and annihilate competition. 05. Defend Protect yourmarket against safeguards and competitors or you’ll be replaced. 02. Seed germs Find the best environment to incubate under favorable circumstances. Do things that don’t scale to kick-start yournetwork and reach liquidity. Uber: the transportation virus
01. Synthesize it Identify a poorly-served market and develop a platform to serve it 10 times better.
11 Uber’s founding idea dates back to 2008 in Paris at LeWeb conference, when Travis Kalanick and Garrett Camp couldn’t find a taxi in the cold Paris winter. Impossible to find a cab to hail, ordering on a phone was expensive, and they couldn’t find the nearby taxi station. There are three ways to get a taxi, and none of them combines low price, reliable pickup time and good experience. Hailing a cabAt a taxi station Order with phone Not reliable because demand > offer In many countries, one has to pay for the waiting time There aren’t much taxi stations and one has to walk long distances to find one Sources: Uber Identifying the incompatibility triangle
12 Uber’s core value proposition resides in a simple but ambitious objective: a ride at the tap of a button. To deliver on its promise, it created a well-designed app that took the dispatch function out of the black car and traditional taxi markets. Partner AppRider App Push a button and get a ride Uber puts 100% of the taxi experience on your mobile “I want to go frompoint A to point B” “I want to drive someone from point A to point B” Request a car. A driver is dispatched. Indicate you’re available. Once you receive a request just pick up your rider. A simple solution: a ride at the tap of a button
13 • One-click order • See your driver approaching • Check pickup time • Check driver’s ratings • Uber ride is tracked (information & security) • Seamless payment • 5-star rating • Streethailing • Fees for booking ahead • The driver choses you • Unknown duration • No taxi tracking • Cash payment required in many countries • No customer service Taxi UX filled with pain points… Seamless Uber UX Improving every step of the experience
14 Uber has built its whole service on top of infrastructures set out by GAFA (Google, Amazon, Facebook, Apple). Now that it has grown big, is slowly gaining independence; for example from Google Maps by acquiring DeCarta and Bing Maps. Access to users - Driver navigation - Payment - App distribution on the App Store, Google Play, Amazon Echo and soon Facebook Messenger. Google Maps used to geolocate cars and users as well as to help drivers navigate. Google Wallet and Apple Pay are used to complete transactions. Source: Uber Gaining speed thanks to GAFA’s infrastructure
15 Leveraging smartphone’s sensors, Uber is able to precisely locate, identify and connect every car and every user to its platform. Smartphones are the indispensable tool to Uber’s success, by bridging the gap between the digital and the physical worlds. “In the networked world, the three most important things are connections, connections and connections” Marc Andreessen & Venkatesh Rao MVP insight: smartphone + car = connected car An asset-light model Uber has become a major actor on the connected car market by simply attaching a smartphone to all the cars of its fleet. No need to invest billions in CAPEX when you can leverage existing, customer- owned assets. Networks are the new asset
Uber created a network of real-time geolocated riders and drivers, commonly called a platform. It gives access to this network through its app, in order to efficiently match demand for transportation with supply. Uber: a real-time transportation network
As seen in GAFAnomics Season 2, networks are the winning structure of the 21st century and are at the core of GAFA’s success. Network orchestrators outperform traditional companies on both revenue growth and margins. Average revenue compound annual growth rate (CAGR) 2011-2012 Source: Harvard Business Review (authors: Barry Libert, Megan Beck Fenley, Yoram Wind)Source: GAFAnomics Season 2, FABERNOVEL Networks: 21st century’s winning model
Its network gives Uber a structural competitive advantage over traditional taxi companies. As explained in GAFAnomics Season 2, Uber embraces 4 Superpowers to orchestrate and optimize its transportation network. Magnet enterprise Aggregating and managing very small units – Networked companies are able to detect, organize and animate very small units of value. They outsource value creation. Real-time enterprise Instantly tuning value – Networked companies use real-timedata feedback to instantly optimizemarket fit and improve products’ value. Infinite enterprise Shooting for the 100% profit consumer – Networked companies use highly scalable software and services to achieve zero cost delivery once criticaluser mass is achieved. Intimate enterprise Hospitality is the norm – Networked companies use customer knowledge to fine-tune and personalize the experiences they deliver to each customer. Large-scale customization is at the heart of their products. Unlocking four superpowers
19 In the US, cars remain idle 96% of the time. Uber could have bought a fleet of cars to become a black car service. Instead it structured itself as a platform to aggregate, sell and monetize this excess capacity by allowing anyone to opt-in and drive people around with their own cars. MAGNET ENTERPRISE Pays for ride Gives 80% of the fares Provides ride Matches riders with drivers Keeps 20% of service fees Sources: The Guardian, Uber Managing cars’ excess capacity A very similar approach to Airbnb’s revolution of the accommodation market: “Essentially, we’ve built a platform to facilitate payments, reviews, search. […] I like to think hosts are micro- entrepreneurs and we give them a hospitality tool kit.”   Nathan Blecharczyk CTO Airbnb Provides car Pays for gas
20 Trust and safety are essential parts of the Uber experience. Could you have imagined riding in a stranger’s car a few years ago? That’s why Uber introduced its rating system, a concept developped a decade ago by eBay. But it’s also a smart way to delegate the management of its drivers to users and maintain the standard of service with more than 3 million ratings gathered everyday. Uber created a feedback loop by asking riders and drivers to rate each other after each ride. Drivers with an average rating below 4.6 are at risk of being denied access to the platform. Uber doesn’t hold the reputation, drivers do. And Uber doesn’t fire drivers, riders do when they give drivers less than 4,6 . DRIVE WELL OR DON’T THE CUSTOMER IS KING Most of the extra-services provided by drivers are not mandatory. Think about free bottles of water or opening the door. Even wearing a suit ! They’re “suggestions” to get 5 ratings. Ratings incentivize drivers to please riders. Hopefully; riders also behave correctly with drivers to get a good rating. Source: Uber MAGNET ENTERPRISE Turning riders into managers GAME OVER
21 REACHING LONG-TERM MARKET EQUILIBRIUM ADAPTING SUPPLY TO DEMAND IN REAL TIME Uber fixes prices in eachcity based on local data. Whenever it can, Uber lowers prices to trigger an increase in demand and decrease drivers’ idle time, thus maintaining drivers’ hourly rates. In some cities, it cut prices 5 to 6 times in a 3-year period. With surge pricing, Uber increases prices in given areas during excessive demand or low supply: • Provides an incentive for drivers to flock to empty neighborhoods while cabs don’t know where the demand is higher. • Maintains low pickup time and high utilization in case of marketstress. Surge pricing eliminates 2/3 of unfulfilled requests in a period of high demand. REAL-TIME ENTERPRISE Always priced at the optimum Uber leverages data to optimize its pricing in real-time and make sure demand and offer always reach a market equilibrium. Data gathered is relative to rides facilitated, local transportation offers and users’ price elasticity. Pricing is a tough challenge for Uber: drivers want to maximize revenues while riders want to minimize costs. That’s the platform dilemma.
22 Uber dispatches one trip every second in London, optimizing pickups in real time. Having thousands of cars is not enough. You need to make sure they’re at the right place, at the right time. While traditional taxis wait in line expecting for customers to show up at the taxi station, Uber leverages geolocation data to instantly matches riders with drivers. Thanks to its powerful dispatch algorithm, it optimizes car allocation to minimize drivers’ idle time and rider’s waiting time. Reliability is key to Uber’s goal: ”a car at the tap of a button”. Uber tests its dispatch algorithms with AI simulations on a 100x100 blocks virtual city. A strong differentiation from data-blind legacy taxi systems. Close to 60% of SF taxis are dispatched in more than 10 min. In major cities, average pick-up time is around 3 minutes Sources: The Guardian, Travis Kalanick, Forbes REAL-TIME ENTERPRISE A data-driven optimization engine
23 Uber constantly adapts its services to fine-tune and personalize the experience based on customer needs and usage scenarios. Uber develops a wide variety of offers to target users with different elasticities. For some, reliability is more important, others value low prices while for some a premium experience is the main selling point. Lauren & Tim, 45 years old Time sensitive entrepreneurs Experience sensitive -Have 2 children UberBLACK for occasional usage. UberBERLINE for professional rides on their Uber business profiles Family profiles to pay for their children’s rides on sundays John, 30 years old Doctor - Price sensitive Lives far from public transport UberCOMMUTE to go to work on a daily basis without taking care of parking Carl, 24 years old Student - Price sensitive Likes to go out a lot UberX occasionally UberPOOL at night on week ends INTIMATE ENTERPRISE Diversifying to adapt to users’ needs
24 Uber is available in more than 70 countries. Each market has its own specificities made of expectations, restrictions and preoccupations. Uber doesn’t hesitate to tweak, enrich and personalize its offers to conquer these new markets. Uber launched UberMOTOin towns where two-wheelers are the preferredmeans of transportation: Thailand, India, Indonesia… It launched UberGREEN in eco-conscious countries like Portugal or UberBOAT in Istanbul to cross the Bosphorus. ADAPTING Payment methods TAILORING Types of vehicles Uber adapts its payment methods according to the context of the market. In India and Egypt, where creditcard is not the norm, Uber introduced cash payment, making the service available to more users. DEVELOPING Extra services In India, passengers’ safety remains a real concern for Uber. As a result, it launched an in-app SOS button. This button automatically sends trip information to relatives and local police authorities. It can also directly call India’s emergency number. Source: Uber INTIMATE ENTERPRISE Adapting to local specificities
Uber uses highly scalable software and services to achieve zero cost delivery once critical user mass is achieved. It doesn’t own any of the cars it dispatches, already cutting down many costs incurred by legacy taxi companies (medallion, car…). In addition, it has automatized all steps of the taxi experience apart from the ride itself. Uber can scale and grow indefinitely at virtually no additional cost. • Request ride at GPS location • Pick up rider at GPS location • Ride information • Tracking • Seamless payment • Shareable ride 8,000 drivers in Paris 270 phone operators (to dispatch cars) 1 operator for 30 drivers 1 million drivers worldwide <100 phone operator If the booking process hadn’t been automated, Uber would have needed to hire 33,000 phone operators. (5x its current global staff) • Seamless payment • Shareable ride CLOSE TO FULL AUTOMATION OLD VS NEW WORLD Source: G7 INFINITE ENTERPRISE Scaling at zero marginal cost Order & Pick-up Ride Payment Customer service Automated through the app
Thanks to its network structure, Uber benefits from network effects when it reaches critical mass. A network effect occurs when a product or a service becomes more valuable to its users as more people use it. Network effects explain Uber’s exponential growth and raise high barriers to entry for new comers. Sources: David Sacks (CEO of Zenefits),Uber, Hall & Krueger More drivers, means more cars in the streets, thus more geographical coverage Less driver down time, means Uber can lower price/ride while maintaining stable hourly rates for drivers More geographical coverage means less distance between a car and a potential rider, thus faster pickups Lowerprices make Uber more accessible , thus increase demand More demand means better opportunities foraspiring drivers, thus increase offerFaster pickups make Uber more reliable, thus increase demand INFINITE ENTERPRISE Network effects and value loop: deadly weapons
27 By creating a connected network of drivers and riders, Uber changed the personal transportation network for ever: “a ride at the tap of a button” became a reality. Thanks to its network structure, Uber benefited from the 4 superpowers and solved the incompatibility triangle, offering a better, cheaper and more reliable experience day after day. By leveraging excess capacities, Uber ensures low prices By leveraging data and algorithms, Uber ensures reliability at all time By tailoring its service to users, Uber ensures an optimal experience By automatizing processes, Uber ensures low prices. Thanks to network effects it keeps decreasing prices and increasing reliability. Incompatibility triangle solved
02. Seed germs Find the best environment to incubate under favorable circumstances. Do things that don’t scale to kick-start your network and reach liquidity.
The transportation behemoth is available in more than 470 cities in 70 countries across the globe. With a city-by-city approach, it has created local networks of drivers and riders. Since its creation in 2010, Uber has opened a new city every 5 days and 8 hours. 2009 2014 2012 2011 2013 2013 “Being local and speaking with local voice is important when you're doing transportation” (T.Kalanick) Uber has spread locally, or globally
In a networked world, markets concentrate around one monopoly. The winning platform is not the first mover but the first settler: the first that reaches liquidity, a state where there is enough volume of supply and demand, for transactions to start sparking. In Uber’s case it means enough drivers and riders to ensure “a ride at the tap of a button” for both. Sources: Greylock Partners, platformed.info First settlers always win FIRST MOVER FIRST SETTLER “Liquidity isn’t the most important thing, it’s the only thing.” Simon Rothman Greylock Partners GAFAnomics®is all about the “first settler advantage”
31 In every market it enters, Uber aims at building liquidity to benefit from the first settler’s advantage. It uses abundant funding to absorb high operating costs aimed at aggressively build the initial demand and supply. Once reached, network effects start taking off, annihilating any hope of competition and triggering huge revenue growth. Uber’s network represent its asset. It uses OPEX to build CAPEX. Uber lost a total of $1.7 billion over the first three quarters of 2015. It registereda loss of $1 billion for the year 2015 alone trying to compete in China. According to its CEO, after years of loss, the company is now profitable in North America, Australia, Europe, Middle-Eastand Africa Sources: Tech-Thoughts, Business Insider, BetaKit Liquidity first, profits later Uber’s revenues vs operating costs (2012-2014)
32 The presence of “accelerants” that could trigger demand To make sure it can reach liquidity fast, Uber carefully selects each city beforehand according to a set of criteria, in search for the perfect ecosystem to launch. • Restaurants and nightlife • Bad Weather • Sports • The presence of a constrained number of taxis • The quality of public transports The intensity of rivalry • Size of the city and its suburbs • Standards of living • Quality of urban infrastructures General data about the city Sources: TheNextWeb, GrowthHackers Invest in favorable market conditions Uber leverages existingdata by using app opening in unsupported cities to gauge interest for its service An existing demand for Uber
33 Because it is multi-local by nature, Uber has an horizontal organization that offers high autonomy to each town’s office. Uber adopts a startup approach when launching in a new town with minor oversight from the Californian headquarters. For each new city, Uber selects a launcher, whose role is to get the business up-and-running in 8 weeks or less. Uber has already launched a city in less than 5 days! “We basically find the top talent in [the most relevant communities in that city] and give them the opportunity to run their own business ” Lay out a marketing strategy to attract customers Build a pricing structure Find a team and office Find the initial supply of drivers Identify business development opportunities (partnership with car operators, co-promotions) J. Palaniappa UBER REGIONAL GENERAL MANAGER FOR EASTERN EUROPE / MIDDLE EAST / AFRICA TASKLIST Understand the transportation ecosystem and relevant regulation Source: City A.M. Launching with the A-team
To be first to liquidity, Uber has bought its supply through various mechanisms, lowering onboarding barriers for drivers. Cannibalize the existing network of drivers Attract drivers with hourly guarantees Poach local taxi drivers and TNC drivers, even from competitors (Uber is believed to have aggressively recruitedLyft drivers). Offer cash incentives to new drivers ($500). Uber offers a guaranteed revenue to drivers when launching in a new town (up to 30$/h). Drivers turn on the app and get paid regardless the number of clients they serve. A smartway to maintain the level of supply while building demand. Uber forges partnerships with car manufacturers and car resellers offering to buy,lease and rent cars at preferredprices to drivers. Uber promotes its own vehicle financing programs through partnerships with financial institutions. Lower onboarding barriers for drivers Sources: The Verge, Uber Building the supply side aggressively
Once it has drivers on the road, Uber focuses on bringing in riders on its platform through sponsored events and free rides for influencers who could spread the word about Uber’s value proposition. “ In many cases, the importance of the early adopter tech community can be overstated. In Uber’s case it cannot. […] Uber was highly active at local-area tech and venture capital events and provided free rides to attendees. Uber knew that these attendees were well connected and highly likely to share their experiences with friends, tech press, and social media audiences after trying Uber.” Travis Kalanick, CEO, Uber Targeting innovators to build the demand side Technology Adoption Life Cycle 2,5% Innovators Early Adopters 13,5% Early Majority 34% Late Majority 34% Laggards 16%
03. Become contagious Once a strong user base has been constituted, leverage it and make partnerships to increase virality
37 After reaching critical mass, Uber’s network effects start catching on, bringing in new users. But Uber even dopes these network effects, incentivizing word of mouth through referrals, accelerating its own growth. No need for TV spots, Uber lets users do the marketing. 95% of all riders heard about Uber from other riders* Rider-to-rider referral *As of 2012 Driver-to-driver referral Source: Uber, therideshareguy.com In some cities, Uber hires Brand Ambassadors, in charge of recruiting new drivers. Some settle kiosks in gas stations and attract drivers with free gas and sign-up bonuses. Ambassadors are paid minimum wage and make $250 for every driver they sign up. Build an ambassadors network User evangelism better than TV
38 NUMBER OF RIDES TAKEN 2 3 41 5 6 7 8 9 For Uber, a customer is a long term asset carrying a lifetime value. Uber’s profits will come in the long term as they are driven by Uber’s strong retention rate. In the US, Uber is already generating profits since 2015 after supporting heavy customer acquisition costs for years through referrals. CAC has to be inferior to LTV to be sustainable. - € 16.6 - € 13.2 - € 9.8 - € 6.4 - € 3 Referral fees €10x2 = €20 Average profit per fare 20% (commissions) x €17 (average fare) = €3.4 Number of fares before profitability 20 / 3.4 > 5 Example of a customer P&L If the customer is acquired through referral, Uber loses 16,6€ on the first ride because of referral fees CUMULATEDPROFITFORUBER (modulofixedcosts) Source: FABERNOVEL calculations Contagion: a long-term investment
39 Uber has been successfully using low cost guerilla marketing campaigns and taking advantage of social media to spread and prove its concept: “anything in 5 minutes”. Give your customers a story to tell and create virality. Uber Ice Cream Uber launched multiple Uber Ice Cream campaigns: “An ice cream at a tap of a button, delivered to your door, for free”. On the 24th of July 2014, it launched it in 252 cities, across 57 countries, and invited users to share with an astounding success. A stunt repeated with Uber Puppies, Uber Mariachi, Uber Chopper, and many others. 92% Increase in discussion volume on social media 70M Users came across Uber’s campaign 11% Increase in organic signups in Poland Source: Brand24.com Sell an idea, not a product
40 Even if it adapts its offers to local demand, Uber offers the same interface and experience everywhere, allowing riders to use the service, even when abroad. Contagion doesn’t recognize borders ! One single app and brand to have a transportation experience whatever the language, the currency, the nationality of either the driver or the customer. NEW YORK CITY SHANGHAI MUMBAI PARIS LIMA As a result 20% of Uber riders have taken a ride in another city. Source: Uber UX consistency: the secret to the first universal taxi service
41 Uber can reach 200 million more users through its partners’ apps. Uber’s future customers are probably someone’s current customers. In order to acquire users from other businesses' customer bases, Uber has opened a set of APIs to integrate its service into third parties’ apps and gain visibility. Outsourcing marketing efforts “Consider emailing your user base to ensure they are aware of the Uber integration within your app” The Partner Program is aimed at big companies that integrated Uber in their own app. It’s a free added service for their customers and it offers exposure to Uber. Be where users are Suggestionto its API users Uber’s APIs allow developers to incorporate Uber into their applications (close to 10,000 at the end of 2015). Developers can make up to 5000$ in referral fees. (5$ per signed-up user) Leverage others’ networks to grow
04. Mutate fast Never stop innovating and pivoting to enlarge your market and annihilate competition.
43 In less than 6 years, Uber’s mission statement has changed twice, highlighting the major mutations of Uber’s model and vision. Uber’s evolving vision: a perpetual mutation UberBLACK UberSUV UberX UberEATS UberRUSH UberPOOL UberCOMMUTE Uber trip experiences Uber Offers Everyone can become an Uber driver Open to goods delivery: Uber is a transportation network Shared rides: more people into fewer cars Monetize captive user attention Aim for the perpetual ride Increase offer Decrease price Increase demand Minimize drivers’ idle time New revenue streams Decrease inprice Increase demand Increase offer New revenue streams In progress… UberX drivers are 6x more numerous than UberBLACK drivers UberEATS is available in 16 cities In San Francisco UberPOOL represents 50% of total rides MISSION STATEMENT NEW UBER SERVICES SHIFTS IN THE MODEL KEY METRICS EVERYONE’S PRIVATE DRIVER TRANSPORTATION AS RELIABLE AS RUNNING WATER MOVING BITS AND ATOMS 2010 2012 2014 2016 CORE GOAL
44 UberCab, founded in 2009 started operating its first black cars in 2010 in San Francisco. • Professional drivers • Black sedans only • No booking fees • Order at the tap of a button • More expensive than a taxi • Premium service and experience Uber challenged the taxi and black car market by providing a simple service: a ride a the tap of button. A perfect user experience was the core of Uber’s value proposition. UberCab became Uber in 2011 and launched UberBLACK and UberSUV with an identical value proposition. Later it launched UberVAN for larger groups of passengers. Starting the network: a black car service
45 In 2012, Uber launchedUberX (UberPOP in Europe), a taxi-ridesharinghybrid registeringas a “Transportation Network Company”, taking the best of both worlds: • Non-professional drivers driving their own car when they want to (they pay for gas themselves) • A new source of income for anyone that is willing to drive • Lower prices for riders • Same experience as UberBLACK By tapping intoprivately owned excesscapacities, Uber has been able to exponentially grow its pool of drivers and decrease price . Before launching UberX, the number of Uber drivers had a steady but slow growth. MAKING THE SUPPLYEXPLODE Number of Uber drivers (partners) in the US Sources: Uber, Hall & Krueger Tuning the network– letting more drivers in There are 6 times more UberX drivers than UberBLACK drivers in the US.
46 UberPOOL enables you to share a ride and split the cost with another user who is requesting a ride along a similar route at the same time. Users can pay up to 50% less. Drivers gets 2 or 3 rides for the cost/time of one, and Uber takes a higher 35% fee. Sources: Uber, The Rideshare Guy, Forbes, CSmonitor Optimizing further excess capacities. An increase in cars’ utilization and a decrease in price and driver’s idle time. Uber also launched UberCOMMUTE, a version of UberPOOL dedicated to commuting to work in its top 3 markets: US, China and India. 95% Of trips could be shared if riders were willing to wait an additional 5 minutes for other passengers. 50% Of Uber rides in San Francisco are Uber Pool rides. 30M Uber Pool rides every month in China. 1M Cars could be taken off from London’s roads according to Travis Kalanick thanks to UberPool. Tuning the network– getting more people into fewer cars
47 In 2015, Uber launched Smart Routes and HOP. These services are designed for price-sensitive customers willing to sacrifice time: announcing Uber’s direct competition with public transportation. Users request UberHOP rides and the app gives them directions to their pickup location. Users share ride to a predefined destination, and walk the last few blocks. Uber smart routes is an extension of UberPOOL. It offers fare reductions to customers if they get picked up near a smart route. By providing incentives for customers to rally precise pickup points, Uber wants to maximize the number of people per car and therefore continue to lower prices. UberHOP is a pilot in Seattle. Smart routes only exist in San Francisco so far. Tuning the network– from premium to low-cost 1 2 3 1 2 3 Drop-off location Pickup location
48 In 2014 and 2015, Uber launched UberEATS and UberRUSH, respectively a meal delivery service for restaurants, and a package delivery service for businesses. UberEATS is embedded in the Uber app. While UberRUSH is accessible to businesses through a dedicated API. Both services leverage Uber’s existingnetworkof drivers and dispatch technology.A smart way to decrease drivers’ idle time and exploit excess capacity further. Uber leverages its direct access to users through its app to create new sources of revenues. UberRUSH is live in SF, NYC and Chicago since 2014. UberEATS has launched in 15 North American cities, as well as London, Melbourne, Paris and Singapore. “If we can get you a car in 5 minutes, we can get you anything in 5 minutes.” Travis Kalanick CEO, Uber Extending the network: from transportation to logistics
49 The math seems to add up Megan Quinn (an ex-KPCB partner) sold her car and decided to take an Uber anytime she needed to move around, and realized the cost of moving in Uber was below the cost of owning a car. Cost of owning a car for a year: $10.281 (Parking + Gas + Insurance + Maintenance + Tolls / parking tickets + amortized cost of car ) Cost of riding with Uber for a year: $4655 “So the magic there is, you basically bring the cost below the cost of ownership for everybody, and then car ownership goes away.” Travis Kalanick CEO Uber Uber’s ambition is to become a substitute to car ownership. In some cities Uber cut prices 5 to 6 times in a two-year period to make its service more appealing to customers and turn them away from car ownership. In large cities, the cost of owning a car can reach $15.000 per year. The average US household owns 2.1 cars, with 20% owning 3 or more. Uber’s proposition might find its public! $0 $5 $10 $15 $20 $25 $30 $35 UberBlack Taxi UberX UberPool Subway Price from 1162 Pacific St. to 55 Washington St. NYC Sources: Oak Ridge National Laboratory, Mega Quinn, FABERNOVEL analysis. Average number of cars per household as of 2013. With one goal in mind: moving away from car ownership
50 As Aaron Levie (CEO of Box) puts it, “sizing the market for a disruptor based on an incumbent's market is like sizing the car industry off how many horses there were in 1910.” Uber is no longer a cab company, it’s a transportation network. It wants to move everything and everyone from point A to point B, enlarging its market day after day, and setting a vision for a world where Uber would replace car ownership. So forget about the taxi market - Uber’s market is way bigger than it seems! US market size in $Bn Sources: IBISWorld, The Wall Street Journal From network to industry leader
51 With its latest mission statement (“moving bits and atoms”), Uber clearly states its ambition to become more than a transportation giant: a real infrastructure and a platform where other service providers can contribute to value creation. Uber is taking advantage of the direct contact and captive attention it has with passengers during their Uber rides. Indeed, Uber provided the equivalent of 40,000 years of rides since 2010. Media distribution channel Customer acquisition channel Uber Trip Experiences allows users to connect to their favorite apps during their Uber trip. Uber gives brands an opportunity to use Uber riders’ captive attention to push adapted content based on the time of the day and trip duration. A smart way to improve riders’ experience. Uber Offers enables brand to push promotions to passengers based on their geolocation data. For example, Starbucks may pay for your ride to their shop. Offers are targeted and become a new way for local businesses to reach new customers. For Uber, it’s a way new way of providing cheaper/free rides to its riders. What’s next ? Increasing average revenue per car
52 The ideal transportation network “We can imagine a perpetual trip – the driver picks up one customer, then picks up another, then drops one of them off, then picks up another – the trip just keeps going, and the driver always has a customer in the car” Becoming a reality? Travis Kalanick, CEO, Uber What’s next ? The perpetual ride: 24/7, 100% of capacityused Imagine cars that never stop, a perfectly optimized transportation network, where resources (drivers, cars) are used at 100% capacity. To fulfil this dream, Uber will have to reach a massive scale, to ensure high liquidity at the local level with maximum capillarity. Uber is doubling down on UberPOOL in China and the US with incentives for drivers. In San Francisco, Uber has reached a record of 8 non-stop UberPOOL rides.
53 Uber plans to replace its fleet of drivers by a fleet of driverless cars as soon as the technology is ready, thus making the rides cheaper without having to care about drivers’ revenue expectations and moving closer to the perpetual ride dream: • Opened a research center in Pittsburg in 2015, to build its own autonomous cars • Allegedly pre-ordered 100,000 Mercedes for when they get self-driving technology. • Recruited top researchers and executives from the car industry and Google’s ex-VP of Engineering • Holds a strong advantage in the race to the autonomous car: data about how, where and when people want to be driven. “The reason Uber could be expensive is you’re paying for the other dude in the car. When there is no other dude in the car, the cost of taking an Uber anywhere is cheaper.” Travis Kalanick CEO, Uber Sources: Uber, Manager Magazin What’s next ? The autonomouscar
54 1. Control the infrastructure Infected professional cars With Uber Black 2. Widen the infrastructure Infected all available cars With UberX & Pool From virus to host: a disruptive strategy Uber is following a 3-step plan to become the transportation infrastructure of our cities. Becoming more and more infectious, the virus is slowly becoming the host. 3. Become the infrastructure Will be built in its own cars With autonomous vehicles
05. Defend Protect your market against safeguards and competitors or you’ll be replaced.
Regulation Competitors Carmakers Tech giants Drivers All over the world, governments are threatening Uber’s model. How long can the outlaw resist to the legal pressure? Uber won’t be anything without its drivers. Will the transportation giant be able to keep them in its network? Uber is not the only on-demand actor. It is challenged all around the world by growing actors well decided to stop its growth. With the promise of “moving away from car ownership”, Uber hasn’t made carmakers happy. But they have room left to reinvent themselves and challenge Uber in the on- demand economy. Tech giants are progressively investing huge amounts to conquer the transportation market. The war is just beginning… Uber has grown to become a transportation giant in less than a decade, changing the rules of the game and challenging legacy actors. But beware of the backfire. On its way up, Uber has created frustration, fear and envy from multiple stakeholders ready to fight for their premises. Uber threatened from all sides
We should've realized sooner that we are running a political campaign and the candidate is Uber Travis Kalanick CEO, UBER Uber vs governments: also a political fight “
With the creation of the “Transportation Network Company” status, Uber has initially leveraged regulation to create unfair competitive advantages againsttaxi networks for which medallions could reachup to $1M in cities like NYC. But now, regulation threatens Uber and could be its worst nightmare. Depending on the city it is dealing with, Uber reacts in multiple fashions. Retreat PartnerAdapt Pay Uber adapts to comply with the law: in Moscow Uber just accepts professional drivers and shares data. Uber partners with governments to operate: in Hyderabad it has promised to train 2,000 drivers and invest $50M to build headquarters. Some municipalities decided to ban some of Uber’s services. In this case, Uber obeys like in Paris where it ceased its UberX activity (aka.UberPop). In some cities like Austin, Uber is not forbidden but retreats because policies prevent liquidity. Some municipalities like Newark don’t hesitate to make Uber pay to operate: $3M upfront and $10M across 10 years to access the airport. Sources: Uber, Fortune, CBS, Le Monde, Wired Lobby Globally, Uber is spending millions of dollars into lobbying. It hires top profiles in its public affairs department, like Neelie Kroes, an ex EU-commissioner for Competition, or David Plouffe, the ex director of Obama’s campaign. Under pressure from governments Defend A Californian judge requalified a driver as an employee. A similar judgement is awaited in France. A serious threat to Uber’s economic model. It appealed the decision. In the US, Uber paid $100M to settle a similar class action with drivers.
• Determine a distinctive ideology: ultra- liberal (gig economy), libertarian, objectivist (T. Kalanick is a big Ayn Rand fan) • Declare it to the world: Marketing campaign ”Uber-entrepreneur” • Demarcate from outsiders through symbols: black sedans only • Demonize the other: repeated attacks on taxi so called “monopolies” and states’ interventions Uber has created a divide in the public opinion in many cities, where the support and the opposition to ridesharing services has become intense. In The Culting of Brands, Douglas Atkin, VP Community at Airbnb explains how brands can leverage cults’ techniques to turn customers into true believers and it seems Uber has learned the lesson well. The transportation genius has always been able to count on its users to promote and defend its service against all attacks. 4 steps to turn customers into believers: Launching many petitions, to seek support from users against governments Counting on tech gurus’ support Uber’s response: an ideology war
“if you refuse to meet and discuss with us […] protests and strikes are only going to intensify nationally and globally as we continue to coordinate with driver groups around the globe. Uber Drivers Network Open Letter To Uber, Travis, Josh Mohrer, Uber’s investors and employees Drivers’ mutiny
Uber forgot it’s a network of drivers and not a network of cars yet Low prices and pickup times depend on a high supply of drivers: steal its drivers away and Uber’s market power collapses. Under regulatory pressure from the outside, Uber is now challenged from the inside, by its own partner drivers. Keeping its drivers inside the network till it gets to the autonomous car seems like Uber’s biggest challenge. By trying to please riders with lower prices, Uber has enraged its drivers. All around the world, they have protested against price cuts. They are also unionizing inside “The Uber Drivers Network” to speak of a common voice against Uber. In a two-sided market, it’s a risky move to sacrifice one side to please the other. Uber can be challenged by anyone with a large amount of funding and a pro-driver strategy Emerging actors like Gett and Juno are taking on Uber by developing driver-friendly value propositions. Gett offers fare guarantees to drivers. Juno only takes a 10% commission on rides and reserves 50% of its founding shares to drivers. Startups like Arcade City leverage the blockchain to organize a network of driver: commissions reach 0%. In a market with supply-side network effects, if competitors attract your supply,the demand will follow. Sources: Uber Drivers Network, FastCompany, The Verge Uber’s Achilles' heel ? Its drivers !
“ 62 “ William Clay Ford Jr Executive chairman of Ford Motors Company If you live in a city, you don’t need to own a car Uber made on-demand cars mainstream and changed the face of transportation forever. Pure players, carmakers and tech giants are now in the race to conquer this market, questioning fundamentals of their own models. A never-ending competitive cycle
In 7 years Uber has conquered the world. But will it be able to keep its position of power for ever? Legacy actors and pure players are challenging its supremacy using 4 different strategies. Connect to existing networks Create your own networks 4 strategies to compete with Uber
Sometimesjust leveraging a disruptive virus’ assets might bring more value than fighting it. Transportation has become an increasingly crowded market with disruptors adding a new layer to the existing infrastructures. By plugging to Uber, transportation networks can extend their reach, gain in flexibility, and solve ”thelast mile problem“ by serving underserved areas. In Paris, around 40% of Uber trips happen before or after a public transportation trip. Integrating with mass transit actors is crucial to Uber’s survival. Caltrain & Uber partnership in San Francisco extends the reach of Caltrain network by providing UberPOOL rides to and from South Bay station. For special events, Uber can bring flexibility to the public transit system. Bringing flexibility to existing networks Plugging in to improve customers’ experience United airlines integrated the Uber option into its own app, bringing an additional service to its own customers. By just plugging in to Uber, United is differentiating itself from other airlines. PLUG IN Linking up with the virus
65 Competing head-on with an installed virus is usually a very difficult challenge. Because of its multi-local inherent structure, Uber has to fight hard against local actors in every market it tries to conquer and usually operates in the context of a duopoly, both actors spending billion of dollars only to survive. A virtually infinite fight. Sources: The Wall Street Journal, La Tribune. Valuation figures as of June 2016. LYFT United States Launch: 2012 Valuation: $5.5bn EASY TAXI Brazil Launch: 2012 CHAUFFEUR- PRIVE France Launch: 2012 Valuation: €25M GRAB Malaysia Launch: 2012 Valuation: $1.6bn OLA India Launch: 2011 Valuation: $5bn DIDI China Launch: 2012 Valuation: $25bn COMPETE HEAD-ON Uber facing multi-local competition
66 To beat a disruptive virus infecting your industry, differentiation could be your best ally. Uber’s most dangerous competitors might win the transportation war by leveraging differentiating value propositions. Pure players of course are in the race, but also legacy actors: GM created Maven and Ford created Ford Smart Mobility as independent entities to focus on mobility services like hourly car rental. Model Taxi-like Ride-share Hourly Car-rental Car-share Value proposition “A car and a driver at the tap of a button” “I have room left in my car. Want to join?” “Get access to our cars anywhere in the city” ”Rent a car from other users” Who does it? Uber Didi, Lyft, Ola Waze Rider by Google, Blablacar Maven by GM, ReachNow by BMW, Zipcar, Autolib Turo Drivy Distance Short Medium-long Short-Medium Medium-long Sets destination Rider Driver Rider Rider Sets price Company Car owner Company Car owner Owns the car Driver (excess capacity) Driver (excess capacity) Company (assets) Other user (excess capacity) Business model Commission Commission Subscription Commission DIFFERENTIATE Various on-demand transportation models
67 Partnering with a disruptive virus might be the best strategy to reinvent yourself. Legacy actors are joining forces with Uber, hoping to take the leadership in this revolution of the transportation industry. A smart move that could bring them the knowledge and the assets they’re missing to enter the network economy. Toyota and Uber entered into a strategic partnership to “explore the future of ridesharing”with the first brick being car-leasing programs for drivers. Toyota also invested close to $100M in Uber. The Indian automotive giant Tata invested close to $100M in Uber. That’s the first investment of Tata outside India. A good support for Uber looking to expand in this gigantic country Hertz and Uber entered into a partnership to provide rental cars to Uber drivers. A smart way for Hertz to revive its business. Fiat Chrysler and Uber are said to be discussing a strategic partnership to develop autonomous cars together. Back in 2013, Google’s investment arm, Google Capital invested $258M into Uber. A way to have an insider into the on-demand transportation market. After selling its mapping service to the transportation startup, Microsoft invested $100M in Uber. Making strategic partnerships Investing in Uber’s future PARTNER Share assets and knowledge with the virus
68 Competing frontally against a disruptive virus is nearly impossible, unless your form alliances. By sharing assets and knowledge, competitors highly increase their chances of fighting Uber, the transportation virus. Sources: Lyft, TechCrunch If Uber falls in one of its opponent’s markets, it could trigger its failures in the other markets. If success can spread like a virus, failure could too. Didi (China)i, Lyft (USA), Grab(Malaysia)andOla (India) partnered : • Invested in each other’s companies • Share technology & business resources • Let users book a ride from the local player with their home- country app ! GM invested $500M in Lyft to provide car rentals services for drivers and build together a network of autonomous cars. In the same vein, Apple invested $1Bn in Didi, Uber’s Chinese competitors, and Chrysler is building mini vans to help Google extend its test of autonomous cars. By bringing their fighting power and hardware knowledge to Uber’s direct competitors, legacy actors are reshuffling the mobility cards. Competitors a meta-platform Competitors creating mobility alliances ! ! PARTNER Share assets and knowledge to fight the virus
The autonomous car revolution is coming faster than we expected and will reshuffle the cards in the on-demand transportation sector. This revolution looks a lot like the previous one: the smartphone revolution. Apple and Google are the big winners of the smartphone revolution having wiped out former phone giants like Blackberry or Nokia. They both have had a very unique strategy to reach this position of power. What would Uber become if it applied the same recipe to the transportation industry ? From phones to autonomous cars: an eternal repetition Randall Stephenson CEO, AT&T “The car will just be a big smartphone on wheels in the future
70 Asset builders Technology creators Platform orchestrators Service providers In the networked world, 4 types of companies emerge in every market, following the model set out by the smartphone revolution. The same will happen in the autonomous car market, with actors positioning themselves in each category. Some try to occupy more than one category. 4 types of companies for one market These companies build, develop, and lease physical assets to make, market, distribute, and sell physical things. They will build the autonomous cars. These companies hire employees who provide services to customers or produce billable hours for which they charge. They will provide insurance, repair cars, etc… These companies develop and sell intellectual property such as software, analytics, pharmaceuticals, and biotechnology. They will build the software that drives the autonomous cars. These companies create a network of peers in which the participants interact and share in the value creation. They will orchestrate autonomous cars to serve riders.
71 Uber in Apple’s footsteps? Apple’s strategy has been one of vertical integration: being a technology creator, an asset builder and a network orchestrator at the same time. Developed iOS Built iPhones with iOS built-in Operated the AppStore If Uber follows Apple’s strategy, it will develop autonomous’ cars Operating System, will build its own cars and orchestrate its own network of cars. Probably a risky move, as it will compete directly with carmakers, and with Apple itself. DEVICE RIDER AUTONOMOUS CAR
72 Uber in Google’s footsteps? Google’s strategy has been an Open Software strategy. It created the technology, orchestrated the network but didn’t built the assets. Developed Androïd and opened it to phone makers Smartphones built by phone makers (Samsung, HTC, etc…) with Androïd as an OS Operated the Play Store If Uber follows Google’s strategy, it will develop autonomous’ cars Operating System and open it. Carmakers will build the cars with UberOS inside. Uber will naturally orchestrate the cars for carmakers, dispatch them to riders, and take a cut on the transactions. Probably the best strategy if it can develop the OS faster than Google and other competitors. DEVICE RIDER AUTONOMOUS CAR
Marc Andreessen Breaking Smart Season 1 Software is eating the world “ One axiom
74 Accomodation Retail Media Energy Professional services Entertainment Travel Banking Telecom Software is eating industries one after the other, with young startups reinventing business models and value propositions to conquer the world at once. If your industry is safe, it probably won’t be for long. One certainty: your industry will be eaten too
75 Facebook’s Little Red Book If we don’t create the thing that kills [us], someone else will “ One strategy: think like a virus
1.SYNTHESIZE IT Identify a poorly-served market and develop a platform to serve it 10 times better. 3.BECOME CONTAGIOUS Leverage your user base and make partnerships to increase virality. 4.MUTATE FAST Never stop innovating and pivoting to enlarge your marketand annihilate competition. 5.DEFEND Protect your market againstsafeguards and competitors or you’ll be replaced. 2. SEED GERMS Find the best environment to incubate under favorable circumstances. Do things that don’t scale to kick-start your network. Forget about CAPEX. Networks are the new asset. Forget about marketing, users are the new media Forget about first mover advantage, it’s all about the first setller Forget about cash cows. Perpetual innovation is the only path to success. Forget about direct competition. Differentiate or partner up to remain in the race. 5 rules to act like a virus
77 Follow our Medium page Inside GAFAnomics Get fresh news on GAFAnomics
78 Facebook, The Perfect Startup (2012) 6 365k views on Slideshare Amazon, The Hidden Empire (2011) 918k views on Slideshare ••• Three digital engines to reshape and dominate retail mazon.com THE HIDDEN EMPIRE Linkedin,The serious Network (2013) 197k views on Slideshare And more. Apple: 8 Easy Steps to Beat Microsoft (and Google) Paris, September 2010 Apple, 8 easy steps to beat Microsoft (and Google) (2011) 179k views on Slideshare GAFAnomics®, New Economy New rules (2014) – 312k views on Slideshare GAFAnomics®, 4 Superpowers… (2015) – 316k views on Slideshare See also…
79 We are A new world needs new solutions Who we are We are a “digital native” organization of a new type, nourished by a unique culture and incomparable talents. We gather wide and cutting-edge capabilities –in strategy, software, design and data marketing – boosting our clients’ competitiveness. Our offices From our offices in San Francisco, Paris, Toulouse and Lisbon, we work with clients everywhere in the world to help them define and develop new opportunities. What we do We transform feareddisruptions into business opportunities. We craft impactful user experiences that benefit our clients and their customers. We build agile prototypes to test and develop strong strategic assets. And we play a prominent role with a sustainable impact, in the best ecosystems. At startup speed. @FABERNOVEL facebook.com/FABERNOVEL FABERNOVEL.com
80 A full stack and digital native company to identify levers for competitiveness Stéphane DISTINGUIN Founder & CEO FABERNOVEL stephane.distinguin@fabernovel.com Cyril VART Executive VP FABERNOVEL cyril.vart@fabernovel.com Leila TURNER CEO FABERNOVEL INNOVATE leila.turner@fabernovel.com Dominique PIOTET CEO FABERNOVEL US & PARISOMA dominique.piotet@fabernovel.com Baptiste BENEZET CEO Applidium by FABERNOVEL baptiste.benezet@applidium.com Alexis Godais CEO FABERNOVEL CODE alexis.godais@fabernovel.com Kevin GENTIL-CANTIN Co-founder & CEO FABERNOVEL DATA & MEDIA kevin@fabernovel.com Yassine BELFKIH Co-founder & CEO FABERNOVEL DATA & MEDIA yassine@fabernovel.com Antonin TORIKIAN CEO FABERNOVEL Institute Antonin.torikian@fabernovel.com
81 Amaury BOTREL Art Director DESIGN - Kevin ECHRAGHI Project Analyst Tom Morisse Analyst RESEARCH - SPECIAL THANKS - Robin Chase(Peers Inc) | Frederic Mazella (BlaBlaCar) | Jean-ChristopheLiaubet (Exane) | MarieEkeland (Elaia Partners, daphni) | PaulFoucault (Ex-FABERNOVEL) | The whole FABERNOVELteam Benoit TALABOT Partner & Creative Director Joachim Renaudin Junior Project Analyst Credits
82 // NEW YORK 150 West 25th St. , Suite 503 New York, NY 10001 +1415 298 02 09 meet_nyc@fabernovel.com // MOSCOW 3-iy Monetchikovskiy Peureulok 17, Stroenie 2 Moscow 11054 Russia +7(999) 639 80 82 meet_moscow@fabernovel.com // PARIS 17 rue du faubourg du Temple 75010 Paris +33 1 42 72 20 04 meet_paris@fabernovel.com // SAN FRANCISCO 169 11th St. San Francisco, CA 94103 USA +1415 626 6406 meet_sf@fabernovel.com MEDIA INQUIRIES Zineb Akharraz Torikian zat@fabernovel.com

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Uber the transportation virus 160711161601-1

  • 2.
    2 It is licensedunder the Creative Commons BY-NC-SA license to allow for further contributions by experts and users in the coming months. You are free to share and remix/adapt the work. You must cite this document: FABERNOVEL, Uber: The Transportation Virus, July 2016 You may distribute a modified work under the same or similar license. Why do we release this kind of work for free? Our job is to help large organizations think and act like startups. We believe this can only be achieved by encouraging people to innovate and explore new business models. We aim to inspire you by giving you the keys to understand new markets, new business drivers like APIs or successful companies like Apple, Amazon, Facebook or LinkedIn. This work was made for you to share, reuse, remix, rework… You may not use this work for commercial purposes.
  • 3.
    3 A lot hasalready been said about Uber. Indeed it seems that a new article about the half- fascinating, half-scary young giant is published every hour on the internet. So why a study? It seemed to us that most of current discussions about Uber are driven by ideologies and belief systems. We wanted to take a step back and just look at it from a business perspective. What are its secrets? How did it grow so fast? Of course it has unlimited cash, but isn’t there more to it? Very bright people have already shared a vast amount of food for thought on the social and legal impacts of Uber so we won’t be going over these topics here. Anyhow, whether you want to support Uber, fight it or just understand the world we’re living in, there is much to learn about this spectacular “coup d’état” in the transportation world. It’s up to you to make use of this information to serve what you believe is best for all of us. Enjoy the ride! We’re only talking business here. Stéphane Distinguin CEO of FABERNOVEL Foreword
  • 4.
    Uber: faster, higher,stronger Sources: The Verge, Reuters, The Washington Post, Uber. Number of trips per day as of December 2015; number of drivers as of June 2015; the billion trips threshold was crossed on December 30th, 2015.
  • 5.
    5 Uber is availablein 470 cities across 70 countries, competing directly with local transportation actors. Its biggest market is China, with one third of its total rides. Sources: Uber, National Post Eating the world - one city after the other London UK 15,000 20,000 1000 UBER DRIVERS 1000 TAXIS
  • 6.
    6 Uber’s valuation isthe largest for a private startup in the world – and in history. In total Uber raised $14bn over 16 rounds in 7 years from banks (Goldman Sachs…) & VCs (Benchmark, fidelity…) , tech giants (Google, Baidu…) and tech stars like Amazon’s CEO Jeff Bezos. MARKETCAP TO A BILLION The most valued startup In the world Uber reached a $50Bn valuation in 5 years (with $1.5Bn in revenue at the time). Along Facebook, it is the only startup to have reached such a valuation. Xiaomi $46Bn Airbnb $25.5Bn Uber $68Bn Sources: Exponential Organizations (by Salim Ismail), The Wall Street Journal Fastest metabolism so far
  • 7.
    7 • Uber isworth more than 85% of S&P 500 companies. • Valued at 6x more than the size of the taxi & limo market in the US before Uber entered the market. • GM has 32x more employees than Uber despite a lower valuation. • Yet Uber’s driver network far exceeds GM head count. In less than 7 years of existence, Uber has already surpassed the valuation of the 108 year old carmaker General Motors. NUMBEROFEMPLOYEES MARKETCAP/VALUATION Sources: Bloomberg, The Wall Street Journal, Barrons, Business Insider, General Motors, TechCrunch, The Washington Post. Growing higher than historical actorsUber: the transportation virus
  • 8.
    But how ? WHATARE THE YOUNG GIANT’S SECRETS ? HOW DID IT GROW SO FAST TO TAKE OVER THE WORLD ?
  • 9.
    Since its beginningUber has been behaving like a virus. Wikipedia defines a virus as “a sub-microscopic infectious agent that replicates only inside the living cells of other organisms.” A virus isn’t necessarily harmful, it is only defined by its ability so self-replicate and spread fast. In Uber’s case the host organisms are the millions of cars flooding our cities. Uber is infectinghundredseveryday and taking control of transportation in our growing metropolises. 01. Synthesize it Identify a poorly-served market and develop a platform to serve it 10 times better. 03. Become contagious Leverage youruser base and make partnerships to increase virality 04.Mutate fast Never stop innovating to enlarge yourmarket and annihilate competition. 05. Defend Protect yourmarket against safeguards and competitors or you’ll be replaced. 02. Seed germs Find the best environment to incubate under favorable circumstances. Do things that don’t scale to kick-start yournetwork and reach liquidity. Uber: the transportation virus
  • 10.
    01. Synthesize it Identify apoorly-served market and develop a platform to serve it 10 times better.
  • 11.
    11 Uber’s founding ideadates back to 2008 in Paris at LeWeb conference, when Travis Kalanick and Garrett Camp couldn’t find a taxi in the cold Paris winter. Impossible to find a cab to hail, ordering on a phone was expensive, and they couldn’t find the nearby taxi station. There are three ways to get a taxi, and none of them combines low price, reliable pickup time and good experience. Hailing a cabAt a taxi station Order with phone Not reliable because demand > offer In many countries, one has to pay for the waiting time There aren’t much taxi stations and one has to walk long distances to find one Sources: Uber Identifying the incompatibility triangle
  • 12.
    12 Uber’s core valueproposition resides in a simple but ambitious objective: a ride at the tap of a button. To deliver on its promise, it created a well-designed app that took the dispatch function out of the black car and traditional taxi markets. Partner AppRider App Push a button and get a ride Uber puts 100% of the taxi experience on your mobile “I want to go frompoint A to point B” “I want to drive someone from point A to point B” Request a car. A driver is dispatched. Indicate you’re available. Once you receive a request just pick up your rider. A simple solution: a ride at the tap of a button
  • 13.
    13 • One-click order• See your driver approaching • Check pickup time • Check driver’s ratings • Uber ride is tracked (information & security) • Seamless payment • 5-star rating • Streethailing • Fees for booking ahead • The driver choses you • Unknown duration • No taxi tracking • Cash payment required in many countries • No customer service Taxi UX filled with pain points… Seamless Uber UX Improving every step of the experience
  • 14.
    14 Uber has builtits whole service on top of infrastructures set out by GAFA (Google, Amazon, Facebook, Apple). Now that it has grown big, is slowly gaining independence; for example from Google Maps by acquiring DeCarta and Bing Maps. Access to users - Driver navigation - Payment - App distribution on the App Store, Google Play, Amazon Echo and soon Facebook Messenger. Google Maps used to geolocate cars and users as well as to help drivers navigate. Google Wallet and Apple Pay are used to complete transactions. Source: Uber Gaining speed thanks to GAFA’s infrastructure
  • 15.
    15 Leveraging smartphone’s sensors,Uber is able to precisely locate, identify and connect every car and every user to its platform. Smartphones are the indispensable tool to Uber’s success, by bridging the gap between the digital and the physical worlds. “In the networked world, the three most important things are connections, connections and connections” Marc Andreessen & Venkatesh Rao MVP insight: smartphone + car = connected car An asset-light model Uber has become a major actor on the connected car market by simply attaching a smartphone to all the cars of its fleet. No need to invest billions in CAPEX when you can leverage existing, customer- owned assets. Networks are the new asset
  • 16.
    Uber created anetwork of real-time geolocated riders and drivers, commonly called a platform. It gives access to this network through its app, in order to efficiently match demand for transportation with supply. Uber: a real-time transportation network
  • 17.
    As seen inGAFAnomics Season 2, networks are the winning structure of the 21st century and are at the core of GAFA’s success. Network orchestrators outperform traditional companies on both revenue growth and margins. Average revenue compound annual growth rate (CAGR) 2011-2012 Source: Harvard Business Review (authors: Barry Libert, Megan Beck Fenley, Yoram Wind)Source: GAFAnomics Season 2, FABERNOVEL Networks: 21st century’s winning model
  • 18.
    Its network givesUber a structural competitive advantage over traditional taxi companies. As explained in GAFAnomics Season 2, Uber embraces 4 Superpowers to orchestrate and optimize its transportation network. Magnet enterprise Aggregating and managing very small units – Networked companies are able to detect, organize and animate very small units of value. They outsource value creation. Real-time enterprise Instantly tuning value – Networked companies use real-timedata feedback to instantly optimizemarket fit and improve products’ value. Infinite enterprise Shooting for the 100% profit consumer – Networked companies use highly scalable software and services to achieve zero cost delivery once criticaluser mass is achieved. Intimate enterprise Hospitality is the norm – Networked companies use customer knowledge to fine-tune and personalize the experiences they deliver to each customer. Large-scale customization is at the heart of their products. Unlocking four superpowers
  • 19.
    19 In the US,cars remain idle 96% of the time. Uber could have bought a fleet of cars to become a black car service. Instead it structured itself as a platform to aggregate, sell and monetize this excess capacity by allowing anyone to opt-in and drive people around with their own cars. MAGNET ENTERPRISE Pays for ride Gives 80% of the fares Provides ride Matches riders with drivers Keeps 20% of service fees Sources: The Guardian, Uber Managing cars’ excess capacity A very similar approach to Airbnb’s revolution of the accommodation market: “Essentially, we’ve built a platform to facilitate payments, reviews, search. […] I like to think hosts are micro- entrepreneurs and we give them a hospitality tool kit.”   Nathan Blecharczyk CTO Airbnb Provides car Pays for gas
  • 20.
    20 Trust and safetyare essential parts of the Uber experience. Could you have imagined riding in a stranger’s car a few years ago? That’s why Uber introduced its rating system, a concept developped a decade ago by eBay. But it’s also a smart way to delegate the management of its drivers to users and maintain the standard of service with more than 3 million ratings gathered everyday. Uber created a feedback loop by asking riders and drivers to rate each other after each ride. Drivers with an average rating below 4.6 are at risk of being denied access to the platform. Uber doesn’t hold the reputation, drivers do. And Uber doesn’t fire drivers, riders do when they give drivers less than 4,6 . DRIVE WELL OR DON’T THE CUSTOMER IS KING Most of the extra-services provided by drivers are not mandatory. Think about free bottles of water or opening the door. Even wearing a suit ! They’re “suggestions” to get 5 ratings. Ratings incentivize drivers to please riders. Hopefully; riders also behave correctly with drivers to get a good rating. Source: Uber MAGNET ENTERPRISE Turning riders into managers GAME OVER
  • 21.
    21 REACHING LONG-TERM MARKETEQUILIBRIUM ADAPTING SUPPLY TO DEMAND IN REAL TIME Uber fixes prices in eachcity based on local data. Whenever it can, Uber lowers prices to trigger an increase in demand and decrease drivers’ idle time, thus maintaining drivers’ hourly rates. In some cities, it cut prices 5 to 6 times in a 3-year period. With surge pricing, Uber increases prices in given areas during excessive demand or low supply: • Provides an incentive for drivers to flock to empty neighborhoods while cabs don’t know where the demand is higher. • Maintains low pickup time and high utilization in case of marketstress. Surge pricing eliminates 2/3 of unfulfilled requests in a period of high demand. REAL-TIME ENTERPRISE Always priced at the optimum Uber leverages data to optimize its pricing in real-time and make sure demand and offer always reach a market equilibrium. Data gathered is relative to rides facilitated, local transportation offers and users’ price elasticity. Pricing is a tough challenge for Uber: drivers want to maximize revenues while riders want to minimize costs. That’s the platform dilemma.
  • 22.
    22 Uber dispatches onetrip every second in London, optimizing pickups in real time. Having thousands of cars is not enough. You need to make sure they’re at the right place, at the right time. While traditional taxis wait in line expecting for customers to show up at the taxi station, Uber leverages geolocation data to instantly matches riders with drivers. Thanks to its powerful dispatch algorithm, it optimizes car allocation to minimize drivers’ idle time and rider’s waiting time. Reliability is key to Uber’s goal: ”a car at the tap of a button”. Uber tests its dispatch algorithms with AI simulations on a 100x100 blocks virtual city. A strong differentiation from data-blind legacy taxi systems. Close to 60% of SF taxis are dispatched in more than 10 min. In major cities, average pick-up time is around 3 minutes Sources: The Guardian, Travis Kalanick, Forbes REAL-TIME ENTERPRISE A data-driven optimization engine
  • 23.
    23 Uber constantly adaptsits services to fine-tune and personalize the experience based on customer needs and usage scenarios. Uber develops a wide variety of offers to target users with different elasticities. For some, reliability is more important, others value low prices while for some a premium experience is the main selling point. Lauren & Tim, 45 years old Time sensitive entrepreneurs Experience sensitive -Have 2 children UberBLACK for occasional usage. UberBERLINE for professional rides on their Uber business profiles Family profiles to pay for their children’s rides on sundays John, 30 years old Doctor - Price sensitive Lives far from public transport UberCOMMUTE to go to work on a daily basis without taking care of parking Carl, 24 years old Student - Price sensitive Likes to go out a lot UberX occasionally UberPOOL at night on week ends INTIMATE ENTERPRISE Diversifying to adapt to users’ needs
  • 24.
    24 Uber is availablein more than 70 countries. Each market has its own specificities made of expectations, restrictions and preoccupations. Uber doesn’t hesitate to tweak, enrich and personalize its offers to conquer these new markets. Uber launched UberMOTOin towns where two-wheelers are the preferredmeans of transportation: Thailand, India, Indonesia… It launched UberGREEN in eco-conscious countries like Portugal or UberBOAT in Istanbul to cross the Bosphorus. ADAPTING Payment methods TAILORING Types of vehicles Uber adapts its payment methods according to the context of the market. In India and Egypt, where creditcard is not the norm, Uber introduced cash payment, making the service available to more users. DEVELOPING Extra services In India, passengers’ safety remains a real concern for Uber. As a result, it launched an in-app SOS button. This button automatically sends trip information to relatives and local police authorities. It can also directly call India’s emergency number. Source: Uber INTIMATE ENTERPRISE Adapting to local specificities
  • 25.
    Uber uses highlyscalable software and services to achieve zero cost delivery once critical user mass is achieved. It doesn’t own any of the cars it dispatches, already cutting down many costs incurred by legacy taxi companies (medallion, car…). In addition, it has automatized all steps of the taxi experience apart from the ride itself. Uber can scale and grow indefinitely at virtually no additional cost. • Request ride at GPS location • Pick up rider at GPS location • Ride information • Tracking • Seamless payment • Shareable ride 8,000 drivers in Paris 270 phone operators (to dispatch cars) 1 operator for 30 drivers 1 million drivers worldwide <100 phone operator If the booking process hadn’t been automated, Uber would have needed to hire 33,000 phone operators. (5x its current global staff) • Seamless payment • Shareable ride CLOSE TO FULL AUTOMATION OLD VS NEW WORLD Source: G7 INFINITE ENTERPRISE Scaling at zero marginal cost Order & Pick-up Ride Payment Customer service Automated through the app
  • 26.
    Thanks to itsnetwork structure, Uber benefits from network effects when it reaches critical mass. A network effect occurs when a product or a service becomes more valuable to its users as more people use it. Network effects explain Uber’s exponential growth and raise high barriers to entry for new comers. Sources: David Sacks (CEO of Zenefits),Uber, Hall & Krueger More drivers, means more cars in the streets, thus more geographical coverage Less driver down time, means Uber can lower price/ride while maintaining stable hourly rates for drivers More geographical coverage means less distance between a car and a potential rider, thus faster pickups Lowerprices make Uber more accessible , thus increase demand More demand means better opportunities foraspiring drivers, thus increase offerFaster pickups make Uber more reliable, thus increase demand INFINITE ENTERPRISE Network effects and value loop: deadly weapons
  • 27.
    27 By creating aconnected network of drivers and riders, Uber changed the personal transportation network for ever: “a ride at the tap of a button” became a reality. Thanks to its network structure, Uber benefited from the 4 superpowers and solved the incompatibility triangle, offering a better, cheaper and more reliable experience day after day. By leveraging excess capacities, Uber ensures low prices By leveraging data and algorithms, Uber ensures reliability at all time By tailoring its service to users, Uber ensures an optimal experience By automatizing processes, Uber ensures low prices. Thanks to network effects it keeps decreasing prices and increasing reliability. Incompatibility triangle solved
  • 28.
    02. Seed germs Find thebest environment to incubate under favorable circumstances. Do things that don’t scale to kick-start your network and reach liquidity.
  • 29.
    The transportation behemothis available in more than 470 cities in 70 countries across the globe. With a city-by-city approach, it has created local networks of drivers and riders. Since its creation in 2010, Uber has opened a new city every 5 days and 8 hours. 2009 2014 2012 2011 2013 2013 “Being local and speaking with local voice is important when you're doing transportation” (T.Kalanick) Uber has spread locally, or globally
  • 30.
    In a networkedworld, markets concentrate around one monopoly. The winning platform is not the first mover but the first settler: the first that reaches liquidity, a state where there is enough volume of supply and demand, for transactions to start sparking. In Uber’s case it means enough drivers and riders to ensure “a ride at the tap of a button” for both. Sources: Greylock Partners, platformed.info First settlers always win FIRST MOVER FIRST SETTLER “Liquidity isn’t the most important thing, it’s the only thing.” Simon Rothman Greylock Partners GAFAnomics®is all about the “first settler advantage”
  • 31.
    31 In every marketit enters, Uber aims at building liquidity to benefit from the first settler’s advantage. It uses abundant funding to absorb high operating costs aimed at aggressively build the initial demand and supply. Once reached, network effects start taking off, annihilating any hope of competition and triggering huge revenue growth. Uber’s network represent its asset. It uses OPEX to build CAPEX. Uber lost a total of $1.7 billion over the first three quarters of 2015. It registereda loss of $1 billion for the year 2015 alone trying to compete in China. According to its CEO, after years of loss, the company is now profitable in North America, Australia, Europe, Middle-Eastand Africa Sources: Tech-Thoughts, Business Insider, BetaKit Liquidity first, profits later Uber’s revenues vs operating costs (2012-2014)
  • 32.
    32 The presence of“accelerants” that could trigger demand To make sure it can reach liquidity fast, Uber carefully selects each city beforehand according to a set of criteria, in search for the perfect ecosystem to launch. • Restaurants and nightlife • Bad Weather • Sports • The presence of a constrained number of taxis • The quality of public transports The intensity of rivalry • Size of the city and its suburbs • Standards of living • Quality of urban infrastructures General data about the city Sources: TheNextWeb, GrowthHackers Invest in favorable market conditions Uber leverages existingdata by using app opening in unsupported cities to gauge interest for its service An existing demand for Uber
  • 33.
    33 Because it ismulti-local by nature, Uber has an horizontal organization that offers high autonomy to each town’s office. Uber adopts a startup approach when launching in a new town with minor oversight from the Californian headquarters. For each new city, Uber selects a launcher, whose role is to get the business up-and-running in 8 weeks or less. Uber has already launched a city in less than 5 days! “We basically find the top talent in [the most relevant communities in that city] and give them the opportunity to run their own business ” Lay out a marketing strategy to attract customers Build a pricing structure Find a team and office Find the initial supply of drivers Identify business development opportunities (partnership with car operators, co-promotions) J. Palaniappa UBER REGIONAL GENERAL MANAGER FOR EASTERN EUROPE / MIDDLE EAST / AFRICA TASKLIST Understand the transportation ecosystem and relevant regulation Source: City A.M. Launching with the A-team
  • 34.
    To be firstto liquidity, Uber has bought its supply through various mechanisms, lowering onboarding barriers for drivers. Cannibalize the existing network of drivers Attract drivers with hourly guarantees Poach local taxi drivers and TNC drivers, even from competitors (Uber is believed to have aggressively recruitedLyft drivers). Offer cash incentives to new drivers ($500). Uber offers a guaranteed revenue to drivers when launching in a new town (up to 30$/h). Drivers turn on the app and get paid regardless the number of clients they serve. A smartway to maintain the level of supply while building demand. Uber forges partnerships with car manufacturers and car resellers offering to buy,lease and rent cars at preferredprices to drivers. Uber promotes its own vehicle financing programs through partnerships with financial institutions. Lower onboarding barriers for drivers Sources: The Verge, Uber Building the supply side aggressively
  • 35.
    Once it hasdrivers on the road, Uber focuses on bringing in riders on its platform through sponsored events and free rides for influencers who could spread the word about Uber’s value proposition. “ In many cases, the importance of the early adopter tech community can be overstated. In Uber’s case it cannot. […] Uber was highly active at local-area tech and venture capital events and provided free rides to attendees. Uber knew that these attendees were well connected and highly likely to share their experiences with friends, tech press, and social media audiences after trying Uber.” Travis Kalanick, CEO, Uber Targeting innovators to build the demand side Technology Adoption Life Cycle 2,5% Innovators Early Adopters 13,5% Early Majority 34% Late Majority 34% Laggards 16%
  • 36.
    03. Become contagious Once a stronguser base has been constituted, leverage it and make partnerships to increase virality
  • 37.
    37 After reaching criticalmass, Uber’s network effects start catching on, bringing in new users. But Uber even dopes these network effects, incentivizing word of mouth through referrals, accelerating its own growth. No need for TV spots, Uber lets users do the marketing. 95% of all riders heard about Uber from other riders* Rider-to-rider referral *As of 2012 Driver-to-driver referral Source: Uber, therideshareguy.com In some cities, Uber hires Brand Ambassadors, in charge of recruiting new drivers. Some settle kiosks in gas stations and attract drivers with free gas and sign-up bonuses. Ambassadors are paid minimum wage and make $250 for every driver they sign up. Build an ambassadors network User evangelism better than TV
  • 38.
    38 NUMBER OF RIDESTAKEN 2 3 41 5 6 7 8 9 For Uber, a customer is a long term asset carrying a lifetime value. Uber’s profits will come in the long term as they are driven by Uber’s strong retention rate. In the US, Uber is already generating profits since 2015 after supporting heavy customer acquisition costs for years through referrals. CAC has to be inferior to LTV to be sustainable. - € 16.6 - € 13.2 - € 9.8 - € 6.4 - € 3 Referral fees €10x2 = €20 Average profit per fare 20% (commissions) x €17 (average fare) = €3.4 Number of fares before profitability 20 / 3.4 > 5 Example of a customer P&L If the customer is acquired through referral, Uber loses 16,6€ on the first ride because of referral fees CUMULATEDPROFITFORUBER (modulofixedcosts) Source: FABERNOVEL calculations Contagion: a long-term investment
  • 39.
    39 Uber has beensuccessfully using low cost guerilla marketing campaigns and taking advantage of social media to spread and prove its concept: “anything in 5 minutes”. Give your customers a story to tell and create virality. Uber Ice Cream Uber launched multiple Uber Ice Cream campaigns: “An ice cream at a tap of a button, delivered to your door, for free”. On the 24th of July 2014, it launched it in 252 cities, across 57 countries, and invited users to share with an astounding success. A stunt repeated with Uber Puppies, Uber Mariachi, Uber Chopper, and many others. 92% Increase in discussion volume on social media 70M Users came across Uber’s campaign 11% Increase in organic signups in Poland Source: Brand24.com Sell an idea, not a product
  • 40.
    40 Even if itadapts its offers to local demand, Uber offers the same interface and experience everywhere, allowing riders to use the service, even when abroad. Contagion doesn’t recognize borders ! One single app and brand to have a transportation experience whatever the language, the currency, the nationality of either the driver or the customer. NEW YORK CITY SHANGHAI MUMBAI PARIS LIMA As a result 20% of Uber riders have taken a ride in another city. Source: Uber UX consistency: the secret to the first universal taxi service
  • 41.
    41 Uber can reach200 million more users through its partners’ apps. Uber’s future customers are probably someone’s current customers. In order to acquire users from other businesses' customer bases, Uber has opened a set of APIs to integrate its service into third parties’ apps and gain visibility. Outsourcing marketing efforts “Consider emailing your user base to ensure they are aware of the Uber integration within your app” The Partner Program is aimed at big companies that integrated Uber in their own app. It’s a free added service for their customers and it offers exposure to Uber. Be where users are Suggestionto its API users Uber’s APIs allow developers to incorporate Uber into their applications (close to 10,000 at the end of 2015). Developers can make up to 5000$ in referral fees. (5$ per signed-up user) Leverage others’ networks to grow
  • 42.
    04. Mutate fast Never stopinnovating and pivoting to enlarge your market and annihilate competition.
  • 43.
    43 In less than6 years, Uber’s mission statement has changed twice, highlighting the major mutations of Uber’s model and vision. Uber’s evolving vision: a perpetual mutation UberBLACK UberSUV UberX UberEATS UberRUSH UberPOOL UberCOMMUTE Uber trip experiences Uber Offers Everyone can become an Uber driver Open to goods delivery: Uber is a transportation network Shared rides: more people into fewer cars Monetize captive user attention Aim for the perpetual ride Increase offer Decrease price Increase demand Minimize drivers’ idle time New revenue streams Decrease inprice Increase demand Increase offer New revenue streams In progress… UberX drivers are 6x more numerous than UberBLACK drivers UberEATS is available in 16 cities In San Francisco UberPOOL represents 50% of total rides MISSION STATEMENT NEW UBER SERVICES SHIFTS IN THE MODEL KEY METRICS EVERYONE’S PRIVATE DRIVER TRANSPORTATION AS RELIABLE AS RUNNING WATER MOVING BITS AND ATOMS 2010 2012 2014 2016 CORE GOAL
  • 44.
    44 UberCab, founded in2009 started operating its first black cars in 2010 in San Francisco. • Professional drivers • Black sedans only • No booking fees • Order at the tap of a button • More expensive than a taxi • Premium service and experience Uber challenged the taxi and black car market by providing a simple service: a ride a the tap of button. A perfect user experience was the core of Uber’s value proposition. UberCab became Uber in 2011 and launched UberBLACK and UberSUV with an identical value proposition. Later it launched UberVAN for larger groups of passengers. Starting the network: a black car service
  • 45.
    45 In 2012, UberlaunchedUberX (UberPOP in Europe), a taxi-ridesharinghybrid registeringas a “Transportation Network Company”, taking the best of both worlds: • Non-professional drivers driving their own car when they want to (they pay for gas themselves) • A new source of income for anyone that is willing to drive • Lower prices for riders • Same experience as UberBLACK By tapping intoprivately owned excesscapacities, Uber has been able to exponentially grow its pool of drivers and decrease price . Before launching UberX, the number of Uber drivers had a steady but slow growth. MAKING THE SUPPLYEXPLODE Number of Uber drivers (partners) in the US Sources: Uber, Hall & Krueger Tuning the network– letting more drivers in There are 6 times more UberX drivers than UberBLACK drivers in the US.
  • 46.
    46 UberPOOL enables youto share a ride and split the cost with another user who is requesting a ride along a similar route at the same time. Users can pay up to 50% less. Drivers gets 2 or 3 rides for the cost/time of one, and Uber takes a higher 35% fee. Sources: Uber, The Rideshare Guy, Forbes, CSmonitor Optimizing further excess capacities. An increase in cars’ utilization and a decrease in price and driver’s idle time. Uber also launched UberCOMMUTE, a version of UberPOOL dedicated to commuting to work in its top 3 markets: US, China and India. 95% Of trips could be shared if riders were willing to wait an additional 5 minutes for other passengers. 50% Of Uber rides in San Francisco are Uber Pool rides. 30M Uber Pool rides every month in China. 1M Cars could be taken off from London’s roads according to Travis Kalanick thanks to UberPool. Tuning the network– getting more people into fewer cars
  • 47.
    47 In 2015, Uberlaunched Smart Routes and HOP. These services are designed for price-sensitive customers willing to sacrifice time: announcing Uber’s direct competition with public transportation. Users request UberHOP rides and the app gives them directions to their pickup location. Users share ride to a predefined destination, and walk the last few blocks. Uber smart routes is an extension of UberPOOL. It offers fare reductions to customers if they get picked up near a smart route. By providing incentives for customers to rally precise pickup points, Uber wants to maximize the number of people per car and therefore continue to lower prices. UberHOP is a pilot in Seattle. Smart routes only exist in San Francisco so far. Tuning the network– from premium to low-cost 1 2 3 1 2 3 Drop-off location Pickup location
  • 48.
    48 In 2014 and2015, Uber launched UberEATS and UberRUSH, respectively a meal delivery service for restaurants, and a package delivery service for businesses. UberEATS is embedded in the Uber app. While UberRUSH is accessible to businesses through a dedicated API. Both services leverage Uber’s existingnetworkof drivers and dispatch technology.A smart way to decrease drivers’ idle time and exploit excess capacity further. Uber leverages its direct access to users through its app to create new sources of revenues. UberRUSH is live in SF, NYC and Chicago since 2014. UberEATS has launched in 15 North American cities, as well as London, Melbourne, Paris and Singapore. “If we can get you a car in 5 minutes, we can get you anything in 5 minutes.” Travis Kalanick CEO, Uber Extending the network: from transportation to logistics
  • 49.
    49 The math seemsto add up Megan Quinn (an ex-KPCB partner) sold her car and decided to take an Uber anytime she needed to move around, and realized the cost of moving in Uber was below the cost of owning a car. Cost of owning a car for a year: $10.281 (Parking + Gas + Insurance + Maintenance + Tolls / parking tickets + amortized cost of car ) Cost of riding with Uber for a year: $4655 “So the magic there is, you basically bring the cost below the cost of ownership for everybody, and then car ownership goes away.” Travis Kalanick CEO Uber Uber’s ambition is to become a substitute to car ownership. In some cities Uber cut prices 5 to 6 times in a two-year period to make its service more appealing to customers and turn them away from car ownership. In large cities, the cost of owning a car can reach $15.000 per year. The average US household owns 2.1 cars, with 20% owning 3 or more. Uber’s proposition might find its public! $0 $5 $10 $15 $20 $25 $30 $35 UberBlack Taxi UberX UberPool Subway Price from 1162 Pacific St. to 55 Washington St. NYC Sources: Oak Ridge National Laboratory, Mega Quinn, FABERNOVEL analysis. Average number of cars per household as of 2013. With one goal in mind: moving away from car ownership
  • 50.
    50 As Aaron Levie(CEO of Box) puts it, “sizing the market for a disruptor based on an incumbent's market is like sizing the car industry off how many horses there were in 1910.” Uber is no longer a cab company, it’s a transportation network. It wants to move everything and everyone from point A to point B, enlarging its market day after day, and setting a vision for a world where Uber would replace car ownership. So forget about the taxi market - Uber’s market is way bigger than it seems! US market size in $Bn Sources: IBISWorld, The Wall Street Journal From network to industry leader
  • 51.
    51 With its latestmission statement (“moving bits and atoms”), Uber clearly states its ambition to become more than a transportation giant: a real infrastructure and a platform where other service providers can contribute to value creation. Uber is taking advantage of the direct contact and captive attention it has with passengers during their Uber rides. Indeed, Uber provided the equivalent of 40,000 years of rides since 2010. Media distribution channel Customer acquisition channel Uber Trip Experiences allows users to connect to their favorite apps during their Uber trip. Uber gives brands an opportunity to use Uber riders’ captive attention to push adapted content based on the time of the day and trip duration. A smart way to improve riders’ experience. Uber Offers enables brand to push promotions to passengers based on their geolocation data. For example, Starbucks may pay for your ride to their shop. Offers are targeted and become a new way for local businesses to reach new customers. For Uber, it’s a way new way of providing cheaper/free rides to its riders. What’s next ? Increasing average revenue per car
  • 52.
    52 The ideal transportationnetwork “We can imagine a perpetual trip – the driver picks up one customer, then picks up another, then drops one of them off, then picks up another – the trip just keeps going, and the driver always has a customer in the car” Becoming a reality? Travis Kalanick, CEO, Uber What’s next ? The perpetual ride: 24/7, 100% of capacityused Imagine cars that never stop, a perfectly optimized transportation network, where resources (drivers, cars) are used at 100% capacity. To fulfil this dream, Uber will have to reach a massive scale, to ensure high liquidity at the local level with maximum capillarity. Uber is doubling down on UberPOOL in China and the US with incentives for drivers. In San Francisco, Uber has reached a record of 8 non-stop UberPOOL rides.
  • 53.
    53 Uber plans toreplace its fleet of drivers by a fleet of driverless cars as soon as the technology is ready, thus making the rides cheaper without having to care about drivers’ revenue expectations and moving closer to the perpetual ride dream: • Opened a research center in Pittsburg in 2015, to build its own autonomous cars • Allegedly pre-ordered 100,000 Mercedes for when they get self-driving technology. • Recruited top researchers and executives from the car industry and Google’s ex-VP of Engineering • Holds a strong advantage in the race to the autonomous car: data about how, where and when people want to be driven. “The reason Uber could be expensive is you’re paying for the other dude in the car. When there is no other dude in the car, the cost of taking an Uber anywhere is cheaper.” Travis Kalanick CEO, Uber Sources: Uber, Manager Magazin What’s next ? The autonomouscar
  • 54.
    54 1. Control theinfrastructure Infected professional cars With Uber Black 2. Widen the infrastructure Infected all available cars With UberX & Pool From virus to host: a disruptive strategy Uber is following a 3-step plan to become the transportation infrastructure of our cities. Becoming more and more infectious, the virus is slowly becoming the host. 3. Become the infrastructure Will be built in its own cars With autonomous vehicles
  • 55.
    05. Defend Protect your marketagainst safeguards and competitors or you’ll be replaced.
  • 56.
    Regulation Competitors Carmakers Tech giants Drivers All overthe world, governments are threatening Uber’s model. How long can the outlaw resist to the legal pressure? Uber won’t be anything without its drivers. Will the transportation giant be able to keep them in its network? Uber is not the only on-demand actor. It is challenged all around the world by growing actors well decided to stop its growth. With the promise of “moving away from car ownership”, Uber hasn’t made carmakers happy. But they have room left to reinvent themselves and challenge Uber in the on- demand economy. Tech giants are progressively investing huge amounts to conquer the transportation market. The war is just beginning… Uber has grown to become a transportation giant in less than a decade, changing the rules of the game and challenging legacy actors. But beware of the backfire. On its way up, Uber has created frustration, fear and envy from multiple stakeholders ready to fight for their premises. Uber threatened from all sides
  • 57.
    We should've realized soonerthat we are running a political campaign and the candidate is Uber Travis Kalanick CEO, UBER Uber vs governments: also a political fight “
  • 58.
    With the creationof the “Transportation Network Company” status, Uber has initially leveraged regulation to create unfair competitive advantages againsttaxi networks for which medallions could reachup to $1M in cities like NYC. But now, regulation threatens Uber and could be its worst nightmare. Depending on the city it is dealing with, Uber reacts in multiple fashions. Retreat PartnerAdapt Pay Uber adapts to comply with the law: in Moscow Uber just accepts professional drivers and shares data. Uber partners with governments to operate: in Hyderabad it has promised to train 2,000 drivers and invest $50M to build headquarters. Some municipalities decided to ban some of Uber’s services. In this case, Uber obeys like in Paris where it ceased its UberX activity (aka.UberPop). In some cities like Austin, Uber is not forbidden but retreats because policies prevent liquidity. Some municipalities like Newark don’t hesitate to make Uber pay to operate: $3M upfront and $10M across 10 years to access the airport. Sources: Uber, Fortune, CBS, Le Monde, Wired Lobby Globally, Uber is spending millions of dollars into lobbying. It hires top profiles in its public affairs department, like Neelie Kroes, an ex EU-commissioner for Competition, or David Plouffe, the ex director of Obama’s campaign. Under pressure from governments Defend A Californian judge requalified a driver as an employee. A similar judgement is awaited in France. A serious threat to Uber’s economic model. It appealed the decision. In the US, Uber paid $100M to settle a similar class action with drivers.
  • 59.
    • Determine adistinctive ideology: ultra- liberal (gig economy), libertarian, objectivist (T. Kalanick is a big Ayn Rand fan) • Declare it to the world: Marketing campaign ”Uber-entrepreneur” • Demarcate from outsiders through symbols: black sedans only • Demonize the other: repeated attacks on taxi so called “monopolies” and states’ interventions Uber has created a divide in the public opinion in many cities, where the support and the opposition to ridesharing services has become intense. In The Culting of Brands, Douglas Atkin, VP Community at Airbnb explains how brands can leverage cults’ techniques to turn customers into true believers and it seems Uber has learned the lesson well. The transportation genius has always been able to count on its users to promote and defend its service against all attacks. 4 steps to turn customers into believers: Launching many petitions, to seek support from users against governments Counting on tech gurus’ support Uber’s response: an ideology war
  • 60.
    “if you refuseto meet and discuss with us […] protests and strikes are only going to intensify nationally and globally as we continue to coordinate with driver groups around the globe. Uber Drivers Network Open Letter To Uber, Travis, Josh Mohrer, Uber’s investors and employees Drivers’ mutiny
  • 61.
    Uber forgot it’sa network of drivers and not a network of cars yet Low prices and pickup times depend on a high supply of drivers: steal its drivers away and Uber’s market power collapses. Under regulatory pressure from the outside, Uber is now challenged from the inside, by its own partner drivers. Keeping its drivers inside the network till it gets to the autonomous car seems like Uber’s biggest challenge. By trying to please riders with lower prices, Uber has enraged its drivers. All around the world, they have protested against price cuts. They are also unionizing inside “The Uber Drivers Network” to speak of a common voice against Uber. In a two-sided market, it’s a risky move to sacrifice one side to please the other. Uber can be challenged by anyone with a large amount of funding and a pro-driver strategy Emerging actors like Gett and Juno are taking on Uber by developing driver-friendly value propositions. Gett offers fare guarantees to drivers. Juno only takes a 10% commission on rides and reserves 50% of its founding shares to drivers. Startups like Arcade City leverage the blockchain to organize a network of driver: commissions reach 0%. In a market with supply-side network effects, if competitors attract your supply,the demand will follow. Sources: Uber Drivers Network, FastCompany, The Verge Uber’s Achilles' heel ? Its drivers !
  • 62.
    “ 62 “ William Clay FordJr Executive chairman of Ford Motors Company If you live in a city, you don’t need to own a car Uber made on-demand cars mainstream and changed the face of transportation forever. Pure players, carmakers and tech giants are now in the race to conquer this market, questioning fundamentals of their own models. A never-ending competitive cycle
  • 63.
    In 7 yearsUber has conquered the world. But will it be able to keep its position of power for ever? Legacy actors and pure players are challenging its supremacy using 4 different strategies. Connect to existing networks Create your own networks 4 strategies to compete with Uber
  • 64.
    Sometimesjust leveraging adisruptive virus’ assets might bring more value than fighting it. Transportation has become an increasingly crowded market with disruptors adding a new layer to the existing infrastructures. By plugging to Uber, transportation networks can extend their reach, gain in flexibility, and solve ”thelast mile problem“ by serving underserved areas. In Paris, around 40% of Uber trips happen before or after a public transportation trip. Integrating with mass transit actors is crucial to Uber’s survival. Caltrain & Uber partnership in San Francisco extends the reach of Caltrain network by providing UberPOOL rides to and from South Bay station. For special events, Uber can bring flexibility to the public transit system. Bringing flexibility to existing networks Plugging in to improve customers’ experience United airlines integrated the Uber option into its own app, bringing an additional service to its own customers. By just plugging in to Uber, United is differentiating itself from other airlines. PLUG IN Linking up with the virus
  • 65.
    65 Competing head-on withan installed virus is usually a very difficult challenge. Because of its multi-local inherent structure, Uber has to fight hard against local actors in every market it tries to conquer and usually operates in the context of a duopoly, both actors spending billion of dollars only to survive. A virtually infinite fight. Sources: The Wall Street Journal, La Tribune. Valuation figures as of June 2016. LYFT United States Launch: 2012 Valuation: $5.5bn EASY TAXI Brazil Launch: 2012 CHAUFFEUR- PRIVE France Launch: 2012 Valuation: €25M GRAB Malaysia Launch: 2012 Valuation: $1.6bn OLA India Launch: 2011 Valuation: $5bn DIDI China Launch: 2012 Valuation: $25bn COMPETE HEAD-ON Uber facing multi-local competition
  • 66.
    66 To beat adisruptive virus infecting your industry, differentiation could be your best ally. Uber’s most dangerous competitors might win the transportation war by leveraging differentiating value propositions. Pure players of course are in the race, but also legacy actors: GM created Maven and Ford created Ford Smart Mobility as independent entities to focus on mobility services like hourly car rental. Model Taxi-like Ride-share Hourly Car-rental Car-share Value proposition “A car and a driver at the tap of a button” “I have room left in my car. Want to join?” “Get access to our cars anywhere in the city” ”Rent a car from other users” Who does it? Uber Didi, Lyft, Ola Waze Rider by Google, Blablacar Maven by GM, ReachNow by BMW, Zipcar, Autolib Turo Drivy Distance Short Medium-long Short-Medium Medium-long Sets destination Rider Driver Rider Rider Sets price Company Car owner Company Car owner Owns the car Driver (excess capacity) Driver (excess capacity) Company (assets) Other user (excess capacity) Business model Commission Commission Subscription Commission DIFFERENTIATE Various on-demand transportation models
  • 67.
    67 Partnering with adisruptive virus might be the best strategy to reinvent yourself. Legacy actors are joining forces with Uber, hoping to take the leadership in this revolution of the transportation industry. A smart move that could bring them the knowledge and the assets they’re missing to enter the network economy. Toyota and Uber entered into a strategic partnership to “explore the future of ridesharing”with the first brick being car-leasing programs for drivers. Toyota also invested close to $100M in Uber. The Indian automotive giant Tata invested close to $100M in Uber. That’s the first investment of Tata outside India. A good support for Uber looking to expand in this gigantic country Hertz and Uber entered into a partnership to provide rental cars to Uber drivers. A smart way for Hertz to revive its business. Fiat Chrysler and Uber are said to be discussing a strategic partnership to develop autonomous cars together. Back in 2013, Google’s investment arm, Google Capital invested $258M into Uber. A way to have an insider into the on-demand transportation market. After selling its mapping service to the transportation startup, Microsoft invested $100M in Uber. Making strategic partnerships Investing in Uber’s future PARTNER Share assets and knowledge with the virus
  • 68.
    68 Competing frontally againsta disruptive virus is nearly impossible, unless your form alliances. By sharing assets and knowledge, competitors highly increase their chances of fighting Uber, the transportation virus. Sources: Lyft, TechCrunch If Uber falls in one of its opponent’s markets, it could trigger its failures in the other markets. If success can spread like a virus, failure could too. Didi (China)i, Lyft (USA), Grab(Malaysia)andOla (India) partnered : • Invested in each other’s companies • Share technology & business resources • Let users book a ride from the local player with their home- country app ! GM invested $500M in Lyft to provide car rentals services for drivers and build together a network of autonomous cars. In the same vein, Apple invested $1Bn in Didi, Uber’s Chinese competitors, and Chrysler is building mini vans to help Google extend its test of autonomous cars. By bringing their fighting power and hardware knowledge to Uber’s direct competitors, legacy actors are reshuffling the mobility cards. Competitors a meta-platform Competitors creating mobility alliances ! ! PARTNER Share assets and knowledge to fight the virus
  • 69.
    The autonomous carrevolution is coming faster than we expected and will reshuffle the cards in the on-demand transportation sector. This revolution looks a lot like the previous one: the smartphone revolution. Apple and Google are the big winners of the smartphone revolution having wiped out former phone giants like Blackberry or Nokia. They both have had a very unique strategy to reach this position of power. What would Uber become if it applied the same recipe to the transportation industry ? From phones to autonomous cars: an eternal repetition Randall Stephenson CEO, AT&T “The car will just be a big smartphone on wheels in the future
  • 70.
    70 Asset builders Technology creators Platformorchestrators Service providers In the networked world, 4 types of companies emerge in every market, following the model set out by the smartphone revolution. The same will happen in the autonomous car market, with actors positioning themselves in each category. Some try to occupy more than one category. 4 types of companies for one market These companies build, develop, and lease physical assets to make, market, distribute, and sell physical things. They will build the autonomous cars. These companies hire employees who provide services to customers or produce billable hours for which they charge. They will provide insurance, repair cars, etc… These companies develop and sell intellectual property such as software, analytics, pharmaceuticals, and biotechnology. They will build the software that drives the autonomous cars. These companies create a network of peers in which the participants interact and share in the value creation. They will orchestrate autonomous cars to serve riders.
  • 71.
    71 Uber in Apple’sfootsteps? Apple’s strategy has been one of vertical integration: being a technology creator, an asset builder and a network orchestrator at the same time. Developed iOS Built iPhones with iOS built-in Operated the AppStore If Uber follows Apple’s strategy, it will develop autonomous’ cars Operating System, will build its own cars and orchestrate its own network of cars. Probably a risky move, as it will compete directly with carmakers, and with Apple itself. DEVICE RIDER AUTONOMOUS CAR
  • 72.
    72 Uber in Google’sfootsteps? Google’s strategy has been an Open Software strategy. It created the technology, orchestrated the network but didn’t built the assets. Developed Androïd and opened it to phone makers Smartphones built by phone makers (Samsung, HTC, etc…) with Androïd as an OS Operated the Play Store If Uber follows Google’s strategy, it will develop autonomous’ cars Operating System and open it. Carmakers will build the cars with UberOS inside. Uber will naturally orchestrate the cars for carmakers, dispatch them to riders, and take a cut on the transactions. Probably the best strategy if it can develop the OS faster than Google and other competitors. DEVICE RIDER AUTONOMOUS CAR
  • 73.
    Marc Andreessen Breaking SmartSeason 1 Software is eating the world “ One axiom
  • 74.
    74 Accomodation Retail Media EnergyProfessional services Entertainment Travel Banking Telecom Software is eating industries one after the other, with young startups reinventing business models and value propositions to conquer the world at once. If your industry is safe, it probably won’t be for long. One certainty: your industry will be eaten too
  • 75.
    75 Facebook’s Little RedBook If we don’t create the thing that kills [us], someone else will “ One strategy: think like a virus
  • 76.
    1.SYNTHESIZE IT Identify apoorly-served market and develop a platform to serve it 10 times better. 3.BECOME CONTAGIOUS Leverage your user base and make partnerships to increase virality. 4.MUTATE FAST Never stop innovating and pivoting to enlarge your marketand annihilate competition. 5.DEFEND Protect your market againstsafeguards and competitors or you’ll be replaced. 2. SEED GERMS Find the best environment to incubate under favorable circumstances. Do things that don’t scale to kick-start your network. Forget about CAPEX. Networks are the new asset. Forget about marketing, users are the new media Forget about first mover advantage, it’s all about the first setller Forget about cash cows. Perpetual innovation is the only path to success. Forget about direct competition. Differentiate or partner up to remain in the race. 5 rules to act like a virus
  • 77.
    77 Follow our Mediumpage Inside GAFAnomics Get fresh news on GAFAnomics
  • 78.
    78 Facebook, The PerfectStartup (2012) 6 365k views on Slideshare Amazon, The Hidden Empire (2011) 918k views on Slideshare ••• Three digital engines to reshape and dominate retail mazon.com THE HIDDEN EMPIRE Linkedin,The serious Network (2013) 197k views on Slideshare And more. Apple: 8 Easy Steps to Beat Microsoft (and Google) Paris, September 2010 Apple, 8 easy steps to beat Microsoft (and Google) (2011) 179k views on Slideshare GAFAnomics®, New Economy New rules (2014) – 312k views on Slideshare GAFAnomics®, 4 Superpowers… (2015) – 316k views on Slideshare See also…
  • 79.
    79 We are A newworld needs new solutions Who we are We are a “digital native” organization of a new type, nourished by a unique culture and incomparable talents. We gather wide and cutting-edge capabilities –in strategy, software, design and data marketing – boosting our clients’ competitiveness. Our offices From our offices in San Francisco, Paris, Toulouse and Lisbon, we work with clients everywhere in the world to help them define and develop new opportunities. What we do We transform feareddisruptions into business opportunities. We craft impactful user experiences that benefit our clients and their customers. We build agile prototypes to test and develop strong strategic assets. And we play a prominent role with a sustainable impact, in the best ecosystems. At startup speed. @FABERNOVEL facebook.com/FABERNOVEL FABERNOVEL.com
  • 80.
    80 A full stackand digital native company to identify levers for competitiveness Stéphane DISTINGUIN Founder & CEO FABERNOVEL stephane.distinguin@fabernovel.com Cyril VART Executive VP FABERNOVEL cyril.vart@fabernovel.com Leila TURNER CEO FABERNOVEL INNOVATE leila.turner@fabernovel.com Dominique PIOTET CEO FABERNOVEL US & PARISOMA dominique.piotet@fabernovel.com Baptiste BENEZET CEO Applidium by FABERNOVEL baptiste.benezet@applidium.com Alexis Godais CEO FABERNOVEL CODE alexis.godais@fabernovel.com Kevin GENTIL-CANTIN Co-founder & CEO FABERNOVEL DATA & MEDIA kevin@fabernovel.com Yassine BELFKIH Co-founder & CEO FABERNOVEL DATA & MEDIA yassine@fabernovel.com Antonin TORIKIAN CEO FABERNOVEL Institute Antonin.torikian@fabernovel.com
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    81 Amaury BOTREL Art Director DESIGN - KevinECHRAGHI Project Analyst Tom Morisse Analyst RESEARCH - SPECIAL THANKS - Robin Chase(Peers Inc) | Frederic Mazella (BlaBlaCar) | Jean-ChristopheLiaubet (Exane) | MarieEkeland (Elaia Partners, daphni) | PaulFoucault (Ex-FABERNOVEL) | The whole FABERNOVELteam Benoit TALABOT Partner & Creative Director Joachim Renaudin Junior Project Analyst Credits
  • 82.
    82 // NEW YORK 150West 25th St. , Suite 503 New York, NY 10001 +1415 298 02 09 meet_nyc@fabernovel.com // MOSCOW 3-iy Monetchikovskiy Peureulok 17, Stroenie 2 Moscow 11054 Russia +7(999) 639 80 82 meet_moscow@fabernovel.com // PARIS 17 rue du faubourg du Temple 75010 Paris +33 1 42 72 20 04 meet_paris@fabernovel.com // SAN FRANCISCO 169 11th St. San Francisco, CA 94103 USA +1415 626 6406 meet_sf@fabernovel.com MEDIA INQUIRIES Zineb Akharraz Torikian zat@fabernovel.com