Cancel Please Log In

Need password help? Click here.

Don't have an account yet? Sign up here.

Uber — What’s Fueling Uber’s Growth Engine?

UberApp

Uber Co-Founder and CEO Travis Kalanick explains, “In the beginning, it was a lifestyle company. You push a button and a black car comes up. Who’s the baller? It was a baller move to get a black car to arrive in 8 minutes.” (Source)

But what began in 2009 as a luxury car service in San Francisco is now valued at $3.76 billion and operates in more than 35 cities worldwide. As of August of this year, Google Ventures has officially cast their vote of confidence in the startup with a $258 million investment—a full 86% of their $300 million annual budget—and for good reason. (Source) Uber’s revenue is up 18% month over month, and in the past year alone they’ve grown from just 75 employees to more than 300. (Source)

In fact, at Disrupt NY 2013, Bill Gurley of Benchmark—investor for both eBay and Uber—claimed, “Uber is growing faster than eBay did … [it] is probably the fastest growing company that we’ve ever had.” (Source)

How did Uber do it? As a multi-sided marketplace business model, how did they crack the chicken-and-egg problem that so many marketplace startups struggle with? Much like Belly, Uber used intense market focus to create local network effects in their launch city, San Francisco, while fueling word of mouth growth through targeting of the early adopting Bay Area techset.

 

The Need for Uber

The Need For Uber

If on the outside chance you’re not familiar with Uber, the basics are as follows:

In the past, when you needed to get somewhere, hailing a cab was a nightmare. You either stood outside—wind, rain, sleet, snow, or shine—waving your hand in the air until you could hail a cab, or you called a taxi dispatch (if you had their number) and had to wait 20 minutes until a car arrived.

Once you arrived at your destination, you fumbled to count out the right amount of cash plus a tip, negotiate with the driver who never had the right change, or who “forgot” to start their meter, or whose credit card machine was “broken”.

All told, very few people viewed finding and using taxi service as something enjoyable—it was simply something that they dealt with due to the lack of an alternative. Before Uber you were beholden to an entrenched, monopolistic entity, whose sloppy execution and lack of regard for the customer experience was evident at every touch point.

This poor experience and a perceived lack of ability to change anything about it created pent up frustration and demand from consumers who were eager to find anything better. Uber tapped into that frustration and demand exceptionally well.

Uber is completely changing the way getting private transportation is done in several key ways.  First, their smartphone app is integrated with Google maps so that you can see how far away the nearest cars are, set a meeting point on the screen, and hail a car to meet you there. You can even see your driver’s information (including ratings) as you watch the car get closer to your location.

Uber drivers call or text to confirm that they’re on the way, giving you peace of mind that your order was received. Once your car arrives (usually within a few minutes), the driver greets you by name and you hop in. The cars are black cars and SUVs. Uber X, a lower cost version of the service, is made up of a fleet of well maintained sedans.

Once you arrive at your destination, the app charges your card, and you’re free to go on about your day. There’s no need to deal with cash, change, tips, or receipts. You just hop out. (Source) Uber has removed the friction from the typical taxi cab transaction, and made it highly enjoyable in the process.

Bill Gurley sees Uber’s key to growth as a simple one: Uber offers a great product. He explains, “The product is so good, there is no one spending hundreds of thousands of dollars on marketing.” (Source) While this is certainly the case, it isn’t the only factor driving growth at Uber. First, let’s go back to the beginning and look at some of Uber’s early tipping points.

 

Early Traction

Uber Early Traction

Though the company was founded in 2009, Uber didn’t officially launch until June 2010.  In January 2011, just six months later, they had had between 3,000 and 6,000 users and had already done between 10,000 and 20,000 rides. (Source) So what got them there?

 

Completely Solves Problems for Riders

First and foremost (as Gurley points out, and as with Square), Uber provides a solution to a real problem that impacts millions of people. In all sense of the word they have disrupted the monopoly of taxi cab transportation that exists in many cities and reinvented the experience from top to bottom.

Among the many problems Uber is tackling are: poor cab infrastructure in some cities, poor service and fulfillment–including dirty cabs, poor customer experience, late cars, drivers unwilling to accept credit cards, and more.

Uber set out to reimagine the entire experience to make it seamless and enjoyable across the board. They didn’t fix one aspect of the system (e.g. mobile payments for the existing taxi infrastructure), they tackled the whole experience from mobile hailing, seamless payments, better cars, to no tips and driver ratings.

By avoiding the trap of smaller thinking, and iterating on one element of the taxi experience (say, by making credit card payments more accessible in the car) they were able to create a wow experience that has totally redefined what it means to use a car service, sparking an avalanche of word of mouth and press.

 

Early Adopter Advocacy

In many cases, the importance of the early adopter tech community can be overstated. In Uber’s case it cannot. Uber knew that launching in San Francisco meant that they would be interacting regularly with the tech community who are continually looking for new tools and services that improve their quality of life. Uber took aim at those people by sponsoring tech events, providing free rides, and in general driving awareness among this audience.

San Francisco, with it’s notoriously spotty cab service served as the perfect foil for the launch. As early adopters, completely fed up with the taxi situation in the city, tried Uber, they took to blogs, social media and every other way possible to tell their friends about this new way to ride.

The Uber experience became a vector for growth as early adopters in the know impressed their friends with the ability to call a black car from their phone with a couple taps. These new riders were immediately wow’d by the experience and became new users and advocates within the span of a single car ride.

So how did Uber reach those early adopters? One distinct channel was event sponsorship. 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.

By seeding this audience, they were able to create a growth engine that hinged on the fact that these adopters would show their friends, who would become new users after their first Uber experience. Leading to a growing network of passionate customers.

 

Word of Mouth from Satisfied Customers

Much of Uber’s success can be attributed, as mentioned above, to the fact that it is totally mind blowing compared to the frustrating and broken taxi experience. Max Crowley of Uber Chicago explains:

“We’ve found that our growth is driven substantially by word of mouth. When someone sees the ease of use, the fact that they press a button on their phone and in under 5 minutes a car appears, they inevitably become a brand advocate.” (Source)

According to Kalanick, Uber relies almost exclusively on word of mouth, spending virtually nothing on marketing. He explains, “I’m talking old school word of mouth, you know at the water cooler in the office, at a restaurant when you’re paying the bill, at a party with friends – ‘Who’s Ubering home?’ 95% of all our riders have heard about Uber from other Uber riders.” In fact, for every 7 Uber rides, word of mouth generates a new Uber user. (Source)

Uber has even gotten attention from the likes of comedian Dave Chappelle, actor Edward Norton, venture capitalist Marc Andreessen—who calls it a “killer experience,”—and AirBnB CEO Brian Chesky—who claims that “Uber makes it very easy to not own a car.” (Source)

This word of mouth is as much today’s growth engine as it was in early days. Uber doesn’t need to do traditional marketing to drive users, they simply find ways to fan the flame of that first trial to reach new people and grow their user base.

 

Leverage Distinct Growth Opportunities

In addition to providing an overwhelmingly superior solution, Uber has also leveraged some real life situations to spur growth, which Kalanick refers to as “accelerants.” These accelerants indicate a concentrated, temporary need for Uber’s services. These include:

  1. Restaurants and Nightlife

  2. Holidays and events

  3. Weather

  4. Sports (Source)

Each of these factors makes driving yourself problematic at best (and in some cases downright impossible), and cities in which they coexist are especially receptive to Uber’s services. Uber focused on executing in cities where those problems are near constants to drive accelerated adoption. For example, In Chicago—a city with great nightlife, intense weather, and tons of sporting events —Uber’s initial viral growth was double what’s typical for them (see viral growth numbers cited below).

Special events and holidays also provide an opportunity to showcase Uber’s model, and the company was able to deliver on key nights like New Year’s Eve in San Francisco—a city notorious for a lack of taxis—which drove buzz for the new service. These events created intense demand and pressure to get new users to take their first Uber ride, driving spikes in new riders and total rides.

 

Benefits for Uber Drivers

Not only does Uber transform the experience for riders, but it’s also good for drivers. Discussing Uber’s expansion to D.C.,  Kalanick explains,

“There are a lot of drivers in this city who are out of work. Because of that, there are a lot of drivers and limo companies that are coming to us to basically help their drivers make a living.” (Source)

Uber doesn’t employ drivers. Instead, the service acts as a liaison between people who need rides to drivers who are in the area. This arrangement can bring in more than $500 a day, which amounts to a week of work for some cab drivers. (Source) Like any good service, it’s a win-win for all parties involved, and this is certainly another factor contributing to Uber’s growth.

 

Today’s Growth Engine

Now, let’s examine today’s growth engine a bit more thoroughly. In addition to the points mentioned above—which are still very much driving forces—Uber’s growth engine is comprised of several related, moving parts, including:

engine_graphic

Intensely Local, City-by-City Expansion

But perhaps the reason Uber has expanded so quickly is because they acknowledge that growth is not one-size-fits-all. What worked for San Francisco may not be what’s right for Chicago or New York, which is why they take it city by city, with local efforts tailored to each new location.

Because of the politics, regulations, and interests that make up each city, Uber needs to adapt their launch plans to suit the unique topology of each new market. It’s this ability to go into a market, understand who the suppliers are, who the special interests are, and account for those dynamics that makes Uber successful right from the start in new cities.

Kalanick explains: “We think that cities deserve to have another transportation alternative. It sounds crazy to have to say that but you have to do that because you have incumbent interests which are often trying to curtail innovation and curtail sort of transportation alternatives that might compete with their existing business. And, because of that, it requires us to take a very local approach to how we go after a city. We have launchers that go into [cities] …  and turn nothing into something. I like to say they drop in with parachutes and machetes [and] get highly involved with the suppliers, people who own cars and run car services, and really just make sure that we can launch a service that is high quality from the start. Being local and speaking with local voice is important when you’re doing transportation and means you know what’s going on for the city.” (Source)

A city in which Uber has seen unprecedented growth is Washington D.C. Kalanick explains, “We’re not really sure exactly why, but D.C. really, really likes our product a lot. That is reflected in our growth, and the sort of overall demand we’ve seen has been unprecedented.” He claims that, month over month, growth is in the 30 to 40 percent range. When asked if this growth in D.C. reflects “that people are not happy with their alternatives,” Kalanick replies, “I think one can make that conclusion.” (Source)

Update: As reflected by Noah in the comments, the effort of Uber to support these city launches is massive and all encompassing, from local events, industry partnerships, business development and more. Uber makes sure that their marketing and business efforts are in full support of fueling that word of mouth engine, driving local growth.

 

Huge Potential to Disrupt Transportation

A major factor contributing to Uber’s growth is its potential. Not only is the company changing the way a lot of cities are hiring cars, but they’re doing so in a way that stands to transform car ownership and transportation in general—taking an established infrastructure and utilizing it in a totally new way.

Michael Wolfe, an entrepreneur and frequent technology commentator  explains:

  • If you think of Uber as a town car company operating in a few cities, it is not big.

  • If you think of Uber as dominating and even growing the town car market in dozens of cities, it gets bigger. (Data point: there are now more Uber black cars in San Francisco than there were ALL black cars before Uber started).

  • If you think of Uber as absorbing the taxi markets, it gets pretty huge.

  • If you think of Uber bringing taxis to parts of the world that did not have them before because of insufficient density, it gets even larger.

  • If you think of Uber as a personal logistics service that can drive your kids to school and back, take you to work, pick up your parents at the airport, drive you to date night so you can get your drinks on, it gets very very large.

  • If you think of Uber as delivering both people as well as things (packages, dry cleaning, groceries) it gets even larger.

  • If you think of Uber as a replacement for your car, it gets even larger.

  • If you mix in a fleet of self-driving cars, orchestrated by Uber, it grows again.

  • If you think of Uber as a giant supercomputer orchestrating the delivery of millions of people and items all over the world (the Cisco of the physical world), you get what could be one of the largest companies in the world. (Source)

This potential is the primary reason that Uber has garnered so much attention from investors. The economic, environmental, and everyday implications are huge. They are changing the way that people think about transportation, making it less about everyone purchasing his or her own car and more about purchasing rides (like water or electricity) as we need them.

Understanding this potential, Kalanick envisions Uber as an “instant gratification” service—giving people “what they need, when they need it, whether that’s a ride or some other delivery.” As to what this other delivery might be, the possibilities are pretty limitless. (Source)

Kalanick explains, “What we’re doing right now is we’re in the experimentation phase where you sort of find some interesting ways to do promotions like Uber ice cream.” He continues, “It’s very straightforward for us to basically give [drivers] a phone with an app on it and say, ‘Look, when the thing is blinking, hit the screen and go to where the map tells you to go. And you don’t have to pick them up and take them anywhere, just give them ice cream.’” (Source)

In fact, so far the company has experimented with:

  • on-demand Uber Ice Cream

  • on-demand roses for Valentine’s day

  • on-demand barbecue in Texas

  • DeLorean rides in San Francisco

  • UberCHOPPER helicopter rides to the Hamptons

  • partnership with the NFL Players Association to promote safe rides for NFL players

  • as well as more standard promotional efforts, such as $10 off coupons and the like.

Though these are primarily marketing promotions, they are also ways to test the market for demand, and they hint at the company’s potential direction for growth. Though nothing is set in stone, many interpret Google Ventures’ whopping investment in Uber as an indication of what’s to come. Google is, after all, in the process of making the self-driving car a reality, which means the prospect of a fleet of driverless cars shuttling us to and from work, school, fun, errands, and home is no longer purely in the realm of science fiction.

 

Controversy and Press

Uber’s word of mouth engine is fueled not only through word of mouth; the company is fast becoming public relations experts. As Uber rolls out into new cities, they face myriad lawsuits from existing interests, challenges to their legality from state and local lawmakers, and varying degrees of support or resistance from drivers.

The company has done a masterful job of turning these dust ups into a platform to tell their pro-consumer story. Uber has taken what could be seen as a massive business hurdle—litigation—and turned it into an asset that drives growth.

As Uber launches into market after market, these controversies are played out in the court of public opinion, and the power of Uber advocates and the quality of the experience, create an outpouring of local public support for the company. This support changes laws, helps pave the way for Uber in new cities, and the local and national press coverage helps Uber reach more potential users who hear about an innovative new company recreating a transportation experience that is nearly universally disliked by people everywhere.

 

Low Risk Trials

Uber knows that once you ride Uber, it’ll be your preferred mode of getting around from that moment forward. That insight and confidence makes it easy to make the first ride a free trial. The company routinely hands out $20 first ride credits that let new users take a free Uber ride to try them out. This incentive removes any barriers that new riders may have and after experiencing Uber they are exceptionally likely to become a long-term customer.

 

The Remaining Pieces of Uber’s Growth Engine

Uber is by all measures a growth machine, and while it is easy to sit back and point to the press they’ve received as the main driver, it’s clear that the big idea, executed flawlessly is the true engine. The company has smartly built its team to fuel that growth engine to the full extent possible.

From public perception management, to lobbying, to relationship building with established taxi commissions and car drivers, to brand advocates and community managers who fan the word of mouth flames, to special promotions that highlight the potential that is Uber, the company spread the word, Uber has built not just a sustainable engine, but one powered by rocket fuel.

Now with a war chest of funds, and a powerful model, Uber’s job is to continue to execute and do the hard work of overcoming existing legislation and models to create the environment for them to excel. Uber is just getting started, and tenacious execution is what stands between them and their ultimate vision.

Uber is a fascinating case study because it is one of those truly disruptive ideas that completely redefine an industry and change the way people consider long-entrenched beliefs and habits. In addition, their success in a highly political arena, building a multi-sided marketplace among many disparate and entrenched interests is a model for anyone looking to take a moonshot with their startup idea.

We hope this case study helps startup founders and entrepreneurs who are looking to disrupt legacy marketplaces in formulating their growth strategy. While fighting political and entrenched special interests is very difficult, we believe that Uber shows that building a pro-consumer product that completely reinvents the experience can lead to sustainable growth and a lasting business success. Whether you’re tackling healthcare, government, transportation, or other well established marketplace, Uber’s growth provides insights on what it takes to find the growth you’re looking for.

What did we miss? What else was key to their growth in both the early days and today? Share your thoughts and insight in the comments, and help us make this the definitive piece on Uber’s meteoric rise.

Share on Twitter

 

Contributing Authors:

Sean Ellis

Everette Taylor

Dylan La Com


You must be logged in to post a comment or flag a post.

  • Morgan Brown

    Found this great nugget on the design of the Uber app. Awesome annecdote: http://bryce.vc/post/64889707700/most-people-wont

    Quoting from an interview with Elle Luna:

    So I was using Uber all the time in San Francisco, even though I hated the design. And then I went to the Crunchies awards ceremony and at a post-ceremony event, where I was in a ball gown, I saw the CEO of Uber, Travis Kalanick, sitting at the bar. I was three whiskeys deep at this point and I walked up to him and said, “I use Uber all the time and I absolutely hate the app. I think you should bring me in to fix it.” He replied, “Oh, yeah? What are the three things you’d fix about it?” I said, “I’d redo the logo, redo the entire app, and change the rating system.” I think there was something about being in a dress that empowered me to say such things (laughing). And do you know what he said? He said, “Be at the Uber office at 9am on Monday.” I told him I couldn’t do it alone and he said he’d have a team for me.

    I thought the offer was bogus, but I went to Uber’s office on Monday at 9am, laughing to myself, and Travis led me back to a project room with two other designers—they were from outside of Uber and he had flown them in from New York! We took on the Uber app and redesigned it in three weeks. In fact, one of the guys he flew in from New York, Shalin Amin, ended up staying on full-time. The app is gorgeous and last night it won the Fast Company 2013 Innovation By Design Awards for the transportation category, beating out Mars Rover and Tesla.

  • Sean Ellis

    Kuddos to Morgan who did most of the work on this study. We had some fun conversations assembling the growth engine based on the data Morgan was able to uncover. I’ll be curious to hear if other people agree with our assessment. Of course, if you’ve come across other growth initiatives from Uber, please share them with us in the comments.

  • NoahSidman-Gale

    I just want to emphasize the importance of Uber having localized growth teams in each city. The amount of local events and partner outreach that they partake it is pretty amazing. Every new city is a new launch and a new community that gets created from the ground up. While the Uber brand helps, its still on the biz dev/ partner growth teams to hustle and cultivate growth.

    Check out the Uber city blogs to see the array of events and partnerships Uber uses to spur growth: http://blog.uber.com/cityblogs/

    • Sean Ellis

      Great point Noah. We probably didn’t emphasize the importance of the local growth teams enough. I agree that they really seem to be relentless in their drive to create traction in each market.

    • Morgan Brown

      Hey Noah,

      Thanks for the comment. I just added your thoughts under our city-by-city roll out section. Great insight.

      Morgan

  • BrendanO'Driscoll

    Great article guys – a very enjoyable and informative breakdown of Uber. Two points in particular resonated:

    1. Focus on the whole experience – not just one piece
    2. Uber doesn’t need to do traditional marketing to drive users, they simply find ways to fan the flame of that first trial to reach new people and grow their user base.

    Lots of lessons to learn from this.

    Brendan
    Soundwave CEO
    @soundwave
    soundwave.com

  • AnujAdhiya

    I had a question with respect to Uber providing event sponsorpship

    At what stage was this? In general boostrapped startups cannot afford to sponsor events etc.
    So what this after they had received some funding/backing or did they fund this themselves (and if yes, what was the extent of this funding)?

    The broader question is, are there specific criteria for early stage startups to consider for hacking growth via sponsorships at relevant events?

    • Morgan Brown

      Hi Anuj,

      Great question. I know that some of their early sponsorships were for VC events, which may have been given to them courtesy of their backers, or cost very little money.

      I also know that many events are happy to work with Uber to give free rides to their attendees due to the convenience factor alone, and don’t charge Uber anything on top. So they get “free” sponsorship in exchange for the rides they provide.

      I will do some more digging and see if I can find some additional context for you.

  • RachelMurray

    Nicely done! I am a total Uber-evangelist. As a Bostonian, for me Uber has completely revolutionized the horrible monopolies existing taxi companies had in a town where the subways shut down earlier than the bars, the city isn’t like NYC with taxis on every corner and it’s, well, cold here a lot of the time. It makes going out at night safe, comfortable and all around awesome. Thanks for highlighting this revolutionary company. It’s nice to see wow-companies win!

    • Morgan Brown

      Thanks for the feedback Rachel—we’re with you, we love Uber. They’ve totally changed the game.

  • LincolnMurphy

    Okay…. so Uber is yet another company with a fantastic customer experience (or product or service). Great.

    What I’m looking for are case studies on products/services that aren’t great, aren’t innovative, don’t really meet any big need for a massive market, and have no natural or inherent network effects to exploit but that have had massive viral and word-of-mouth growth.

    Where are those case studies? You guys picked the easy ones. ;-)

    Before Uber arrived in Dallas, my special lady friend met me in San Francisco and we took an Uber roughly 1 block – from the hotel to dinner – just so she could experience this service that I’d been raving about. Oh, and that I’m willing to waste $15 at the drop of a hat.

    The driver said that was not the first time that’s happened. In Dallas drivers have told me people will take their friends around the block several times just to show them the service.

    Every driver I’ve ever talked to – San Francisco, NYC, Dallas, wherever – has said Uber has been awesome for them… one driver said his business was up 40% this year (most don’t give me exact numbers like, but that sounds good).

    On the driver-side here in Dallas, one guy told me that he loves Uber because he knows who he’s picking up (and their rating). Apparently he was robbed one time so Uber is also a safety measure here.

    Uber is also getting beaten up by the Taxi companies here in Dallas who are tight with the city council. There were even undercover police taking Uber rides recently, looking for violations to try to shut ‘em down. Apparently all other crime has been eradicated in Dallas (good to know).

    Great Case Study guys…

    • Morgan Brown

      Thanks Lincoln—throw down the gauntlet and name a few companies. We’ll see what we can do!

      In all seriousness, Belly is kind of an under-the-radar success, and we’ll have more cases of products that don’t benefit from network effects; but I would be surprised if “great product that drives word of mouth” is missing from many that we do. It just speaks to the importance of product and must-have experience in finding success.

      Thanks for all your contributions to the community. It keeps us going!

      • LincolnMurphy

        Not sure you’ll find too many that fit my criteria because… well… my criteria was stupid.

        But, I did vote for Evernote, though. That’s an interesting growth story since Phil Lebin has stated they explicitly avoided being “social” for the longest time… but still achieved massive growth. Why did that happen? Clearly they have a great product, but that lack of an obvious network to exploit is interesting.

        I often encounter companies who say their top customer acquisition method is “word of mouth” but when I ask how they know or even more, what they’re doing to facilitate that they don’t have an answer.

        So I’m always interested in how companies orchestrate that process both directly (i.e. tell a friend) and indirectly (i.e. creating an amazing experience like Uber).

        And honestly, I had never heard of Belly before the case study so that’s cool.

        • Morgan Brown

          @Lincoln, I wouldn’t be too surprised to see Evernote up here in the near future. But you’re right—we do want to cover different types of business models in different markets to uncover how their growth engines differ from some of the well known companies.

          I do think that most growth engines will include a version of the “must have product” element too them. There are plenty of businesses with OK products that because of awesome distribution they went big with a so-so product. Usually they have a ton of cash or get a sweetheart deal, like being bundled with Windows, etc.

          Thanks for the encouragement and feedback!

  • Sean Ellis

    I had an illuminating chat with my Uber driver today in San Francisco. I was particularly surprised to hear how the Lyft pink mustache led him to become an Uber driver…

    He explained that when he first saw the pink mustache on some cars he asked one of the drivers what it was. The driver described the Lyft model and said that he was earning upwards of $500 per day. Prior to Uber this seemed really attractive for my driver, so he signed up to become a Lyft driver. However, he quickly became frustrated that he wasn’t earning close to what the other driver said (ie, I just saw a Lyft ad that says drivers make $20/hour). Even worse, he said that Lyft was not transparent with payments (it wasn’t a consistent percentage of the passenger’s payment). Finally he complained that he often spent 20 minutes or more waiting between passengers.

    He expressed his gripes to a friend who suggested he try signing up for Uber. My driver said Uber is much more professional toward their drivers and even invites then to attend events. More importantly, he found that he could get an Uber rider request usually within a minute or two of dropping off another passenger. In fact his income became so predictable that he was confident enough to lease a pretty nice Mercedes (which he uses as an Uber x driver). Contrast this to the only pink mustache car I saw in sf today – it was a crappy old car that looked to be from the late 90s.

    Given that Uber is such a positive experience for the drivers, they’ve not surprisingly attracted a pretty large fleet. Our wait for an Uber driver today was about one minute from the time I ordered it.

    I’ve often thought that Uber isn’t a very defensible business – what’s stopping a driver from signing up for multiple services? But after today’s conversation I now understand that it is a winner take all situation. Drivers don’t need to have multiple services if Uber is keeping them busy on its own.

    • LincolnMurphy

      I just have to add this.

      1. Lyft is definitely interesting but I have zero interest in riding with just some person in their normal car (actually, Lyft is in Dallas now and the cars are even crappier than what I’ve seen in San Francisco) – no matter how vetted the driver is. Just not what I’m down for; but I’m not the target user for them. In fact, that leads me to…

      2. I was telling someone about Uber in my overly-excited way and they asked me if it was cheaper than a cab. That blew me away… I had to stop and think about that for a minute… are they? No. But who cares. You see, Uber doesn’t compete with a cab in my mind (where positioning really takes place, kids).

      Uber isn’t disrupting cab service for me. They aren’t an alternative to a taxi because I wouldn’t take a cab most places unless I absolutely had to. I would drive and pay obnoxious amounts to park or valet. Or I would pre-arrange a towncar for the airport, but I take Uber because it’s easier and it’s cool. And this is really interesting to me, because I simply don’t do many things because they’re cool, but I do Uber. And that’s a big reason… at least for me.

      Just some random thoughts as we all try to make sense of something like Uber from the outside.

  • AndyHuang

    Awesome post! One of the best I’ve ever read. Any idea what tactics they used to recruit their drivers?

  • SamAshken

    Great post!
    That Michael Wolfe quote plus the Google Ventures investment really makes you think!
    One observation and one question:
    1. The name is awesome. I’ve been through a fair few naming processes and can’t immediately think of any startup with a better name. Who is not going to enjoy talking or hearing about. and remembering, a a great new service called “Uber”??
    2. The fact that they have grown so fast outside the dominant taxi companies / monopolies implies that there is A LOT of spare capacity in terms of drivers and black cars. This especially surprises me in New York where sometimes, in Manhattan at least, it seems like about 75% of cars are yellow taxis. So the question: have Uber just very successfully made use of all this extra capacity among drivers and black cars outside the dominant taxi companies / monopolies? Or has capacity of these two increased at all because of Uber?

  • Sean Ellis

    I just noticed a “Get Free Rides” link in my Uber account. It offers a coupon code that I can share with friends to give them a $10 credit for trying Uber. Every friend that uses the $10 credit will credit my account $10 in free rides too. I can earn up to $500 in free rides. Obviously it means that Uber is happy to pay a $20 customer acquisition cost and they do spend money on marketing (beyond sponsorships). From my days at Dropbox I know this type of double incentive referral program can be very effective.

    Anyone know if they are only offering it for a short period of time when they seed a new market? I’m based in Orange County, CA and Uber only recently expanded here. Figure maybe more established markets aren’t seeing this offer.

    • Dylan La Com

      The referral promo is a persistent feature of the app – everyone gets a promo code that they can share at any time. Max redemptions is 50 though.

  • RaminFarzami

    Excellent analysis. Very in-depth and enjoyable to read. One aspect that really stood out to me was the future potential for Uber to reshape the fundamental ideology of vehicle ownership. “They are changing the way that people think about transportation, making it less about everyone purchasing his or her own car and more about purchasing rides (like water or electricity) as we need them.” Commoditizing transportation is obviously nothing new in major cities like NYC that have mass transit infrastructure (subway/bus/taxi) but in places without efficient mass transit infrastructure like Southern California, in particular Los Angeles and Orange County this could be huge.

    I’m personally a “car guy” and love cars but would gladly ditch the need to actually own and maintain one if an efficient and enjoyable alternative was available. I do think in an individual car culture like Southern California transportation being enjoyable would be an important key factor in evolving the personal nature of having your own car. It’s a regular sight in LA rush-hour traffic to see nearly every single car carrying only 1 occupant. From a pragmatic macro level this is really nonsensical. Unlike other major cities LA and Orange County are spread out metropolitan areas so travel times/distance from one location to another in your car are on average longer than for instance going cross town in NYC. This makes your car a very personal and intimate place to spend your time. Uber would presumably be able to provide that enjoyable experience users in this demographic are accustomed to with their fleet options be it luxury or economic vehicle choices.

    I’m really interested to see how/if this component of Uber evolves, because one way or the other areas like Southern California need a realistic alternative to individual cars being the primary mode of transportation.

  • Adam Komarnicki

    Hi, sorry for joining this that late, but I have one big doubt about Uber growth that I would like to share. It refers to their prospects of international growth. I have lived in 10 different cities outside of USA (mostly Europe) and currently live in Santiago (Chile), where Uber recently launched.

    Simply speaking, many of the problems that helped its growth in the US, are not such a big deal in other places. In Europe getting a nice cab from the street is quite easy, prices are OK and I feel there is less need to be driven in style. Apart from that, there are already many apps that help you hail normal cabs, just like Uber.

    Does anyone have numbers/ insights about Uber’s international growth? I just do not see what the hype is about, from non-US perspective.