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Uber’s success story has driven many other startups to follow suit with a similar business model. It’s no surprise if you’re seeking information on how to start a company like Uber and replicate its revolutionary potential.
In 2019, the ride-hailing and taxi industry posted revenue of $302 billion worldwide. Despite the global pandemic crisis, the figure is expected to recover from its downturn and hit $365 billion in 2024.
There’s no better time to start an Uber-like business than the present. That’s when getting a product manager is helpful—or reading the tips shared by one. In this article, I’ll share my expertise in building Uber-like apps, give a detailed overview of Uber’s business model and MVP features.
At Uptech’s product department, we’ve helped many clients develop successful apps, so I believe we can nudge you in the right direction.
But first, let’s revisit the mercurial rise of Uber.
Revisiting Uber’s Inception
Uber was founded in 2009 by Garrett Camp and Travis Kalanick. Back then, it wasn’t the Uber that you’re familiar with today. It kicks off as a service for customers to hire black luxury cars in San Francisco.
In 2011, Uber revamped its idea and started connecting customers with regular cars. It revolutionized the taxi industry by providing convenience and a low-cost option for public transportation.
From a business point of view, it is a brilliant idea that answers the growing demand for an affordable ride and creates job opportunities for Uber drivers. Since then, Uber’s business model has been adopted in other industries with their respective on-demand delivery apps.
Interesting Taxi App Statistics
- In Q1 2020, Uber has registered more than 1.6 billion users on its app worldwide.
- Uber has more than 5 million drivers at the end of 2019.
- Uber is present in over 900 cities, spread over 93 countries.
- Ride-hailing app penetration is estimated at 19.3% worldwide in 2020.
- The average revenue per user for ride-hailing is approximately $133.72.
- Of the $192 billion global revenue projection in 2020, China is the largest source, with an estimated $55 billion.
Uber’s Business Model
So what is so special about Uber's business model that has fuelled a new startup, "on-demand economy"?
To put it simply, Uber works as a moderator between drivers and riders. It connects passengers who need a ride from point A to point B with drivers.
At first glance, it seems like Uber works like any other taxi company. But the backbone of Uber's business model is that the company doesn't employ drivers, which means it doesn't own the money generated through rides.
Uber makes money by collecting fees from the platform's gross bookings.
What does it mean?
When customers order a taxi through the Uber app, the app charges a 20-25% fee. The fee differs depending on the geographies and class of vehicles. What's more, it's not drivers who decide how much they'll charge for the ride. Uber follows standardized prices per kilometer/mile for different classes of rides/offerings. For example, in New York, a 7.5 km journey can cost from $25 to $280.
Through its model, Uber moved from just being a taxi service to a really helping platform that takes people from A to B in the most affordable, dependable, and convenient way.
Uber’s Value Proposition
Uber's business model was the first step forward to the disruption in the on-demand industry. The next stage was getting passengers and drivers on the platform in the most attractive way.
So the company came up with strong value propositions for both user roles. From my experience, it's a common case when the value proposition stage is underestimated, and startup owners jump into development right away.
My key point here is you need to think of user attraction first. This is what Uber did by offering passengers and drivers a range of benefits. So if you want to start a company as successful as Uber, create a solid value proposition. Here's what Uber offered to passengers and drivers.
Uber's Value Proposition for Passengers
- On-demand cab bookings;
- Real-time tracking;
- Accurate ETAs;
- Cashless rides;
- Lower wait time for a ride;
- Upfront pricing;
- Multiple ride options.
Uber's Value Propositions for Drivers
- Flexibility to drive on their own terms;
- Better income;
- Lower idle time to get new rides;
- Training sessions;
- Assistance in getting vehicle loans;
- Better trip allocation.
How To Build The Next Uber
If you want to start the next Uber, my tip is you don’t actually need to build an exact app like Uber. Why? Cos Uber has been around for more than a decade, and in that span, many other ride-hailing apps are popping up in various countries.
Some are successful in their rights, but others withered away in a competitive industry. These 5 steps are crucial to start an Uber-like business.
Check out your competitors
You can gain a wealth of insights by researching your competitors. While the underlying technologies are similar, each of the competitors differs in terms of values and strategies.
Learning the strengths and weaknesses of the major players allows you to establish a unique value proposition. By doing that, you’ll avoid being just another Uber-wannabe in the market.
Capitalizing on the opportunity gap ensures that your ride-hailing app has a better chance for success.
Know your potential users
It’s always a mistake to create an app without getting feedback from the potential users. Are the users happy with the existing app, or is there a wishlist that will turn your app into the next Uber?
Assumptions will only lead to failure when the app does have the right product/market fit. Instead, you’ll want to conduct surveys individually or in a group to find out the pain points that are yet to be solved.
Besides, you may have a pool of ready-tester from the users that you’ve surveyed.
Choose your business model
Uber's business model I described above isn't cast in stone. You're free to adapt and change the original business model that works for you.
This is what BlaBlaCar did by offering ride-sharing services. Instead of paying for the service, customers pay directly to the driver for sharing the fuel and wear-and-tear expenses.
The critical thing here is to ensure that your business model guarantees a return on investment, efficiency, and flexibility.
Stay focused on user experience
Technical glitches, bad design, and transaction failure are inexcusable when building an Uber-like app. Users have zero tolerance for an app lacking in UI/UX, particularly if it means getting late to their destination.
Again, you can turn to your competitors to find out what’s working and what’s not. It also helps to create a mockup and test it out with a target group of users.
Test with an MVP (Or On Paper)
Forget fancy features like a loyalty program. What matters the most is getting the basic app to the market fast and improvising based on the feedback.
Prior to the launch, you’ll want to focus on the basic features critical for a ride-hailing app. Ensure that these features are functional, flawless, and user-friendly.
By testing with an MVP, you’ll have more accurate feedback as the users are not distracted with unnecessary features.
However, if you’re tight on budget, you can get pretty good results with a paper prototype. The key idea is to get feedback from the users as you chart the way forward.
Tech stack for a taxi app
To build a taxi app like Uber, you’ll need the right tools and technologies.
Uber is pretty transparent on their choice of techstack and here’s an article of it.
If you’re a non-tech startup, going through the list of tools and technologies will be overwhelming. It’s best to leave that to IT professionals that are building the app for you.
Here’s the question.
Should you use the same tech stack that powers Uber’s platform?
I’ll say it depends. Uber’s app has evolved, along with its choice of tech stack. For example, Uber started with PostgreSQL before switching to Schemalesss to meet its tremendous growth rate.
An MVP can be built by almost any techstack, but if you’re planning for growth you’ll want to choose a scalable techstack from the start.
Doing so prevents rebuilding the app from scratch, which costs time and money.
Must-have Features of MVP
- Sign up/login - allows users to create an account and log in to the app.
- Integration with Maps - display locations on a digital map.
- Track user/driver location - Display the location of the user and driver in real-time.
- Pick-up location - Provides the option to set the pickup location on the map or via text input.
- Destination location - Allow users to specify the destination on the map or through text input.
- In-app payment options - Support one type of popular payment methods.
- Become a driver - Provides a form for riders who are interested in registering as a driver.
- Receive order - Allow drivers to view an order from a list.
- Accept order - Let drivers confirm an order.
- View route to the drop locations - Project the best route to the rider’s location.
- Check balance - Allow drivers to check their earnings.
- List of orders - Records of all orders transacted over the apps.
- List of driver applications - Allow admins to view, accept, or reject driver applications.
- Manual Payouts - Allow the admin to execute payouts manually.
- Matching algorithm - Intelligently match nearby drivers that fit the rider’s search criteria.
Nice-to-have Features for the Taxi App
- Pre-booking - allows users to book the ride in advance.
- Vehicle type - Let users choose the type of vehicle for the ride.
- Multiple drop-offs - Enable a sequence of locations in a single ride.
- Trip -history. - Users can check their past records on the app.
- In-app chat/call - Allow riders and drivers to communicate within the app.
- View driver reviews and ratings - Ratings and reviews are shown on the driver’s profile.
- Rate driver and leave review - Allows users to rate and review their drivers.
- Preferred driver - Users can save their favorite drivers on the app.
- Loyalty program/bonuses - Accumulate points which are exchangeable for gifts and rewards.
- View and edit profile - Birthday, and other useful information for targeted marketing in the future.
- Reject order - With this, the driver can turn down orders.
- Rate user - Drivers can now rate their passengers.
- Automatic payout - Payout is automatically done as configured.
- Analytics - Provide insights into driver performance, orders, revenue, rider demographic, and more.
What’s the cost of building an Uber-like app?
Typically, developing an Uber-like app will cost around $30,000 to $40,000. This ballpark range may vary depending on the complexity of the design and list of features added to the scope.
Uber's success started a chain reaction with hundreds of on-demand startups. And the story of this company is truly remarkable. Starting from a value proposition to the business model they created – altogether worked as a booming mix.
The thing I wanted to highlight in this article was that you shouldn't copy Uber's story to start a company like Uber. On-demand transportation and logistics industries are full of uncovered needs. If you study the market well, find the niche and focus on customers' needs – you'll make it a win.
1. How to start a business like Uber?
Uber’s success lies in its business model and the apps that connect the riders and drivers. Its unique business model has been replicated in other industries with great results.
If you’re hoping to launch a business based on Uber’s model, you’ll need to execute the following:
- Competitor analysis.
- User survey.
- Focus on UI/UX.
- Build and test with users.
2. What type of business is Uber?
Uber offers on-demand service apps to the public.
3. What is Uber’s revenue model?
Uber primarily earns from charging a fee on both riders and drivers. It also imposes cancellation charges and takes part in promotional partnerships for additional revenue.