How Uber Transformed Transportation Worldwide

It‘s hard to remember what life was like before Uber. With the tap of a button on your smartphone, you can hail a ride that arrives within minutes to take you wherever you need to go. No more wandering the streets trying to wave down a cab or wondering when the next bus will arrive. Uber has made on-demand transportation a reality for millions of people in over 900 cities across 69 countries.

But how did this revolutionary service get started? Let‘s take a look at the history of Uber, the technology that powers it, and what aspiring entrepreneurs can learn from Uber‘s incredible journey.

Uber‘s Humble Origins

The story of Uber begins, fittingly, with a simple idea. In 2008, Travis Kalanick and Garrett Camp were attending a conference in Paris. After the conference wrapped up, they found themselves standing on a street corner in the rain, unable to hail a cab. In that moment of frustration, they thought "What if you could request a ride from your phone?"

This inspired the initial concept for Uber: a timeshare limousine service that could be ordered via an app. After the conference, the duo went their separate ways, but when Camp returned to San Francisco, he continued to be fixated on the idea and bought the domain name UberCab.com.

In 2009, Camp began working on a prototype for UberCab as a side project. He persuaded Kalanick to join as UberCab‘s ‘Chief Incubator‘ and the pair officially launched the service in May 2010 in San Francisco. At first, the service only offered black luxury cars and the cost was about 1.5 times that of a taxi. The goal was to offer a chauffeur experience at a lower cost than traditional limo services.

In late 2010, Ryan Graves became Uber‘s first employee and was named CEO. He implemented a number of important improvements like switching to a cashless model, adding cars other than black limos, and rebranding from UberCab to Uber. With its sleek app and revolutionary concept, Uber started to gain traction, completing its millionth ride in the summer of 2012.

How the Uber Magic Happens

So what is the technology that makes the Uber experience so seamless and magical for riders? At its core, Uber relies on four key systems:

1. Mapping and routing: When a rider requests a trip, Uber‘s system must locate available drivers in the area and choose the optimal vehicle based on the rider‘s location, desired car type, and other factors. It utilizes mapping services and real-time traffic data from companies like Google, Apple, and Bing to calculate ETAs and determine the fastest route.

2. Matching and dispatch: Once the mapping system has identified the optimal vehicle, the matching system pairs the rider with their driver. The dispatch system then sends trip information to the driver‘s app so they know where to pick up the rider. Complex algorithms power the matching and dispatch processes, taking into account things like driver proximity, direction of travel, and previous ride history.

3. Payment processing: One of Uber‘s key innovations was a cashless payment system. After a trip is completed, the rider‘s pre-saved credit card is automatically charged the fare plus any tip. Uber originally used Braintree for payment processing. In 2015, it started moving to its own custom solution called Charon.

4. Ratings and reviews: Uber was an early pioneer in using a two-way rating system where riders and drivers rate each other after each trip. High ratings are critical for drivers to continue getting work. Riders with low ratings may have a harder time getting picked up. Machine learning models analyze ratings and reviews to identify problematic behavior and maintain high quality on the platform.

To power these systems, Uber‘s engineering team relies on a variety of technologies:

• The Uber app is built in a mix of Objective-C, Swift (for iOS), and Java (for Android).
• The backend utilizes Node.js, Python, Go, and Java running on AWS and its own data centers.
• It uses PostgreSQL and MySQL for its relational databases and Redis and Cassandra for NoSQL.
• Stream processing technologies like Apache Kafka, Apache Flink, and Apache Spark handle the massive volume of real-time data.
• Machine learning models are built using libraries like TensorFlow, PyTorch, and scikit-learn in Python.

Of course, this is a simplified view and Uber‘s actual tech stack is large and constantly evolving. But this gives a high-level sense of some of the key technologies that power the Uber platform.

Becoming a Global Phenomenon

With a compelling service and a top-notch technical foundation, Uber shifted into hypergrowth. Just three years after launch, Uber was already operating in 35 cities across 14 countries.

A few of the key milestones in Uber‘s rise:

• June 2010 – UberCab launches in San Francisco
• May 2011 – Uber closes a $11M Series A funding round and drops "Cab" from its name
• December 2011 – Uber begins international expansion in Paris
• July 2012 – Uber rolls out UberX, allowing people to drive for Uber in their own cars
• August 2013 – Uber launches in India and Africa, its first forays into Asia and Africa
• June 2014 – Uber begins UberPOOL carpooling service
• May 2015 – Uber completes its 1 billionth trip
• July 2016 – Uber raises a $1.15B leveraged loan, valuing the company at $62.5B
• May 2019 – Uber goes public, raising $8.1B in its IPO for a market cap of $75.5B

According to Uber‘s IPO prospectus, it had 91 million monthly active platform consumers at the end of 2018 and operated in over 700 cities across 63 countries. More than 10 billion trips have been completed on the platform to date. Its revenue in 2018 was $11.3 billion (up 42% year-over-year) and its core business had finally reached profitability, although heavy investments in autonomous driving technology, scooters, freight and other new initiatives kept the overall company in the red.

The Uber Business Model

Clearly the demand and growth are there, but how does Uber actually make money? As a marketplace, Uber‘s business model is to take a commission from each transaction on its platform. Essentially it‘s a middleman connecting people who need rides (demand) with drivers (supply).

The exact commission varies by city and vehicle type, but is typically around 25% of the total fare. So if a rider pays $10 for a trip, $2.50 goes to Uber and $7.50 goes to the driver. Uber also charges riders a "safe rides fee" and "booking fee" which it keeps in entirety.

On the surface, a 25% take rate sounds quite lucrative. However, there are a number of costs that eat into that margin, including:

• Payment processing fees on each transaction
• Extensive rider and driver support
• Driver incentives and rider discounts to juice growth (funded by capital)
• Marketing and advertising to attract riders and drivers
• Insurance for drivers
• Massive R&D investments in autonomous driving, flying cars, delivery robots, etc.

As a result, Uber posted a GAAP loss of $8.5 billion over 2015-2018 (although much of this was due to one-time stock compensation expenses related to the IPO). As it matures, Uber will need to balance growth with profitability.

The Cost to Build an Uber Clone

Given Uber‘s success, many entrepreneurs are eager to build the next great on-demand service, whether it be for laundry, dog walking, massages, tutoring, or marijuana delivery.

While the cost to build an app like Uber can vary depending on the features, platforms, scale, and location of the development team, a ballpark estimate is $50,000 to $150,000 to build an MVP (minimum viable product).

Here‘s a rough breakdown:

• $20,000 – Backend and web development
• $15,000 – Android app development
• $15,000 – iOS app development
• $15,000 – UI/UX design
• $10,000 – Project management and QA
• $25,000 – Buffer for ad ditional features and changes

Keep in mind that development is just the beginning. You‘ll also need to invest heavily in marketing to attract both supply and demand to your marketplace. Uber spent almost $3.2 billion in sales and marketing between 2014 and 2018. Not every startup will have pockets that deep, so it‘s critical to get the unit economics right.

Keys to Uber‘s Success

Looking back, it‘s clear Uber tapped into something special. A few elements were key to its success:

1. Timing: Uber launched just as smartphone adoption was exploding. The proliferation of reliable mobile broadband allowed it to deliver a magical experience from day one.

2. Clear value prop: Uber offers an objectively better experience than taxis at a lower price point. The value is immediately apparent the first time you use it.

3. Two-sided marketplace: By aggressively signing up both riders and drivers in each market, Uber jumpstarted the flywheel of supply and demand that powers its business.

4. Simplicity: Uber took something incredibly complicated – urban transportation – and boiled it down to a simple, elegant interface: press a button, get a ride.

5. Localization: Uber was quick to expand globally but was deliberate about localizing the service for each market. It accepted cash in some countries, integrated with local apps in China, and added motorbikes and rickshaws in certain markets.

Lessons for Aspiring Uber Builders

While it‘s unlikely that we‘ll see another startup grow as rapidly as Uber, its journey still offers valuable lessons for entrepreneurs:

1. Look for real pain points. Uber solved a genuine problem (urban transportation) that affects millions of people every day. Too many startups are solutions in search of a problem.

2. Take advantage of new technologies. Just as Uber piggybacked off the rise of smartphones, new startups can leverage emerging tech like machine learning, augmented reality, blockchain, and more.

3. Focus on the user experience. Uber became a verb because using it is so easy and seamless. Invest in design and user experience from the beginning.

4. Bet on network effects. Uber is a classic example of a business with built-in network effects – it becomes more valuable to both riders and drivers as more people use it. Choose ideas that get stronger as they scale.

5. Localize, but with a global mindset. Uber expanded globally early on, but took the time to tweak the model for each geography. Nailing product-market fit requires an intimate understanding of the market.

6. Move fast. Uber often pushed into markets quickly and dealt with the regulatory consequences later. Speed is a competitive advantage, especially in a crowded market.

Of course, following in Uber‘s exact footsteps isn‘t advisable or even feasible for most companies. But the broader lessons around problem-solving, elegant design, rapid growth, and localization apply whether you‘re building a ride-hailing app, a B2B SaaS tool, or a consumer product.

So study Uber‘s successes and failures, learn what you can, and then put your own unique stamp on the world. You may not end up creating an entirely new category like Uber did, but you just might build something that makes life a little bit better or easier for a lot of people. And that‘s an admirable goal for any startup.