It seems to be one of the fastest growing Internet companies in history.
Obviously, they do the fundamentals well. Good brand. Good experience. Good word of mouth. Good PR. Etc. Etc.
But after my interview with Ryan Graves, the head of Global Operations at Uber (https://www.growthhacker.tv/ryan-graves), it became clear that they are operationally advanced and this is a huge part of their success. I'll explain.
Uber isn't just a single startup, it's essentially dozens of startups rolled into one because every time they enter a new city they have to establish themselves from essentially nothing (except whatever brand equity has reached the city ahead of them). This means finding/training drivers, marketing to consumers, and building out local staff to manage operations for that city.
This is where Ryan Graves comes in. He has a protocol of everything that must be done, and in what order, and by who, to ensure the best chance of success in a new city.
So how has Uber grown so fast? Essentially, they figured out how to grow in one locale and were relentless about refining their launch process to recreate that initial success over and over in new cities. No plan works for every city, and they've had to adapt in many situations, but it is still a driving factor for their success.
Uber grew quickly because of a savvy marketing ploy- appeal to people to get what they perceive as quick and easy money. Uber is essentially a variation on the "make 1000 dollars a day working from home" marketing ploy.
They shift all the risk to their "partners" and skirt regulations and requirements because "Uber" is just a dispatch service ( their contention).
They have grown so rapidly because tech dependent millennials use their phones for everything and as far as the consumer is concerned, it is "cool" and "easy".
I am waiting. The lawsuits are just starting to roll in. Most Uber "partners" have yet to deal with the 1099 tax hassle. Lawyers always go for "deep pockets" so lawyers are already trying to find ways to hold Uber accountable for the actions of its "partners". "Partners" are already suing because under the laws of many states they are employees and are entitled to employee benefits from Uber.
Uber has hit it's zenith, municipalities are already starting to adapt their regulations to have Uber,Lyft, and all "sharing" type Aps included.
Uber has made their boatload of cash. When it starts to look like they will lose the lawsuits or become subject to industry rules and regulations, I look for them to fold up their tent and go.
That's the name of the game. Make your money fast and get out when it looks like the tide is turning, then go on to something else.
Like most great consumer technology companies: through a maniacal focus on delivering the best end-user experience, and relentless operational execution.
It is not one of the fastest-growing internet companies in history. It is however, as Bronson points out, the best execution of a city-by-city, mobile service company roll-out. I believe that any localized service provider requires a significant "on-the-ground" presence to succeed and as Bronson articulates, Uber has developed an operational "playbook" that through continuous iteration, has produced great results.
Uber has spent extensively to do this, and has the best execution, but has also had failures where their playbook just hasn't worked, and cities have been abandoned or "postponed."
Uber's total customer acquisition cost is very high, but they have also sold investors on the belief that there is a tremendous lifetime value per customer (I believe this to be true), so they can spend high up-front. But their actual month-over-month growth of net new customers in most cities is not tremendous, nor does it have to be.
It should also be noted that Uber has almost become a verb around mobile-based "one click" service offerings. Companies pitch on the basis of "Uber for x", people (especially in SF) talk about wanting an "Uber for y", so there is tremendous value in the brand they've managed to create.
I think what it's taken for Uber to succeed should be considered a "cautionary tale" for many startups looking to replicate their playbook. The type of talent required and the capital required for a national, or even multi-city service is incredibly daunting. That said, done right, it's one of the most valuable assets.
One of the reasons it took off so fast in San Francisco is because of an incredibly change-resistant, blockheaded bunch of taxi-cab companies that fought every increase in the number of taxi licenses in the city for decades, even after demand far outstripped the taxi companies' ability to deliver. The cab companies also got incredibly lazy and bad at customer service. There was so much more demand than supply that a taxi driver did not need to excel or even be basically competent to stay busy and get plenty of passengers. After years of taking cabs that reeked of cigarettes (and other things), having cabbies talk on the phone, text, and otherwise not pay attention to what they're doing, or who relied on their GPS devices more than their knowledge of the city's streets, customers were delighted to have an alternative. And when the cab companies just crossed their arms and stamped their feet and refused to evolve, they were rolled over by the social media/technology wave. I don't know how it rolled out in other cities, but in San Francisco, Uber's rise was greatly enhanced by the utterly dinosaur-like behavior of the taxi companies.
Uber has grown so fast because it attracted a great deal of capital to fund its business model. It was able to attract capital because it skirts/ignores traditional safety and financial regulations on the one hand and takes advantage of desperate and unemployed people willing to put their capital to work for free (ie their cars) on the other. The combination of rule breaking and exploitation appeals to the libertarian and capitalist leanings of VCs.
They tapped into existing infrastructure. Sure, they do have excellent marketing and PR (sometimes), but you can only grow as fast as you can scale. Uber could scale seamlessly as their drivers and vehicles were already in place. Anyone with a fairly new vehicle and a clean history is 'employable' by Uber.
The tech and operations are HOW they scaled. But the demand and service quality are WHY they scaled.
100 years ago, anyone with a car could drive you across town for a fee. It was a dangerous job and, left unregulated, became difficult to provide safety, ensure supply/demand matching, etc. So cities stepped in and regulated. Taxi commissions became entrenched, powerful and politically mafia-esque. They focused on core areas where they could get the most business with certainty: airports and hotels. You could only drive if you had a city-issued medallion and cities set caps on the number they issued. Those who had medallions fought cities to prevent new medallions from being issued to reduce supply and increase demand.
Supply & demand grew increasingly imbalanced. And, as more young professionals entered cities with fewer parking spaces for cars, demand grew rapidly- but taxis did not serve this market as they focused on hotels and airports.
Uber entered via black cabs and then P2P. Neither of which required medallions, thus circumventing the taxi supply/demand constraint. Technology enabled them to overcome the trust and safety issues of previous jitney services, increase speed and reliability, and enabled them to scale to a new market: urbanites.
Growing parking constraints from increasing urbanization, increasing ubiquity of smartphones/apps, changing (younger, professional) demographics of cities, and deteriorization of both taxi and transit service quality have all supported the growth and demand for their service.
Note that their growth has not been universal across all markets. Even though they are in 300 cities, most of their demand comes from a handful of cities sharing certain similar characteristics for certain types of trips at certain times.
I believe the main reason Uber and AirBnB both grew extremely fast is that they adopted a new (is it really though ?) approach to startups: fake legality until you make it legal.
The idea is to pick an illegal activity in a somewhat grey area and to start making money without bothering about legal until you're big enough to lobby your way out of it, either by way of "job creation", PR or just money.
The main reason most people did not try to build Uber or AirBnB before is because they stopped at the analysis step with the conclusion that it would be illegal, against regulations and thus an unwinnable battle.
Uber delivers an awesome affordable service by a) offering a taxi service, b) circumventing all taxi laws, regulations, ecosystem and related costs and c) enabling their drivers to not declare their revenue.
By cutting a few middle men, spending $0 on regulatory compliance and having a few "a little money on the side" drivers, you end up with better prices, happier drivers and none of the sluggishness of bureaucratic processes that prevents simple reviews from ruining a driver's career instantly.
At this point in time, a lot of the services offered through Uber are at least partially illegal.
Simply put: a strong business model, where consumers can't but be seduced by their offer. They solve multiple issues while getting the gob done (move you from A to B) and they make it easy for you to switch from your previous solution to theirs. At the same time, they also solve the issue of drivers who want to have an additional income.
If you are interested in finding up more about strong business models (vs. weak ones which command what I call "booty call clients"), check out serenademaio.com
The #1 reason Uber has grown is because they redefined the industry and created a new market category which labeled them the category king. A category king redefines the way we live, do business, and operate. Combined with solving a unique problem and conditioning the market to receive that problem, they have been able to grow and scale quickly.
Remember, Uber operated for about 2-3 years in California before they became main stream. They have no cars yet they are the largest car service. It gave people a job and the freedom to do it when they want and how long they want. On all fronts, they redefined the way we live our life and that's what makes them the Category King. No matter what Lyft does, they will never overtake Uber because they weren't first and they didn't redesign an industry to create their own category.