Wednesday, October 26, 2011

The Will to Ride: Über and the Cab Companies

Anyone who has ever tried to call a cab in San Francisco will identify with the crucible in which new transportation communication strategies are forged in Silicon Valley.  Calling a cab is often a painful enterprise, more akin to pulling teeth than finding an easy way home.  Traditionally, there are two ways to arrange a taxi ride: customers can stand with one foot on the sidewalk and one in the street, raising their arm high above the head and hoping to be seen by the traffic whizzing by, or one can call a taxi company and hope that the gruff radio dispatcher will send one to meet them in a timely and efficient fashion.

Uber (formerly ubercab) aims to change the whole game around about the way that taxis and limousines are hailed, priced and held in contemporary thought.  Rather than hiring its own drivers and stocking its own fleet, Uber works to facilitate connections between drivers and potential passengers. Uber is downloadable as an application to iPhone and Android phones. Once the application is loaded, it stores your payment information and automatically calculates the fare based upon the distance traveled and/or the time spent waiting. Rates vary by city but typically it costs about $8 to hail the cab and approximately $5/mile after that, unless traffic is going less than 11mph, in which case a fee is assessed for the time spent waiting.

There have been a number of minor hiccups for the service.  First, on October 20th, 2010, Ubercab received a cease and desist notice from the San Francisco Metro Transit Authority & the Public Utilities Commission of California. On October 24th, Uber decided to continue operating under a new name (dropping the cab) and educating the regulatory bodies about how it satisfies the burden of any applicable regulations.  Although Uber received some flak from taxi companies, they remained in service despite penalties up to $5,000/instance of operation and potentially 90 days in jail per extended day of operation.  The complaint from the city was primarily based on the notion that Ubercab was operating an unlicensed taxi service, but Uber has been successfully able to argue that it is actually just facilitating communication between car and rider.

In June of 2011, scores of taxi drivers decided to strike to protest new credit card fees which were accompanied by delays to cab fare increases.  Uber decided to step in and fill the gap and offered 50% off for rides through its service.  This strategy was successful and Uber continues to grow.  Uber’s success comes as no surprise when one takes into account the pedigree of its founders.  Garrett Camp leads StumbleUpon’s product and business strategy at the same time as he advises Uber, and Travis Kalanick has a long history of successful ventures, including Red Swoosh and Scour.  Uber received an additional $11 million in venture funding from Benchmark Capital in February of 2011.


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