As anybody who has any experience living in any kind of urban environment will be able to tell you, the advent of lift-sharing services such as Uber and Lyft have drastically changed the automobile landscape, especially when it comes to convenience and what was previously thought possible in terms of how much people can charge to economically drive other people around.
Taxi drivers will be the first to gripe about it, and with good reason—what has long been a noble, upstanding profession (just take a look at the exam black cab drivers have to take in order to be able to legally operate in London) is in serious danger of being swamped completely by these newly founded companies, whose revolutionary approach to the problem of lift-sharing has made a serious dent in the taxi industry.
Not least among the most impressive things about Uber is the fact that their rates are much lower than one would expect to be charged for what’s essentially a rent-a-chauffeur service. Added to the popularity of the new technology is the widespread availability of drivers: depending on the area you live in, there could well be dozens of Uber drivers waiting to be hired within 5 minutes of wherever you happen to be standing. As it happens, you’re probably on personal terms with at least one person who drives for Uber—it really is that possible.
The way the service works means that users can either opt to drive full-time for Uber, or they can use it as a side hustle in order to supplement their main source of income. It’s clear to see how the wide range of possibilities available would appeal to a larger swathe of the society than would the typical taxi-driving profession, which has historically been monopolized by a few big countries and has always been a full-time job that required intimate knowledge of whichever urban landscape the taxi driver in question was operating in.
Indeed, that was a large part of the charm—taxi drivers could be relied upon to be charming, earthy individuals who knew as many street names as they had stories to tell. Scorcese’s masterpiece, Taxi Driver, brought the profession to mainstream media attention, as well as giving Robert DeNiro arguably his best role to date.
The Moral Question
As with any debate, there are bound to be proponents on each side, all of whom are capable of articulating well thought-out arguments with a basis in reality to support their point of view. That is, after all, the inevitable consequence of a debate which has two reasonable positions to take.
Whether you think Uber is fighting against the monopolization of an industry by a few big heavy-weights (and as economics tells us, any monopoly is bad for the market in which it’s taking place, given that according to capitalism’s tenets it’s competition that drives innovation, and a monopoly is the exact opposite of competition), or whether you think this new company is a crass, selfish way to take aim at a historical profession, much in the same way AirBNB is causing problems for traditional B&B owners, is going to come down to personal preference. We have absolutely no interest in telling you how you should feel about this new direction the entire service industry appears to be headed in.
What we are interested in, however, is exploring the facts of the matter and presenting them as clearly as possible, with a view to making it easier for you to form your own opinion. When it comes down to it, using services like Uber can be considered an almost moral choice—you’re welcome to pretend that you aren’t directly harming traditional taxi drivers by hopping into an Uber, but whether you acknowledge it or not, it’s happening.
It seems clear to us that one of the main questions that must be answered is to what extent Uber is taking advantage of both its users and the economic climate, and to what extent they’re simply providing a service out of some sort of consumeristic altruism, only pocketing as much as they need to in order to be profitable.
And it seems equally clear to us that the way to answer this question, if not the answer itself, lies in a frank and honest examination into exactly how much of a cut Uber take as a percentage from the population who make up its drivers, all of whom come from different social strata and have different needs that must be met. When it comes down to it, this is going to be the crucial deciding factor as to whether or not Uber and companies like it are more of a positive impact than a negative one.
With that in mind, we’ll get straight to the discussion, which will require a brief overview of the company’s recent history in order to properly set it in context; because without the requisite context, any hard figures (which we’ll get into when the time is right) are going to be difficult to analyze correctly, and could even wind up being a little misleading.
So, with that introduction out of the way, let’s answer this all-important question when it comes to the service side of the automobile industry, which occupies a huge chunk of the overall revenue flow. How much of a percentage do Uber actually take? And is its overall impact on the vehicle world good or bad, when viewed objectively?
The Sharing Economy
Uber can owe their ability to fit into the current economic landscape to a concept known as the ‘sharing economy.’ Previously, it was widely held that for companies to nee successful, they must be competitive. Sharing was the very opposite of the ideal embodied by the capitalism we’re all familiar with, growing up and living in Canada, the USA, Europe and Australia, most especially. But when a few companies came along and started to recognize that there was a market out there for people to share ideas, products, and services, we suddenly observed that there was a niche waiting to be filled which nobody had ever seen before.
Founded in 2009 by Garrett Camp and Travis Kalanick under the name UberCab, Uber had humble and generally reasonable origins. According to the story, Camp had spent $800 on hiring a private car to take himself and his friends to a party on New Year’s Eve, and (quite rightly, we might add) felt that this was a totally unreasonable sum to be paying for such a straightforward service. The real stroke of genius was in the logical reasoning, which is quite sound, that led him to deduce that if multiple people were allowed to share the cost of the ride, it would be cheaper for everybody involved.
Uber (who gained their now-ubiquitous trademark name in 2011) only really took full advantage of the possibilities of the sharing economy in 2012, however, when they rolled out UberX. This provided the functionality for regular people to drive their own car for Uber: before then it had essentially just been a more communal way to hail a cab. Ever since then, they’ve gone from strength to strength, rolling out more advanced carpooling services, self-driving cars, the well-known meals-on-wheels spin-off of UberEats, and even a helicopter service, one after another.
It’s also fair to say that they’ve been incredibly successful at what they’ve been trying to do. Nowadays they operate across 6 continents (setting up chauffeur services in Antarctica remains a challenge), and in 2016 they grossed $20 billion.
When they floated their company on the public stock exchange, however, for the first time in May of 2019, they were valued at $80 billion. While that’s an impressive figure, it’s only 80% of the value they had assumed they would be traded at, and was widely considered to be a bit of a disaster in the financial world.
There have been a whole range of reasons touted for why the company ‘failed,’ if we can even use the term in relation to the figure of $80 billion; chief among them was the fact that for one, Uber had never turned a profit (it was a string of corporate-culture scandals that eventually forced their co-founder Travis Kalanick to resign, although he still holds around $5 billon’s worth of shares). Another reason for the flop could have been the re-emergence of US trade tensions with China, which was untimely, if it was nothing else.
But the most telling reason for the general public’s lack of faith in Uber could well be the fact that they’re not quite sure whether or not Uber is as altruistic as they say they are. Which brings us to the main question of this article, which we feel confident we can answer now that we’ve provided the necessary backdrop of information. What percentage does Uber take from their drivers?
Passengers pay a flat-rate booking fee, as well as per minute and per mile of the ride they wind up taking. Initially, Uber floated the idea that they were only taking a nominal ‘service fee,’ although this was eventually shown to be artful advertising more than it was hand-on-heart truthfulness.
In actual fact, Uber takes much more from their drivers than the 25% they claim according to their booking fee model. As it happens, they can actually take as much as 42.75% of every fare, with the closer the fare is to the minimum amount allowed, the higher the percentage they take of the total amount. And bear in mind that these statistics are related to UberX drivers, which is the version of the platform that allows average Joes to turn their own cars into taxi cabs. More information about the subject, as well as the processes used to deduce the true cut the companies take, can be found here, which is a webpage that includes a fantastic infographic on the whole state of affairs.
As we can now see, Uber hasn’t always been completely transparent about the amount of money they take for themselves out of every fare that goes through the company’s service. This lack of total honesty may have played a part in the company’s—relatively—dismal performance on the stock exchange, and could well have a say in how you, personally, consider the company.
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