Uber (company)

• Date Founded: 2009
• Industry: Transportation, Mobile technology
• Corporate Headquarters: San Francisco, California
• Type: Public

Uber is a popular app-based ride-hailing service. Uber functions much like a standard taxicab service, in that clients request transportation to a specified destination in exchange for payment. Despite this "vehicle-for-hire" aspect, however, Uber has largely not officially been recognized as a taxi service by local, state, or national government agencies, which has proven advantageous to Uber but has generated controversy and tensions with taxi drivers and government agencies. Eventually operating in several cities and countries worldwide, despite the company facing some scandal and backlash, Uber's popularity as a service surged after its founding in March 2009 by tech entrepreneurs Travis Kalanick and Garrett Camp.

Aside from a brief period in 2010, Kalanick served as the CEO and codirector of Uber until his resignation in June 2017, after which a fourteen-person executive team took over executive duties until Dara Khosrowshahi was named the new CEO in late August. In 2018, Uber filed for an initial public offering, and in May 2019, the company went public. At the time, the company was valued at $120 billion, but on May 9, 2019, the company made history with the largest dollar loss on a company's first day trading in US history. As a result of the COVID-19 pandemic, the company suffered a significant decrease in patronage and was forced to lay off nearly 15 percent of its workforce in 2020. However, the company continued to acquire profitable assets and enhance its additional operation as a food delivery service, reporting an annual profit in 2023.

Background

The idea for a mobile-application-based passenger transportation service was reportedly born when Kalanick and Camp had difficulty hailing a taxi on a cold, snowy night in Paris after attending a 2008 conference. This incident prompted Kalanick and Camp to contemplate similar difficulties riders sometimes face in hailing taxis in their city of residence, San Francisco. Kalanick and Camp aimed to create a mobile application, or app, that would enable riders to request a vehicle for hire on demand, and their company was established in March 2009 as UberCab. In January 2010, Camp and Kalanick conducted a test run in New York City, which consisted of three cars cruising through the streets of Lower Manhattan while a small number of customers summoned a car through a mobile app. Uber fully launched service in San Francisco on July 5, 2010, and during its first several months of operation, the company primarily focused on gaining a strong foothold in the Bay Area of Northern California. Initially, Uber used only black Lincoln Town Cars as its vehicles and hired limo drivers to operate its vehicles. The company changed its name from UberCab to Uber Technologies, Inc., in October 2010, in response to a cease-and-desist order from the San Francisco Municipal Transportation Agency and the California Public Utilities Commission on the grounds that Uber was not an officially licensed taxicab service.

As Uber’s popularity and revenue grew, service expanded to other cities throughout the United States and, eventually, internationally. Uber established service in New York City in May 2011, and in December of that year, the company began its first overseas operations in Paris. Uber services launched in China and India in August 2013. By 2016, Uber operated in more cities in these two nations than in any country other than the United States.

Initially, Uber rides were slightly more expensive, on average, than taxi fares (as a result of both the higher costs of operation incurred by a start-up company and the higher costs of operating its high-end Lincolns). Then, in July 2012, Uber launched the UberX service option using ordinary passenger vehicles, such as the Toyota Prius, and relying on nonprofessional drivers. Consequently, UberX prices were about one-third the cost. By 2016, Uber offered more than six different grades of service, each featuring different classes of vehicles, ride-sharing criteria, pricing, and professional or nonprofessional drivers. In addition, the company introduced UberPOOL, a hybrid carpooling and taxi service that picked up and deposited multiple customers during one trip, with all of the riders’ destinations along the same route. In certain areas, UberTAXI hailed conventional taxis for customers but allowed for app-based payment.

Uber also brought its on-demand approach to the delivery industry. Using its independent drivers and real-time tracking capabilities, UberRUSH (est. 2015) offered pay-as-you-go, one-way-trip pricing for businesses sending packages, while UberEATS (est. 2014) delivered food to customers from an array of local partner restaurants.

Overview

Uber has become an important mode of transportation in numerous cities across the United States and, increasingly, in large cities of other nations as well. However, as Uber’s presence and popularity has grown, so has the controversy and criticism directed toward the company. Major objections to Uber have been voiced by taxi drivers and taxi unions, as well as elected officials, in nations throughout the world. Other questions have surrounded Uber’s treatment of its drivers, safety measures, and the extensiveness of its pre-employment background checks.

Because Uber offers urban transportation from a point of origin to a predetermined destination in exchange for a fee (making it, essentially, a taxi-like enterprise in terms of service rendered), taxi drivers and their unions generally view Uber unfavorably as siphoning business away. Some consider Uber an illegal enterprise. US taxis are required to obtain medallions (official licenses issued by local or municipal governments to legally operate), which, in major metropolitan areas, can cost several hundreds of thousands of dollars. However, because Uber was not officially designated a "taxi" company, it was not required to purchase medallions. Similarly, taxis may be required to meet more stringent regulations regarding vehicle operation, driver background, and taxation.

Furthermore, most taxi drivers drive as their full-time occupation, while most Uber drivers only drive part-time. A company-sponsored study published in 2015 found that Uber drivers earned higher hourly median wages than taxi drivers and limo chauffeurs in major US cities. Those higher wages derived, in part, from Uber not having to pay licensing fees, local taxes, vehicle maintenance, insurance, fuel, or employee benefits. Because the drivers are responsible for some of these costs, their net income sometimes remained lower than that of a regular taxi driver despite the higher wages.

As a result of these issues, numerous cities and nations have taken action to either impose fees or implement restrictions on Uber. For example, in January 2016, a court in Paris fined Uber $1.3 million to compensate taxi unions for Uber’s violation of French transportation laws. In India, Karnataka banned Uber and its major competitor there, Ola, from engaging in surge pricing (hiking rates in response to higher levels of demand). However, a federal judge dismissed a case brought by Boston taxi companies in which they had asserted that the failure to regulate Uber according to the same standards as taxi companies was a violation of the right to equal protection. Later, in December 2017, the European Court of Justice ruled that Uber was, in fact, a transport service, rather than (as the company had argued) an information society service, and was thus subject to local transport regulations in European Union (EU) member states.

Uber has also faced criticism regarding customer safety. Although the company conducts pre-employment criminal background checks for drivers, critics claim that these checks are not as thorough or stringent as those taxi drivers must undergo. This concern intensified after an Uber driver in Kalamazoo, Michigan, killed six people in a February 2016 shooting spree. There have also been numerous allegations of sexual assaults by Uber drivers both in the United States and elsewhere.

The status of Uber drivers as contracted rather than full-time employees also continued to cause consternation among drivers and critics as well as legal battles. In January 2017, Uber agreed to a settlement of $20 million after the Federal Trade Commission (FTC) filed a complaint with the federal court in San Francisco claiming that the company, specifically between the years 2013 and 2015, knowingly made false statements regarding the amount of money that drivers could make and how much it would cost drivers to finance a car to participate in the service. FTC investigations revealed that the majority of Uber drivers were making far less than the median income Kalanick had claimed on the company's website.

In the first few months of 2017, Uber faced a series of controversies that ultimately led Kalanick to resign from the company in June. This included opposition of Uber's continued service to John F. Kennedy International Airport despite other transportation companies protesting US president Donald Trump's executive order banning travelers from seven countries with majority Muslim populations from entering the United States. Additionally, current and former employees issued public claims of sexual harassment occurring within the company that had been reported but ignored, as well as experiences of an overall hostile workplace culture. At the same time that Kalanick apologized when a video was released in which he argued with an Uber driver and was dismissive about concerns regarding drivers' wages, the company faced a lawsuit related to self-driving technology and revelations of wrongdoing related to regulation evasion exposed by a New York Times investigative report.

After Kalanick's departure, a group of fourteen executives was formed to temporarily oversee the day-to-day running of the company. In August 2017, the board selected then–Expedia CEO Dara Khosrowshahi to take over as CEO of Uber. In November, Khosrowshahi issued a new set of cultural values for Uber, including one that states, "We do the right thing. Period."

In 2018, Uber temporarily paused testing of self-driving vehicles after pedestrian Elaine Herzberg was killed by one of Uber’s self-driving vehicles in March. While authorities disagreed on whether the vehicle was at fault, Uber settled with the victim’s family and did not face criminal charges. Uber did not resume self-driving vehicle testing until December 2018, under more restrictions. The same month, Uber filed for an initial public offering—the process to begin selling stock to outside investors—seeking a valuation between $90 billion and $100 billion.

The number of reported assaults, kidnappings, and murders committed by ride-sharing drivers or people posing as ride-sharing drivers grew in the late 2010s, leading many to call for added security measures to be taken by both passengers and Uber drivers. Despite the difficulties of 2020 and the pandemic, the company acquired a rival food delivery service for $2.65 billion as it continued to expand this part of its service. Having committed to being fully electric globally by 2040, the company additionally launched initiatives such as Uber Green in an attempt to meet that goal.

Bibliography

Alderman, Liz. "Uber Dealt Setback after European Court Rules It Is a Taxi Service." The New York Times, 20 Dec. 2017, www.nytimes.com/2017/12/20/business/uber-europe-ecj.html. Accessed 22 Jan. 2018.

Bacon, John. "Uber Driver Arraigned on 6 Murder Counts: What We Know." USA Today, 22 Feb. 2016, www.usatoday.com/story/news/nation/2016/02/22/uber-driver-accused-killing-6-what-we-know/80725680. Accessed 10 July 2017.

Badger, Emily. "Now We Know How Many Drivers Uber Has—and Have a Better Idea of What They’re Making." The Washington Post, 22 Jan. 2015, www.washingtonpost.com/news/wonk/wp/2016/01/20/now-we-know-how-many-drivers-uber-has-and-have-a-better-idea-of-what-theyre-making. Accessed 10 July 2017.

Carson, Biz, and Caroline Cakebread. "Uber's CEO Has Resigned—Meet the 14 Executives Running the Company." Tech Insider, Business Insider, 21 June 2017, www.businessinsider.com/uber-executives-power-during-ceo-leave-2017-6/#david-richter-svp-of-business-2. Accessed 24 July 2017.

Chapman, Michelle. "In a First for Uber since Becoming a Public Company, an Annual Profit." The Seattle Times, 7 Feb. 2024, www.seattletimes.com/business/in-a-first-for-uber-since-becoming-a-public-company-an-annual-profit/. Accessed 17 Oct. 2024.

Chen, Liyan. "At $68 Billion Valuation, Uber Will Be Bigger Than GM, Ford, and Honda." Forbes, 4 Dec. 2015, www.forbes.com/sites/liyanchen/2015/12/04/at-68-billion-valuation-uber-will-be-bigger-than-gm-ford-and-honda. Accessed 10 July 2017.

Dockery, Nami. "Three Women Sue Uber for Negligence." WLTZ, 11 Apr. 2019, www.wltz.com/2019/04/11/3-women-sue-uber-for-negligence. Accessed 11 Apr. 2019.

Fowler, Susan J. "Reflecting on One Very, Very Strange Year at Uber." Susan J. Fowler, 19 Feb. 2017, www.susanjfowler.com/blog/2017/2/19/reflecting-on-one-very-strange-year-at-uber. Accessed 24 July 2017.

Franklin, Joshua, and David Randall. "Lyft's Stock Slide Casts Long Shadow on Uber's IPO." Reuters, 11 Apr. 2019, www.reuters.com/article/us-uber-ipo-lyft/lyfts-stock-slide-casts-long-shadow-on-ubers-ipo-idUSKCN1RN0R0. Accessed 11 Apr. 2019.

Healy, Jack. "They Thought It Was Their Uber. But the Driver Was a Predator." The New York Times, 4 Apr. 2019, www.nytimes.com/2019/04/04/us/fake-uber-driver-assaults.html. Accessed 11 Apr. 2019.

Isaac, Mike. "How Uber Deceives the Authorities Worldwide." The New York Times, 3 Mar. 2017, www.nytimes.com/2017/03/03/technology/uber-greyball-program-evade-authorities.html. Accessed 24 July 2017.

Isaac, Mike. "Uber Buys Postmates for $2.65 Billion." The New York Times, 6 July 2020, www.nytimes.com/2020/07/05/technology/uber-postmates-deal.html. Accessed 2 May 2023.

Isaac, Mike. "Uber Chooses Expedia's Chief as CEO, Ending Contentious Search." The New York Times, 27 Aug. 2017, www.nytimes.com/2017/08/27/technology/uber-ceo-search.html. Accessed 22 Jan. 2018.

Isaac, Mike. "Uber Fires 20 amid Investigation into Workplace Culture." The New York Times, 6 June 2017, www.nytimes.com/2017/06/06/technology/uber-fired.html. Accessed 24 July 2017.

Isaac, Mike. "Uber Founder Travis Kalanick Resigns as CEO." The New York Times, 21 June 2017, www.nytimes.com/2017/06/21/technology/uber-ceo-travis-kalanick.html. Accessed 11 July 2017.

Isaac, Mike. "Uber's New Mantra: 'We Do the Right Thing. Period.'" The New York Times, 7 Nov. 2017, www.nytimes.com/2017/11/07/technology/uber-dara-khosrowshahi.html. Accessed 22 Jan. 2018.

Isaac, Mike. "What You Need to Know about #DeleteUber." The New York Times, 31 Jan. 2017, www.nytimes.com/2017/01/31/business/delete-uber.html. Accessed 10 July 2017.

Lee, Timothy B. "Uber Escapes Criminal Charges for 2018 Self-Driving Death in Arizona." Ars Technica, 5 Mar. 2019, arstechnica.com/cars/2019/03/arizona-prosecutor-wont-charge-uber-for-2018-self-driving-death. Accessed 11 Apr. 2019.

Solomon, Brian. "The Numbers behind Uber’s Exploding Driver Force." Forbes, 1 May 2015, www.forbes.com/sites/briansolomon/2015/05/01/the-numbers-behind-ubers-exploding-driver-force. Accessed 10 July 2017.

Tsotsis, Alexia. "Uber Opens Up Platform to Non-Limo Vehicles with 'Uber X,' Service Will Be 35% Less Expensive." TechCrunch, Oath, 1 July 2012, techcrunch.com/2012/07/01/uber-opens-up-platform-to-non-limo-vehicles-with-uber-x-service-will-be-35-less-expensive. Accessed 10 July 2017.