Uber : overview

How the controversial ride-sharing company came to dominate its market worldwide
By DAN BLYSTONE Updated February 14, 2024
Reviewed by MARGARET JAMES
Fact checked by AMANDA JACKSON
Uber Technologies Inc.'s (UBER) explosive growth and seemingly endless controversies have made it a fascinating company to watch. Its global ride-sharing app, launched in 2009, disrupted modern transportation as we know it, at one point making Uber the most valuable startup company in the world.1

Ten years after its founding, Uber went public on May 9, 2019. Though the road has been bumpy, Uber remains a leading company in the ride-sharing space. In its 2022 annual report, Uber reported a total of 7.6 billion trips, $31.9 billion in revenue, and a net loss of $9.1 billion.2

KEY TAKEAWAYS

• Today's leading ride-hailing app by far, Uber Technologies was founded in 2009 and quickly became the world's most valuable startup.
• Uber's disruptive business model, explosive growth, and constant controversies have made it one of the most fascinating companies to emerge since the late 2000s.
• Before its highly anticipated IPO in 2019, investors valued Uber at as much as $120 billion. But after going public on May 9, 2019, it made history with the biggest first-day dollar loss in U.S. history.
• Since then, Uber has worked on becoming profitable, in part through the acquisition of other companies.

An Idea Is Born

As the company tells it, Uber's story began in Paris in 2008. Two friends, Travis Kalanick and Garrett Camp, were attending LeWeb, an annual tech conference that The Economist describes as "where revolutionaries gather to plot the future."1
 In 2007, both men had sold startups they co-founded for large sums. Kalanick sold Red Swoosh to Akamai Technologies, while Camp sold StumbleUpon to eBay (EBAY).3
4

The concept for Uber was born one winter night during the conference when the pair could not get a cab. That led to an epiphany: "What if you could request a ride from your phone?" Initially, the idea was for a timeshare limo service that could be ordered via an app. After the conference, the men went their separate ways. However, when Camp returned to San Francisco, he continued to be fixated on the idea and bought the domain name UberCab.com.1
 

The Early Years

In 2009, Camp was still CEO of StumbleUpon, but he began working on a prototype for UberCab as a side project. By summer of that year, Camp had persuaded Kalanick to join as UberCab's "chief incubator." The service was tested in New York in early 2010 using only three cars, and the official launch took place in San Francisco that May. The company soon shortened its name to Uber.

Ryan Graves, who was Uber's general manager and an important figure in the early stages of the company, became Uber's CEO in early 2010. In December 2010, Kalanick took over as CEO, while Graves took on the title of general manager and senior vice president of global operations.
The ease and simplicity of the Uber app fueled its rising popularity. With the tap of a button, a user could order a ride, GPS would pinpoint their location, and the fare would be automatically charged to the card listed on the user account.1
In 2010, the company received its first major funding, a $1.3 million round led by First Round Capital.5
 In early 2011, it raised another $11 million in a Series A funding round led by Benchmark.6
 The firm then went on to expand to New York, Seattle, Boston, Chicago, and Washington, D.C., as well as abroad in Paris, where the idea for it first took root.

In December, at the 2011 LeWeb conference, Kalanick announced that Uber had raised $37 million in Series B financing from Menlo Ventures, Jeff Bezos, and Goldman Sachs.7
 In 2012, the company broadened its offerings by launching UberX, which provided a less expensive hybrid car as an alternative to black car service.

From 2015 to Today

In July 2015, Uber became the most valuable startup in the world, valued at $51 billion after its funding rounds. In June 2016, Uber raised a further $3.5 billion from Saudi Arabia's sovereign wealth fund.
In April 2017, Uber opened up about its finances for the first time to Bloomberg and reported a global loss of $3.8 billion for 2016. This included losses from its China business, which it sold in the summer of 2016—without it, net adjusted losses were $2.8 billion.8
By the following year, the firm's valuation had dropped from a lofty $68 billion to $48 billion. In 2018, Japanese conglomerate SoftBank Group, along with a group of investors including Dragoneer Investment Group, successfully bid for 20% of Uber's stock at this lower valuation, a 30% discount on the last valuation figure. The deal reportedly gave SoftBank a 15% share in the company, while Uber got a powerful ally in Asia that could help turn the tide for it after a few very public missteps. The remaining shares reportedly went to other investors in the group.

This period was also marked by other challenges, including the fatal crash of a self-driving vehicle from Uber's fleet. Additionally, in August 2018, the New York City Council voted to put a pause on new licenses issued to ride-hailing services such as Uber and Lyft.9
 
Uber's May 2019 IPO made history as the biggest first-day dollar loss in IPO history in the United States. At one point, Uber was valued at $120 billion by Wall Street analysts, which would have made it the largest company ever to debut on the stock market. After the IPO, it was valued at about $69 billion—just over half of its high-hopes IPO.

As of Feb. 4, 2024, Uber's market capitalization stood at over $140 billion.

In Wake of Scandals, Kalanick Out, Khosrowshahi In

The year 2017 was especially rough for Uber. The troubles began in February when a female former Uber engineer outed the company for its sexist culture in a 3,000-word blog post. It alleged that Uber's corporate culture was highly hostile, sexist, and offensive to most people.10
The post quickly went viral, and a number of high-level employees were let go or resigned for reasons relating to the allegations in the following months. Following the blog post, the board called for an internal inquiry, which became known as the "Holder Investigation" (it was led by former U.S. Attorney General Eric Holder). The investigation resulted in 47 recommendations intended to improve the culture and work environment, and according to Uber, the firing of more than 20 staff members.11
 

In the following months, scandals seemed to haunt both the company and its CEO. Letters were released to the press which confirmed that sexist attitudes came from the top down—including from Kalanick himself. Kalanick was also caught on video arguing with an Uber driver about lowering fares, which did not strengthen his image in the public eye. 
On June 21, 2017, Kalanick resigned after a shareholder revolt. After a little more than two months, it was announced that Dara Khosrowshahi—then-CEO of Expedia (EXPE)—would take over. Khosrowshahi came to New York in 1978 with his parents to escape the Iranian revolution. He started his career in finance at an investment bank and eventually became the CFO of IAC/InterActiveCorp (IAC), a position he held for seven years before becoming the CEO of Expedia.12

As of Feb. 4, 2024, Khosrowshahi remains the CEO of Uber.13

More Controversies and Calamities

During its expansion, Uber met fierce resistance from the taxi industry and government regulators. As part of its strategy to mitigate the opposition, the company hired David Plouffe, a high-profile political and corporate strategist who worked on Barack Obama's 2008 presidential campaign. Here are some of Uber's many challenges.

The Backlash Against Surge Pricing

Uber uses an automated algorithm to increase prices based on supply and demand in the market. On New Year's Eve 2011, prices soared to as much as seven times standard rates, fueling fierce negative feedback from users. Surge pricing triggered outrage again during a snowstorm in New York in December 2013. More recently, Uber committed to capping surge pricing during several blizzards in New York City.

In 2014, taxi drivers in London, Berlin, Paris, and Madrid staged a large-scale protest against Uber. Taxi companies have claimed that because Uber avoids their expensive license fees and bypasses local laws, it creates unfair competition. The case was heard by Europe's top court in November 2016. Uber lost its license to operate in London, where the company had 40,000 registered drivers in September 2017. In June 2018, a London judge overturned the ban, effectively allowing Uber to operate under a 15-month license, along with certain conditions.14
 In September 2020, Uber was granted a new 18-month license to operate in London.15
16
 In March 2022, it received a license for another 30 months.17

Calls for Fair Pay and Driver Benefits

In New York, it became publicly known that Uber had mistakenly charged drivers commissions based on pretax earnings instead of after-tax earnings—at a cost of tens of millions of dollars to New York drivers. The company said it was an accounting error and that it was committed to paying its drivers back in full as quickly as possible.

The issue also raised questions about the fairness of who pays the taxes. Driver advocacy groups have argued for some time that Uber is avoiding a tax at the expense of its drivers, something The New York Times found evidence to support. The paper estimated that Uber's miscalculation could have cost drivers hundreds of millions of dollars.18
In 2017, a New York judge ruled that Uber drivers should be considered employees instead of independent contractors, at least in some instances. That decision opened up the possibility for drivers to receive employee benefits, which would likely have had a significant impact on the company's bottom line.19
 Later, restrictions on licenses by the New York City Council were introduced, which represented another blow for Uber and meant a pause on any new licenses for the service in the city for 12 months.20
 
Meanwhile, California passed Proposition 22 in November 2020, allowing companies like Uber to classify their workers as independent contractors in the gig economy and not as full-time employees.21
 The Uber-backed ballot measure became the costliest in California history, with over $200 million spent on campaigning for it.22

The constitutionality of Proposition 22 was immediately challenged, but a California appeals court ruled in March 2023 that it was largely constitutional and would remain in effect.23

Claims of Discrimination and Harassment

In 2018, Uber paid approximately $7 million to more than 480 current and former employees to settle a 2017 lawsuit alleging gender discrimination, harassment, and a hostile work environment. The lawsuit claimed that Uber used a discriminatory ranking system that undervalued female employees and employees of color.
The complaints against Uber weren't limited to its employees. An arbitrator ordered Uber in April 2021 to pay $1.1 million to Lisa Irving, a blind customer. The arbitrator ruled that Uber's drivers had discriminated against Irving by denying her rides or verbally abusing her more than a dozen times. Uber had argued that it was not responsible for the drivers' actions because of their independent contractor status.24

Uber's Acquisitions and Other Business Units

Uber derives a significant portion of its revenue from its investments and from services other than its basic ride-hailing app. Those include:

Uber Eats, Postmates, and UberX Share

Uber launched its food delivery app, Uber Eats, in 2015.25
 In July 2020, it acquired a rival food delivery service, Postmates.26
In June 2022, Uber launched UberX share, which allows multiple customers to share a ride, saving them up to 20% on the normal fare.27
 It replaced a similar service, UberPool, that had been suspended during the COVID-19 pandemic.

Lime Scooters

In July 2018, Uber announced that it would be investing in the electric scooter rental company Lime in collaboration with Alphabet Inc.'s GV (GOOG).28
 Lime's lightweight scooters are available for rent in several major cities, and customers leave them on the sidewalk for the next rider, making for a convenient and clean-energy-based business model. Uber users can book a scooter through their Uber app.29

Uber Self-Driving Cars

Like Google, Apple Inc. (AAPL), and Tesla Inc. (TSLA), Uber also made a much-publicized push into driverless cars. After a series of problems, however, Uber sold that division, Uber Advanced Technologies Group, to Aurora, a young autonomous vehicle company, in late 2020.30
In December 2022, Uber and another autonomous car company, Motional, announced the launch of a "public robotaxi service" in Las Vegas that they called the first step toward providing "ride-hail and deliveries on the Uber network in major cities across the U.S."31

How Much Do Uber Drivers Make?

Uber notes on its website, "The money you make driving with the Uber app depends on when, where, and how often you drive."32
 The job website Indeed puts the median hourly pay for Uber drivers at $17.98.33

Which Is Bigger, Uber or Lyft?

In terms of both market share and market capitalization, Uber is considerably bigger than Lyft. In February 2024, Lyft's market cap stood at $5 billion, compared with Ubers $140 billion.

Where Did Uber Get Its Name?

The Wall Street Journal reports that, "Uber's name comes from the German word über, meaning "over, above."34

The Bottom Line

Uber remains one of the most closely followed and fastest-growing companies in the world. At the same time, it continues to struggle to attain profitability, especially in its core ride-hailing business.
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