Market disruption is the ultimate objective when a new technology is introduced into a mature marketplace. Stodgy old adherents who occupy that marketplace don’t like disruption though, because it usually means they are on the losing end of the equation. Such is the circumstance in Europe for the shooting star known as Uber.
Uber is an app that serves as an alternative to taxis and connects car ride seekers with ride providers in 37 countries and 128 cities across the globe. From any place in one of those cities you can request a car just like a taxi service right from your smartphone app. The app will report the name and photo of the driver, vehicle make and model, and license plate number. Drivers are screened through background checks and use their own vehicles which must live up to Uber standards. One of the most notable aspects of the app is that no money ever changes hands between riders and drivers. All transactions are handled digitally by Uber.
If you have not used Uber, try it. I have used it in New York, Washington, DC, and Nashville. I found the drivers to all be mature professionals with excellent customer service skills.
On the business front, a recent round of funding values Uber at a sensational $17 billion. Uber makes several claims on its website (AN UBER IMPACT) about the economic benefits it is providing, including the following:
- $2.8 billion in annual economic activity in the US
- 20,000 new jobs created per month
- Average income per year for a New York City UberX driver = $90,000
- Riders feel safer because of Uber’s screening of drivers
- Drivers feel emancipated, as small business owners are flocking to the app to become partners
Naturally, success leads to controversy. Taxicab companies usually have to pay exorbitant amounts for taxi commission licenses in major cities, such as New York where there are a limited number of taxi medallions that can be valued at $500,000 each or more. In Europe, a multi-city day of protest was just staged against Uber, attracting an estimated 30,000 taxicab drivers.
This is a growing Internet trend where old market squatters confront new market online innovators:
The protests have a deeper significance beyond the taxi industry. They underscore the growing backlash against the likes of room-booking service Airbnb Inc. and video-streaming provider Aereo Inc. as they clash with traditional industries arguing the competitors should be subject to the same regulations (Bloomberg).
This day of protest will hardly make Uber CEO and founder Travis Kalanick flinch, as he jettisons into Internet history. In December, TechCrunch reported through leaked financial data that were later verified by Uber an estimated $1 billion in gross bookings and $213 million in revenues for Uber in 2013. Not bad for a four-year-old company.
To his credit, Kalanick did not dismiss the protests out of hand, as noted at mashable.com:
Meanwhile, Uber argues it is simply creating healthy competition in a stagnant market. The company responded to the protests in the UK capital by opening its platform to London’s traditional black cabs with the newUberTAXI app, which will allow Londoners to hire a taxi directly through their phones. Until now, you could only hire private drivers through Uber, not traditional, licensed taxi drivers.
Though this day of protest in Europe may not have been effective against this Internet juggernaut, it does tell a story about possible future interference with the Uber business model, namely through taxation. Innovative lawmakers will seek to interrupt Uber’s pace of growth or join the Uber bandwagon, depending on your perspective, through new taxes, licensing fees, and regulations on local Uber partners or on the Miami-based business itself.
Clearly, Uber is the disruptor in this intriguing tale. That should not be misunderstood.
Nonetheless, These protests could serve as an incubator for concepts that may seek to interrupt Uber’s phenomenal growth. Wouldn’t the lowly cabbies with tales of woe like to be seen as the David against this Internet Goliath? Such subplots may encourage innovative union leaders, lawmakers, and trial attorneys to see dollar signs (or Euros as the case may be) in their dreams and become very creative in their search for a new shakedown target. They will likely use the media attention on the European protest to fuel the perception of discontent with Uber.
Despite Uber’s booming popularity, the company should not completely disregard a inter-continental day of protest that boasted of 30,000 participants. Organizing against the company has just begun and that could cause long-term problems if not properly addressed with a government affairs and strategic communications plan. Uber should start to make serious investments in a defensive strategy that looks far and wide for signs of business interruption in the form of tax and fee proposals. This company has the resources to build a strategic firewall and should start now.
Being a text book market disruptor, the Uber growth story is a classic one already, but it has only just begun. Though Uber should enjoy the ride it is on, the company should also consider itself forewarned as they face potential speed bumps on the journey ahead, and should factor these in their long-term business road map.
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