It's Already Over And Uber Has Won
The company has vanquished competitors, incumbents, regulators, and critics. All that is left is to see how far it can go.
Money isn't everything, but it's certainly a useful metric for keeping score, especially when you're measuring it in the billions. Which is why it's big news that Uber just closed another funding round — this time it scored another $1 billion, bringing its total raise to $4 billion and its overall valuation to $40 billion. That is more than double where it was just six months ago, making it worth a little bit more than Fiat Chrysler and The Gap combined. The reason investors are still willing to pile money into an already highly valued Uber? Because it’s increasingly clear that Uber has already won. It has beaten everyone out there capable of putting up a real fight. What’s left is mostly a matter of how high it can run up the score.
If you want a sense of how dominant Uber is, just look at the company’s coup in Illinois. In January 2014, the Illinois House and Senate went after Uber with a series of new rules. They banned its drivers from airports, and capped how many hours they could sit behind the wheel each day. Yet instead of backing out of the market, Uber mobilized close to 90,000 customers to petition the governor to veto the rules. He did. And then Uber went for the throat, releasing contact information for legislators who otherwise might have tried to override the veto. When a legislator did file a motion to do so, the Illinois legislature had been sufficiently intimidated by outraged Uber customers that the motion was promptly denied. One year later, on Jan. 12, 2015, Illinois Governor Pat Quinn signed what Uber referred to as “the most progressive ride-sharing legislation in the country.” Uber didn’t just win, it ran the field.
The ride-hail industry — in its current form — has only been around for about five years. In that time, as the industry struggled to gain its footing, ride-hail quickly found a champion in Uber. Since its inception in 2009, it has faced off against a slew of opponents, the most formidable of which has been the taxi industry itself. Often shielded by local regulators, big taxi has launched attack after attack on what, today, has become a ride-hail and tech leviathan.
But, armed with a sophisticated PR strategy and a small army of political operatives on its payroll, Uber has almost always won. Nothing — not regulators, not competition, and certainly not the existing taxi industry — has been able to stop it. It has killed everything in its path, and it now seems almost certain that Uber will become the dominant player in an emerging multibillion-dollar, global, ride-hailing sector. (Next up? On-demand logistics.)
Uber has a tried and true playbook to win over regulators, and that starts with owning the market.
Uber is on its way to becoming even more embedded into the fabric of society than the taxi industry it sought to displace. The country’s lawmakers are using it. A condominium complex in San Francisco is now offering unlimited free Uber rides to tenants in lieu of a parking spot. And as BuzzFeed News reported, Republicans have hailed Uber (not the industry) as a champion of the free market.
Uber has almost single-handedly managed to convince regulators across the country to create a new framework for the industry as a whole to operate within legally. It opened the umbrella that now gives all its competitors shelter from the storm. The company’s aggressive stance on regulations has paved the way for the entire ride-hail industry in the United States. As of Tuesday, there are now 23 jurisdictions that have passed permanent ride-hail legislation that favors Uber and five others that have implemented short-term legislation. (Virginia just passed permanent regulations on Tuesday.)
The legal battle that Uber fought on behalf of the ride-hail industry in Illinois is typical of its fights fought nationwide. Here’s how it usually works: Uber rolls out its service without getting regulatory approval. Regulators fight back, and often issue a cease-and-desist. But Uber stays put, because it has the money and user support to do so. Sometimes, local authorities set up sting operations and issue citations and fines against both the drivers and the company for operating illegally. Uber takes those citations and the associated penalties in stride, usually offering to handle all legal costs that drivers may encounter. And almost inevitably, what happens is that it is the local government who bends, not Uber.
Uber has a tried and true playbook to win over regulators and that starts with owning the market. Uber is everywhere. It’s in 54 countries, serves 170 cities domestically, and hundreds more internationally. In the U.S. alone, where Uber serves 55% of the population, there are millions of riders across all those markets, according to Uber.
Those customers have given it some of its best leverage. Uber has managed to cultivate a sense of activism among riders. In some cases, Uber gives riders who live in areas surrounding its target markets a taste of its ease and reliability. Passengers can take an Uber into cities like Portland, Oregon, where it is banned, but they can’t hail an Uber while in the city on their way back to the surrounding neighborhood. And it’s all a part of the company’s sophisticated playbook. Uber entered Portland illegally in December after it infiltrated those markets immediately surrounding the city, suffered through sting operations and cease-and-desists, mobilized its users, and then in December 2014 nailed down a commitment from Portland officials that they would come up with permanent regulations that would allow Uber to operate in the next three months. (Notably, neither Lyft or Sidecar have stepped foot in the city as of yet.)
It is Uber, not the ride-hail industry, that is becoming part of the fabric of society.
In cities like New York, the taxi industry has fought tooth and nail to put a cap on the supply in order to maintain the value of medallions — making the introduction of thousands of additional for-hire vehicles on the road a welcomed addition. But even outside of New York, where the taxi system and public transit is often unreliable, Uber is the first service to offer these riders an easy way to get around. That newfound ease and reliability is enough to get citizens to fight for Uber where it is threatened. Again and again it has turned casual riders into active advocates.
“I think the last two dozen Uber petitions that were filed in response to regulatory battles in particular markets [garnered] 500,000 total petition signatures,” Justin Kintz, Uber’s head of public policy for North America, told BuzzFeed News. “That’s a level of civic engagement that few issues have ever created for any sort of political issue, let alone for one that is being driven by an app-based technology company.”
And Uber isn’t just taking on government. Even when the company fought against established and powerful insurance companies, Uber bent the establishment to its will with relative ease (or at least relative speed) and came out triumphant.
Look at Virginia, where Uber was banned. One of the primary issues the company faced was whether its drivers were properly insured. Personal insurance policies are not designed to cover commercial services such as ride-hailing. Many companies will go as far as to cancel the policies of drivers who begin operating for Uber or Lyft. But commercial insurance is far more expensive than personal policies are, and if the government were to mandate that all ride-hail drivers have to buy it, that would put a big strain on the supply of available drivers.
Geico was by far the biggest opponent of providing personal insurance for commercial services. In November, leaked transcripts of an internal training document showed that the company was rejecting requests for coverage from ride-hail drivers and as a policy cancelled the existing coverage of drivers who drove for any of the ride-hail companies.
But in a reversal, just this month Geico rolled out a commercial ride-hail policy. What changed? Uber approached Geico and convinced it to provide coverage for its drivers, alleviating some of the concerns that regulators have. On Tuesday, Virginia Governor Terry McAuliffe signed new permanent ride-hail rules into law, enshrining Uber’s operations.
On the back of Uber, its competitors Lyft and Sidecar and the rest of the ride-hail industry are winning legitimacy from strictly regulated industries that, just four months ago, stood in the way of the success. Yet while the rest of the industry stands to benefit greatly from Uber’s fight against taxi regulations, Uber has certainly reaped the most rewards. It is Uber, not the ride-hail industry, that is becoming a part of the fabric of society. Its very name is becoming as synonymous with ride-hailing as Google is with search, or Xerox is with copying papers.
In terms of sheer number of drivers in each market, Uber’s supremacy is undeniable. In Los Angeles and New York, where the city’s estimated 13,400 yellow cabs represent 23% of the country’s entire taxi supply, there are a total of 36,000 active drivers. Just in December, 40,000 new drivers joined the platform and more than 160,000 drivers performed four or more trips. And drivers aren’t leaving. Though drivers across the country were up in arms about the series of price cuts Uber implemented throughout the year, Uber has still managed to maintain a relatively steady retention rate. According to a driver study the company published early this year, more than half of the drivers who started in 2013 remained active a year after starting.
Two of the company’s largest opponents, the taxi industry and Lyft, are still nowhere near as big as Uber is. At $11 billion, the country’s entire taxi industry is worth far less than Uber’s valuation, according to an IBISWorld report. Though Lyft is reportedly in talks to raise $250 million, positioning it at a $2 billion valuation, the company (which is in 65 cities in the U.S.) still has quite a way to go before it “catches up to” Uber.
Still, Uber does have a lot more growing and improving to do, mostly for the sake of its drivers. In addition to price cuts, many drivers complain that Uber does not include a tipping feature on its app, and in cases where a driver would like to dispute a bad rating or is otherwise concerned, they have no way of contacting the company without either physically going into the closest Uber offices or emailing a support staffer. While the company hasn’t seen any significant impact in terms of driver retention as of yet, several of Uber’s competitors are making a play at attracting Uber’s disgruntled drivers. Gett, for example, is shifting all of its focus to the New York City market and offers its drivers guaranteed per-minute fares in addition to 100% of the tip a rider leaves through the in-app tipping feature.
Meanwhile, both Uber and Lyft are facing lawsuits that are seeking class action status and could drastically change the respective ride-hail companies’ business models. Drivers are suing the companies for misclassifying them as independent contractors, whereas, they allege, they should be classified as employees. The case could pose a substantial threat — Uber could be forced to either scale back its operations or hold off on expansion, instead using new funding to subsidize salaries and employee benefits for its drivers. Drivers may also seek damages in the form of expense reimbursement, forcing the company to pay for things like gas, commercial insurance, and car maintenance.
But Uber may not even need drivers down the road. As part of a partnership with Carnegie Mellon, Uber and the university are creating a robotics research lab that will explore the possibility of driverless cars. While Uber drivers won’t have anything to fear for at least the next five years, they may not be a necessary aspect of the company’s long-term business model.
It also faces considerable global competition. With fewer missteps and legal challenges, by this time Uber could have arguably put the domestic market on cruise control and focused on its international expansion. Large local players have already cornered many of these markets and understand the nuances of the area — some have even begun discussions of a global taxi alliance against Uber. Uber’s success in many markets in the United States was due in large part to a first mover’s advantage and the balance the company has struck between the supply of drivers and demand of riders — an advantage the company does not enjoy internationally.
But here in the United States, Uber’s victory over its competitors, the incumbents, and regulators seems nearly certain. The company is inescapable – it’s simply everywhere. Its customers and, even more so, its investors are passionate about and willing to fight for the service. Whether it’s because of its vast war chest of funding, its deeply connected network of lobbyists, or a simple fear of being branded as “antiquated” or “anti-progression,” regulators have historically bent to the will of Uber. The taxi industry is in retreat. And Lyft and the rest of the ride-hail industry could arguably not even exist without Uber.
There are still obstacles left to overcome, but what was once characterized as an uphill battle for Uber now appears to be an impending, if not entirely inevitable, victory.