Team ASYNC - Assignment 3

Project Report: This report analyses the Internet based ridesharing service Uber, with reference to broader trends in online commerce.


Introduction

Uber is an app-based ride sharing company founded in 2009. It provides users with cheap, fast-response transportation in approximately 270 cities by connecting travellers with drivers through its mobile app. Uber drivers provide the capital resources including cars and insurances, allowing Uber to manage and share the information that connects drivers to riders and processes payments. The system integrates an algorithm for distribution, collaboration and to calculate surge pricing to meet supply and demand.

Uber disrupted the taxi industry through online commerce, operating in the attention, sharing and network economies. Its ongoing technological innovations, traditional, stunt and social marketing, and a sound business model have all influenced Uber’s success. Questions have arisen relating to legal and political issues that Uber have disrupted. The questions centre on Uber’s position in the sharing economy and its disruptive impacts on the taxi industry and employment conditions. Uber’s ability to take the centuries-old taxi industry and completely modernise it for a digital age paves the way for future e-commerce projects to integrate with already-established industries.

Uber’s position in the online economy

Part of our analysis of Uber is discussing how the company has utilised, and in some cases redefined, particular elements of e-commerce; namely the attention, sharing and network economies. These economies are inherently linked to each other, and Uber has unquestionably drawn on their influences.

Attention is intrinsically scarce. This means it can be consumed and spent. Even the phrase “paying attention” implies that there is some kind of transaction. Goldhaber’s definition of the attention economy is “a system that revolves primarily around paying, receiving, and seeking what is most intrinsically limited and not replaceable by anything else, namely the attention of other human beings” (2006). It can therefore be considered to a financially motivated economy, due to the scarcity of it, and how willing people are to pay for other people’s attention.

The motivation behind holding someone’s attention also comes with monetary value. Goldhaber’s analysis is that “the more people pay attention to you, the more they want what you want” (2006). We also know that the goal of the attention economy is to get “as much as possible” (Goldhaber, 1997). Organisations and individuals aim to exploit people’s attention in order to sell products.

The Internet has played a pivotal role in the rise of the attention economy. Organisations are utilising the web in order to maintain consumers’ attention (Golderhaber, 1997). Terranova argues that the attention economy is the “the economy of socialisation…”. By participating in behaviours such as clicking, liking and sharing, paying attention has become a collaborative, social experience. This draws similarities between the attention economy and collaborative consumption, and demonstrates why marketing is a pivotal practice for Uber.

The sharing economy, which is sometimes referred to as collaborative consumption, has emerged from a long-held value of mankind: mutual beneficence. Belk (2014) defines collaborative consumption as “people coordinating the acquisition and distribution of a resource for a fee or other compensation”. Uber’s business model is focused on sharing information to connect commuters to drivers (Sundararajan, Hargreaves, Foroohar, 2016).

The sharing economy has evolved as society’s participation and acceptance of it has evolved.
Traditionally sharing happened between kinship groups and communities (Carmack 2013, p293) however with the affordance of the internet, strangers now share goods and services. Early concepts of digital-based collaborative consumption focused on non-physical items such as peer-to-peer sharing of music and video files through programs such as Napster and BitTorrent (Humari, Sjoklint and Ukkonen 2015). Regular people started sharing personal thoughts to (Facebook), reviews (Trip Advisor) and inspiration (Pinterest) (Belk 2014) within online communities through social networks. However, the practicalities of the sharing economy have changed in recent years to provide a more tangible experience. It has extended to physical items such finances (Crowd Funding) and, most significantly for this essay, assets. Assets such as homes, clothes and cars are now being shared and rented just as easily as hiring a video from the rental store (Sundararajan et al, 2016).

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Source: http://www.businessinsider.com/reputation-and-the-sharing-economy-2014-10?IR=T

Not only is the sharing economy experiencing a revolution in cultural attitudes to collaborative consumption, but it is also fundamentally a technological advancement. Humari, Sjoklint and Ukkonen define the sharing economy as “an emerging economic-technological phenomenon that is fueled by developments in information and communications technology” (2015). By identifying the influence technology has had on the sharing economy, it is easier to distinguish which businesses have actually helped to drive this economy. A company such as Uber, which is solely operated through its mobile app, can therefore be attributed to the sharing economy.

Uber x Technology

Uber’s position in the sharing economy

Technological infrastructures such as the Internet, the smartphone and mobile applications have enabled Uber to capitalise on the sharing economy.

These digital platforms are used to facilitate person to person transactions and provide access between networks of consumers with networks of suppliers. By making use of various technologies, on-demand services are able to be more efficient and convenient than traditional businesses (Jaconi, 2014). There are several technological challenges to be overcome with a sharing services and in particular with Uber’s business model. Creating a better user experience, which entails making their service more convenient to encourage users to choose their service over more traditional services and by providing users with more valuable information. The other side of the equation is to facilitate the actual sharing, which means merging supply with demand and better utilising user data.

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Source: Lazer, Z. (2012) Retrieved from http://www.theatlantic.com/magazine/archive/2012/05/why-you-cant-get-a-taxi/308942/

Convenience

Convenience is key in modern e-commerce. Kalanick at Start Up Fest (2016), expressed conveniences as the initial motivation to creating the Uber app. He explained how he was out late in France and unable to get a taxi to get home. His co-founder stated that he wished he could push a button and request a driver on demand. A study by akamai.com on user behaviour in relation to page load times shows that 40% of users will abandon a website if it takes more than three seconds to load (Work, 2013). It is easy to see how this translates to deciding between ordering a taxi or an Uber.

Uber’s mobile application provides a convenient way to find a driver in your area. Users receive a quick in-app response when booking a ride. The user can see available cars in their area as well as their expected wait time. This is far superior to the traditional taxi companies where customers would need to book through a call centre or hope to find a taxi on the street ( Kalanick at Start Up Fest 2016). The prospect of being put on hold or having to walk to a taxi rank is a big ask in a world where we expect or needs to be met on demand. Another convenience the application provides is automatic payments via credit card. Users provide their card details when signing up so there is no cash changing hands. This provides a more convenient, faster and safer experience for users and drivers.

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Source: (2015). Retrieved from http://www.mymassachusettsdefenselawyer.com/how-could-an-uber-for-lawyers-work/

Information networks

Products that provide users with more valuable and up to date information appear more valuable to users (Flew, 2009). Uber knows your location. It also knows the location of every driver in their network. Users can see the location of drivers in their area along with their expected arrival time. You can view the available drivers in your area on the in app map. Along with your drivers expected arrival time, you also receive the estimated trip time and a map of the route the driver will take. The entire journey is recorded via GPS and users can review the driver’s route or share their expected arrival time with friends and family via the Share my ETA feature. As well as information on their trip, users have access to data on their prospective drivers. Users rate drivers out of five stars. When ordering an Uber, users can see the drivers rating along with their licence plate number, their type of car and even a picture of the driver.

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Source: (2015) Retrieved from https://dadi.co/the-feed/issue-3/how-uber-uses-big-data

Big Data

All this information on users and drivers provides vast amounts of data. Big data has become ubiquitous in modern ecommerce Bhatt, S. (2015). The effective use of this data underpins many of Uber’s application features and new innovations. Street maps and historical travel times are used to estimate travel times (How Uber Scales Their Real-time Market Platform, 2014). Using GPS and street data the system is able calculate the time the journey is likely to take. Uber’s algorithm monitors traffic conditions and travel times of other drivers to make its calculations. Drivers are selected on their estimated arrival time, even if they currently have a passenger.

Uber is able to fluctuate its prices depending on demand. During busy periods prices will go up to encourage more drivers to take on work and meet the demand. When business is slow, prices will go down to encourage more customers. Uber calls this Surge pricing (Ranny, 2014).

This data has also enabled the company to make new innovations within their business model. Using available data from their service the company was able to see that many users were traveling along the same routes at the same times on a regular basis (Ranny, 2014). This spawned the idea for ridesharing or carpooling, where users can opt to share their trip with other travellers for a discount (Kalanick Start Up Fest, 2016).

Access to large amounts of user data also provides further potential for profit. User data is valuable and Uber has lots of it. They have a timeline of where you go and when, they possibly know where you live and where you work, they might know who you live with and the places you go together. Selling access to user data has become commonplace for large companies that have it and purchasing that data is common for businesses that don’t (Hirson, 2015).

That Algorithm - in detail

Algorithms are used to match drivers to customers, to fix fare prices on demand and to evaluate drivers and customers (Matias 2015). As noted earlier, Kalanick (2016) refers to this as an accountability model.

While the “accountability model” provides comfort and security to participants drivers are concerned that the “accountability model” is biased towards the customer and in many cases is prohibitive to driver autonomy (McBride 2016).

Tweaking algorithmic management

Drivers express concerns in relation to customer ratings and the pressure they face to maintain ratings to enable continued access to the application. They worry about the competitiveness of surge pricing and fair cuts Knight (2016) and Benner (2016).

The distance between the driver and Uber has lead drivers to converse with each other in dedicated platforms to try and understand the way in which Uber works. The instability created has lead to class action lawsuits across the globe. A recent dispute resulted in “Uber trying to improve the experience of its drivers”. (Benner 2016)

Lee et al (2015) and Wang (2016) discuss the implications of data driven management which empowers a “few human managers in each city to oversee hundreds and thousands of drivers on a global scale.” (Lee et al, 2015, p1) The process limits human interaction between Uber and its drivers (Lee et al, 2015). suggest that the Uber application is not transparent enough. Drivers express confusion regarding the distribution of work and the amount of autonomy it offers them. Lee et al (2015) suggest that new research regarding human centered algorithmic management needs to focus on defining “different ways of specifying and evaluating requirements, states and interactivity (p9)

The Internet and network economy have lowered barriers to entry for industries that were previously run on scarcity models.Activity in the Internet domain have followed in the footsteps of other major communication advancements such as, the move from land line telephones to mobile telephones and analogue television to digital television (Jenkins at India Culture Lab 2015). However, unlike its predecessors which offered one-way and two-way communication, the Internet along with Web 2.0 provide an unlimited level of communication, or many-to-many communication (Liebowitz). It is these influences of communication networks that has “brought about the rise of the network economy” (Fekete 2006). Bates (2009) adds that the network economy is “limiting the ability to maintain monopolistic market structures”, and has opened the door to a more competitive market.

Competition is not the only cost-reducing factor of the network economy. Liebowitz (2002) states that “The Internet creates value by reducing the costs of transmitting information”. This statement can therefore be applied to the costs of advertising, communications, and public relations. A view once held as a utopian idea, the network economy brings productivity, growth, connectivity, and the “perfect competitive market system” (Fekete 2006).

Uber x Marketing

Although technology has given Uber the capabilities and platform to operate effectively and make an impact within the sharing economy, marketing is the primary attention practice. Marketing is a vital practice of any online commerce business that is looking to attract and create interest around a certain product or service. Uber’s overall marketing strategy is designed to infiltrate and lead the attention and network economies within their desired target market through a series of intense and specific marketing executions.

In the beginning

So how did Uber become an online service that is valuated at 68 billion dollars? (Chen, 2015).
Uber has mastered the act of gaining attention and promoting networking amongst their users, but how did it all begin? The early adopter marketing strategy.

Initially, Uber utilised an early adopter marketing strategy to attract the right kind of customers through an intense focus on a particular market, generally a well analysed city or state, this targeting created hype within local networks, which would evoke the network effect to drip feed into their next marketing stunt (Brown, 2016). The network effect is when the user of a product can influence the value of that product to other potential users, and when network effects are present, the increased adoption of the product by users is likely to increase (Binken, 2016). The chosen market was the tech savvy entrepreneurial hotbed of San Francisco’s, California, U.S.A. Within this area Uber sponsored local tech events and targeted these specific tech savvy attendees with free rides in and around the San Francisco area, knowing that they were the ideal, and with a high percentage likelihood to be early adopters. This strategy is designed to leverage the power of others to advocate for the company through their social networks and overall network effect.

It’s all about the stunts

“Stunts are designed to gain attention”, and that is exactly why Uber incorporates stunt focused marketing to tap into the attention economy. The attention economy is a primary focus area for Uber’s marketing, as user attention is the sort after scarce commodity. The online space is a world where users are continually bombarded with information, and this “wealth of information creates a poverty of attention” (Terranova, 2012).

Terranova suggests that there is an ongoing crisis of attentiveness, where companies are continually pushing the limits of attention and distraction, with an endless series of new products and stimulation. Uber has utilised the shock or surprise effect of stunt marketing to better leverage themselves within the attention and network economies. The undertaken stunts, when executed properly, attract the attention of both existing customers and potential customers.

The following stunts are standout campaigns from Uber’s marketing activations.

Stunt Analysis: #UberKittens
One of Uber’s most talked about stunts was Uber Kittens. Uber teamed up with local animal protection agencies at select cities around the world between October 2013 and 2015 to offer kittens to customers (Lu, 2015). The promotion involved the delivery of kittens to Uber customers, who were then able to interact with the delivered kittens for a set period of time. On top of impressing the receiver of the kittens, Uber is strategic in offering a positive community message, as users were also given the option to go through the process of adopting one of the kittens. The stunt surrounding the kittens utilised the network effect within each city, as the stunt gained both local, worldwide and word of mouth attention.

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Source: (Lu, 2015) https://urbanful.org/2015/01/21/17-of-ubers-most-brilliant-ad-campaigns/

Stunt Analysis: #UberTree
Uber teamed up with a hardware store to offer users the ability to order Christmas trees via the Uber application. The trees were offered through ten different cities in America, with all costs for the trees being charged directly to the users Uber account. The novelty and feeling generated from users seeing their Christmas trees arrive by an Uber stimulated users to promote the product or experience through their social networks.

Although Uber has offered many variations of stunts including; #UberIceCream, #UberSky, #UberSleigh and #UberSleep (Uber Global, 2016), the desired goal for all is to attract attention and utilise the power of users to promote within their social network. “Attention is the real currency of business” (Davenport & Beck, 2001) and Uber is demanding plenty of it.

uber_christmas_trees_on_demand_graphics_700x300_r4-1.jpg

Source: (Lu, 2015) https://urbanful.org/2015/01/21/17-of-ubers-most-brilliant-ad-campaigns/

You’re going to need want a referral

Uber places focus on the value of networking amongst its current and potential users, and carefully targets the network economy with a user referral marketing strategy. The network economy ultimately puts the power into the user to determine how much a piece of information should be valued at. The action of the user passing on that information is the goal when targeting the network economy, and with over 8 million Uber users (Smith, 2014), there is a potentially huge social network that can be tapped into outside of existing Uber customers.

Uber executes select referral marketing campaigns throughout the world, by offering users the ability to give out free or discounted rides to their friends. Whilst this referral strategy benefits the receiver of the voucher, Uber also rewards the referrer through offering credit points. This is a more traditional form of marketing, but is a contributing factor to Uber’s initial high growth rate.

UBER-referral1(1).jpg

Source: http://www.appvirality.com/

Technology and marketing are key elements for the longevity and growth of Uber, but Uber’s outlined business model enables them to offer a higher standard of service and flexibility than the traditional taxi model.

Uber x Business Model

The traditional model

Kalanick at Start up Fest (2016) outlines how taxi industries around the globe are run on scarcity models. He used the New York taxi industry as an example he suggested that in 2014 there were approximately 1400 taxi licences available and that, that number had not changed much since 1939. This made the cost of purchasing a licence in 2014 over one million dollars US. Drivers are required to lease a taxi for $140/day which is equivalent to $40 000 per year. This model restricts that number of cars available to consumers and causes long wait times and increases the cost of travel. The infographic below was created by certify, it depicts the reduced cost of travel for business consumers in North America in 2015.

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Source: https://newsroom.uber.com/wp-content/uploads/2015/04/Sharing_Economy_Infographic.pdf

Uber’s model and decentralisation

​Uber is decentralising the taxi industry. Rather than maintaining ownership of vehicles and employing staff Uber crowd sources drivers to provide the capital investments.
Drivers provide cars, insurance, and all other capital investments. Uber provides an application.

The peer to peer market has marked a shift away from centrally accessed goods and services. In a centralised economy people acquire goods and services from governments and organisations. In a decentralised 'sharing economy' individuals source goods and services from peers. (Sundararajan, 2016) refers to this method as crowd based capitalism. He suggests that there has been a "shift in the role of the individual”….he suggests “Individuals are going to ascend past a labour provider role and take on more ownership."

As identified Uber has disrupted the transportation network in approximately 270 cities worldwide, through providing an alternative to the archaic traditional taxi model. The underlying principle to Uber’s business model is the sharing of information via a smartphone app which connects customers with drivers immediately. One of the ways in which Uber grew exponentially is by sacrificing full employee benefits for its drivers and capitalising on lower labour costs by classifying drivers as independent contractors.

Why it works

The cultural shift is driving Uber's business model and collaborative consumption. Collaborative consumption is largely driven by consumer ideology. Humari et al, suggests that expectations for greater sustainability, increased customer enjoyment and lower economic costs all contribute to how consumers perceive the sharing economy, and ultimately influences their decision to participate in it (2015). Uber has reduced wait times and decreased travel costs for consumers.

Flooding the market with on demand cars is desirable to young people who choose not to own vehicles and prefer ridesharing. The need for personal car ownership is less desirable and the sharing economy is embraced by millennials. (Price Waterhouse Coopers 2016 p19) According to Belk (2013) young people no longer link car ownership to social status, he states "they find car purchase, maintenance and parking to be prohibitively expensive and increasingly would rather not have the hassle" (p 1598).

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Source: https://www.theguardian.com/technology/2016/apr/27/how-uber-conquered-london

Uber’s discussed business model addresses the two key areas that the traditional taxi model fails at; dispatch and payment (Ross, 2015). The ability to access more cars, and no handover of cash allows Uber to revel in the uprising of the collaborative and sharing generation. The pricing surge allows Uber to raise prices whenever demand is high. Uber’s notable competitor in the market, Lyft, also implements pricing surging via a set algorithm. This is in contrast to the fixed pricing in traditional taxis which is based on mileage and time. In the dynamic pricing model, the price can be adjusted upward and multiplied several times over when the quantity demanded exceeds quantity supplied. Consumers have struggled with the dynamic pricing model as it is not something they encounter in many other industries.

Central to the theme of a sharing economy is the concept that consumers have the ability to access and use commodities and services that they otherwise would not be able to afford or don’t want to own themselves (Posen, 2015). Because of technology and a shared economy, consumers nowadays have access to a wide variety of products and services. Ridesharing service providers like Uber thrive in this type of economy.

To its supporters, Uber is more than just transportation. It pairs personal services with technology and provides instant gratification – in the form of the service being provided. The business model of linking services with technology and providing it on demand is the precursor to the new economy where all consumer goods will be available as a service and all consumer services will be available on demand. At the end of the day, the consumer is only interested in what net benefit is provided to them (Elliot, 2016).

In the Uber business model, the first component is that it is a personal service. The second component is that it must be available on demand anywhere, anytime in the fastest way possible. This requirement for immediacy is forcing established traders to look at new ways to deliver goods and services on demand. It is also inspiring research and development into blockchain technology that aims to remove the intermediary altogether, resulting in pure peer-to-peer economy.

Technology as discussed earlier, in the form of mobile apps is central to Uber’s business model but there is no doubt that in future new technologies will evolve that will provide services even faster (Glavas & Letheren, 2016).

Another key feature of Uber’s business model is that the relationship between consumers and producers, retailers and wholesalers have changed from a go-to to a come-to model. Previously consumers used to go to producers but now producers have to go to consumers (Smith, 2016)

Due to Uber’s unique business model, the company is often at the forefront of challenging local and regional laws within in each operating country.

Uber x Law

Changing of the guard

Uber’s global operations are subject to a myriad of laws across many jurisdictions. Resistance to Uber at the transport industry level is based on a loss of market share and at policy level it centres around a misunderstanding of the benefits the sharing economy and a perceived need to protect the existing taxi industry. In Australia, Uber has experienced mixed reception by state and territory governments since its Sydney launch in May 2014. However, Uber has now been legalised in the ACT and NSW and legal processes are currently underway in Western Australia, South Australia and Tasmania. In Queensland the Taxi Council Queensland (TCQ) launched an effective campaign to dissuade riders from using the services and gained political support. However in August the taxi industry review report will be presented to state Parliament and there is a chance the service could be legalized. (2016, Burke)

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Source: Raeside, Adrian, (2014). editorial cartoon Uber. Viewed 24 July 2016. Used with permission http://raesidecartoon.com/vault/uber-taxi/

For and against

​The ethical principles of the Uber model were questioned by McBride (2016) she asked whether this model is in the best interest of the drivers and suggested that "the sharing economy is the next step in what has been a 50 year journey in the Unites States of increased income inequality and increased worker vulnerability "By taking on an ownership role drivers are waiving their entitlement to equitable employment conditions.”

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Source: https://newsroom.uber.com/wp-content/uploads/2015/04/Sharing_Economy_Infographic.pdf

The NSW Business Chamber (2016) states that the Sharing label or "what constitutes sharing is contested" they suggest that there are two contentions one that the sharing economy is "unlocking the transformative potential of sharing" the other is that the sharing economy is "circumventing established regulatory and quality measures".

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Source: http://www.nswbusinesschamber.com.au/NSWBCWebsite/media/Policy/Tourism/Sharing-Economy-Issues-Impacts-and-Regulatory-Responses-COMBINED-POLICY-9-11-15.pdf

Globally regulators are working to moderate the legislative environment to adapt to the sharing economy. Academics such as Sundararajan (2016) suggest decision makers should work with innovators when creating new legislation concerning the economy. This view is also held by the NSW business chamber.

However, some industry groups such as the Australian Taxi Industry Association Limited question the use of the word sharing in describing Uber's business model. They lobby government to restrict the reach of Uber. They affirm that Uber is : "for all intents and purposes unlicensed taxi services, and as such, currently unlawful in every Australian state and territory." (NSW Business Chamber 2016 p10)

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Source: http://www.hawaiibusiness.com/whats-your-view-of-uber-airbnb-other-parts-of-hawaiis-sharing-economy/

A legal loophole you could drive a cab through?

The difference between the taxi services and Uber and a point of law, is that under the Uber business model the drivers are not employees, but rather ‘partners’ who share their transport with ‘riders’, therefore Uber skates around the edges of the transport and industrial regulations and avoids fines for operating an illegal taxi service – technically it has no drivers nor cars.

This difference provides Uber with lower operating costs, and with a larger number of private vehicles can offer users reduced waiting times. This competitive advantage offers Uber the ability to inject large amounts of cash into marketing to attract and retain customers. Marketing is one of Uber’s largest expense category, registering a spend of $246 million dollars in 2014. (Soloman, 2016)

Those that wish to protect the older existing economic structures argue that Uber exploits a legal loophole in facilitating the introduction of drivers to riders, rather than employing drivers and owning vehicles.

Queensland MP, Bob Katter is representative of those seeking to paint Uber as an opportunistic and illegal operator declaring in April 2016 in an ABC interview (Burke); "They [Uber] don't make the decisions, we do here. Someone has to be the a grown-up and say 'I'm sorry you might get a cheaper ride tonight but in the long run this does not serve the national interest'…" At the time, Katter’s Australian Party had successfully passed a private member’s bill, where driver fines increased from $1413 to $2356. The point Katter and others who share his view miss is that supporting share economy players is very much in the national interest and that economic conditions and laws are not timeless.

For over twenty years commentators have cautioned on the implications and longevity of the new economies. Goldhaber (1997) advised ‘…economics is about the overall patterns of effort and motivation that shape our lives, and it is these patterns and motivations that are changing. That implies a wholly new set of economic laws that replace the ones we all have learned.’ Goldhaber delivered a shot over the bow to alert us to the massive reshaping of our lifestyles, and the flow-on effects to economics and law. It seems as if the politicians and law-makers have taken two decades to comprehend the significance and are now scrambling to catch up and comprehend there is a power shift occurring.

In the transport industry taxi licence owners and regulators previously held power. Uber has challenged their mode of operation, eroded their value and therefore their power. Uber is a prime example of an organisation with New Power, a direct product of the Network Economy. Heiman and Timms (2014) describe New Power as operating like a current “It is made by many. It is open, participatory, and peer driven. It uploads, and it distributes. Like water or electricity, it’s most forceful when it surges. The goal with new power is not to hoard it but to channel it.” By contrast the taxi industry can be seen to hold what Heiman and Timms define as Old Power “Old power works like a currency. It is held by few. Once gained, it is jealously guarded, and the powerful have a substantial store of it to spend. It is closed, inaccessible, and leader-driven. It downloads, and it captures.” Like all powers both can be won and lost, where we see the taxi industry losing power to competitors such as Uber, Uber could also lose power if it loses its ‘surge’ that is, the number within its network subsides.

In Australia, where the 2016 election was won (albeit narrowly) under the mantra of ‘jobs and growth’ Uber demonstrates a prime example of how to generate both. The table below (Minifie, 2016) indicates Uber’s revenue in 2015 was 1,800 million USD.

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Source: Source: Minifie, Jim & Wiltshire, Trent, (2016) Peer to peer pressure: policy for the sharing economy, Grattan Institute. Viewed 17 July 2016. https://grattan.edu.au/report/peer-to-peer/

These revenue figures present opportunities for governments as well as obligations to revise legislation to reflect the current economic reality, limit international companies like Uber from circumventing tax obligations; ensure consumer and employee rights and safety are upheld; and to promote economic growth and yes, jobs.

In its 2016-7 report, The Gratten Institute references Uber and recommends governments legalise and ‘mandate safety checks and insurance for ride-sharing’ and points out that “If governments act fast, Australia can make the most of the peer-to-peer economy. Not all traditional industries will be happy – but consumers, workers, and even the taxpayer can come out ahead.” Minifie (2016).

Further to their duty to revise legislation to suit current economic events, there is a responsibility for vigilance and to foster relationships with innovators and disruptors in anticipation of future change. As Kelly advised (1997) “The Network Economy is not the end of history. Given the rate of change, this economic arrangement may not endure more than a generation or two. Once networks have saturated every space in our lives, an entirely new set of rules will take hold.” Therefore lawmakers and politicians would be wise to accommodate and build deeper relationships with companies of the Network and Sharing Economies rather than make futile attempts to restrict them or protect older industries that are becoming irrelevant.

Minifie (2016) acknowledges the risks posed by peer-to-peer platforms but warns “they should not be used as excuses to retain policies, such as taxi regulation, that were designed for another era and no longer fit. Governments should not try to hold back the tide to protect vested interests.”

Besides those risks, the nature of peer-to-peer platforms results in disintermediation - the removal of the middleman, thereby disempowering regulators as customers access services via mobile devices in their homes rather than regulated shop fronts. It is nearly impossible to track all offences and enforce restrictions.

Our analysis suggests the time, energy and funds spent by those in positions of responsibility and influence attempting to stem the tide could be better spent assisting older economies transition to new ways of operating and monitoring innovation in new economies for the next wave of lifestyle impact and therefore economic reshaping that sits just beyond the horizon of their imagination.

Conclusion

There is no doubt that Uber has revolutionised not just the taxi industry but business models in general through the use of e-commerce in the attention, sharing and network economies.
Building on the role of the Internet in the rise of the attention economy, Uber has used to its advantage the fact that people want a collaborative social experience. The parallel between the attention economy and collaborative consumption is demonstrated by the unique marketing practices used by Uber.

The sharing economy initially started between kinship groups and communities however as the use of the Internet became more prevalent, sharing expanded to peer-to-peer sharing of music, ideas, thoughts and finally into a more tangible experience with sharing of goods and services. A company like Uber, which solely operates through its mobile app can be directly attributed to the sharing economy.

Digital platforms such as the Internet, the smartphone and mobile applications facilitate person to person transactions and provide access between interconnected networks of consumers and suppliers. The underlying principle of Uber’s business model is the sharing of information via a smartphone app which connects customers with drivers immediately. Use of this technology and providing an extremely convenient service, available at the push of a button with real time information has allowed Uber to capitalise on the sharing economy. Using this real time information and the vast amounts of data that is available through complex algorithms, Uber is able to fluctuate its prices during peak times. This works to the benefit of both drivers and users as higher prices means more drivers will get on the road and when business is slow, lower prices mean more customers.

The Internet and the network economy have lowered barriers for entry to industries like the taxi industry which operated on scarcity models. Additionally the network economy has reduced costs and opened the door to a more competitive market.

Although the Internet and the use of technology has allowed Uber to make a disruptive impact within the sharing economy, marketing is the pivotal way in which it draws attention and interest to its service. Uber’s overall marketing strategy centres around using specific marketing campaigns with stunt marketing to infiltrate and lead the attention and network economies in their desired target market.

The sharing economy is surely here for the long term and government regulators have recognised this as companies like Uber are able to operate outside of legislation. Those who are pro older existing economic structures argue that Uber exploits a legal loophole in facilitating the introduction of drivers to riders rather than employing drivers and owning vehicles. In the transport industry of old, taxi licence owners and regulators held all the power. Uber has destroyed this power by challenging their mode of operation.

Like it or not, Uber and the resulting effect of ‘uberisation’ might be here to stay.


References

Project Diary

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