5MR#47 - Startup Growth Engines : Uber

Hailing a ride was always a pain and the founders of Uber took the responsibiliy to connect the already existing dots and turn it into what is now called as "Uber". Lets take a deep dive for what was different for Travis Kalanick’s and Garrett Camp’s growth start up – Uber

How did Uber do it? As a multi-sided marketplace business model, how did they crack the chicken-and-egg problem that so many marketplace startups struggle with? Much like Belly, Uber used intense market focus to create local network effects in their launch city, San Francisco, while fueling word of mouth growth through targeting of the early adopting Bay Area techset.

The Need for Uber

Uber is completely changing the way getting private transportation is done in several key ways. First, their smartphone app is integrated with Google maps so that you can see how far away the nearest cars are, set a meeting point on the screen, and hail a car to meet you there. You can even see your driver’s information (including ratings) as you watch the car get closer to your location.

Uber drivers call or text to confirm that they’re on the way, giving you peace of mind that your order was received. Once your car arrives (usually within a few minutes), the driver greets you by name and you hop in. The cars are black cars and SUVs. Uber X, a lower cost version of the service, is made up of a fleet of well maintained sedans.

Once you arrive at your destination, the app charges your card, and you’re free to go on about your day. There’s no need to deal with cash, change, tips, or receipts. You just hop out. (Source) Uber has removed the friction from the typical taxi cab transaction, and made it highly enjoyable in the process.

Bill Gurley sees Uber’s key to growth as a simple one: Uber offers a great product. He explains, “The product is so good, there is no one spending hundreds of thousands of dollars on marketing.”

Early Traction

Though the company was founded in 2009, Uber didn’t officially launch until June 2010. In January 2011, just six months later, they had had between 3,000 and 6,000 users and had already done between 10,000 and 20,000 rides. (Source) So what got them there?

Completely Solves Problems for Riders

Uber provides a solution to a real problem that impacts millions of people. Among the many problems Uber is tackling are: poor cab infrastructure in some cities, poor service and fulfillment–including dirty cabs, poor customer experience, late cars, drivers unwilling to accept credit cards, and more.

Uber set out to reimagine the entire experience to make it seamless and enjoyable across the board. They didn’t fix one aspect of the system (e.g. mobile payments for the existing taxi infrastructure), they tackled the whole experience from mobile hailing, seamless payments, better cars, to no tips and driver ratings.

Early Adopter Advocacy

In many cases, the importance of the early adopter tech community can be overstated. In Uber’s case it cannot. Uber knew that launching in San Francisco meant that they would be interacting regularly with the tech community who are continually looking for new tools and services that improve their quality of life. Uber took aim at those people by sponsoring tech events, providing free rides, and in general driving awareness among this audience.

The Uber experience became a vector for growth as early adopters in the know impressed their friends with the ability to call a black car from their phone with a couple taps. These new riders were immediately wow’d by the experience and became new users and advocates within the span of a single car ride.

So how did Uber reach those early adopters? One distinct channel was event sponsorship. Uber was highly active at local-area tech and venture capital events and provided free rides to attendees. Uber knew that these attendees were well connected and highly likely to share their experiences with friends, tech press, and social media audiences after trying Uber.

Word of Mouth from Satisfied Customers

Much of Uber’s success can be attributed, as mentioned above, to the fact that it is totally mind blowing compared to the frustrating and broken taxi experience. Max Crowley of Uber Chicago explains: “We’ve found that our growth is driven substantially by word of mouth. When someone sees the ease of use, the fact that they press a button on their phone and in under 5 minutes a car appears, they inevitably become a brand advocate.”

According to Kalanick, Uber relies almost exclusively on word of mouth, spending virtually nothing on marketing. He explains, “I’m talking old school word of mouth, you know at the water cooler in the office, at a restaurant when you’re paying the bill, at a party with friends – ‘Who’s Ubering home?’ 95% of all our riders have heard about Uber from other Uber riders.” In fact, for every 7 Uber rides, word of mouth generates a new Uber user.

This word of mouth is as much today’s growth engine as it was in early days. Uber doesn’t need to do traditional marketing to drive users, they simply find ways to fan the flame of that first trial to reach new people and grow their user base.

Leverage Distinct Growth Opportunities

In addition to providing an overwhelmingly superior solution, Uber has also leveraged some real life situations to spur growth, which Kalanick refers to as “accelerants.” These accelerants indicate a concentrated, temporary need for Uber’s services. These include:

Restaurants and Nightlife

• Holidays and events
• Weather
• Sports

Each of these factors makes driving yourself problematic at best (and in some cases downright impossible), and cities in which they coexist are especially receptive to Uber’s services. Uber focused on executing in cities where those problems are near constants to drive accelerated adoption.

Benefits for Uber Drivers

Not only does Uber transform the experience for riders, but it’s also good for drivers.

Uber doesn’t employ drivers. Instead, the service acts as a liaison between people who need rides to drivers who are in the area. This arrangement can bring in more than $500 a day, which amounts to a week of work for some cab drivers.

Like any good service, it’s a win-win for all parties involved, and this is certainly another factor contributing to Uber’s growth.

Today’s Growth Engine

Now, let’s examine today’s growth engine a bit more thoroughly. Growth engine is comprised of several related, moving parts, including:

Intensely Local, City-by-City Expansion

Perhaps the reason Uber has expanded so quickly is because they acknowledge that growth is not one-size-fits-all. What worked for San Francisco may not be what’s right for Chicago or New York, which is why they take it city by city, with local efforts tailored to each new location.

Because of the politics, regulations, and interests that make up each city, Uber needs to adapt their launch plans to suit the unique topology of each new market. It’s this ability to go into a market, understand who the suppliers are, who the special interests are, and account for those dynamics that makes Uber successful right from the start in new cities.

The effort of Uber to support these city launches is massive and all encompassing, from local events, industry partnerships, business development and more. Uber makes sure that their marketing and business efforts are in full support of fueling that word of mouth engine, driving local growth.

Huge Potential to Disrupt Transportation

A major factor contributing to Uber’s growth is its potential.

This potential is the primary reason that Uber has garnered so much attention from investors. The economic, environmental, and everyday implications are huge. They are changing the way that people think about transportation, making it less about everyone purchasing his or her own car and more about purchasing rides (like water or electricity) as we need them.

Controversy and Press

Uber’s word of mouth engine is fueled not only through word of mouth; the company is fast becoming public relations experts. As Uber rolls out into new cities, they face myriad lawsuits from existing interests, challenges to their legality from state and local lawmakers, and varying degrees of support or resistance from drivers.

The company has done a masterful job of turning these dust ups into a platform to tell their pro-consumer story. Uber has taken what could be seen as a massive business hurdle—litigation—and turned it into an asset that drives growth.

As Uber launches into market after market, these controversies are played out in the court of public opinion, and the power of Uber advocates and the quality of the experience, create an outpouring of local public support for the company.

This support changes laws, helps pave the way for Uber in new cities, and the local and national press coverage helps Uber reach more potential users who hear about an innovative new company recreating a transportation experience that is nearly universally disliked by people everywhere.

Low Risk Trials

Uber knows that once you ride Uber, it’ll be your preferred mode of getting around from that moment forward. That insight and confidence makes it easy to make the first ride a free trial. The company routinely hands out $20 first ride credits that let new users take a free Uber ride to try them out.

The Remaining Pieces of Uber’s Growth Engine

Uber is a fascinating case study because it is one of those truly disruptive ideas that completely redefine an industry and change the way people consider long-entrenched beliefs and habits. In addition, their success in a highly political arena, building a multi-sided marketplace among many disparate and entrenched interests is a model for anyone looking to take a moonshot with their startup idea.

Whether you’re tackling healthcare, government, transportation, or other well established marketplace, Uber’s growth provides insights on what it takes to find the growth you’re looking for.

The Zoom Out has been pivotal for Uber from Rides to Uber Eats and to delivering Groceries. Uber has come a long way with a business model that has reached globally in almost all the countries and used at large. A super successful startup listed in the NYSE.

Thanks for your time and encouragement. Make it a great day ahead !?