What is the Gig Economy? - Definition from WhatIs.com - TechTarget
A gig economy is a free market system in which temporary positions are common and organizations hire independent workers for short-term commitments.
Uber
The gig economy provides consumers with an alternative to commercial products and industries. They turn to the gig economy for convenience, better service or both. This is the case with ride-hailing apps, like <anchor>Uber</anchor>, and food delivery services, like Grubhub. Gig apps have also met consumer demand where a service is in short supply or expensive. This is a role Airbnb has played in places where hotel rooms are in short supply, making more temporary accommodations available, sometimes at lower prices.
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# What is Uber?

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Rahul Awati

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Uber is a transportation and ride-sharing technology company that allows passengers to book rides and drivers to charge fares and get paid via a smartphone app. By hiring independent contractors as drivers, Uber created a new business model that changed the way traditional transportation companies operated. Since its inception, Uber's services have contributed to the expansion of the sharing economy, supplying a means of connecting existing resources (cars and drivers) with buyers (passengers) without the company having to own any of the physical resources facilitating those services.

## Uber history

Travis Kalanick and Garrett Camp founded Uber in 2009. Kalanick replaced Ryan Graves as CEO in December 2010 and held the position until 2017, after which he was replaced by Expedia CEO Dara Khosrowshahi. Khosrowshahi remains Uber's CEO as of August 2024.

Kalanick and Camp formed the company around a simple idea: What if anyone could book a "cab" ride from any location to any location through their phones? In March 2009, the two entrepreneurs developed an app to help people do exactly that. However, it wasn't until July 2010 that the first ride was booked with the Uber app by a passenger who requested a ride across San Francisco. In December 2011, Uber started its international operations; it remains based in San Francisco.

By 2014, Uber connected riders to drivers in 100 cities worldwide and continued to expand widely over the next several years. By 2015, the company had reached 1 billion trips, surpassing 5 billion trips by May 2017 and 10 billion trips by June 2018.

Between 2013 and 2018, Uber launched various social initiatives in the United States and elsewhere to support the LGBTQ+ community. It also launched a self-driving pilot program in Pittsburgh in 2016 that reached 2 million autonomous miles in its first 100 days, a freight trucking program in 2017 to connect trucking companies and drivers directly with shippers, and a Fund for Sustainable Mobility in 2018 to campaign for future-focused mobility policies. Following numerous scandals -- including the death of a woman -- and lawsuits, Uber sold its self-driving division to Aurora, a San Francisco-based startup in 2020.

Sensors that detect people, vehicles and other relevant objects are an enabling technology in self-driving cars like those Uber used in a pilot program.

As of 2024, Uber is available in 10,000-plus cities in 70-plus countries worldwide. In Q4 2023, Uber had completed 2.6 billion trips worldwide compared to 2.1 billion in Q1 of the same year. In Q2 2024, Uber reported that its gross bookings had grown by 19% year over year (YoY) and 21% YoY on a constant currency basis. Also in this period, Uber's YoY revenues grew 17% to $10.7 billion, with income from operations up $470 million YoY to $796 million.

## How does Uber work?

Uber links passengers with drivers using the Uber app, which works on almost every smartphone.

Generally, the drivers own their own car, and Uber receives a commission from each booking. Passengers can request rides from drivers and pay the fare that's set by Uber's computer algorithm based on multiple factors like distance, driver supply and passenger demand.

In addition, Uber's software locates drivers that are closest to the passenger's location, allowing the two parties to connect quickly and initiate a ride with minimal waiting on either side. The waiting time might be more in rural areas and in places where passenger demand outstrips driver supply.

Besides ride-sharing, Uber also offers these services:

- Car rentals or leases through vehicle partners like Hertz, Getaround and Avis.
- Uber Eats on-demand food delivery.
- Uber Freight that matches carriers with shippers.
- Uber for Business with automated billing, expensing and reporting services.
- Uber Fleet for Uber partners who manage squads of drivers and cars.

Customers can access most of these services via's Uber's apps on smartphones.

## Uber pricing model

Uber offers rides under a surge pricing model for both drivers and passengers. Also known as peak pricing, this model automatically adjusts prices so ride payments depend on local demand. Passengers needing a ride can use Uber's app to hail a driver with an estimated price that depends on their destination and demand at the time. As more rides are requested through the app, prices go up. This means riders pay more at busy times, which helps ensure that the required number of drivers are available to match demand.

By paying drivers more during peak demand times, Uber incentivizes them to pick up more fares during those hours. Passengers can also expect to pay higher prices during holidays, such as New Year's Eve, when demand for taxi services usually surges, especially in urban areas. The advantage of paying more is that passengers can expect that the price will attract a driver as opposed to a regular taxi that might never show up in isolated areas or during late hours.

## Benefits of Uber

Using Uber's ride-sharing app provides several benefits to passengers. For one, Uber's dynamic surge pricing model attracts drivers to certain areas, making it more likely a car will be available for a passenger when they really need it. The app also allows them to view the available drivers in that area on a map. After choosing a driver, they can track their driver in real time as they navigate to the pick-up location, and even get real-time updates on estimated time of arrival. This allows for ultimate convenience when booking a ride.

Another benefit is that passengers no longer have to waste time or effort hailing a cab on the road. All they need to do is book a ride via Uber's simple app and have the car reach them at their location in just a few minutes. They can also choose to make cashless payments, which can be a great option for ride-hungry but cash-strapped passengers.

Uber works consistently to maintain a fleet of skilled, polite drivers whose identities are verified, which minimizes the potential for passenger-driver conflict and maximizes passenger safety. Most drivers own the cars they drive and are therefore invested in keeping the vehicle clean and well-maintained. Also, customers and drivers both rate each other in the app. Drivers with a consistently low rating might be removed from Uber's rolls while passengers with a consistently low rating might find their accounts deactivated. In this way, Uber tries to foster positive experiences for both drivers and passengers.

Uber's ride-sharing model also benefits drivers. It allows car owners to convert their cars into a source of income. Moreover, they can choose their own working hours and earn money on their own terms.

Like other companies that participate in the sharing or gig economy, Uber can -- at least in theory -- more efficiently use underutilized assets (cars) and make a profit by balancing supply with demand.

## Challenges of Uber

Although Uber generally increases the convenience and efficiency of ride-sharing using its app, there are ways in which this method of offering and getting rides can create new challenges for passengers and drivers alike.

For one, passengers need access to an app-capable device and an internet connection to hail a ride. They cannot hail an uber directly from the street. (To serve passengers who lack a smartphone or space on their phone for the Uber app, or who need to book a ride from a nonmobile device, such as a PC, Uber lets them request a ride online via m.uber.com. They must first create an account and register their contact details.)

Another challenge is that although Uber drivers must pass a background check to become a driver, the check process is not perfect. Also, Uber does not always test driver skills during the hiring process. These gaps result in inconsistencies in driver quality, resulting in customer complaints and, in the worst cases, security issues like accidents. Furthermore, it's nearly impossible for the company to properly handle incidents because it operates in so many countries and cities, and because driver employment and rides are managed remotely.

Uber's surge pricing model can also cause difficulty for drivers who rely on Uber as their primary source of income. Because fares can change quickly and changes are difficult to predict, they might not earn as much as they expect, especially if they prefer to work during nonpeak hours when demand and therefore prices are lower. Lower earnings can demotivate some drivers to maintain high standards of vehicle cleanliness, professional behavior or passenger safety, resulting in passenger complaints and potentially damaging Uber's reputation.

This was last updated in September 2024

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