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Uber’s Move Toward Software Might Be the New Normal

Uber is an interface company. That means that their business is squarely located at the interface between customers and a service they need. Uber does not generally own the vehicles that give you the ride you hail using its app. That interface is powered by software, which means that Uber is primarily a software company. But now Uber is taking a new approach: they will be partnering with a Californian county to provide the software to link users with public transport. [1, 2]

This move appears to be a first step toward a new normal. David Reich, who heads up Uber Transit, is quoted as saying “This is not a one-off. This is a new product and a new business.” [2] A new product it may be, but it isn’t an extraneous one. Uber’s core business involves software, and so this move is a reasonable extension of that. 

The deal between Marin County, which covers much of the north side of the San Francisco Bay Area and is just to the west of the famed wine regions of Sonoma and Napa, and Uber is starting small. The pilot will cover four wheelchair-accessible vans operated by Marin County. Uber’s app will provide the logistics details to the user and to the van operators. Rather than commissions for each ride, Uber will receive a regular payment that will equal to $80,000 over two years. [2] 

Uber is in a difficult position due to Covid-19 and the changing transportation behaviors the pandemic has brought about. In May, for example, they fired 6,700 workers and have moved to shut down 45 offices. Despite a high IPO in 2019 Uber has struggled, with its stock down every quarter since. [3] It is not surprising, then, that Uber sees this move as “the start of a reliable revenue stream in the future in the form of long-term contracts.” [2]

 

Personal comment

It is interesting to see how Uber is responding to the changing transportation landscape. In the announcement of this partnership with Marin County the head of Uber Transit, David Reich, stated that “Together we want to make car ownership a thing of the past.”[2] This should be read private, or individual, car ownership as the vehicles that transport people will need to be owned by somebody. If this is indeed Uber’s aim it leaves them in a potentially interesting bind further down the road. If a competing company, be it Tesla, Lyft, or some other, develops robotaxis that may well spell the end of private car ownership, but it would also make it hard for Uber to compete if they remain purely in the interface space. For example, if a full-stack company like Tesla can solve autonomy then they will own not just the interface with customers but the vehicles the customers will use, and thus will be in a much stronger position. 

 

Written by Joshua Bronson, RISE.

 

Sources

1. 2015-03-04 The Battle Is For The Customer Interface

2. 2020-06-17 Uber to Sell Software, Starting With Four-Van Transit Service

3. 2020-06-17 Uber Offers Its Ride-Hailing Software To Public Transit Agencies