How Uber can be the Amazon of tomorrow
Seamlessly connecting the online and offline worlds
Uber is doing for the mobile world what Amazon did for the desktop world. It is using logistics to seamlessly connect the online and offline worlds. Like Amazon it is creating a marketplace where it controls the arbitrage between consumers and service providers.
In a world where mobile applications are providing content and entertainment and yielding small profits via virtual transactions and advertising, Uber is training its home run hitting machine by focusing on the industries where there is a high number of medium-to-high dollar transactions. Just like Amazon took the fragmented book industry and brought it under one roof, Uber is laying the fabric to defragment and make efficient every on demand service that we would want to be part of our life. And the results are already showing via their taxi-like service around the world.
Three advantages Uber has over Amazon:
On Demand: In a world where we are used to instant gratification, Uber enables us to get a cab within minutes, in a hassle-free way and even lets us socially proof the service provider before commissioning them!
Higher Margins: Unlike Amazon which has giant warehouses for all the products it has to ship, Uber focuses on a service where no long term storage is required. The service providers bring the ephemeral storage needed to transport and deliver product or service. In this sense, Uber is much like eBay; it has created a marketplace where it takes a cut of the revenues rather than incur any costs before services or products are delivered.
Reusable Assets: Uber’s biggest competitive advantage is its logistics and service provider network. Whether or not governments break down the current taxi-like business, the network can be leveraged for many other businesses. The vast logistics and service provider network can be used for transportation, on demand (perishable and non-perishable) deliveries and household services, just to name a few. Additionally, the power of a service provider network means that Uber’s focus is on building a high margin, low cost technology platform that can be leveraged by any qualified service provider.
Three directions Uber can go in coming years:
More On-Demand Services: While Uber has been strategically disrupting the taxi-like business around the world, there’s no reason for Uber to not expand to other similar on-demand businesses in cities it has already established market leadership. On demand restaurant deliveries and home services are two industries that seem ready for such disruption. A good strategy might be to acquire companies like DoorDash and HomeJoy and let them leverage Uber’s network to scale faster.
Advertising: I’d be surprised if Uber went down this track anytime soon, but it is definitely something Uber could be very good at. Imagine Uber drivers accurately tagging the restaurants, nightclubs, tourist attractions, shops andservices their customers used. That data could be used to build one of the most accurate and valuable sets of customer profiles available anywhere in the world. As the basis for a next-generation advertising targeting systems this data set would be priceless.
The biggest challenge for this model would be the reach of Uber and the number of people it would actually touch. The saving grace would be the self selective nature of Uber’s demographic; just like iOS users today, it would be a strata that every advertiser would want to target. Another potential challenge will be the privacy-related backlash by Uber’s user base. It has taken Amazon almost a decade and a half of existence to finally starting to use its user data to build it’s advertising product!
Personalized Offers / Services: A much more specialized application of the ideas from the above advertising section could be an Uber powered personalized offers and services product. I think of this as Groupon 2.0 but much better because of Uber’s understanding of each of its users’ offline behaviors. If Uber notices you going to Yoga studios, it could suggest a Yoga Retreat with a 80% discount. If Uber notices you go to nightclubs every weekend, it could offer you and your friends 40% off on Bottle Service at a new club in town.
I’m extremely bullish on Uber for many of the reasons above. The biggest reason I’m a believer in Uber is because for the first time in years, a company is letting technology make our lives easier and truly get out of the way. Online, to Uber, is just the set of pipes that enable offline efficiency. Seamlessly.
P.S. A lot of the future ideas can be businesses in themselves. It would be extremely interesting to see Lyft, the #2 in the on-demand taxi-like market, be more aggressive and go after this to better leverage the logistics network they are building. It’ll be interesting to see this unfold.
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