By Sabrina Ross, Head of Policy, Marketplace
We launched What Moves Us last November as a way for anyone with an interest in the technology that powers Uber’s ridesharing marketplace to learn how it all works and the principles that shape its design.
At the time, we said What Moves Us was a first step. We knew it wouldn’t answer every question about our ridesharing marketplace, in part because our technology is always changing and evolving to make our platform a more reliable source of work and mobility for our customers.
One of those changes was to surge pricing for drivers — a change that sparked questions on how it works and why we made the change to begin with. In the following I’d like to shed some light on these questions and share some data on how things are going.
Surge pricing is designed to balance supply and demand in our marketplace. It goes into effect automatically when there are more riders in a given area than available drivers. For riders, it’s a premium: demand decreases as some riders wait for more drivers to become available, and the marketplace rebalances. For drivers, it’s an incentive to serve busier areas.
**You can learn more about how surge pricing works here.
One issue we had to address, however, was that surge could often feel uncertain to drivers. For example: drivers would often “chase the surge,” only to see the multiple of, say, 1.6x go away by the time they got there. That’s why we introduced a new version of driver surge that made it:
- Longer lasting: Surge areas remain on the map longer, giving drivers more time to get to those locations. More stability means more opportunities to earn extra.
- Easier to understand: Exact dollar amounts on top of drivers’ fares let them know the extra amount they will make for each trip, regardless of length.
- Location based: When a driver has reached a surge area, that extra dollar amount will be added to their next trip, no matter where they pick up a rider.
So after introducing the new driver surge, how have things played out?
Finding 1: Drivers earn surge more frequently, but at lower amounts
When we introduced new surge, we said “drivers could expect their weekly surge earnings to remain steady or increase.” So what happened?
A look at twelve weeks of data (and hundreds of millions of trips) in 2019 for all US cities with new driver surge, shows that drivers earned surge on 23 percent more trips under the new surge formula.
This is due, in part, to the fact that new surge is longer-lasting, giving drivers more opportunities to earn extra. What also happened was that the average amount of surge a driver receives per surged trip went down slightly compared to the previous version.
In other words, the average surge payout per trip went down, but the total volume of surged trips went up. The result? Surge earnings per trip under new and old driver surge were consistent on average. What did change is that surge became a more reliable signal for drivers to identify areas of high demand, leading to a more reliable service overall.
Finding 2: Driver surge consistent with rider surge
While driver- and rider-side surge are both tied to real-time imbalances in supply and demand, what a rider pays in surge and what a driver earns from surge on a given trip isn’t always the same. This is because new driver surge is based on the driver’s location, not the rider’s.
What this all means is that a driver may receive surge on a trip even if the rider doesn’t pay anything extra. So what does the total rider/driver breakdown look like with new surge?
For the same twelve weeks of data in 2019 for all US cities with new driver surge, we found that the amount drivers earn in surge has remained consistent with what riders pay in surge (after Uber’s service fee).*
Finding 3: Some Longer Trips Can Be Painful
For all the pain points new surge helped solve, it has its challenges: top among them is the fact that even though drivers earn surge on more trips, they may earn less on longer surged trips than in the previous version.
We understand drivers can feel frustrated on longer trips where their surge payout may seem small compared to before, however rare these trips may be.
To better serve drivers, surge amounts on longer trips are now often adjusted with added amounts to ensure drivers are earning extra for their effort and receiving a meaningful portion of the surge rider price. Drivers are able to see this additional amount on their trip receipt after the trip is over.
**Still have questions about driver surge works? Here’s the FAQ we shared with drivers here.
We’ll continue to improve driver surge and the driving experience. And we’ll do so with our marketplace principles in mind, namely Delivering Reliability and Aligning Needs, because we understand the work we do has real-world consequences一and that’s a big responsibility.
The driving idea behind What Moves Us was to bring more clarity and accountability to the technology that powers more than 15 million trips a day. In fact, one of our marketplace principles is Being Upfront. That means being clear about pricing, matching, and how our technology affects riders and drivers. That work never stops. We’ll continue to listen and learn from our customers and the communities we serve.
* Per Uber’s Quarterly Report published on August 8, our global ridesharing take rate was 19% for the three months ended June 30, 2019. Take Rate is calculated as Core Platform Adjusted Net Revenue as a percentage of Core Platform Gross Bookings.