Question

In its relatively short life span, Uber has attracted a lot of media attention. Why is this? What is it about the Uber business model that is both compelling and polarizing? In addition, why has Uber managed to achieve such a high valuation? What are the pros and cons of a high valuation?

Answer 1

The reasons behind Uber’s media attraction in such a short span of time are their unique strategy and business model. Uber implemented surge price system which is based on demand and availability. The the business model used is disruptive, it allowed the customers to enjoy taxi services with ease and provided them with cheap and fast services. Also the driver's model of Uber is also unique which hired drivers as contractor not as employee and providing with the share of the profit accumulated from the passenger. The use of smartphone for both passengers and driver was an excellent strategy but is polarizing due to many lawsuits against Uber which lead to ban in Austin. Also this aggressive strategy gained criticism from the existing taxi business companies. Uber dealt with criticism and was able to raise $1.2 billion at a $40 billion valuation in the year 2014 and by the year 2016, Uber raised $12.5 billion with a valuation of $66 billion.This high valuation is the reason why investors feel hesitant to invest in Uber due to taxation policies