Roosevelt Institute | Cornell University

Our Future Economy: "Uberification"

By Stephanie HahmPublished February 22, 2015

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As more and more people carry smartphones, mobile traffic has been increasing exponentially. Knowing this, mobile applications have become much more personalized, and firms have catered their business models to exploit the immediacy of the services that these apps provide. This article investigates the app-based transportation company Uber as a case study for the rising trend that will transform our current economy.
Our technology industry has made it increasingly easier to get everything on-demand. This generation can now communicate in real-time, quickly access different leisure options such as music, TV shows, games, and most recently, requested items and services delivered right at our doors.

One of the greatest things that technology allows us to use is its on-demand feature. On-demand services have become a growing business model for upcoming start-ups, and have begun to drastically change the economy and consumer behavior. As more and more consumers are getting hooked on the immediate gratification of receiving something right then and there, the on-demand business model has been extremely effective. Business Insider defines the on-demand economy as "the economic activity created by technology companies that fulfill consumer demand via the immediate provisioning of goods and services." By creating these on-demand platforms mostly through mobile apps, businesses are also able to serve these immediate requests by exploiting untouched resources on a local level.

Mobile apps provide on-demand services to customers at ground level by leveraging the skills and labor of the very customers they are meant to benefit. Similar to the recursive nature of how Wikipedia provides knowledge to an audience that itself contributes to Wikipedia, mobile apps exploit the ubiquity and popularity of mobile devices to allow their end users to also be providers of goods and services. The general principle behind this is that the work output of an entire community of people is much greater than that of a single business.

"Uberification" has become the up-and-coming term economists use to describe this phenomenon of employing freelance labor. By the click of a few buttons, consumers can access a wealth of resources that were previously inaccessible without on-demand mobile services. Uber, the company on which this term is based, has been the prime example and model for other businesses. An article (what article? Perhaps name the source, like Reuters, or the author) explains, "Uber is already operating in more than 205 cities around the world. It announced the availability of its citizen-operated taxicab service UberX, which it calls ride sharing… UberX allows people to hitch a ride with another person for a fee." This company has considerably changed the transportation industry, with people finding Uber's fast services and cheap prices a better option compared to conventional taxi services.

Uber's popularity can be demonstrated by its revenue. In June 2014, CEO Travis Kalanick told The Wall Street Journal, "We're at least doubling [revenue] every six months." This puts Uber above a "$2 billion gross and $400 million net revenue run rate just six months later. [Its] current revenue in San Francisco is larger than the entire San Francisco taxi and limo industry revenue in 2009." Even with a quick glance over the numbers, it is clear that on-demand services, at least in the transportation division, are immensely powerful.

If Uber alone can drastically redefine transportation, one can only imagine how on-demand services can transform other business sectors. Currently, start-ups have also percolated into sectors such as food and drink, housing, entertainment, health & beauty, home services, delivery, and others.

Companies look to Uber's business model and its ability to increase revenue, and have found value in its consumer-friendly but efficient methodology. Uber, and many other on-demand mobile services, capitalize on the following things: instant gratification, idle workers in the economy, local communities, and a simple interface.

Juggernaut created an infographic explaining why on-demand mobile services are the future. First of all, on-demand services can directly receive requests and provide solutions in real-time. If a consumer needs a specific grocery item delivered to their door within the next hour, on-demand services can cater towards that need. The immediacy of these apps can profit on consumer's instant needs.

In addition, with an excess demand from consumers who want prompt services, these on-demand mobile services also stimulate a new work base for idle workers. This business model provides the average layman a quick, part-time job on his or her time and schedule. This is a much more efficient use of labor, as anyone, assuming that he or she passes the minimum background check, can participate in this flexible and casual labor force.  

The localities of these services also make them convenient. By catering towards specific communities, businesses can set better models and prices depending on the need for a particular service. Hyper-specializing to the consumers based on locations has made it that much more personalized and efficient.

Lastly, the interface itself is appealing. The mobile app allows for all these processes to happen in a couple clicks of a button. There is little to no burden for the consumer, and quickly leads to consumer loyalty to a specific mobile app. The mobile app allows for an "improved purchase funnel" —meaning that everything can happen in the same place, and gives consumers a consistent and smooth shopping experience.

On-demand services have quickly occupied several business models, and we can only see this pattern increase with time. Venture capitalist investments
in the on-demand economy have expanded, with more than $1.5 billion (as of 2013) supplied to these companies. People should be quick to notice this reshifting of our economy, and realize the potential of on-demand mobile services.