How Uber won the rideshare wars and what comes next

How Uber won the first phase of the rideshare war and how cabs, competitors, and car companies are battling back.

In 2011, two University of Michigan alums Adrian Fortino and Jahan Khanna partnered with venture capitalist Sunil Paul to revolutionize how people got from point A to point B quickly without having to do much.

The company was Sidecar, and the idea was simple: "We're going to replace your car with your iPhone," Fortino explains.

Sidecar did not lack competition. Around this time, the taxi industry was experimenting with new ways to make it easier for individuals to summon cars. And entrepreneurs, frustrated with wait times, imagined new ways to hire someone to drive them around. Multiple companies formed to solve this need, including one that is now considered a global powerhouse: Uber.

By the time Sidecar went into beta testing in February 2012, Uber, or UberCab as it was originally known when it was founded in 2009, had raised at least $37.5 million at a $330 million post-money valuation, according to VentureBeat. Lyft followed shortly after when it went into beta in mid 2012, boasting more than $7 million in funding, according to TechCrunch's figures.

Ridesharing had quickly become the VC-backed battle for the future. So why launch Sidecar in the face of such competition? Fortino says he wasn't concerned at the time.

Uber focused on providing a black car service (using high-end cars) with professional drivers, whereas Sidecar enabled anyone with a car–any car–to pick up passengers.

Fortino says the thought at the time was there seemed to be enough space in the ridesharing market for more than one player. They were not alone. Many players started up during the late 00s, early 10s, looking to own a city or gobble up market share as urban dwellers without cars flocked to the ease of mobile car hailing.

"We didn't think of it as ‘Oh man, we're going to go after a Goliath," he notes.

But a Goliath it did encounter.

Uber, worth $62.5 billion based on Bloomberg's 2015 estimates, is now considered one of the most innovative and powerful companies in recent memory: this generation's Amazon in terms of its ambitions and scope. It has a presence in about 500 cities worldwide, and in July, Reuters reported that Uber had completed more than two billion rides—a feat that it achieved six months after hitting its first billion.

Ultimately, the competition would prove to be too much for Sidecar. And by the end of 2015, it announced that it was ceasing all operations. Then in early 2016, Sidecar revealed that General Motors (GM) had acquired some of its assets and would be hiring a number of Sidecar employees.

Indeed, the marketplace has contracted in the face of Uber's dominance. The second largest player, Lyft, is burning through cash in its fight for marketshare, too. In April 2016, Bloomberg reported that Lyft had promised investors not to exceed $50 million a month in losses. Lyft is still humming along, though media reports say it has hiredQatalyst Partners, an investment bank offering merger and acquisition consulting.

Although Uber started as a black car service, it has expanded into a logistics network—one that now transports food, deliveries, and passengers and is a contender in the autonomous car market. As Travis Kalanick, CEO and cofounder of Uber, once told TechCrunch, "Uber is ultimately a cross between lifestyle and logistics. Lifestyle is ‘Give me what I want,' logistics is ‘How do I get it?'"

But its march to world domination isn't without hiccups. According to Reuters, Uber is still losing money—at least $1.27 billion in the first half of 2016. It also recently ceded the Chinese market—long the major global expansion goal—to rival Didi Chuxing. If it couldn't beat them—and regulation and inability to scale up drivers made that a reality—it would join them. In August, Uber announced its intention to merge its Chinese operations with Didi Chuxing while investing in the competitor—bringing Didi Chuxing's valuation up to $36 billion, according to The Wall Street Journal.

To read the full article on PRWeek's sister title DMN click here

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