Scourge pricing

Nobody’s talking about the biggest, most obvious problem with Uber

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Uber’s upfront pricing has now officially arrived in New York City. (It’s been unofficially here, on select rides, for a while.) Instead of being charged on a minutes-and-miles basis, now Uber passengers will see a preset fare when they book their ride.

On its face, upfront pricing seems like a welcome move in the direction of simplicity and transparency. What Uber rider doesn’t want to know the price they’re paying, before they get into the car?

But I see the upfront pricing shift as part of a broader problem with Uber. It’s one that weirdly few people are talking or writing about, but it’s also one that poses a serious threat to Uber’s health as a company. Namely, the company’s actual product—the app that allows people to order cars to take them places—is a mess.

Uber is about as iconic and symbolic as companies come. Its rise epitomizes any number of trends, all of which have spawned countless think-pieces: the power of GPS-enabled phones to open up whole new industries; the way that private companies can raise billions of dollars in equity capital at eleven-figure valuations; the disruptive potential of the self-driving car; the power of fat balance sheets to crush competitors; the battle between public regulators and private companies; the status of “independent contractors” in a gig economy; the power of gatekeepers in two-sided markets; good versus evil in corporate governance; and many, many more to boot.

Precisely because it lends itself to chin-scratching, Uber has to date managed to deflect a lot of attention from its actual product. But as you can see below, the Uber app is becoming increasingly complex and unintuitive.

Here’s what Uber looked like in 2014:


And here, per Noah McCormack, is what the bottom of his Uber app looked like the other day:



When Uber started, as “your own private driver”, the product was impressively simple: press a button, and a sleek black car would magically appear to whisk you wherever you wanted to go. The back seat would be kitted out with phone chargers and small bottles of water, the cost was aligned with other luxury-car services, and the regulatory issues were pretty much nonexistent.

But then, as Uber started offering an ever-wider range of services through a single app, while having to juggle the demands of multiple competing stakeholders, it started to become increasingly confusing and opaque.

UberX was the first difficult transition, because it turned Uber into a real two-sided market, where raising prices would keep drivers happy while lowering them would attract more customers. At that point, whatever Uber did, someone was going to be unhappy—especially when taxi drivers and their regulators also start getting involved.

Around the same time, Uber started varying wildly from city to city, in everything from its naming conventions (UberPOP?) to its pricing algorithms.

Then UberPOOL came along, a service which promised lower prices but almost zero transparency in terms of how they were calculated. It was bathed in rosy promise for Uber—it portended a future not only where the number of paying passengers per car could increase dramatically, but also where Uber could start using ever-more-complex algorithms to determine individual fares, replacing the much-hated surge multiplier.

Not long afterwards, Uber started introducing its upfront fares. Every so often, in certain cities, rather than being charged by the mile and the minute, passengers would find themselves being offered an flat price, calculated by some inscrutable algorithm somewhere in the cloud.

Again, that was fantastic for Uber, because it meant that the company could effectively hide surge multipliers, and indeed could start charging a premium not only when there was greater than usual demand, but also according to anything else that might prove profitable. Want to get picked up at a bar after midnight? It’s a pretty good bet that your normal price sensitivity might be impaired. Using a corporate card? Maybe you won’t mind so much if a few extra dollars are tacked on to the fare. It might not be long before Uber prices fluctuate as much, and as inexplicably, as Amazon prices do.

The problem, for Uber, is that every one of these product extensions carried with it a bit more complexity, and more questions to be answered.

For instance: are Uber’s upfront fares really guaranteed? Twice last month, in Miami, I was quoted an upfront fare before getting stuck in traffic. Then, at the end of my journey, I was presented by Uber with a standard bill, for a higher amount, with a note at the bottom of the receipt saying that “Your fare reflects the time and distance you traveled rather than the destination you entered.” There was no change to the destination, and no substantive change to the route taken; it was simply a matter of the minutes-and-miles calculation coming out significantly higher than the flat fare quoted.

In principle, when this happens, Uber should simply pay the driver more, without charging the passenger more. After all, there are many situations where Uber takes a premium from the passenger, without passing it through to the driver. But there could be potential regulatory issues with that. If Uber used the drivers who get to their destination quickly to cross-subsidize those who take longer, that could help provide ammunition to people who make the argument that Uber drivers are employees, who work together, rather than independent contractors who work independently.

Meanwhile, the app still doesn’t have something which is a basic feature of pretty much every taxi in the world: a meter, showing how much you’ve spent so far. In a taxi, you know how much you’ve spent once you arrive at your destination; in an Uber, you generally don’t really have a clue, and you certainly don’t know when the app might have decided to switch you from an upfront price to a minutes-and-miles fare.

Sometimes, even Uber can’t explain what’s going on. I received one receipt last month which was so utterly befuddling that I sent it to the company’s press office to see if they could shed some light on it. (It included a $5 flat fare, a 3.3x surge, a subtotal of $116.85, and a final charge of $40.95.) The company wasn’t particularly helpful, although they did concede that the receipt had “errors”.


From the early days of surge pricing, Uber has always been run by ultra-rational engineers who are much more comfortable with complexity than are most of its passengers, drivers, or regulators. The result is that while Uber is used by millions of people around the world, it’s still not a pleasure to use, and indeed it’s less of a pleasure to use now than it has ever been.

There’s no doubt that in order to succeed over the long term, Uber will need to solve huge problems like autonomous driving. But right now, what’s increasingly clear is that Uber needs, if not a Steve Jobs or Jony Ive, then at least someone who can do Marissa Mayer’s old job at Google: saying no to potentially profitable new ideas, if they add too much complexity to the product.

Google’s clean search bar, Apple’s rounded edges, Slack’s disarming gifs and emojis: these things drive intense loyalty and create billions of dollars in value. And Uber has none of them. Yes, it can compete by throwing so much money at markets that it crushes most competitors. And yes, it has an enviable first-mover advantage and international brand recognition.

What it doesn’t have is someone with an obsessive attention to detail, someone willing to spend millions of dollars to make sure that cars to to the right address and not to some GPS dot a block away, someone who can veto the fourth passenger in a cramped UberPOOL.

What’s more, Uber needs to hire and empower that person now, before it goes public. Because if it waits until afterwards, it’s going to be too late.

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