You spend New Year’s eve chugging champagne. You dress up. You kiss your sweetheart at midnight.
And then, as you wake up blurry-eyed and hungover the next morning, you check your email to see a receipt from Uber and learn you spent an obscene amount of money to get home.
Then come the complaints and blog posts, flooding social media in chorus of indignation at Uber. How dare they! It’s price gouging! Why does a company valued as much as $70 billion need to charge so much for a simple car ride? What does Uber want me to do? Drive home drunk?
And so on.
To a degree, those complaints are justified. It stinks paying $100 (or $300 or $400 in some cases) for a relatively quick trip in a car, especially on a night where all you want to do is go out, get a little tipsy, and arrive home safely.
But even though Uber has been around for over five years, it’s still a very new concept that people have a hard time wrapping their hungover noggins around. Uber is not your traditional car service. And there’s a reason why its rates aren’t always consistent.
Yes, Uber is designed to get you from Point A to Point B, but more importantly, it’s designed to get you a car just a few minutes after you hail one. In order to make sure your driver gets there on time, it has to manage the supply of its vehicles on the road by temporarily increasing the price of rides until it can ensure a timely ride for everyone willing to pay.
It’s the same way a lot of industries work. It’s why aeroplane tickets vary in price. It’s why hotel rooms vary in price. It’s why apartment rents can vary month to month or year to year. These industries are designed to guarantee you get the thing you want when you want it without selling out of inventory.
That’s what Uber is doing for car services, and it’s something that this particular industry hasn’t really seen before. It also explains why Uber just seems so cool the first time you use it. A few taps on your smartphone and — voila! — a personal driver is at your door a few minutes later.
On New Year’s eve you basically have two options: Call a traditional car service that has a standard fare structure and wait an hour or two or three for your ride to show up. Or you call an Uber that’s guaranteed to show up in just a few minutes and pay out the nose.
Which option sounds better when you’re tired, drunk, and just want to get home?
I realise this explanation may seem basic to those who have been following the company for years, but (surprise!) there is a world that exists outside the bubble tech and media people live in. The annual uprising of Uber customers every New Year’s day just highlights the fact that there are plenty of people who still don’t get how this company works.
Uber does a pretty good job at warning its customers about New Year’s eve surge pricing. It puts out a blog post every year that gives you a good idea when you have the best chance of avoiding surge pricing. It sends you a notification in the app, warning that prices are likely going to be high. It makes you confirm that you understand your ride is going to cost a certain multiple of the standard fare before it even lets you call the car. But people are still confused. And it will probably stay that way for years to come.
Could Uber do better?
Of course. It could make it easier to estimate your fare before you call a car. (That option is kind of buried in the app.) It could give you a live view of your fare on your phone as you ride, just like a normal taxi does. It could use its massive war chest to expand offerings like Uber Pool, which lets you split rides with other people going in the same direction.
If you want to be cynical, you could argue that Uber’s surge pricing is a hint at a future where the company dominates the logistics of transportation to the point where you basically have no choice but to pony up and pay whatever Uber demands.
That cynicism is fine, and probably healthy as Uber basically runs away with its unchecked domination of this new market it created. Things could get messy down the road.
But you shouldn’t be surprised.
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