You can see how complex the matter is its not about

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You can see how complex the matter is. It’s not about solving this for Uber. The messageis that as an innovator you should be aware of these kinds of considerations.I also wanted to raise this, because I have seen ridiculously simple “unit cost”calculations for Uber on “serious” business management portals.The most important insight should be that the revenue is not just the sum of transactionfees. The question will always be if a platform cancreate enough cumulative valuefor itsparticipants so that it can capture value for itself.Invest in yourself: Our products come with learning aids that will reduce your initiallearning iteration to a few hours. Use the next weekend morning to reward yourself withknowledge of the kind you have likely not experienced before.ʇCost Structure
12/15/2020Business Model Canvas Uber - platform business model37/44For many online platforms, the biggest cost element are customer acquisition costs(CAC). Up to the release of the IPO document, this was also assumed to be the case forUber.However, one rather interesting point that was revealed in the IPO document andsubsequent annual report, was the signi¦cant cost of revenue. Thesereportsindicatethat the biggest elements of it are insurance and payment costs. Cost ofrevenue was higher than marketing and sales since 2014. It still is possible that cost ofcustomer acquisition is the single biggest driver given that both buckets (cost of revenueand sales and marketing) include many sub-items. But it might not be the case.Uber’s cost element are (ordered in the highest percent of revenue, 2019):1.Cost of revenue(51% of revenue, 2019): including“insurance expenses, credit cardprocessing fees, hosting and co-located data center expenses, mobile device andservice expenses.”This cost item went up from 50% in 2018. This would beconcerning because it is a direct cost and was coming down over the recent years(in terms of % of revenue) as one should expect. However, the 2019 10-K indicatesthat the increased ine¨ciency was caused by the new business areas.2.Sales and marketing(33% of revenue):“advertising expenses, expenses related toconsumer acquisition and retention, including consumer discounts, promotions,refunds, and credits, Driver referrals, and allocated overhead”(and post-IPO it alsoincludes stock-based compensation to sales and marketing employees)3.Research & Development(soared up to 34% of revenue in 2019): slightly higherthan sales and marketing (but it was far lower for most of the previous reportingperiods). It was largely driven by stock-based compensation for engineeringemployees, hence likely to go back to previous levels of around 15% over time. R&Dcosts“consist primarily of compensation expenses for engineering, productdevelopment, and design employees, including stock-based compensation,expenses associated with ongoing improvements to, and maintenance of, ourplatform offerings, and ATG and Other Technology Programs developmentexpenses, as well as allocated overhead.”

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Term
Spring
Professor
jame smith
Tags
Management, BUSINESS MODEL CANVAS Uber

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