Uber generates revenue primarily through service fees charged to drivers and delivery partners on their platform. There are a few main revenue streams for Uber:
Platform Fees: When passengers or merchant customers request a ride or delivery through the Uber app, Uber charges the driver/delivery partner a service fee based on the total fare paid by the customer. For rides, Uber typically charges drivers a 20-30% commission on each fare. For Uber Eats, Uber charges restaurants a 15-30% commission fee on each food delivery order placed through the app. This platform fee is usually Uber’s largest source of revenue.
In the third quarter of 2021, Uber reported $2.5 billion in platform revenue, which made up about 65% of the company’s total revenue for the quarter. Platform fees can fluctuate based on demand levels and incentives offered to drivers/restaurants.
Delivery Fees: For Uber Eats orders, Uber also charges customers a delivery fee, which the company retains as revenue. Delivery fees often range from $2-5 per order. These fees aim to offset some of Uber’s costs associated with the logistics and infrastructure needed to support deliveries. In Q3 2021, Uber generated $892 million in delivery revenue, comprising about 23% of total quarterly revenue.
Advertising & Additional Services: Uber has increasingly looked to diversify its revenue streams beyond core rides and deliveries. One way they do this is through advertising in the Uber app. Uber displays targeted promotions and advertisements to passengers and delivery customers during certain trips. Advertisers pay Uber to display these ads.
Uber also generates additional revenue through services like Uber 4 Business and Uber Freight. Uber 4 Business allows large companies to manage employee travel on the Uber platform. Uber Freight is Uber’s digital marketplace that connects shippers with carriers for freight transportation. These newer revenue streams still comprise a relatively small percentage of Uber’s overall revenue, but are areas of focus for future growth.
Driver Referral Bonuses: To attract more drivers, Uber offers sign-up and referral bonuses both to new drivers and existing drivers that refer others. A portion of the bonuses paid out come directly from Uber’s funds and are treated as marketing expenses. But a good percentage of driver bonuses also come from a surcharge Uber applies to certain passenger trips. So rider surcharges help offset the cost of driver bonuses without directly impacting Uber’s top line revenue.
Driver & Merchant Loans: More recently, Uber has started partnering with banks and financial institutions to offer loans, leases, and vehicle rental programs to drivers and merchants on its platform. For example, Uber offers drivers no-interest vehicle leasing through partnerships with automakers like Toyota. Uber earns revenue through origination fees, interest income, and other transaction fees associated with these programs. Loans/financing still represent a small fraction of Uber’s overall revenue base currently.
Driver & Restaurant Fees: Uber also charges drivers and restaurants on its platform additional monthly, weekly, or per-trip/order fees for use of certain services. For instance, Uber charging processing fees for credit card transactions that drivers/restaurants accept through the Uber payment system. Restaurants may pay a monthly location fee to be discoverable on Uber Eats. Such auxiliary fees help supplement Uber’s top line revenue figures.
Taxes & Regulatory Fees: In many cities and jurisdictions where Uber operates, local regulations require the company to collect and remit certain taxes, surcharges, and fees on behalf of drivers and merchant partners. Examples include local taxes on rides/deliveries in certain cities, driver benefit surcharges, general sales tax collected from customers, regulatory impact fees, and more. Uber accounts for these tax collections as revenue on its income statements.
Platform fees from rides and deliveries make up the bulk of Uber’s revenue currently. But the company is aggressively diversifying into new services like advertising, freight, and financial products to become less reliant on any single revenue stream. Managing costs associated with incentives and expanding into new verticals will be key to Uber sustaining profitable growth in the coming years. Strict Covid-19 lockdowns in 2020 significantly hampered ride volumes and demonstrated Uber’s continued financial vulnerability to external shocks that curb transportation demand. But most financial analysts remain bullish on Uber’s long term revenue prospects as mobility and delivery needs continue digitizing globally.