Uber was launched in San Francisco in 2010. The concept was strong but difficult to get off the ground. Ride sharing is a network effect business - the bigger it gets the better the service becomes through wider availability and faster pick ups - so Uber needed a way to build its network before competitors had the chance to. It also needed to attract drivers and customers simultaneously. Too few drivers would result in poor service for customers, while too few customers would make it unprofitable for drivers. To tackle this, Uber investing heavily in a referral scheme. Drivers could earn bonuses of up to $1,000 or more in some cities for referring other drivers. Passengers received ride credits worth $10 and $60 for referring a friend, depending on the location. The strategy was effective but expensive. Backed by the venture capital funding totalling over $24 billion by the time it went public in 2019, Uber succeed in establishing strong networks in major cities globally. By 2023, the company reported sizeable profit, even after accounting for interest on its debts.
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Useful links:
Early history
Network effects
Venture funding
Profitability