The Ultimate Guide to Ridesharing: How it Works & What the Future Holds

What is Ridesharing?

Ridesharing has taken the world by storm. The aim of ridesharing, according to Wikipedia, is to reduce traffic congestion, automobile emissions, and vehicle trips. But the award for the best description of ridesharing goes to Dictionary.com which defines it as, “a car service with which a person can use a smartphone app to arrange a ride in a usually privately owned vehicle.”

But it is not a new phenomenon. Ridesharing has a background dating back to the times during World War 2 when there was a dire shortage of gas which resulted in shared rides, and later in the 1970s during both the oil and energy crises.

It became big and modernized only in recent times though. The 21st century has revolutionized the way we perceive ridesharing (also called carpooling, lift sharing, and covoiturage in French) due to the advent of high-end technology.


How Does the Modern Ride Sharing Concept Work?

Ridesharing works on a peer-to-peer driver-partner concept where drivers (who are mostly car owners) partner up with a particular car sharing company like Uber and Lyft to provide rides to potential customers.

Today, ordering a ride has become a cup of cake due to the availability of smartphone apps, social media, GPS navigation devices and online services including websites which link potential people in need of rides with drivers offering them.

Moreover, these apps have completely eliminated the need for one to pay with cash manually. The fact that one is able to choose a car with a tap of a finger (while taking into account factors like the driver’s profile, rating, and reviews etc), track the driver’s location and get notifications has increased the popularity of ridesharing massively.

So much that ridesharing has verifiably crushed the taxi service as depicted in this infographic.

Some reports like the one mentioned in Wired.com, state that commute sharing is just complementary to the old – trains, buses, and taxis. This makes sense given that the invention of TV didn’t wipe of Radio and the invention of Skype didn’t wipe off Telephone. But one no one disagrees on, it seems, is that ridesharing is growing massively and that it is here to stay.


Current Rideshare Giants in the U.S

At the moment, the biggest players in the US ridesharing industry are Uber and Lyft, and the competition between them is a treat to watch for all, though Uber has the upper hand so far.

Let’s take a look at both these companies one by one.


Uber

Uber has established itself as the dominating ridesharing giant worldwide with its headquarters located in San Francisco, California.

The commute sharing company, which was valued at an estimated $62.5 billion as of December 2015, works through a mobile app. Users download the app on their smartphones and submit requests for trips which are then redirected to drivers in nearby vicinities who then have the option to use their personal cars or the Uber fleet of vehicles to pick up riders.

You can learn how to order an Uber ride with a push of a button via the video below:

As of May 2016, Uber is available in several states in the US including California, San Francisco, Dallas, NYC, Los Angeles, Seattle, in addition to being present in over 66 countries and 499 cities worldwide.

The ridesharing giant completed its one billionth ride on Christmas Eve last year, marking a major milestone for the company and a testament of its widespread popularity.

The company’s rapid rise has led to the term ‘Uberfication’ being used by several other businesses which are, in some way or another, trying to replicate the Uber business model or the business practices that make it successful. The last time a company’s name became a verb, noun or adjective was when Google took the world by storm. We surely are living in interesting times to see the same phenomenon happening again in front of our eyes.

Coming back to Uberfication (and ‘Uber of this’ and ‘Uber of that’), nowadays you will find several businesses based on the Uber concept of sharing.

For example, Uber for houses (Airbnb), Private Jet Uber (BlackJet), and even an Uber Puppy delivery service that brings puppies right to your doorstep!

As if that’s not enough, the Uberfication principle has gone way beyond our imagination with the advent of even more hilarious innovations such as Uber Walk (tongue in cheek :P).

Looking at the way things are going for Uber, it doesn’t look like this rideshare innovator and transport industry disruptor is going to back down any time soon even though it has been involved in controversies, and several lawsuits are being hurled at it from every direction.

In fact at the time of writing this, Uber is involved in at least 70 different federal lawsuits for different allegations including driver woes, but it doesn’t seem like Uber is too bothered by all the controversies (though we suggest that it does remain mindful of them and think of it as ‘customer feedback’ so as to learn from it and adapt).

This is especially necessary given how the ride-sharing giant just survived what would have been a major blow to its very existence in April 2016, when it reached a $100 million settlement to resolve claims involving driver settlement allowances such as retirement benefits.

Uber’s IPO

Despite being marred with lawsuits and controversies for cases like alleged sexual harassment by drivers, investors are eagerly waiting for the rideshare giant to go public.

The $62 billion company is rumored to be going public in sometime this year, although nothing has been confirmed from Uber itself.

Uber is a good candidate for an IPO given that it operates on a combination of smartphone technology, real-time engineering, and a transportation concept which is all set to boom in the coming years, and so we predict that it’s IPO will be a huge success.


Lyft

Lyft works on an operational concept that is similar to that of Uber. It utilizes a mobile app based on a peer-to-peer ridesharing model whereby potential customers are connected to drivers who use Lyft’s fleet of cars to offer rides.

The company was launched by Logan Green and John Zimmer in 2012 and has its headquarters in San Francisco, CA.

It is estimated to be valued at $5.5 billion and operates in several US cities including New York City, San Francisco, and Los Angeles.

Lyft is distinguished by its trademark pink mustache which is present on the dashboard of the company’s cars.

Though less popular than its ridesharing competitor Uber, Lyft is still seen as a force to reckoned with. It has been funded by many reputable investors including AlibabaCarl IcahnMayfield Fund, and K9 Ventures.

Similarities to Uber: Nevertheless, both ridesharing companies have many things in common as well such as sign-up bonuses, similar rules for drivers and even similar insurance claims.

How Lyft is Different from Uber: Both companies pay $1 million in liability coverage per accident, but Lyft differs by going a step ahead and providing more benefits such as 24/7 customer service.

Lyft’s customer services seem to be better than that of Uber since it has an emergency hotline as well as 24/7 customer support team.

Lyft’s IPO

Like Uber, Lyft too is a potential candidate for IPO. Especially since it is almost on track to meet its yearly goals and has seen an increase in the number of its unique passengers by 2.8 million in May 2016.

Moreover, several investors have already begun to show interest in Lyft, with the most recent one being General Motors.


OTHER RIDESHARING PLAYERS

Other ridesharing companies in the US, which are mostly startups, include Fare, Fasten, GetMe, InstaRyde, z Trip, among others.

In Europe, BlablaCar is one of the most popular long-distance ridesharing platforms available and it most recently raised a good $160 million from Insight Partner Ventures which brings its total value to $1.2 billion.

Now that we have given you an overview of what ridesharing is and what some of the main players are, let’s look at the impact it has on our society and economy, and what the future looks like.


Ridesharing: The Good

The emergence of ride-sharing companies has brought about a revolution in the transportation industry. Some benefits are more obvious than others.

If you think ridesharing is not for you (which would come as a huge shock to us and many others!), then take a look at its benefits below and reconsider your stance:

Ridesharing is a Money Saver

Carpooling means lesser self-driving and more money saving. You will be able to save the money that you’d otherwise spend on maintenance, gas, and insurance. In fact, some insurance companies are said to slash rates for carpoolers.

For drivers, it is a way to earn money from their side hustle in an easy manner. There have been reports of how certain ‘Uberpreneuers’ (yes another of those nouns that the magical times that we live in has given us) have earned much more than they would have ever made in a ‘normal job’.

According to a report published by the American Automobile Association in their 2015 driving costs brochure, it costs an average American driver driving 15,000 miles annually, approximately 58 cents per mile to cover up all costs associated with driving which include maintenance, insurance, legislation, taxes, as well as financial charges.

Now if we bring ridesharing into the equation whereby two people team up to carpool to work for an average distance of 50 miles per day including a return journey, then a good $3400 in transportation costs can be saved annually by both parties combined.

It Reduces Pollution by Improving Air Quality

Automobiles are one of the largest culprits responsible for air pollution in the US. This is because gases emitted by vehicles include a staggering 27% of the country’s total hydrocarbon emissions, 51% of emissions of carbon monoxide, 20% of nitrogen oxide, and 18% of carbon dioxide (CO) emissions.

Reducing the number of cars on the road by ride sharing is paving the way to improved air quality by decreasing the overall emission of gases which therefore curbs the effects of global warming.

Ridesharing Helps Conserve Non-Renewable Sources of Energy

According to the US Energy Information Administration, 28% of non-renewable sources of energy such as crude oil and liquids from natural gas is consumed by the transportation sector in the US.

The advent of high-mileage and fuel-efficient cars in the US has helped conserve more non-renewable sources of energy in the past few years.

Now, with the emergence of ridesharing, there has been a rise in the conservation of non-renewable energy resources. For example, according to DOE, passenger cars have been able to save about 33.7 miles per gallon of fuel in 2010, up from 28.5 miles per gallon in the year 2000.

Now imagine if 2 people decided to commute to and fro work (for a distance of 50 miles) for 5 days per week for a whole year via ridesharing. According to the simple math calculations that we had to do, we came to realize that it would conserve around 502 gallons of gas per year!


Ridesharing: The Bad

While ridesharing has its fair share of advantages, it also has an equal number of challenges (which, we feel, will be fixed soon). These include:

Liability Issues

If you are interested in renting out your vehicle to a rideshare company, you will also have to deal with liability issues.

This can happen in a situation where your car is involved in an accident and you are held liable for it and have to pay additional money in insurances claims. For more on this, come explore our guide to rideshare insurance.

Long Wait Times

While ridesharing has taken up the transportation sector by storm, there is no guarantee that a ride will be available to you when you are in dire need of one.

For example, hailing a ride on a rainy day or during times such as rush hour may be a bit difficult because you have to plan in advance. The best option in such a situation may be to simply hire a cab.

Less or No Negotiation Power and Independent Contractor Woes

This point is specific to drivers. Since drivers are not considered as employees, but rather independent contractors, they have to deal with tax bills and are not entitled to pay for overtime hours (hours exceeding 40 per week).


Ridesharing: The Ugly

Sexual Assaults

Not all is rosy in the ridesharing industry though. Reports of sexual assaults are steadily rising in rideshare companies like Uber and Lyft. This is surely a serious issue and needs to be taken care of as soon as possible.

A recent Buzzfeed article offers internal data of Uber sex assault claims between December 2012 and August 2015 which amount to a whopping 5,827 individual tickets.

Uber was, however, quick to refute the claim by saying that the keyword “rape” returned all queries including all email addresses of individuals with the letters “rape” in them, such as “Don Draper.”

However, Uber did confess that the company received at least five rape claims and 170 claims of sexual assault directly related to an Uber ride between December 2012 and August 2015.

Lyft too is marred by several sexual assault cases. Local police in Austin say that at least seven women were sexually assaulted by Lyft and Uber.

Most recently, a 26-year-old woman in Delhi India was raped by an Uber driver when she ordered a carpool service for a journey back home but was instead taken to a secluded area and raped.

The driver was arrested and charged with sexual assault and imprisoned for life. A move that was applauded by Uber.

It is only imperative that you take the following precautions when necessary so as to be safe rather than sorry.

Use Public Spots for Pickups and Drop Offs

Picking and dropping off at public spots greatly reduces the chances for crime due to the presence of other parties.

Keep Others in the Loop

You should always have one or two out-of-car contacts know your whereabouts. You should send these contacts a picture of the car, as well as a description of the driver.

The driver too should take note of the passengers by noting their description and sending to people of contact.

Learn Self-Defense Skills

Just in order to be safe from potential attacks, you can learn self-defense skills like taekwondo/karate.

For instance, an Indian girl saved herself because she knew Karate.

Follow Your Instinct

Always listen to your intuition. If something does not feel OK and you feel uncomfortable entering the vehicle for any reason, then back out. It’s never too late to hail another cab.


Ridesharing: The Final Verdict

As with any new technology or service, there are bound to be challenges, most of which we mentioned above. But that doesn’t you should fight change and innovation.

Instead, drivers and riders both should take the precautions mentioned above, and together we should also encourage the government to have better legislation in place, and the ride-sharing companies to have better policies and practices in place so that together we all can benefit from this highly exciting sensation.


The Future of Ridesharing: Top 6 Changes

As ridesharing takes the transportation industry by storm, we expect to see even more innovation in the future. Its effects will be felt far and wide since everyone is in the process of catching up with the latest trends.

In future, we expect the following advances in the ridesharing industry:

1. The Use of Autonomous Vehicles

Autonomous (or self-driving) vehicles will soon become the “in-thing” in town. While one may assume that they will just take over the streets and completely replace manually driven cars, the implications of driverless cars are much more than that.

Google's Self-Driving Car

Source: Flickr.com

In the near future, people may not need a car at all. Self-driving cars will take care of most of the daily commuting tasks we perform from picking and dropping off kids to school to grocery shopping.

And ridesharing will be even more interesting. We shall see autonomous cars provide shared rides without drivers (and therefore no driver woes). They will even be able to return the car to the service providers.

2. Juicier Carpooling Incentives

Many workplaces already have carpooling services in place. But as ridesharing becomes even more popular we shall see it completely taking over in workplaces.

Employers will feel the need to save money on costs such as parking space by fostering a ridesharing culture in their companies and hence will incentivize it even more.

3. The Emergence of Ride Linking

By ride-linking, you will be able to share a single journey with several people at once. It will involve the planning of your trip in a sequence form.

For example, you could plan your trip by sharing multiple trips at once, one from town A to town B, and finally to town C.

4. Massive Growth in the Sharing Economy

Ridesharing is going to impact the sharing economy in a big way. Many new startups are investing in the sharing economy thanks to Uber which has set up this trend.

Although the sharing economy is already churning billions of dollars, the numbers are all set to increase in the coming years as more investors set their eyes on startups running on this concept.

Frost & Sullivan also predict the transportation sector, more specifically the shared transport sector as one of the most lucrative fields of investment in the future.

5. The Use of Predictive Software

Although predictive path planning and navigation software and apps are already in massive use, they will become more advanced in the future.

With more insights on traffic conditions, especially those brought about by ridesharing, more predictions can be made, more data deduced, and consequently, more advanced software can be developed on this basis.

6. Modification of Public Transits

Carpooling will undergo a massive infrastructural transformation in a way that carpool lanes are going to be expanded rapidly to cater to the growing trend of ridesharing.

In fact, Lyft has already launched the Lyft carpool pilot program which has been made to address the issue of high congestion between the areas of San Francisco and Silicon Valley.

This trend is set to continue in full swing in the near future since traffic congestion is still a major issue.


Our Take

Despite all the controversies surrounding ridesharing companies, it is interesting to note that the future looks very bright for companies in this industry and investors should keep their fingers crossed as companies like Uber and Lyft may hit the Wall Street someday, given their massive growth in a short period of time.

Are you now ready to hail a ride or become an Uber driver or Lyft driver? Here are some are few signup codes to help you get off to the best start possible: