Uber is Changing the Way Surge Works

On Friday, November 11, Ridester learned that Uber rolled out a new SURGE pricing policy.  As with other changes made during these 180 Days of Change – this one was introduced by saying it is in response to what drivers have been asking for.

And indeed, most of it is. However, given Uber’s history, drivers are already expressing skepticism in online forums.

What are the Changes to SURGE?

In an announcement to drivers via the Uber app, Uber tells drivers that the new “improved SURGE puts you in control” and will offer drivers the following benefits:

1. Surges will last longer.

Making surges last longer will give drivers more time to get to the areas that are surging. This is indeed a much-requested change.

Drivers have long advised each other not to “chase the surge” – because they knew by the time they got there it would be gone.  This appears to be Uber’s answer to those complaints.

Sam Choi, an experienced rideshare driver, on why drivers shouldn’t chase Surge pricing while driving…

2. The new surges will be based on the driver’s location, not the passenger’s.

In the past, drivers could be in the middle of a surge and get a call from a passenger who was located just outside the surge area – and they wouldn’t get paid anything in addition to the regular price.

This was very frustrating for drivers who made an extra effort to get to the area that needed more drivers.  They would often go to considerable time and trouble to get there, only to be frustrated by getting calls from outside the surge area.

Now Uber says, if you’re in the surge area, the next call you get will have surge pricing even if the passenger is outside the surge area.  This would be a very welcome change.

Tip: Check out recent Uber Surges in your area with our Live Surge Map below. Using a mobile device? Check it out here.

3. Uber promises surges will be simpler to understand.

And here’s where it gets tricky and is causing a lot of worry among drivers.

Uber says,

Exact dollar amounts on top of your fares let you know the extra amount you’ll make for each trip, regardless of length.

No driver wants to hear that he’s going to get paid a flat-rate incentive regardless of how long the trip is.  They would like to hear that the incentive will increase with the length of the trip.

Another fear arises because in the past drivers have seen Uber tout changes as if they were for the driver’s benefit, only to realize later that whatever the benefit was supposed to have been, got lost in the fact that they were making less money than they were before Uber made the change.

Uber has established a pattern within the last year of implementing changes that bring substantially more earnings to Uber while holding driver earnings to the same low levels as always.

Related: Fake GPS: Uber’s Deactivation Rampage [+ Clever Solution]

For instance, drivers have recently learned about Uber’s upfront pricing where they charge passengers more than their published rates would warrant but continue to pay drivers on the lower published rates.  Some are speculating that this new surge policy will do the same.  They believe Uber will continue charging customers a multiplier (like 2.0x) of the published rates during surge periods but pay drivers a simple flat dollar amount.

By charging passengers a mutiplier of the published rates, it is likely they will get paid far more for surges than they will have to pay out to drivers.  For instance, a multiplier of 2.0x on a $15 trip will come to an additional $15.  But by telling drivers upfront exactly how much additional they’ll be paid in surge fees for the trip, Uber is effectively de-coupling the surge revenue from the expense of paying the surge to drivers.

Because passengers are now required to enter their destination before ordering a car, Uber knows exactly how much extra the passenger will pay in surge pricing.  So they can take that and simply tell the driver a lower amount.  In our example above, let’s say Uber sees that the passenger will pay an extra $15.  Instead of telling the driver, ‘you will earn 2.0x the normal fare for this trip – no matter how long it is’, they will now tell drivers, ‘you will earn $5 extra on this trip – no matter how long it is’.  So, if the trip ends up being a long one, or if the passenger decides to change his destination during the trip to a location that’s farther away, the driver will not get paid anything extra for the extra distance and time.  He will get the flat $5 fee that Uber promised at the beginning of the trip.

Based on Uber’s well-established track record, drivers are understandably suspicious that this is the beginning of the end of surge pay.

Many drivers believe that it may start off with Uber offering $5-$10 extra for a ride, but will likely end up at $1.50 – $2.00 extra on surge rides – ending what has long been the most attractive feature of driving for Uber.

Check out the screenshot below.  It’s showing two surge areas, a light surge shaded in yellow and a heavier surge shaded in red.  If a driver is in the yellow area when a call comes in, he’ll get $5 extra for the trip.  If he’s in the red area, he’ll get $10.  But under the current surge system, areas shaded in red are getting close to a 2.0x multiplier which means most drivers would have made more than $10 anyway.  But now, their surge payment will be limited to $10.

Another concern is that under Uber’s current bonus program, drivers have seen incentives drop drastically over the last year.  Just to give you an example, at one time early in the year, Uber would pay drivers a $5-$7 premium for pickups in certain areas at certain times.  Now, those payments have dropped to just $1.  So, it seems reasonable to conclude that they will do the same with their new surge system.  What you see in the screenshot below as $5 and $10 flat payments, could soon end up as $1 and $3 payments.

UPDATE 11/15/2017:

Ridester has just obtained one of the first screenshots of this new “surge” from a driver’s group on Facebook – and it shows exactly what we expected.

This is from a driver in Charlotte, NC and Uber is showing that the driver will earn an additional $2.75 on his next trip.  This is the gross amount.  The net amount to the driver would actually be $2.06.

Let’s say this driver’s next trip was a relatively typical 5-mile, 20-minute trip.  With the rates in Charlotte, that would come to about an $8.15 total fare.  According to the color shading of the surge in this screenshot, it looks like it’s what would have been about a 1.5x surge under the old system.  A 1.5x surge on this trip would add another $4.08 to the total fare, which would mean an additional $3.05 to the driver.  So, Uber would pocket the difference and earn an extra $0.99 over what they would have earned under the old surge system.  And the driver will earn $0.99 less than he would have earned under the old system.

 

What do you think of the changes? Will the be good or bad for drivers? Weigh in by leaving a comment below!