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Uber’s Winning Formula: Charm Everyone

Here at Tech & Innovation Daily, we like to be first.

First to spot the most important, profitable tech trends. First with actionable investment ideas. And first in line for coffee.

So let me be the first to call 2013 for what it was: The Year of the Automobile.

Don’t believe me? Consider this brief year in review:

  • The government finally got out of the auto bailout business when it disgorged its General Motors (GM) shares.
  • Tesla Motors (TSLA) generated a ton of buzz this year. Its all-electric Model S car has proved an outstanding success and gained widespread acclaim from motoring publications and consumers alike. It also broke National Highway Traffic Safety Administration safety records.
  • Early in the year, Mercedes Benz introduced augmented reality to the driving experience.
  • We’ve seen Google (GOOG) and major automakers like Toyota (TM), Daimler (DDAIF), Volvo (VOLVY), Audi and BMW make strides with driverless cars.
  • Auto interiors got a makeover for the millennial generation by adding amenities like Pandora (P) radio and wireless charging.
  • Aided by the mobile revolution, the car-sharing area has emerged. Startups like RelayRides, Lyft and Zipcar have found success by providing a seamless mobile platform that links cars to drivers and drivers to paying passengers.

In short, the economy is improving – and innovation is taking the auto industry to new levels.

This company is front and center of another boom…

The Uber Way

No car app has seen more growth in the last three months than San Francisco startup, Uber.

If you’re unfamiliar, Uber is essentially a taxi service with a few twists. It promises users a flawless mobile experience and on-demand car service.

You simply sign up and tie a credit card to your account. Then, when you want a ride, the average wait for the closest Uber driver to pick you up is just two minutes.

At the end of the ride, users can reach for the door handle without reaching for their wallets. The fee (including tip) is deducted automatically from your account. No fumbling around for cash. Users can rate their experience immediately.

For the driver’s part, affiliating with Uber has its own advantages. They can opt into the queue when they feel like it. No late-night shifts like a cab company might require. Moreover, there’s no human dispatcher to sweet talk for choice fares. An algorithm instantaneously makes all the routing decisions.

A $3.5-Billion “Taxi” Firm

Right now, Uber is a privately held company, but recent media leaks have placed the company’s valuation at about $3.5 billion, while TechCrunch has estimated Uber’s annual earnings at $213 million.

The company has grown its business impressively and has gone from having a presence in 35 cities worldwide to 60.

Uber also recently inked a deal with PayPal (owned by eBay [EBAY]) to expand its payment options for users. This could prove particularly advantageous for users in those new cities where credit cards are scarce.

Uber has adopted an interesting tactic to attract new business, too…

What Do I Have to Do to Put You in This Uber Today?

In an effort to put more bums on its seats, Uber has experimented with a discount offering.

It slashes prices and tests the price cut for two weeks. If, in that time, the trips per hour that drivers make outpace the price drop, the price cut stays. If not, Uber ditches it.

If that’s not enough, Uber drivers can now take advantage of a new initiative with GM and Toyota to help would-be buyers of Uber vehicles get discounted auto loans.

The scheme appears to be a win-win for everybody. Drivers get lower car payments. GM and Toyota get access to a less risky loan market with a built-in revenue stream. Uber gets more people signing up as drivers.

But it’s not just drivers and customers that Uber has to woo…

Uber’s Charm Offensive

Uber’s motto seems to be “If you charm them, they will come.” And the company is employing this charm offensive on two fronts.

~ With Regulators: Uber’s biggest challenge has been state regulators who don’t know how to handle Uber’s emerging business model. Is it a taxi service, or a private car service? How should it be regulated? This uncertainty has locked Uber out of lucrative markets like Miami and Houston. In response, Uber has embraced a tried-and-tested crew – lobbyists. And it’s getting the big guns in.

Emboldened by a mid-August cash injection of $258 million, Uber has embarked on a lobbyist-buying binge.

  • In Chicago, Uber has hired a three-man lobbying team, led by Michael Kasper – the man who helped Rahm Emanuel win his bid for mayor.
  • In New York City, Uber’s point man is political strategist Bradley Tusk, who served as campaign manager for Mayor Michael Bloomberg’s re-election campaign.
  • In Baltimore, Uber has assembled a legal team that includes a former Chair of the Maryland Public Service Commission to fight off a subpoena from that agency.

~ With Marketing: In a bid to woo customers, Uber is employing the oldest publicity stunt in the book – kittens!

That’s right. Last month, Uber users could spend 15 minutes cuddling with soft, smooshy-faced kittens as part of its service. In Asia, the company swapped kittens for puppies.

Other headline-grabbing marketing stunts are city specific. For example, here in Baltimore, you can “Roll with a Raven,” where Uber customers (and up to three friends) can pay $50 to ride with a Baltimore Ravens player through the downtown area for 10-15 minutes.

Right now, Uber is even delivering Christmas trees on demand for $135.

The word is out. And so are traditional taxi cabs. These days, more people are “Ubering” it.

Ahead of the tape,

Elizabeth Carney