The days of super-cheap Uber fares arguably one of the last things the ride-hail company still has going for it appear to be numbered. Uber has quietly been changing the way it's been charging customers, which originally was more akin to traditional taxis, based on time and distance. Bloomberg reports via an exclusive interview with Uber’s head of product Daniel Graf that the company has launched something they're calling "route-based pricing" which basically sounds like a more data-science-driven version of surge pricing, but this one penalizes you if you're traveling to a nicer neighborhood versus a poorer one.
To wit, from Bloomberg:
Uber calculates riders’ propensity for paying a higher price for a particular route at a certain time of day. For instance, someone traveling from a wealthy neighborhood to another tony spot might be asked to pay more than another person heading to a poorer part of town, even if demand, traffic and distance are the same.
An Uber spokesperson clarified to Endgadget, "We price routes differently based on our understanding of riders' choices so we can serve more people in more places at fares they can afford."
Uber started doing up-front pricing last year, showing passengers exactly what fare they were charging based on the assumed route and ceasing to show customers what percent "surge" might be in place at any given time. But drivers have complained that the percent that Uber takes from each fare has been changing, and with the new model they may have even more to complain about. Bloomberg characterizes the route-based pricing strategy coming about because the company "needs the extra cash," and even though they may be charging customers more for certain routes, that doesn't mean the driver will be getting any more money for those trips Uber will just be taking a larger cut in those cases.
It's been widely reported that Uber has been spending wildly as it grows, and this appears to be a key to their path to profitability, with Bloomberg saying, "The difference between the calculations of rider fares and driver pay could be the future of Uber’s business."
Graf has previously been an executive at both Google and Twitter, and he tells Bloomberg that he hopes such financial engineering will help it stay ahead of its main competitor, Lyft. "Google search is very simple to do; it’s very complex what’s happening behind the scenes,” Graf says, by way of comparison. “The same thing here. Taking a trip is easy. To make this all work in a whole market, and sustainable, is really, really hard."
In other words, be prepared to pay more for your Ubers, at least incrementally, and always comparison shop before you book a fare.
Drivers for Uber, though, could end up revolting, as Fortune reports that the new pricing model was disclosed to them in an email on Friday, and it's being rolled out, for now, in 14 major markets. Expect more lawsuits like this one, reported by the LA Times in April, which refers to Uber's pricing model as "an active, extensive, methodical scheme to defraud drivers."