Understanding Uber’s Share of Driver Earnings
Uber achieved several important financial milestones in 2023, generating our first operating profit and billions in free cash flow so far this year.
Over nearly a decade of losses, many observers suggested Uber would never be profitable. Now that we are, those same skeptics assert that Uber’s financial improvement must have come at drivers’ expense: in other words, the only reason Uber was able to become profitable was by raising prices while taking an ever larger share of the pie.
This is false.
To better understand why, it’s useful to start with an overview of where the money goes after a rider pays for a ride by looking at the financials for our global Mobility business:
In Q3 2023, out of the total amount that riders paid for their rides, recorded as Gross Bookings in our financial statements, the vast majority went to driver earnings, and a much smaller portion went to Uber as Revenue. (Tips, which are given directly to drivers, are not included in Gross Bookings, and represented another 6% on top of US Mobility Gross Bookings in Q3 2023.)
The portion going to Uber pays for all of our costs to build, operate, and improve our apps and platform, such as payment processing fees, background checks, marketing, R&D, and customer support. By far the largest cost is commercial insurance (more on that below). Generally speaking, for every dollar in Gross Bookings per trip, Uber’s actual profits are just a few cents — but at our scale, those cents add up.
How much of the fare goes to Uber?
One way to see Uber’s Mobility “take” globally is to look at Mobility Revenue as a percentage of Mobility Gross Bookings. In fact, for many years we used to report this publicly as “Take Rate” every quarter. But standard accounting rules and different revenue definitions can make understanding how much Uber actually takes — and how that has changed over time — somewhat confusing.
As all publicly listed companies are required to do in the United States, Uber reports its financials each quarter according to Generally Accepted Accounting Principles (GAAP). As a result of those rules, the GAAP Revenue we publish each quarter increasingly has a lot of other things included in it, which do not correspond to Uber’s underlying take. For example, after Uber moved to treat drivers in the UK as “workers,” the total fare that the rider pays — and not the portion that goes to Uber — is recognized as Revenue, even though the vast majority of that money still goes to the driver.
These GAAP accounting adjustments can make it appear that over the last two years Uber has been taking a significantly greater portion of riders’ fares. If you normalize for those model changes appropriately¹, you’ll find that in fact the opposite is true: in Q3 2023, Uber’s true take was 21% of total rider fares and not the 28.3% you’d see if you were just looking at GAAP Revenue.
But haven’t prices gone up, with Uber taking more?
Yes, prices have gone up significantly over the last few years. Uber is an open marketplace, which means that prices tend to reflect broader economic conditions as well as the balance of supply and demand for rides. After the pandemic, driver shortages and widespread inflation drove prices on Uber up globally. Third-party taxes and fees (like sales tax, city fees, and airport fees) have increased more than 40% in the last three years as well.
Even as prices have gone up, the portion going to Uber, normalized for any accounting changes, has remained relatively flat — and in recent quarters has been trending slightly down. In other words, while prices have gone up quite a bit, the vast majority of total fares have continued to go where they belong: into drivers’ pockets.
That’s globally. What about in the US?
Looking at the US, when drivers compare the total amount the rider paid against the total amount that they received, they would see that Uber’s take is higher than the global average — but this difference is driven by higher third-party fees and, even more acutely, by the cost of commercial auto insurance.
All 50 states require that rideshare drivers have high-value commercial insurance coverage while driving on Uber, in addition to their personal auto insurance. Uber pays for this extra insurance so drivers don’t have to.
The US insurance industry is in crisis, with premiums across the economy skyrocketing for everything from home to personal auto insurance. The rideshare sector has not been immune to this trend, in no small part due to personal injury lawyers who look to take advantage of Uber’s coverage requirements, which are much higher than those for taxis or private vehicles. For example, Uber’s state-mandated commercial auto insurance costs in California rose by more than 65% per trip in just the last two years.
Uber has made the decision to pass some of these growing costs to riders — and not drivers — through increased Booking Fees for each trip, which are spent almost entirely on insurance.
But, as with the global take rate, the service fee that drivers pay to Uber has remained relatively unchanged. So again, even with prices going up, the share going to drivers versus Uber’s true bottom line (after insurance costs) is largely the same.
In fact, if you were to subtract out all of these insurance costs from Uber’s US Mobility Revenue, you would be left with well under 20% of the total fare.
But didn’t Uber cut driver pay?
No. In the US, median driver earnings per utilized hour², including tips and incentives, have grown nearly 30% over the last six years, faster than inflation.
So how did Uber suddenly become profitable?
The secret to Uber’s profitability is really no secret at all: as trips on the platform keep reaching new all-time highs, our revenues are growing faster than our costs. It’s a shift that has been long in the making, through steady improvement each quarter. Uber’s Mobility business has been profitable on a segment basis for years. And emerging from the pandemic, our Delivery business (not included in this analysis) skyrocketed into an equally large and now profitable business as well. So as we continue to grow, we are doing so on top of a much more profitable foundation — while investing consistently in improving the driver experience.
Uber operates an incredibly large and dynamic marketplace, but it only works when it works for all sides. Aligning our interests with drivers’ is a fundamental principle in how we run our platform: we want drivers to be excited, engaged, and choosing Uber. We are also keenly aware that marketplaces that get too greedy with how much they take not only fail to inspire loyalty — they inspire competitors that often replace them. As we continue to grow profitably, we will work to ensure that drivers share in that success.
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¹ See slide 27 of these supplemental slides for the percentage you’d need to subtract.
² We measure earnings per utilized hour — the time drivers spend between accepting and completing a trip — because drivers are free to do as they please in the time between trips. Many drivers work across multiple apps, so simply having an app open doesn’t mean they are actively working. Drivers are also free to reject as many trips as they want.
