Understanding Upfront Fares
by Miriam Chaum, Head of Work, Economic Policy & Advanced Technologies
The way drivers earn with Uber has changed over the years. When Uber first launched in 2010, riders found out what they were paying when a trip was over and drivers paid Uber a fixed proportion of the rider price, which was based on fixed rates, and kept the rest. We then introduced Surge, or dynamic pricing, in 2011, which helped to balance supply and demand in our marketplace when there are more riders in a given area than available drivers by incentivizing riders to wait, if they can, and drivers to head to busier areas. Over the years, we’ve improved Driver Surge, making it more certain for drivers. In 2015, we introduced upfront pricing for riders. As we shifted to that model, drivers began paying Uber a variable service fee, which is the difference between the rider price and what a driver earns (excluding items like tips, tolls, and certain fees, taxes, and surcharges).
A shared goal
Some of these changes were more focused on the driver experience while some of them may appear to have been more focused on the rider experience. But all of these innovations share a common goal: making it easier to connect drivers looking to earn money with riders seeking transportation from A to B.
This is a virtuous cycle, with benefits for both drivers and riders — more rider demand leads to more drivers, resulting in improved service coverage, lower estimated time of arrival for both riders and drivers, and therefore more demand. Put another way: as Uber’s marketplace grows, it becomes more reliable for riders and drivers.
Introducing Upfront Fares for drivers
By adjusting how driver earnings work so that drivers can see their earnings and destination upfront, they can more easily decide whether a trip is worth their time. This is why we started to roll out Upfront Fares for drivers last year.
In U.S. cities where Upfront Fares are live, it’s easier for drivers to decide if a trip is worth their time and effort because they can see key details upfront, including the exact fare and the rider’s destination. As always, drivers have full control over when they are online with Uber and whether to accept or decline any offer that’s made to them — if they don’t think the Upfront Fare offered is enough, they can decline it.
What goes into an Upfront Fare? Upfront Fares are calculated based on a number of real-time factors, including:
- Estimated time and distance to pickup
- Estimated time and distance from pickup to destination
- Current demand at the driver’s location
- Forecasted demand at the rider’s destination
In addition, Upfront Fares account for whether a particular trip is generally more or less likely to be fulfilled by drivers, based on aggregate patterns on similar trips. Individual driver behavior is not a factor. Certain fares may be higher and certain fares may be lower, with the overall goal of making fares as a whole more consistently attractive to all drivers.
Upfront Fares are not personalized — our fares algorithms do not use information on an individual driver’s personal characteristics (like their gender, race, or ethnicity) or past behavior on our platform (like their rating, past trips, or acceptance behavior) in formulating a fare offer for that driver. Upfront Fares don’t include wait time fees or tips, which are added after a trip is complete.
Do Upfront Fares change when trip details change? When a trip takes much longer than expected or the rider changes the destination in the middle of the trip, the fare will be updated to reflect these differences.
Could two drivers see different offers for the same trip at almost the same time? Yes. There are a number of reasons this might happen. Some examples include:
- Our technology models estimated times of arrival based on drivers’ GPS location, which doesn’t always perfectly correspond to their physical location.
- Surge depends on a driver’s location. If a driver travels through an area with higher Surge, their earnings reflect this higher Surge amount — not a lower Surge amount at the trip location.
- Surge heatmaps refresh continuously, which means drivers can have different surge adjustments if they receive offers even seconds apart.
- In order to continuously improve the Driver app and earnings offerings, we also run tests of new features and models that may result in different fares for drivers across different groups, which are never based on protected characteristics.
- Offers may include promotions like Boost+ or the Zero Emissions incentive (see more on this below) on top of the fare. Promotions vary from city to city and week to week. Drivers can see on the offer card the specific Boost+ amount that is added to the fare.
There are always ways we can improve our technology and we are taking steps to reduce fare differences wherever possible.
Have driver earnings decreased with Upfront Fares? When we first launched Upfront Fares in some cities in the U.S. last year, we compared driver earnings to similar cities that still had fixed time and distance rates for drivers. We did not see a significant change in per-trip earnings, but we did see an increase in the number of driving hours, suggesting drivers appreciated the changes made. As drivers know, earnings on Uber vary as marketplace conditions change.
Are Upfront Fares higher for drivers with nicer cars? Drivers with certain cars may receive higher fares because they are eligible for certain ride options. As has long been the case, drivers with eligible vehicles can be offered more per trip by serving, for example, riders requesting Uber Black in premium cars. Note that Upfront Fares offered to drivers in fully electric vehicles include the Zero Emissions incentive, an extra $1 per trip (up to $4,000 per calendar year), funded by Uber until January 2024.
What is Uber’s take rate and what does it fund? In the fourth quarter of 2022, Uber’s take rate — the revenue from Uber’s Mobility business, as a percentage of Gross Bookings, excluding the impact of some business model changes in the UK — was under 20%. Some of what may appear to be Uber’s ‘take’ goes directly to cover costs like insurance and credit card fees for payment processing; some goes toward the marketing, product development, and other investments that make Uber a platform that drivers can use to find work and build their businesses; and, yes, some goes to Uber’s bottom line.
Along with the launch of Upfront Fares, we added a new weekly service fee section to the earnings statements drivers get every Monday showing how much riders paid and Uber’s weekly service fee.
What is the relationship between promotions and the frequency of trip offers? Put simply, there is no link between the frequency of trips offered to a driver and the promotions offered to that driver. Our matching system does not have information on a driver’s engagement with promotion offers, period. If a driver approaching the end of their Quest promotion isn’t receiving offers, this may be because they are online in a place and/or at a time that’s less busy.
Platforms like Uber have a responsibility to provide our users — drivers, couriers, merchants, and their customers — with transparency around how the platform works, including how prices are formulated. We know we have more work to do. As we continue to innovate, we’re working toward the same north star — expanding access to good work and reliable transportation, hand in hand.
