Smartphones Will End Taxis

The century-old taxi industry is on the cusp of disruption. Blame it on the smartphone and a set of exponentially improving technologies like sensors, big data, and the cloud. The disruptors are ‘ridesharing’ companies like Uber and Lyft.

The explosive user and revenue growth of these ridesharing companies indicates that they are solving a real market need. Uber, a San Francisco-based ‘startup’ founded just five years ago, collected more than $1 billion in rides in 2013 and recently raised $1.2 billion at a pre-money valuation of $17 billion.[1] [2] Uber’s CEO said that the company is doubling revenues every six months.

The main problem is that the current taxi system is inherently inefficient. In New York City, drivers spend nearly half their driving time looking for a passenger.[3] The time taxi drivers waste is literally wasted money. The median taxi driver in the United States makes just $22,840 per year, according to the Bureau of Labor Statistics.[4] Potential passengers may not be where the empty taxis are and are left feeling like they are waiting forever for a taxi. This is exacerbated when potential passengers are not in the city center and business districts that tend to attract most taxis. Hard-working drivers and frustrated users are unhappy because they both waste precious time finding each other.

Ridesharing companies essentially provide technology to make the process of finding each other more efficient. Getting a ride now is as easy as picking up your smartphone and clicking.

The modern taxi industry was born in 1897 as Gottlieb Daimler sought new markets for his new internal combustion engine (gasoline) automobile. [5] Since then, the industry has improved its service offerings by adopting technologies such as the taximeter, the two-way radio, and the landline telephone. All of these technologies are more than a hundred years ago. All of these technologies were eaten by the Internet years ago. The taxi industry has fundamentally not changed since the Great Depression. They are now competing with well-capitalized companies that are taking advantage of the latest technologies that include not just the smartphone, but also exponentially improving technologies like sensors, machine learning, big data, and the cloud.

Taxi companies who choose to ignore ridesharing are essentially choosing to be disrupted. Furthermore, the ridesharing disruption is just one of several disruptive waves that will fundamentally change public and private transportation over the next fifteen years.