#42 2015 · Uber · Transportdead-time
Uber paid drivers to wait for riders who hadn't arrived yet
the problem
No drivers without riders, no riders without drivers
background
Marketplaces need both sides live simultaneously to work: a rider app with no nearby cars is useless, and a driver staring at zero ride requests quits within days. A startup entering a new city had neither — no drivers logged in yet, no riders trusting an app showing an empty map — unlike incumbent taxi dispatch, which already had cabs idling at stands and standing driver rosters to draw on.
The obvious fix — market hard to riders first, or let supply and demand find each other organically — fails because whichever side arrives to an empty marketplace first rarely returns. A driver who opens the app to silence, or a rider who waits fifteen minutes for a car that never comes, treats that as proof the service doesn't work; each side's tolerance for emptiness is roughly one bad experience long.
the move
Uber recruited drivers in new and existing markets by guaranteeing minimum hourly earnings regardless of whether ride requests actually came in — most clearly documented in January 2015, when Uber cut rider fares in 48 US cities while simultaneously guaranteeing driver earnings so take-home pay wouldn't fall, keeping drivers logged in and available before demand alone could pay them.
the payoff
Uber's own January 2015 announcement and contemporary press coverage confirm the guarantee-plus-fare-cut mechanism across 48 cities; the same supply-first logic is described by former Uber growth staff as recurring through the company's earlier city-by-city launches from 2011 onward, though a precise, independently citable figure for any single 2013 city launch could not be confirmed live.
what came after
The tactic was later named and codified as the standard 'cold start' playbook for network-effect marketplaces in Andrew Chen's 2021 book The Cold Start Problem, drawing on his time on Uber's growth team, and versions of paid, guaranteed-minimum supply recruitment have since been used by delivery, grocery, and other two-sided marketplace startups launching into new geographies.
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references
- [1]Uber's Clever, Hidden Move: How Its Latest Fare Cuts Can Actually Lock In Its DriversForbes, 2015forbes.com
- [2]Price Cuts for Riders with Guaranteed Earnings for DriversUber Newsroom, 2015uber.com