Why Uber Failed in Russia
Uber, the world-wide ride hailing sensation, meteorically rose to success. It is often cited as the pinnacle of the start-up, and is a company whose growth new entrepreneurs strive to emulate. Uber was founded in 2009 by Travis Kalanick and Garett Camp in San Francisco. Now, the company operates in over 900 regions worldwide and employs about 22,800 people. Their ideas of having prices being determined by supply and demand and not owning methods of transport but matching drivers with those wishing to travel were in large part responsible for the success of their business. Although Uber is undoubtedly one of the most lucrative ventures in the world, their journey in Russia was not able to replicate the growth they saw in other areas of the world.
Uber entered Russia in 2014, beginning their operations in Moscow. During their growth, they were able to expand to 16 different cities. In 2017, their gross annual revenue amounted to 566 billion dollars in Russia. While these numbers do seem positive, they were being significantly outpaced by a fierce competitor, Yandex.Taxi. From the moment Uber entered the market, they were forced to compete with Yandex (Russia’s version of Google). However, Uber’s failure could also be attributed to a few other key factors. The first of these includes that Russia’s taxi market is not heavily regulated. Typically, Uber thrives in areas where the government imposes strict restrictions on the prices and number of taxis there can be in a city. In Russia, this was not the case as people can negotiate prices with their taxi drivers on price, giving Uber less of an edge. The second factor that was key to Uber’s failure was the presence of an already existing market and a very strong competitor. In particular, Yandex already had a vast network of maps that they could employ for their application. Furthermore, the already built driver and customer based served as another advantage. Uber’s last mistake was entering a price war with Yandex.Taxi. From the moment Uber entered the Russian market, Yandex lowered their minimum prices from 199 to 99 rubles. Because of these price drops, Yandex lost approximately 2 billion rubles. Although this may seem like good news to Uber, it was not. As Yandex is by far a more financially powerful company that Uber, it can sustain to lose more money during a price war. Essentially, Uber was fighting a losing battle.
Instead, of continuing to fight for market share, Uber decided it was better to combine forces with Yandex.Taxi. In 2018, the two companies merged and Uber owned 36.6% of the merged company while Yandex owned 59.3%. These numbers continued to skew more towards Yandex as Uber kept selling shares and attempted to exit the Russian market. As of now, Yandex fully bought out Uber’s business in Russia, bringing an end to the company’s efforts in the foreign country.
Sources:
https://www.vox.com/2017/7/13/15964142/uber-russia-yandex-merge-company
https://www.uber.com/global/en/cities/
