New Year's Eve is a major test of surge pricing for Uber car rides. The company is hoping giving customers tips for timing their hails will stave off a storm of angry tweets.
It's been a break-out year for Uber. It's also been a year of extreme scrutiny of the company over its dynamic "surge pricing" of car rides. New Year's Eve--Uber's busiest day of the year--will be a test of the company's technological infrastructure, supply-and-demand matching capabilities, and internal leadership around the globe.
"This is our Super Bowl, World Series, World Cup, Oscars…all rolled into one," says Uber spokesman Andrew Noyes.
This year the company expanded from roughly 20 to more than 60 cities worldwide. It raised nearly $260 million in venture funding, for a whopping $3.5 billion valuation. And it starched up its management team with three experienced hires: a new CFO, an SVP of business, and a Head of Growth.
Uber has also become adept at showing its customers love (for instance, drivers often give riders roses on Valentine's Day). But New Year's is not so fun for customers. Instead of a rose, they get handed incredibly high surge pricing at times of peak demand--specifically, between about 12:15 a.m. and 3 a.m. on January 1.
In some cities, such as New York and Chicago, where customers have had three winters to become familiar with evening and weekend surge-pricing (particularly during harsh weather), the company need not be so concerned about backlash (although we'll likely see a few outraged affluent customers pipe up afterward, a la Jessica Seinfeld).
But in the 40 cities Uber has launched in around the globe this year, for which this is the first New Year's Eve (and therefore perhaps the first time any given customer will encounter Uber's dynamic "surge pricing," which literally multiplies the cost of the ride, up to 8 times a base rate, based upon demand), it's much more of a challenge to keep up with customer complaints and questions, particularly over social media.
So the company is going on the education offensive for New Year's. Here's the strategy:
Teams in the 60 cities are sending out location-specific emails to customers explaining how surge pricing (and ride-cost splitting) works.
Uber's co-founder and CEO Travis Kalanick is explaining in this video (embedded below) his "pro tips" on how to comfortably--and affordably--use Uber on New Year's Eve.
Uber is blogging the "pro tips" for avoiding the peak times (a.k.a. times when surge pricing is at its most extreme) on New Year's Eve.
Kalanick says in the video that over the past couple years, Uber has discovered a reliable pattern that demand follows on December 31 and in the wee hours of January 1.
"Almost every city in the world has the same behavior, same dynamics, on New Year's Eve," he says. Here's what supply and demand will look like Tuesday night, according to Kalanick:
Demand is low, and surge pricing is unlikely until 7:30 or 8 p.m. "If it's before 8 p.m. on New Year's Eve, you're pretty good," Kalanick says.
From 8 p.m. to 10 p.m., demand kicks up, so prices will rise. Expect to pay double what a normal ride would cost. "From 8 p.m. to 10 or 10:30 p.m., it's hot. It's not like the heat we see later in the night, but it's like a typical Friday or Saturday night on Uber," Kalanick says.
From 10:30 to midnight, demand drops, and so do prices. "The ultra pro-tip is that between 10:30 p.m. and about midnight, it's like crickets out there," he says. Lesson? "If you are somewhere and it's like 9:15 p.m., wait until 10, or ideally 10:30, most likely you're going to get normal pricing--no surge at all."
At about 12:15, though, all hell breaks loose for Uber surge pricing. "At about midnight, the ball drops, people kiss their special someone, they pop some champagne, and right after that, people want to get out of Dodge. And it's at 12:15 a.m. in cities around the world when the demand just way outstrips anything that supply can bring to the table." This lasts until about 3 a.m. "If you absolutely need a ride between 1 and 3 a.m., Uber will be very reliable. But it will be a pricey ride," Kalanick says.
All this does raise an eyebrow: If Uber succeeds in socially engineering--er, helping--users to time their party-hopping and champagne-popping to even out demand on Tuesday night, and that leads to surge pricing straight throughout the evening, it risks unraveling its own "pro tips." Certainly, drivers would be happier to have consistent demand, but the customer, hoping to gently hack the system, still loses.