Why you might be paying Uber more money for slower pick-ups, according to a new study
Passengers sometimes wait as their Uber driver drops off someone else before picking them up.
The author of a new study points to a potential reason: Uber's habit of forward-dispatching rides.
The study said these rides were often pricier and took longer to arrive. Uber disputed the findings.
Uber riders know the frustration: watching your driver make another stop before heading your way.
Such rides are a key part of Uber's strategy, the author of a new study claims.
Uber sometimes offers rides to its gig-worker drivers as they are finishing their current jobs. These rides, called forward-dispatch trips, are meant to be convenient ways for drivers to pick up another job and for riders to get into a car faster. The alternative is that riders might have to wait longer, and drivers might spend unpaid time searching for another trip.
A study released on Monday by Len Sherman, an executive in residence and adjunct professor at Columbia Business School, reports that, in practice, forward-dispatch trips "give riders worse service at higher prices, while drivers gain little or none of the price premiums" — a finding that Uber told Business Insider it disputes.
"Contrary to the assertion that Forward Dispatch leads to longer wait times and worse service, the purpose of this feature is exactly the opposite: to reduce rider wait times and improve reliability," an Uber spokesperson told BI.
The study is Sherman's latest analysis of Uber's financial performance. He has previously criticized the company's strategy as well as its approach to pricing rides and paying drivers.
Sherman's latest work looked at data for two Uber "power drivers" in different states who have collectively driven thousands of forward-dispatch trips in recent years. One driver got about 60% of their trips through forward dispatches, Sherman said. For the other, the figure was about 40%, he said.
The data showed that riders waited up to 60% longer for forward-dispatch trips than for other Uber rides.
Riders for one of the drivers waited an average of over 11 minutes between when they ordered a ride and when the driver arrived, when it was a forward-dispatch trip. The wait time was about seven minutes for other trips, the study found.
Riders also paid up to 11% more on a per-mile basis for forward-dispatch trips, according to the study. The study doesn't identify a root cause for this increase.
"But in practice, forward-dispatch trips have allowed Uber to increase its take rates and profits at rider and driver expense," Sherman wrote in the study.
"Riders are paying more for worse service," Sherman said in an interview with BI.
Meanwhile, Sherman found that the two drivers were paid "little or no more" for forward-dispatch rides than normal ones.
Sherman writes that there is "considerable variability in driving patterns and market conditions across Uber's pool of over one million US rideshare drivers," and that there are limits to studying a couple of drivers.
But, he adds, his study "deliberately focused on Uber's most important driver segment" — that is, drivers who work nearly full-time most weeks and have thousands of trips under their belts.
Uber doesn't tell riders when their trips are being filled using forward dispatch, though they might be able to figure out what's going on when they see their driver dropping off someone else. The study said riders were more likely to cancel their trips when Uber tried to fill them using the technique. One of the drivers saw riders cancel 8% of their forward-dispatch rides, higher than the 2% for non-forward-dispatch trips.
An Uber spokesperson said that "forward-dispatched trips often result in shorter average ETAs" for riders since Uber suggests new trips to drivers before they've finished one. Forward-dispatch trips are not priced higher than other trips, and there is "no distinction in driver compensation" between the two kinds, the spokesperson said.
For drivers, saying yes to a forward-dispatch trip can seem attractive, Sherman said. Uber serves the potential trip to the driver on their phone as they are still driving a rider to their destination. Drivers worried about finding their next job might be tempted to agree to it without looking at the details, Sherman said.
"You're navigating traffic, you're talking to your current passenger, you're looking for the address of where you'll be dropping them off, then this thing comes up, and you've got less than 10 seconds to respond," Sherman said. "It's like chaos."
Gad Allon, a professor of operations, information, and decisions at the University of Pennsylvania's Wharton School, has also found that taking forward-dispatch trips isn't the best way for Uber drivers to make money. An analysis Allon published last year, based on data from drivers in New York City, found that they tended to be better off waiting for other trips or checking other ride-hailing apps.
Forward-dispatch trips represent a "conundrum" for Uber drivers, Allon told BI in an interview.
Many choose to drive for Uber because they want to work with a flexible schedule, he said. However, the same drivers often feel pressure to take forward-dispatch trips because it means less unpaid time in between gigs and, therefore, more income.
"You don't have to think about the next ride," Allon said. "You accept it, you know what's going to happen next."
"We all want some certainty in our jobs," he said.
Do you have a story to share about gig work? Contact this reporter at abitter@businessinsider.com or 808-854-4501.
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