There was no shortage of big news stories this week and there was a lot of good commentary over on the RSG Facebook page. It looks like the gig economy just became a political battle with Hillary Clinton weighing in on companies like Uber and Jeb Bush taking rides all over San Francisco. Today, RSG contributor, John Ince, takes a look at that story, recaps Uber’s first multi-million dollar fine and wonders if LAX opening up to Uber could start a chain reaction.
Sum and Substance: There are two broad categories of microtransit: One is services like Chariot and Bridj, which operate commuting shuttles in certain areas based on user demand. Then there are several services that let you split a ride with people nearby who need to get to a similar destination — including CabCorner, Via, UberPool, and Lyft Line. So far, these microtransit companies only operate in a handful of cities. But their backers hope they could one day do for public transit what Uber has done for cab rides.
My Take: This is part of the ongoing evolution of urban transit – further iterations towards greater efficiency. The idea of Microtransit has been around for awhile with shuttle busses and more recently, UberPool and Lyftline. But now other startup apps with variations on this theme are much more technologically sophisticated. The main question is whether the startups can get ridership up high enough so they can compete with Uber and Lyft on price. It’s the network effect question that’s so paramount in this industry.
I’ve been following the situation with Uber in France very closely and while I completely understand the protests and anger towards Uber, I also wonder if maybe these taxi drivers should focus on the root of the problem. The reason why Uber exists in the first place is because taxi drivers were a protected and subsidized industry for so long and their service suffered because of it. Today, RSG contributor, John Ince, takes a look at the backlash from France’s Uber protests and delves into Uber’s financials.
Sum and Substance: Uber Technologies Inc. is telling prospective investors that it generates $470 million in operating losses on $415 million in revenue, according to a document provided to prospective investors. The term sheet viewed by Bloomberg News, which is being used to sell $1 billion to $1.2 billion in convertible bonds, doesn’t make clear the time period for those results. The document also touts 300 percent year-over-year growth. The figures show the heavy losses that Uber is accruing as it expands its global car-booking operation amid fierce local competition. “These are substantially old numbers that do not reflect business activities today,” Uber spokeswoman Nairi Hourdajian said in an e-mail. Hourdajian declined to say why the numbers are being used to promote a current funding round.
My Take: Finally, we’ve got some hard, cold numbers on Uber’s operations and they do not look good on the surface. It’s what’s beneath the numbers that’s more important. For example, a $470 million operating loss can be viewed positively – as a sign of boldness. But can also be seen as a sign of recklessness and financially prolificacy. Essentially these numbers affirm what most have suspected about Uber’s management team. They’re risk takers. They continue to double down on their bets that geographic saturation and network effects are the long term keys to success in the rideshare business. [Read more…]
The safety of drivers and passengers was at stake this week with two separate but huge stories about Uber’s gun policy and an unfortunate incident involving an Uber driver and a minor. Today, RSG contributor, John Ince, takes a look at these stories and more.
Sum and Substance: Car service app juggernaut Uber has quietly changed its policy to prohibit its drivers from carrying firearms while they’re on duty. Previously, Uber had deferred to local laws when it came to whether or not its drivers could carry guns. In an update to the Legal section on Uber’s website there’s a new “Uber Firearms Prohibition Policy,” first noticed by The New Republic. It says: We seek to ensure that everyone using the Uber digital platform — both driver-partners and riders — feels safe and comfortable using the service. During a ride arranged through the Uber platform, Uber and its affiliates therefore prohibit possessing firearms of any kind in a vehicle. Any rider or driver found to have violated this prohibition may lose access to the Uber platform.
My Take: Belatedly it appears the Uber has recognized that it’s sitting on a PR power keg with this issue. When the Chicago driver used a gun in his car to defuse a situation nearby, he was hailed as a hero, but it raised eyebrows when passengers realized that their driver could be packing heat. Here again, we see that Uber must be ultra sensitive to fallout in the media from any issue that potentially compromises the safety of the passenger. Without that, after all, Uber doesn’t have a business.
Even though this week’s big CLC ruling affected only one driver, I think it speaks volumes to the uncertainty around driver’s employment status. I know that a majority of drivers (including myself) don’t want to be employees of Uber but I can also recognize the fact that this IC model has benefited companies like Uber A LOT more than its drivers. I think what ultimately should happen is a mixing of the two so that drivers can retain some of the flexibility they value but aren’t forced to bear a majority of the risk and exposure. Uber likely won’t push for that so who knows how long it could take to get this all resolved.
In the mean time, all we can do is sit back and read all of the news surrounding the story. Today, RSG contributor, John Ince, takes a look at exactly what this ruling entailed and breaks down some of the week’s other top stories.
If you’d like to read more about my thoughts on this week’s main topic, head over to Forbes and read: Do Uber Drivers Even Want To Be Employees?
California Labor Commission rules an Uber driver is an employee, which could clobber the $50 billion company
Sum and Substance: The California labor commission has ruled that an Uber driver is an employee, not a contractor, Reuters reports. The decision was made after a San Francisco driver, Barbara Ann Berwick, filed a claim against the company. The commission sided with her largely because it deemed Uber was “involved in every aspect of the operation.” It’s potentially a huge blow to Uber’s business model, at least in California. There’s currently a class action suit going on in which drivers are suing Uber (and competitor Lyft) trying to get classified as employees rather than contractors. Today’s decision is not part of that suit, but could help set legal precedent for it. Uber is appealing the board’s ruling.
My Take: This is a major development. It’s potentially a crippling blow to both Uber and Lyft. Investors surely are taking note of this and it will likely affect the valuations of the company in any future financing rounds. We can expect Uber and Lyft to fight this battle tooth and nail, but this precedent along with the FedEx ruling a few years ago and the recent settlement (See below) raises the real possibility that the rideshare companies’ business model isn’t going to fly in the face of legal precedent.
The numbers in this ruling are miniscule. The plaintive, was awarded a measly $4,152 bucks in reimbursement for driving just a few months in 2014. But multiply that settlement by the 50,000+ Uber drivers in California many of whom drive year round and you’ve subtracted hundreds of millions of dollars from Uber’s bottom line – every year. Potentially the most damaging aspect of an adverse ruling from the company’s standpoint is opening up the legal path to drivers union’s. If that happens then suddenly neither Uber nor Lyft can unilaterally decide what commissions they will be taking from the driver’s fares. It would become a matter of collective bargaining which changes the whole game. Stay tuned. This game has just become very interesting. [Read more…]