Is fixing Uber going to be easy? Not quite – but it could be the key to future financial success. Also, are driverless cars really around the corner – or is it all PR hype? Senior RSG contributor John Ince covers these stories and more in this week’s round up.
How to Fix Uber in Six Not-So-Easy Steps [Bloomberg]
Sum and Substance: The toxic culture is coming under control. The business challenges? Not so much.
Thanks to Eric Newcomer and Brad Stone in the new issue of Bloomberg BusinessWeek, we now know that the departure of Travis Kalanick from his position as chief executive of Uber Technologies Inc. was “a lot weirder and darker than you thought.” Thanks to a recent story in The Information, a website covering technology, we know that eight years after it was founded, Uber continues to lose ridiculous sums of money: $743 million in the third quarter of 2017 alone.
We know that Uber’s well-publicized problems—everything from its bro culture to the five criminal investigations the company faces—have caused its valuation to decline 30 percent from its $69 billion peak. We know that even after the hiring of a new CEO, Dara Khosrowshahi, skeletons have continued to fall from the closet, like the recent news that Uber had a tool that allowed it to lock down computers in any office around the world if the cops showed up….
Since he was lured to Uber late last summer from Expedia, Khosrowshahi has set the right cultural tone, combining humility with a determination to move forward in the right way. He has made it clear that Kalanick-era “virtues” like “stepping on toes” and thumbing noses at regulators will no longer be tolerated. He has apologized for the company’s previous behavior, most notably in London, where regulators shut Uber down. And he let go of certain executives who personified the old culture. All good moves.
A second problem—the Kalanick cloud, you might call it—has also been largely taken care of. Although the former CEO still has a seat on the Uber board, his influence has been significantly diminished. … Which brings us to Uber’s business problems. The core issue in the U.S. is that Uber is trying to hold onto its dominant share of the online ride-hailing market, which is anywhere between 70 and 80 percent, depending on who you ask.
My Take: Best six step plan I’ve seen for Uber. I hope DK is paying attention between cocktail parties at Davos. Uber’s latest and now largest investor, Softbank, is also pushing Uber to pull out of markets where it’s losing money. Since Softbank also has investments in Didi and Ola, it makes sense for them to push Uber to start pricing their service closer to market rates, which should benefit drivers in the long run.
Uber nearing autonomous cars without human backup driver [Associated Press / Denver Post]
Sum and Substance: DETROIT — Uber plans to carry passengers in autonomous vehicles without human backup drivers in about the same time frame as competitors, which expect to be on the road at the latest sometime next year, the service’s autonomous vehicle chief said Wednesday.
Advanced Technology Group leader Eric Meyhofer wouldn’t give a specific start date but he said Uber won’t deploy the driverless cars without human backups unless they are proved safe.
“Once we can check that box, which we call passing the robot driver’s license test, that’s when we can remove the vehicle operator,” Meyhofer said in an interview at an auto industry investors conference Detroit. “We’re going aggressively too.”
Waymo, the name of the autonomous car unit of Alphabet Inc.’s Google, currently is testing on public roads in the Phoenix area without human backups and plans to carry passengers soon. General Motors Co.’s Cruise Automation has promised to start sometime next year in an unspecified location.
My Take: When I was at the Launch Festival in San Francisco last year, former Uber board member Bill Gurley was asked on stage how soon he thought driverless cars would become commercially viable as part of Uber’s platform. He said, “Twenty years … at the earliest.” Gurley and his firm, Benchmark, made headlines by opposing TK and eventually forcing his ouster.
I don’t know if Gurley’s assessment is widely held within Uber these days. It appears not – as this story suggests Uber is pushing driverless cars hard than ever, at least in the PR releases. For what it’s worth, DK, speaking at Davos this week, said that even if driverless cars become part of Uber’s platform, they’re still going to need “double the amount of drivers it currently has within the next 10 years.”
Cargo raises $5.5M to let Uber drivers sell snacks and essentials nationwide [Techcrunch]
Sum and Substance: Cargo, a startup that wants to let every rideshare driver open their own convenience store in their car, has just raised $5.5 million in a round it’s calling seed preferred financing.
The funding comes from CRCM Ventures and eighteen94 capital, which is Kellogg’s venture capital fund. Kellogg is also an early customer of Cargo, which, along with companies like Mars Wrigley and Red Bull, uses the startup as a marketing and distribution channel to push free products to Cargo passengers. In return for providing the free products and paying a marketing fee, these CPG companies get anonymous data about when their products are given away, so they can figure things out like what time of they day their products would sell best.
These free samples also help Cargo sell its paid goods — about 30 percent of all transactions come after someone had first tried a free transaction to get one of the sponsored items available. Drivers get a 25 percent commission on each paid order plus a $1 base commission for each order (including free products), with the average driver earning around $100-$115 per month. However the top 10 percent of drivers are converting somewhere between 30-60 percent of riders into customers and making up to $275 per month.
So far it’s about a 50-50 revenue breakdown between Cargo selling products directly to riders and receiving distribution deals from product manufacturers. The startup plans to deploy its hardware and software solution in about 20,000 cars and open in one new city each month for the next six months before trying to raise a Series A to propel them to 100,000 cars and beyond.
My Take: One of the commenters on Techcrunch called it “1000% tacky.” Another called it “an excellent idea.” I can see both the pitfalls and the logic of this venture – all drivers have passengers captive in their car if only for a brief period.
From the sellers’ standpoint, it’s an ideal marketing opportunity. But something about this idea doesn’t sit well with me. Somehow I don’t want my car to be turned into a mobile store – or even a marketing platform for giving away products.
When I first started driving, I offered passengers cookies and it was kind of a personalized way for me to break the ice with passengers. Maybe one in three passengers took me up on the offer. Even if they didn’t want the cookies, it became a conversation piece.
But offering passengers free samples of mass produced commercial products seems like a different matter. I don’t know, maybe I just too old fashioned. What do you think? Would you want to use your car to further someone else’s marketing campaign? Would your view change, if the revenues from this started to become significant?
We’ve heard from some drivers that Cargo significantly increases their bottom line – what are your thoughts? What do you think of this week’s round up?
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-John @ RSG