Contents:

    In this week’s roundup, senior RSG contributor John Ince covers the behind the scenes of Uber’s fraud issue, plus how Proposition 22 and the future of gig work could come to impact the entire United States in the future.

    How Uber Learned It Had A Huge Ad Fraud Problem [Which-50]

    Sum and Substance:  Ad fraud remains an embedded, expensive and pervasive problem in the digital advertising sector, although attitudes have changed dramatically from a few years ago when marketers and the adtech sector alike preferred to pretend the problem did not exist.

    doordash

    One of the key moments of cut-through for many was when Uber sued its agency after discovering tens of millions of dollars of ad fraud. That high profile case included Uber suing its agency, and its agency counter suing in response.

    My Take:  The ad fraud is old news, but to have the guy who was in charge describe how he discovered it – well, that’s interesting. Way back when, we had basic click fraud.  Just click fraud.  Now we’ve got all variety of fraud, some of it very sophisticated.  To find it, you have to dig into your numbers – and start analyzing patterns.

    Basically they have all the analytics guys out trying to figure out what was working and why.  The “why” involved a lot of funny stuff and that’s where the fraud was.

    DoorDash Is Hiking Customer Fees to Pay for a Law It Helped Write [Vice.com]

    Sum and Substance: In the months since a coalition of app-based gig companies successfully passed Prop 22 in California, exempting themselves from reclassifying their workers as employees, DoorDash has been silently passing costs onto consumers.

    The company-funded Yes on Prop 22 campaign claimed that not passing the ballot initiative would result in higher prices for consumers, and in early December, news first broke that gig companies would be charging more anyway to cover the cost of benefits promised in Prop 22 such as a healthcare stipend and a minimum pay guarantee. It’s also not clear whether these new benefits warrant price hikes as an October 2019 study by the Berkeley Labor Center of Proposition 22 found that driver pay would come out to $5.64 an hour. Nonetheless, companies in the coalition signaled they’d have to pass costs onto consumers instead of absorbing them into their already unprofitable enterprises.

    Now, DoorDash is raising its service fee to 15 percent in California, which according to an in-app description “helps us operate DoorDash & provide a minimum pay guarantee to California Dashers. Service fees are, according to DoorDash, also calibrated by market demand and Motherboard has seen receipts where the service fee jumped as high as 21 percent.

    My Take:  This is a real world application of the big flaw I see with Door Dash and its brethren. The numbers just don’t work out so well.  Delivery is a low margin, tough nut business.

    Sure there are those who are big tippers, but they’re the exception.  For the rest, fees et al are necessary – and that’s risky.

    Door Dash has pretty much kept one step ahead of the regulators.  You know, whack a mole strategy.  So far its pretty much worked.  But it won’t work forever.  Maybe customers will pay during the pandemic, but what’s coming later?

    Uber and Lyft operating in US cities linked to rises in car ownership  [NewScientist.com]

    Sum and Substance: The introduction of ride-sharing companies, including Uber and Lyft, has been associated with a 0.7 per cent increase in car ownership on average in US urban areas.

    Jeremy Michalek at Carnegie Mellon University in Pennsylvania and his colleagues analysed trends in vehicle ownership in 224 urban areas across the US between 2011 and 2017 to investigate how these were influenced if a ride-sharing company – either Uber or Lyft – began operating in the area….

    Instead, the team found that the trend for vehicle ownership per capita in urban areas changed following the first entry of a ride-sharing company. On average, across areas and through time, there was an increase of 0.7 per cent in car ownership – the increase was larger in car-dependent cities, and in cities with a faster rate of population growth….

    “In a lot of respects, this is not surprising,” says Os Keyes at the University of Washington in Seattle. “If there’s money to be made in having a car, more people are likely to have cars.”…

    My Take:  It’s an interesting study and it appears to be impartial.  So potential drivers – owning a vehicle more than outweighs those who ditch their car.  It’s a small trend, but significant nevertheless – especially since it goes against one of Uber / Lyft’s main talking points.

    Uber always said that the effect of their presence was to reduce car ownership.  This study – even with a very small increase, is significant.

    Report: The gig economy will return in full force in 2021 [TechRepublic.com]

    Sum and Substance: In recent years, the gig economy has become an attractive solution for both employees and workers alike, offering both flexibility and lower commitment than traditional work models. But since the dawn of COVID-19, it’s seen a new resurgence in popularity, as employers and employees are grappling with an uncertain economy. While TechRepublic reported  just a year ago that the gig economy may be in danger, due to increased regulations, new research is showing that it has become an even more appealing option for the American workforce.

    While before COVID-19 things may have slowed down, many Fortune 500 CEOs agree that the gig economy is the new future of work. The gig economy has real benefits for employers, and IT sector employers especially, according to data from recent Constellation Research, which shows that gig economy projects have been 30% more efficient, reduced customer complaints, and were rated higher in satisfaction for gig workers themselves. …

    When it comes to jobs, a whopping 92% think that now is the time to look for gig work. This is not a big surprise, because 57% of workers see this as a great solution to stay afloat in between jobs, given the current unpredictable economic situation. Long-term gigs appeal to more than half of respondents, and 27% say they want short-term work.

    My Take:  So the gig economy is the future.  I guess that makes sense.  If you go out and survey the general working force, which this study did, the trend is there.  It’s a little jarring to see it in an expensive report, but this is how major policy decisions are made – on the basis of studies like this.  So if it’s the future, what about in California after Prop 22?

    SoftBank Sells $2 Billion in Uber Stock as Rides Recover  [Bloomberg]

    Sum and Substance: SoftBank Group Corp.’s Vision Fund sold about $2 billion in Uber Technologies Inc. stock after a rally in the ride-hailing giant’s shares, signaling it may cash in more gains from the sector in the future.

    An affiliate of the investment fund called SB Cayman 2 sold 38 million shares on Jan. 7 at an average price of $53.46, according to a filing with the U.S. Securities & Exchange Commission. SoftBank still holds about 184.2 million shares, according to the filing, worth about $10 billion at current prices.

    My Take:  Take the profits. Uber has had a long runup, and I never thought Softbank would make out as well as they have with this stock. They’ve staked out long positions not just with Uber, but with a whole host of tech companies.

    Softbank invests big – and with Uber they won big. In some sense, they invest so big that it’s hard for the companies they invest in to fail.  Good for Softbank, but there’s still a lot more of the stock in its portfolio.

    Driver lawsuit says Uber and Lyft’s Proposition 22 is unconstitutional [CNET]

    Sum and Substance:  A trio of ride-hail drivers filed a lawsuit in California’s Supreme Court on Tuesday alleging that Proposition 22 is unconstitutional. The proposition was voted into law by California residents in November and ensures that gig workers in the state are classified as independent contractors, rather than employees.

    Proposition 22 was authored by gig economy companies, including Uber, Lyft, DoorDash and Instacart, which spent more than $205 million to get the ballot measure passed. It exempts the companies from a state law requiring that they treat their workers as employees.

    The proposition has only been in effect for one month and already it’s facing challenges. The lawsuit filed Tuesday alleges that Proposition 22 unconstitutionally limits California’s power to protect the rights of gig workers. It says that under the proposition elected officials are unable to amend the law and allow for drivers to have safeguards like workers’ compensation and the right to organize

    My Take:  I would have thought this lawsuit would have been filed sooner – before Uber, Lyft and the others spent $205 million passing the proposition. This feels a bit like Trump’s voter fraud lawsuits – not much there. The thesis is that the California Constitution gives the state the power to define working conditions, etc. We’ll see how it plays out.

    Grab Financial Group Raises $300 Million [TechCrunch]

    Sum and Substance: Grab Financial Group said today it has raised more than $300 million in Series A funding, led by South Korean firm Hanwha Asset Management, with participation from K3 Ventures, GGV Capital, Arbor Ventures and Flourish Ventures.

    Editor’s Note:  One big takeaway from this article, beyond the investment news, is how quickly Grab has grown within the last few years – because of rideshare? No, because of “strong consumer adoption of services like AutoInvest, an investment platform that allows users to invest small amounts of money at a time through the Grab app and insurance products.”

    Interesting how Grab has been able to create other avenues for profits, not simply relying on rideshare. Yes, and Uber and Lyft do this too, to a degree, but maybe we can expect to see more of it in 2020. Also, stay tuned about this news, because Harry will be working with a cool company looking to do something similar in the US!

    Readers, what do you think of this week’s roundup?

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    -John @ RSG

    John Ince

    John Ince

    John Ince is a former Fortune reporter and Wall Street banker. He has about 1,000 rides under his belt driving part time for Uber and Lyft.  He’s writing a book about his experiences entitled:  Travels With Vanessa:  A Rideshare Driver Tries To Make Sense of It all - For a sneak peak visit the link above.