In this roundup, senior RSG contributor John Ince covers the latest on Uber (finally) banning passengers with low ratings, plus Uber’s continued financial woes and a driver-centric company’s expansion plans.
Uber will ban passengers with low ratings [Washington Post]
Sum and Substance: Uber passengers who habitually leave their trash behind and disrespect their drivers may soon get the boot. The ride-hailing company announced Tuesday that riders with ratings that are “significantly below average” may lose access to the app, part of a rollout of the company’s updated community guidelines, which riders must abide by to continue using the service.
Uber, however, said that bans for bad behavior won’t come as a surprise to offending passengers. Riders will receive several notifications before they lose access to the app, the company said. And they also will have opportunities to improve their rating to remain in good standing.
My Take: I mean like, “Duh.” What took you so long? It’s long been one of the great disparities of the Uber (and Lyft) platform that driver ratings have real consequences, but rider ratings don’t. The move, long overdue, appears on the surface to rectify that situation.
But wait. The announcement gives no specific numbers. It only says riders with ratings “significantly lower” than others in the same city will be deactivated. What exactly does significantly lower mean? Below 4.6 riders?? Below 4.5 … 4.2 … 4.0 … or will there be no hard and fast number?
Uber has never been the most transparent company. They’ll get lots of good press out of this move, but they haven’t really said anything specific. And what’s to prevent a de-activated passenger from just creating a new account with a different credit card and slightly altered name. What do you think? Just another smokescreen? Or real change?
The Legal Argument That Could Destroy Uber [Jalopnik]
Sum and Substance: Days after Uber began selling stock, the National Labor Relations Board’s top lawyer gave the company a huge gift. In an advice memo, the general counsel’s office determined that Uber’s drivers are independent contractors, not employees. If drivers are legally determined to be employees, it would throw Uber’s entire business model into question by giving drivers, among other rights, the ability to collectively bargain for pay and working conditions.
While the memo itself is not a court ruling with legal authority, it’s yet another influential voice weighing in on a vitally important legal distinction for Uber and other gig economy companies like it.
But a ruling in the company’s favor would paradoxically expose the ride-hailing giant to a separate legal challenge, one that has gotten far less attention. It poses an even greater existential threat not only to Uber, but most if not all the gig economy businesses: price fixing.
My Take: It’s refreshing to come across an intelligent article that discusses Uber/Lyft’s legal arguments about drivers’ independent contractor status. A judge recently gifted a ruling to Uber that makes it less likely that agencies and courts will favor drivers in ruling on whether or not drivers are entitled to normal protections afforded to employees.
But wait, there’s this other danger lurking – anti-trust laws that prohibit price fixing… and price fixing is exactly what is happening if all us drivers are our own business, as Uber / Lyft says we are. The companies want to have their cake and eat it too, leaving only the crumbs for the drivers.
Traders have a $1.5 billion bet riding against Uber (UBER, LYFT) [Business Insider]
Sum and Substance: Uber’s disappointing public debut may be just the start of its problems. Traders, skeptical that it can maintain growth and turn a profit, have ramped up their bets against the ride-hailing giant to $1.5 billion.
“We’ve seen a surge in borrowing of Uber over the last week,” said Samuel Pierson, director of securities finance at IHS Markit, in an email to Business Insider.
The number of Uber shares on loan has soared by more than 160% in the past two weeks, to 36 million from 13.6 million, he added. Their value now stands at $1.5 billion, meaning Uber short interest has surpassed that of its archrival Lyft — currently $1.3 billion — for the first time.
The short-selling boom has been helped by low borrowing fees. However, as nearly 70% of Uber shares are on loan, further demand from short-sellers will push up those fees, Pierson said.
My Take: It looks like maybe investors have started reading this blog, or some articles on this blog. In any event, there appears to be a disconnect between what private investors were hoping this company would be worth and what public investors really think it’s worth.
Uber stock rises as net losses match expectations [CNBC.com]
Sum and Substance: Uber reported earnings for its first time since its public market debut earlier this month, reporting revenue at the top end of its preliminary estimates and roughly matching analyst estimates for net losses.
The stock barely moved on the news of the report but rose more than 3% during executives’ call with analysts as they discussed Uber Eats’ big potential for growth and how it plans to compete with Lyft without spending more money. Here are the numbers Uber reported for the first quarter of 2019:
Net loss: $1.01 billion, vs. $1.01 billion estimated, according to Refinitv
Revenue: $3.10 billion, vs. $3.04 billion estimated, according to Refinitiv
My Take: Earnings calls are an art in the world of finance, where the painting is framed in terms of expectations. Here, with Uber having lost almost a billion a quarter, every quarter in recent history, no particular alarm bells went off when they reported yet another whopping loss of over a billion.
What’s noteworthy here for drivers is that Uber CEO Dara Khosrowshahi started to shift the narrative from ridesharing to food delivery with one of the most loaded phrases one can imagine: Uber Eats “has the potential to grow significantly and said that if the segment eventually overtakes ride sharing, “that would be an enormous win for us.” Oh my, Uber achieves its legendary status in one thing and when that thing can’t turn a profit, they “pivot” to something else where the economics are even worse. The saga continues…
Firefly raises $30M to bring more ads to Ubers, Lyfts and taxis [TechCrunch]
Sum and Substance: Firefly, a startup that allows ride-hail drivers to make money from advertising, has raised $30 million in Series A funding.
The company is about to launch in New York City, where it’s also acquiring the digital operations of advertising company Strong Outdoor. Co-founder and CEO Kaan Gunay said this will allow Firefly to start working with traditional taxis in a big way.
“It’s essentially locking in the largest taxi advertising contract, partnering with the largest taxi trade organization in the United States,” Gunay said.
Firefly already operates in San Francisco and Los Angeles, where it works with drivers for Uber, Lyft and other services to install a “digital smart screen” that can run targeted, geofenced advertising from companies like Brex, Segment, Caviar and Zumper. And although the startup is starting to work with taxis too, Gunay said it won’t be ignoring ride-hail drivers: “Firefly is for everyone.”
Editor’s Note: An interesting article about a company we covered recently, which helps drivers earn more money from advertising. It looks like not only is their business model working, but thriving!
Readers, what do you think of this week’s roundup?
-John @ RSG
