A little bit of good news for Uber this week, although this round up isn’t all rainbows and butterflies. Today, senior RSG contributor John Ince rounds up the latest news on Uber’s SoftBank stock sale, what’s going on with all the Uber lawsuits, and addresses the question “Can UberEATS really make it?”
Uber Has a Big Opportunity from the SoftBank Stock Sale [Bloomberg]
Sum and Substance: Uber Technologies Inc. is taking a psychological blow now that a roster of company stockholders agreed to sell their shares at a steep discount. But the stock sale is the right thing to do both for the Uber stockholders and potentially for Uber itself if it takes advantage of the opportunity.
Let’s not gloss over the bad news, though. Yes, some of Uber’s earliest employees and first investors will make a bundle by selling shares to SoftBank and other firms that are buying the slug of Uber shares. The stock sale won’t work out so well for the company’s more recent investors.
Even with the short-term pain, the SoftBank stock sale could have far-reaching and welcome ripple effects. If the stock sale is finalized, Uber’s former CEO Travis Kalanick will have less sway over the company because his shares will no longer include extra voting power. It’s clear Kalanick did much harm to Uber — as well as much good — and the company is better off with Kalanick taking a diminished role. It’s also time to revisit whether Kalanick should stay on Uber’s board at all.
The bigger opportunity is whether Uber with SoftBank’s help can cut back on the profit-draining wars with rivals around the world. SoftBank Group Corp. will soon be a backer of many of the top on-demand ride companies worldwide, including in China, Southeast Asia, Brazil and India. It amounts to an all-or-nothing gamble by SoftBank on the future of rides on demand.
My Take: This was probably the best week for Uber in over a year. This stock sale is a big win and a big psychological boost to the company, its investors, its employees and, by implication, all of us drivers.
Not only does the deal put to rest all the boardroom struggles, but it also gives those who want to get out of their investment a huge liquidity event. It essentially validates the faith they put in Uber way back when. It doesn’t put to rest all the ongoing legal battles (see article below) or the residual issues affecting drivers, but it’s a great way to start the New Year for a company whose 2017 has to go down in history as one of the worst corporate years on record.
Aiming At Uber [Above the Law]
Sum and Substance: It seems that for every person who celebrates Uber’s role in democratizing transportation (both as a rider and as a source of income for drivers), there is at least another person who believes the company has outlived its usefulness and causes more harm than good.
While I fall in neither category, it is hard not to think that Uber is at an inflection point, and facing severe challenges that are suggestive of a devil-may-care approach to respect for the rule of law. At the forefront of Uber’s challenges is the ongoing saga playing out in the Northern District of California, where Uber’s high-stakes trade secret case against Google’s Waymo continues to present a perhaps mortal threat to the company’s ability to develop a self-driving car program — which has already been acknowledged as a necessary component of Uber’s long-term viability. Making matters worse, the referral of aspects of the case to the U.S. Attorney’s Office — which I wrote about in my first IP-centric column — has borne poisoned fruit from Uber’s perspective, with the Department of Justice confirming that it is investigating the company’s alleged theft of trade secrets.
Uber’s trade secret woes have further metastasized, with news that a Delaware shareholder complaint was recently filed as well. The complaint alleges that Uber’s board failed to properly vet Uber’s acquisition of Otto, the self-driving car technology outfit whose founder allegedly stole Waymo’s trade secrets from.
At the same time, this recent run of bad news is nowhere near a guarantee that Uber’s position is a hopeless one. For one, the criminal probe is an ongoing one, and appears heavily influenced so far by a witness interview on an ex-Uber employee who has provided information regarding secretive Uber practices that could have helped cover up trade secret theft.
This background, coupled with the fact that Uber is managing at least four other criminal investigations that have failed to sink the company as yet, suggests that perhaps Uber will be able to squeeze its way out of this bind without too much lasting damage. …
My Take: I included this article from Above the Law to offer up an assessment of Uber’s legal woes by someone more knowledgeable than I am about the law. The article is heavy on equivocation, which is what we might expect from a lawyer, but it also puts Uber’s Waymo lawsuit in perspective.
It’s not good for the corporate image, but it’s not something that’s going to put Uber out of business. Unfortunately the article’s author doesn’t even mention what I see as the bigger threat to Uber: their ongoing misclassification of drivers as independent contractors.
Uber’s food-delivery company is outgrowing the taxi business in some cities [Business Insider]
Sum and Substance: It was born in Los Angeles in 2013 and is on target to take $3 billion in sales, according to a recent report in the Financial Times. Toussaint Wattinne, an UberEats general manager, told Business Insider how the subsidiary had become such a success so quickly. Uber’s fast-growing food-delivery business is now bigger and more important than Uber’s conventional taxi business in numerous cities across the world.
Uber told Business Insider that UberEats was bigger than Uber’s transportation app in 19 European cities, and Toussaint Wattinne, a general manager for UberEats in London, described UberEats as among the world’s fastest-growing food-delivery services. … Fueled by the billions of dollars that Uber has raised from investors, UberEats operates in more than 30 countries. The UK is one of the largest geographical markets for UberEats, Wattinne said, adding that the service was live in 40 UK cities.
The Uber subsidiary — born three years ago in Los Angeles as UberFresh — is on track to do $3 billion in sales by the end of the year, according to a leaked document seen by the Financial Times. UberEats reportedly had a turnover of $700 million (£527 million) to $870 million (£656 million) for the second quarter of this year, while Uber’s total gross bookings during the period were $8.7 billion (£6.6 billion). Wattinne refused to comment on the report or go into any detail about UberEats’ financials. “They’re healthy and they’re very promising,” he said. Wattinne also refused to disclose how many meals UberEats delivered a day and what the average size was for each order. …
My Take: Uber has been aggressively promoting UberEats and, according to Uber spokesperson Wattinne, it’s on a “healthy growth trajectory.” That’s the kind of vague characterization that Uber has consistently used to describe its ride hailing business while it actually loses billion of dollars per year.
Reading this story with a skeptical eye, it appears that UberEats is also a loss leader. It feeds the investors’ appetites for strong growth figures, while starving for profits. This is not a formula for a sustainable business, but it does provide sustenance to those who want to believe that Uber will one day dominate what looks to be an extremely undesirable business to be in.
Who would want to be taking a small slice of a meal that sells for a few bucks, while trying to keep drivers happy, who are making only scraps of a living … and competing in a viciously cutthroat market? Not me, but that’s the path Uber has apparently chosen.
I’m curious what you other drivers think who have been driving for UberEats or one of its competitors. Do you see this as a potentially profitable business to be in?
Readers, what do you think of this week’s round up? Do you drive for UberEATS or a competitor and, if so, do you think the food delivery companies are making any money? What’s your perspective on delivery?
-John @ RSG