In this week’s roundup, senior RSG contributor John Ince analyzes how Uber could beat out Lyft, new acquisitions by Uber, and how Instacart is fighting back against Uber’s foray into grocery delivery. That and more below!
Uber Eats + Postmates offers Amazon-sized opportunity | Commentary [Seattle Times]
Sum and Substance: Uber Technologies’ deal to acquire Postmates isn’t just about the need for consolidation in the food-delivery industry. The company also has its eyes on a bigger prize: nabbing business from Amazon.com and Walmart in the local commerce market.
Uber announced last week it was buying Postmates for $2.65 billion in an all-stock transaction. A combined Uber Eats-Postmates would vault the company to second place in the U.S. food-delivery market with total share of about 30%, versus DoorDash’s 45% share, according to the latest Second Measure data….
But as important as the merger is in creating a bigger player with the chance of improving profitability and increasing scale, it also opens the door for an even more important longer-term opportunity to compete with big retailers for all categories in local commerce, Uber CEO Dara Khosrowshahi told investors. He explicitly called out Amazon and Walmart.
My Take: It’s an interesting thesis. I’m not convinced, however, that Uber is positioned to make a move here.
Uber and Postmates are best positioned to deliver people and meals. To move into delivering everything is just such a big move – and Amazon already does it pretty well. Besides Amazon has that other income stream, in the cloud.
Ex-Uber employees are being surprised by big tax bills. They blame the ride-hailing company [NBC News]
Sum and Substance: SAN FRANCISCO — When software engineer Peter Moody went to work at Uber in 2015, then one of the hottest companies to work for, he took a deal common at tech startups: a lower salary but with the promise of stock.
It didn’t turn out quite as he expected.
Not only has Uber’s stock dropped in the past year — a normal possibility, especially during a recession — but in the past few months, Moody and others who have worked at Uber said they’ve been hit by huge tax bills that in some cases may have wiped out the promised reward that led them to go to work at the ride-hailing company in the first place.
The tax bills have been a surprise that some are just finding out about ahead of Wednesday’s tax filing deadline.
And Uber is to blame for the tax bills, former employees said, thanks to a little-noticed and last-minute decision that the company made in May 2019, days before its stock market debut. They said Uber in effect shifted potential tax liability from the company to them and other current and former employees, from recent hires all the way up to executives.
My Take: Uber is Uber. They made this change knowing full well what they were doing. It’s not a situation that an employee could have done anything about even if they knew about it. So now it’s up to the lawyers. Good luck.
‘Ruthlessly woke’: How Uber can redeem itself—and demolish Lyft [Fast Company]
Sum and Substance: The first time I met Travis Kalanick, the cofounder and then CEO of Uber, he explained his vision in three blunt sentences: “One day, no one will own a car. Cars will drive themselves. And they’ll come to you at the push of a button.”
Like any venture capitalist, I hear endless pitches from starry-eyed startup founders. But this one stuck with me. Uber’s real value proposition, after all, goes far beyond ridesharing. Over the past several years, as the company’s ambitions have expanded to include trucking, food delivery, carpools, scooters and even flying cars, the message to investors has become clear: Uber can be the Amazon of transportation. Anything in the world that goes from point A to point B, whether it’s a person, a burrito, or a new sprocket for your boiler, runs through Uber. Like Amazon, Uber takes a cut of everything.
But of course, vision and reality are often two different things, and most of the master plan has failed to materialize. Dominating ridesharing in every market globally proved impossible. Even tackling the unit economics of ridesharing in the U.S. has proven challenging, to the tune of billions in annual losses. The acquisition of Postmates last week was a positive step, but until Uber can figure out how to make money on its core business, being the Amazon of transportation seems far-fetched at best.
There may be a way to do it, however—a way that combines the best of Travis Kalanick’s ruthlessness and current CEO Dara Khosrowshahi’s innate feel for public opinion. It’s a long-term play and it’s extremely counterintuitive. But the path to making ridesharing profitable may be the exact opposite of Uber’s current campaign to prevent drivers from being classified as full-time employees.
My Take: It’s an interesting thesis. The author assumes that drivers, if forced to choose, will opt for Uber. I’m not sure that’s the case. But we won’t get a chance to find out anytime soon, because this is a long term vision.
Uber acquires Routematch as it drives deeper into public transit in hunt for SaaS revenue [Techcrunch]
Sum and Substance: Uber said Thursday it has acquired Routematch, an Atlanta-based company that provides software to transit agencies as the ride-hailing company looks to offer more SaaS-related services to cities.
Uber did not share terms of the deal. However, it doesn’t appear to be a minor “acqui-hire,” in which a company is purchased to land a few talented employees. Instead, Uber is making a strategic acquisition for a company that has developed software used by more than 500 transit agencies.
My Take: It’s a small amount of revenue; nevertheless, it’s something. Look for Uber to continue to be on the prowl for promising business. It just costs them some stock.
Instacart is suing Uber’s grocery delivery service Cornershop [CNN]
Sum and Substance: On Thursday, Instacart filed a lawsuit against Cornershop, a new grocery delivery competitor in the US, over allegedly stealing thousands of its copyrighted and licensed images, along with product descriptions and pricing data…. “The lawsuit makes clear that Cornershop is engaging in a systematic effort to illegally steal Instacart’s proprietary catalog while attempting to conceal that theft for its own commercial benefit.”
In a statement, Uber framed Instacart’s lawsuit as an attempt to stifle new competition.
My Take: Uber is still Uber. This sure looks like a theft to me, but then again what do I know? Shame that these guys can’t play fair.
Massachusetts Sues Uber and Lyft Over the Status of Drivers [NY Times]
Sum and Substance: A lawsuit by the state’s attorney general adds to pressure on the companies to consider their drivers full employees.
Uber and Lyft should treat their drivers in Massachusetts as employees with the right to receive benefits, instead of misclassifying them as independent contractors, the state’s attorney general said in a lawsuit filed against the ride-hailing companies.
The suit, made public on Tuesday, makes Massachusetts the second state after California to challenge how Uber and Lyft classify drivers and could deal another blow to their business model. Maura Healey, the state’s attorney general, mailed in the complaint to Massachusetts Superior Court in Suffolk County.
Uber, Lyft and other so-called gig economy companies have maintained that their drivers are independent contractors who are ineligible for benefits like sick leave, paid time off and unemployment insurance. But the companies are facing increasing pressure to reclassify drivers as employees, who would have greater recourse to push back for better working conditions and pay.
My Take: Here comes Massachusetts. Yes, Uber, there are 49 other states that can each file a lawsuit. No ballot initiative in Massachusetts either.
Readers, what do you think of this week’s roundup?
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-John @ RSG