Uber faces rocky road in drive to be the Amazon of transport
It was not so long ago that almost every young technology company wanted to be the Uber of its own field.
Sharing economy apps, which provide a product or service on demand by someone else giving up their time or capital, exploded to the extent that “Uber for X” became a Silicon Valley in-joke.
The website Product Hunt, an online archive of new ideas and products, lists dozens of such services, from Plowz (Uber for snow ploughs) to Swipecast (Uber for fashion models).
Not many companies want to be Uber these days. The app’s scandalous 2017, in which it became better known for sexual harassment scandals, chaotic management and amateur data breaches than for ondemand minicabs, made sure of that.
And now it seems that not even Uber wants to be Uber. Instead, Uber now wants to be Amazon. Dara Khosrowshahi, the app’s chief executive, has spent much of the past few months saying Uber wants to be the “Amazon for transportation”.
It’s a comparison investors would certainly like to be true. While Uber has lurched from crisis to crisis, Amazon has become the world’s second most valuable company. What Khosrowshahi means by it is that while Uber’s vision under his predecessor, Travis Kalanick, was of Uber reinventing the taxi industry by harnessing the power of smart phones and satnavs, his idea is broader.
Khosrowshahi imagines the app becoming the portal through which people get around cities, whether by car or not. He has spent this year making Uber about more than cars. Most notably, he has bought Jump, the electric bicycle rental company and invested in Lime, the batterypowered scooter business.
Uber has also agreed deals with Getaround, a car-hire business, and entered public transport, signing a deal with Masabi, a London company that lets people buy bus and train tickets with an app.
The idea is that while urban commuters rely on a confusing combination of apps to get around, Uber will be the only one people need.
Much has been made of Khosrowshahi’s attempt to clean up Uber’s tainted image in the year since he replaced Kalanick as chief executive. But this U-turn in the company’s strategy may well be his legacy.
The worldwide market for taxi and similar car services is worth perhaps US$200-$300 billion ($304-$456b), so even taking a substantial portion of that struggles to justify Uber’s US$70b valuation, especially when 75 per cent of the cost of an Uber journey goes to the self-employed driver, not the company.
The company used to get around this by promising the cars would drive themselves at some point in the not-too distant future, but self-driving cars seem to be getting further away.
Now confidence in full driverless tech is diminishing. Khosrowshahi himself said they were a decade away earlier this year. That was before one of Uber’s driverless cars killed a woman in Arizona, a tragic event that has suspended tests and probably held the project back years.
Several tech investors believe Uber talked up its self-driving future to juice its valuation when it was raising huge amounts of money. Now the vision is less credible, it needs a new story. Uber has cash for now, but is due to go public by the end of next year. Uber seems to have little prospect of becoming profitable by then. It lost US$708m in the first half of this year, and while its financials are improving, not at the rate it needs. Company executives have recently been emphasising that it is in no rush to make a profit.
Thus, its new idea. The Amazon comparison is an apt one. The Seattlebased giant’s domination of online shopping has much to do with luring independent retailers on to its website and becoming the default place to shop online. If Uber can do the same for transport, its opportunity is much bigger than previously thought.
Khosrowshahi previously ran the travel website Expedia, which aggregates flight, hotel and car rental prices. So he knows the value of Uber being, in technology parlance, a platform for transport, instead of a provider of it. That does not mean it will be easy. Becoming a portal for all types of transportation will mean difficult negotiations with public transport bodies. Other cities may get in the way of its hopes of putting scooters and e-bikes on their streets (San Francisco recently denied the company scooter permits).
The move may also be less lucrative, at first. Scooter rides are typically cheaper than cars, and tieups with other operators such as public transport will see Uber take a much smaller cut of people’s spending. The hope is that it is involved in more trips overall, thus widening its pool of users.
This will be costly, which brings us to what might be the real comparison with Amazon. The retailer carried on for years without making a profit, while still managing to enjoy the support of shareholders. Perhaps that is what Khosrowshahi has in mind.