The gig economy dipped again in the fall, but how bad was it?
In a year turned upside down by the pandemic, Roberto Moreno’s experience as a ride-hailing driver in San Diego reflected the fortunes of the companies for which he drove.
In March, more worried about getting sick than losing money, he stopped picking up passengers. In June, as the pandemic receded in California, he went back on the road. But as the coronavirus case numbers started climbing again, he shut it down once more.
This week, Lyft and Uber, the biggest ride-hailing companies, will announce their financial results for last year, and they are expected to look a lot like the roller coaster experienced by
Moreno.
Investors are also expected to be keenly focused on signs of improvement this year, and whether Uber and Lyft — which held two of the highest-profile initial public offerings in recent years — will be an indicator for the rest of the travel industry. And they’re looking to Airbnb, which is expected to report its earnings in the coming weeks, for hints at consumer spending patterns.
“Ride sharing is in the eye of the storm,” said Daniel Ives, managing director of equity research at Wedbush Securities. “Even though it’s been better than expected, you still have travel down 50 to 60% with constant lockdowns across cities and states.”
The picture of the second slump for the companies toward the end of last year is starting to become more clear. There is some good news: It was not believed to have been as bad as the first. People continued to travel despite lockdowns. In Uber’s case, an aggressive pursuit of the food delivery business paid off.
But the second downturn was another setback to hopes that the companies, which have never turned a profit and have historically had annual losses in the billions of dollars, could become profitable this year. And drivers who stayed on the road said their earnings were down even as they had to pay more for safety equipment such as masks and disinfectant.
The companies declined to comment on the business impact of the pandemic, citing the quiet period before earnings. Investors and analysts believe the companies are poised for recovery once a vaccine becomes widely available, and their stock remained high Friday. Uber finished the day at $58 and Lyft finished at $53 — up 295% and 230% from their lows last year.
Uber’s rides, the core of its business, were down 80% in April, and about 53% in the third quarter of 2020, the most recent period for which it has released data.
To stem its losses, Uber doubled down on its food delivery service, Uber Eats, and acquired a competing service, Postmates. In the third quarter of last year,
Uber said its revenue from the food delivery business grew 125%. Last week, Uber also acquired Drizly, an alcohol delivery service, for $1.1 billion.
Uber also cut costs by dropping its money-losing businesses such as its selfdriving car unit, which aimed to develop fully autonomous vehicles but burned at least $400 million a year. Analysts now expect Uber’s fourthquarter revenue will be down about 12% from the year before.
Lyft, which had avoided expansion into food delivery, did not have a big delivery business to fall back on, though it said it would test a small program, transporting some “essential” products such as medical supplies and groceries. Lyft recently said rides were down 75% in April from the year before and about 50% in November.
Analysts expect Lyft’s fourth-quarter revenue will be down about 44% from the year before. The company said in a December regulatory filing that it would lose less money than the $190 million to $200 million it had initially anticipated, predicting a loss of more than $185 million.
Airbnb, another tech darling that went public in December, also experienced a second dip. In the final week of December, usually a time for holiday travel, Airbnb bookings were down 18% nationwide, according to Transparent, a vacation rental intelligence firm that tracks bookings on Airbnb and other services. An Airbnb spokesman declined to comment.
Many drivers who left the ride-hailing apps in March have yet to return, worried about the risks of spending their days in cars with strangers. For those who have returned, work has been difficult.
Gridwise, an earnings tracker service for gig workers, said driver earnings fell about 10% in November, a double dip that was reminiscent of the 24% drop in earnings drivers saw in March, before recovering around the Christmas holiday. And drivers are spending more time sitting in their cars, waiting for the next ride, while riders cut back on tips, Gridwise said.
But a spokesman for Lyft said that in several of the company’s Top 10 markets, driver earnings have gone up. Because there are fewer drivers on the road during the pandemic, “those that are still driving are receiving a larger portion of the rides available and so are earning more while they’re driving,” said Eric Smith, the Lyft spokesman.
Some drivers said they were being more selective about which rides they accepted, targeting highvalue rides and declining short trips. Sometimes, that means looking for riders who were leaving illegal gatherings.
“I seek out what I would consider superspreader events,” said Ben Valdez, an Uber driver in Los Angeles. “A house party in the Hollywood Hills or remote areas of L.A. — we actively look for these because we can count on people paying top dollar to get out of there.”
Valdez built a plastic partition in his car to separate the front and back seats. Despite the risk, Valdez said that driving is worthwhile if he is able to secure valuable rides. “I have a choice of living off my credit cards or going out there and risking myself for the money,” he said.
Although Uber and Lyft provide some cleaning products and masks to drivers, Valdez, who spends $40 to $60 a week on masks and sanitizing supplies, and other drivers who spoke to The New York Times said they don’t receive enough supplies and have to supplement what they get from Uber and Lyft with their own purchases.
Many gig workers have migrated to delivery services such as DoorDash and Instacart, viewing them as safer options than carrying passengers in their vehicles. Moreno, who runs a WhatsApp group for Spanish-speaking drivers in the San Diego area, said many of the drivers in his group switched to food delivery.
“You have more of a safety net from a delivery standpoint. Do you opt into more safety but less earnings, or do you take more risk and make more money because of that?” said Ryan Green, the chief executive of Gridwise. “It’s a tough choice that drivers have to make.”