Bumper-bash or write-off: the prognosis for ride-hailing apps
• Game-changing services need to resolve personnel issues that keep landing them in court
Last week Uber released its earnings for the second quarter, which arguably were underwhelming. One of the most interesting things from the numbers — which TechCrunch characterised as “less than rosy ”— is the flip-over on how parts of the business are performing.
The delivery division, known as Uber Eats, has outperformed ride-hailing in terms of adjusted net revenue. This illustrates the effect of the pandemic on the Uber model: people aren’t heading out; they are ordering in.
That’s interesting, but overall it is alarming that ride-hailing continues not to be a profitable exercise, at least to my untrained eye. The net loss for the company as a whole was $1.78bn in Q2, which is at least better than this period a year ago, which showed a net loss of $5.24bn.
Uber is reportedly recovering from the cash demands of going public and some diversification of aims.
“The company’s net loss worked out to a loss of $1.02 per share. That was enough to beat analysts’ expectations of a $0.86 per share deficit. Uber missed on profitability in the quarter, but did surpass expectations on top line, posting more revenue than the $2.18bn figure investors expected,” says TechCrunch.
This is all to say that both the business and tech media are watching closely and waiting for Uber to make good on the promise of profitability — which it now says it expects to achieve later in 2020. But the company continues to fight battles on many fronts, as do competitors such as Lyft, leaving some asking what the prognosis for ridehailing companies really is.
That’s fascinating since the innovation element — the way they have spun a service to a platform and challenged traditional cab businesses the world over — is nothing short of astonishing. As I’ve mentioned before, they have done this so well that — like “googling ”— uber has reached verb level in everyday use (“Shall we uber to the restaurant?”). And in business speak it is not unusual to hear that a company is the “Uber of XYZ field”.
The industry’s challenges have been on dual fronts: regulation and social. The question whether an Uber driver is an Uber employee continues to confound the company.
Just this week a judge in California ruled that both Uber and Lyft must incorporate their drivers as “employees”, with the benefits implied. Verge.com called it a “stunning … injunction”. I’m on Team Employee Benefits, so stunning isn’t what I would have called it. Nonetheless, it’s a blow to Team Gig Economy and the Platform Players, or whatever you want to call that side.
Uber and Lyft have an opportunity to appeal and Uber has said it plans to do so immediately, with an emergency appeal to stop the ruling in its tracks.
There is obviously a case to be made in favour of techenabled ride-hailing services. I am a regular Uber user, even though I am a car owner who loves to drive. How do I love thee? Let me count the ways: as a consumer of this service, sometimes calling an Uber is simpler, more economical, and saves time (even after allowing for the initial wait).
For example, if you’re doing business anywhere in downtown Cape Town, you’d lose 15 minutes or more to the search for parking on some days, and then you have to shell out per minute for the pleasure of onstreet parking.
For meetings in the CBD, or dinners out on Bree Street, an Uber from surrounding suburbs such as Gardens and Vredehoek would cost about R30 each way. That’s not even the cost of a craft beer, and means you can actually enjoy such beverage without running the risk of drunk driving. Plus, ride-hailing is my preferred way to avoid airport parking charges.
Travelling? You can keep it cheap by making sense of public transport, or simply use the ridehail app you already have installed, with the credit card you have already linked. Even on the lowly rand — billed in a foreign currency — this makes sense.
As a consumer, I can’t help but sing the praises of ride-hailing services, but they seem likely to continue facing challenges to platformisation and the informality of “gig drivers”.
That pressure is not going to go away in a post-Covid-19 world where the general wisdom of health and leave benefits are pretty clear cut.
I like the narrative of US individualism and ambition as much as the next guy, but I think the tide is turning against naked capitalism. The personnel problems of ride-hailing services are, in one little space, a symptom.
THE QUESTION WHETHER AN UBER DRIVER IS AN UBER EMPLOYEE CONTINUES TO CONFOUND THE FIRM
TRAVELLING? YOU CAN KEEP IT CHEAP BY MAKING SENSE OF PUBLIC TRANSPORT, OR SIMPLY USE THE RIDE-HAIL APP