|Hubert Horan: Can Uber Ever Deliver?
Part Thirty-Three: Uber Isnít Really Profitable Yet But is Getting Closer;
The Antitrust Case Against Uber
|Highlights Of Hubert Horan's Excellent Article|
They (Wamsley&Weinstein)incorrectly assumed that Kalanick
was ousted by the Board because of bad publicity from various
scandals, when the real reason was Kalanickís failure to
implement the IPO as quickly as the early-stage investors wanted.
From a narrow P&L perspective Uberís recent moves to
cut service and raise prices are sensible, but if
openly discussed investors could realize that the entire corporate
growth narrative was always a sham.
Uber has abandoned everything that got the market to
enthusiastically support them 10 years ago. Uber is now
just a much higher cost version of the traditional operators
they vilified as an ďevil taxi cartelĒ.
It is hard to believe that Uber (or Uber/Lyft..)
could continue to increase both prices and traffic volume.
But unless the laws of supply and demand have been
permanently reversed, they cannot use higher prices to drive
ongoing revenue growth without choking off traffic growth.
Thus 6-7% of Uberís 11% net margin improvement appears
to come from the algorithmic price discrimination changes
and the service cutbacks that allowed it to increasing
its take rate from 22% to 28-29%.
Uber has reverted to the more economical traditional taxi approach,
focusing on the narrow area of cities with the densest demand.*
*which means more congestion
Now different passengers/drivers making the same trip can
see very different fares/payments. System average revenue per trip
goes up, average driver payments per trip go down.
Uber has developed algorithms for tailoring customer prices
based on what they believe individual customers would be
willing to pay and tailoring payments to individual
drivers so they are as low as possible to
get them to accept trips.
Starting in early 2022, Uber began keeping a larger
share of gross customer payments and giving a smaller
share to drivers.
Uber abandoned some hopelessly unprofitable overseas markets*
and shrank back to being a pure car service
and food delivery company (plus a tiny freight operation)
Uberís claim that the financial improvement was driven by
revgrowth makes no sense..its much more robust
pre-pandemic revgrowth led to multi-billion-dollar losses demonstrated
Uberís lack of significant scale economies.Expanding unprofitable
operations just increases total losses
The reported $394mn 2nd qtr profit
($237 mn for the first half) was entirely explained
by an alleged $386 million 2nd qtr gain
($707 mn in the first half)in the value
of untradable securities they hold in coslike Didi,Grab,
and Aurora that have nothing to do with their ongoing operations.
Hubert argues that Uber has taken all of its
margin-improving tactics as far as they go
(save perhaps restructuring UberEats)
and projecting more increases would be a mistake.
Hubert highlights one factor driving margin improvement which may
not have gotten the attention it deserves; Uber using
data about individual driver and passenger behavior to tailor
prices so as to better fleece them.
||The Following was not in the article.This is TLC reported
Numerous articles on Ubers numbers have said that number
of trips is back to prepandemic levels. In NYC,
which is Ubers biggest market, this is doubtful.
Comparing Apr/May 2019 Uber/Lyft to Apr/May 2023
Uber/Lyft trips are down 11%.