How Uber plans to bounce back from massive second-quarter losses resulting from driver incentives
Uber’s second-quarter profits revealed larger-than-expected losses, in large part due to the company’s massive $ 250 million stimulus package launched in April to get drivers back on the road. application after a pandemic-induced shortage.
The company reported a loss of $ 509 million before EBITDA. For comparison, Lyft reported positive Adjusted EBITDA for the quarter at $ 23.8 million the day before. Uber’s losses indicate a bigger problem facing the app-based ridesharing industry: the triple threat of a late driver supply, the cost to entice them, and the looming COVID-19 delta variant on the outskirts.
“Drivers increasingly want to get back on the road,” CEO Dara Khosrowshahi said during the earnings call on Wednesday. “In June, 60% of inactive drivers told us they intended to resume driving within a month. This is 40% more than in April. And 90% of drivers told us they plan to come back by September. We are also starting to see market metrics returning to normal in several markets with peak levels and near normal wait times in Miami, Atlanta, Dallas, Houston and Phoenix. But in big cities like New York, San Francisco, and LA, demand continues to outstrip supply and prices of late remain above our comfort levels. “
Khosrowshahi said Uber expects the driver momentum that has picked up in recent months to continue, even as Uber decreases its “post-pandemic” incentives for drivers. But the point is, the pandemic is far from over. Only 50% of the U.S. population is fully vaccinated, and the CDC said the highly contagious delta variant caused between 80% and 87% of all COVID-19 cases in the United States during the last two weeks of July. . Many computer models predict that the number of cases will peak between mid-August and early September, bringing up to 450,000 daily cases.
Closures weren’t the only causes of driver shortages: Drivers don’t want to risk their lives during a pandemic for what is often seen as meager pay. Uber’s losses and attempts to attract more drivers also come as the company returns to the stage as a potential threat to the labor rights of concert workers. Uber is part of a coalition of app-based on-demand transportation and delivery companies that filed a petition this week to introduce a voting measure in Massachusetts that would define drivers as independent contractors, not drivers. employees – like what happened last year in California with Proposition 22.
“I took the incentives they were using to keep people coming back, and I think most drivers with brains have done the same,” an Uber driver called Jay who has been driving since 2013 told TechCrunch. And after the incentives ran out, I stopped driving because I’m losing money when I drive for them now. They’ve cut the fares so low that it doesn’t make sense to work for them anymore, which is why people have such a hard time getting an Uber. You have these disgusting disconnected billionaires running this business in the ground. “
Despite these setbacks, Khosrowshahi – arguably one of Jay’s “disconnected billionaires” of credentials – then assured investors that Uber expects to achieve full profitability from the company’s EBITDA by the end of this year. the year. Uber hopes its investments in what it calls “the employee experience” will help retain workers.
“From doubling the quality of our app, to targeted and personalized re-engagement campaigns, to completely redesigning our onboarding flow to make it easier and faster than ever to earn safely, to deploying unique programs like Rosetta Stone’s free language learning, or free lessons with ASU, our awesome employee app, is unique in the depth and breadth of income opportunities we can offer to drivers and couriers around the world ” , did he declare.
If mobility continues to be affected, as it has recently been in cities like Sydney, Australia, due to persistent blockages, Khosrowshahi says Uber can fall back on its other activities, like freight, Uber Eats and courier service. Khosrowshahi said there was a trend of increasing Uber Eats and courier orders as trips decreased.
Last November, Uber acquired the online food delivery app Postmates, which the company says has enabled nearly 5 million additional consumers, 160,000 couriers and more than 25,000 merchants to migrate from Postmates to Uber. Eats, while helping Uber establish itself as a category leader in Los Angeles and New York.
Uber has also recently expanded into new verticals such as grocery, convenience and alcohol delivery, with gross bookings in the US in June nearly tripling from December 2020 levels and doubling in the UK. United and in France.
“The differentiator we have is the audience and the Uber platform,” Khosrowshahi said. “We were actually one of the last players to start a delivery business, and we built it around the Uber brand, the market match technology we have, the pricing technology, routing, etc. [ … ] We have bigger datasets than anyone else. We are able to train our algorithms on much larger global data points compared to our competitors, which allows us to create a more personalized match, routing, incentives and marketing engine with more great abilities than anyone.
Khosrowshahi also noted that the company has operational teams in the field in each market so that they can understand the right inventory by market.
“All of this translates into: lower customer acquisition cost, higher lifetime value, lower overhead costs and superior technology capabilities. It is the differentiator.
In addition to meeting its fourth quarter EBITDA targets, Khosrowshahi said Uber expects the company’s total gross bookings to be between $ 22 billion and $ 24 billion, and EBITDA The company’s adjusted total was greater than a loss of $ 100 million for the third quarter.