After being a presence in cities across the globe for eight years, driver and rider matching service Uber is finally moving towards being a publicly quoted company, via what is termed an Initial Public Offering. This process has significant benefits to those sceptical of Uber’s business model and practices, as the information the company puts into the public domain preparatory to that offering has to be accurate, and honestly given.
Put simply, it has to be free of bullshit and must come clean about how Uber proposes to actually make money, because thus far, despite screwing down drivers’ earnings and offering promotion codes, it has not. Although Uber generated net income of almost $1 billion last year, its operating loss was around $3 billion. It’s been haemorrhaging billions of Dollars for years now, a money pit where the bottom has not yet been reached.
Worse, as Bloomberg has pointed out, that net income “was driven primarily by the sales of assets in Southeast Asia and Russia, as well as an increase in the estimated value of its stock in China’s largest ride-hailing company, Didi Chuxing”. Hence, perhaps, the attempt to remind investors that Uber is about more than the Private Hire trade.
Bloomberg again. “Chief Executive Officer Dara Khosrowshahi’s stamp on the company has been branding it as a ‘platform’ - a word that appears more than 700 times in its IPO prospectus … ‘Our continued success will come from stellar execution and the strength of the platform we have worked so hard to build,’ Khosrowshahi said in a letter to investors”.
True, there are other aspects to the Uber “platform”, like Uber Eats. But growth in the ride sharing business is slowing dramatically, the driverless technology in which the company has placed so much faith is still many years from being usable, and disputes with regulators, the Taxi trade, and drivers show no sign of dying down just yet.
Also, as Jalopnik has observed, “the vast majority of the [IPO] filing’s mentions of public transit make plainly clear the company sees buses and trains as a competing service. Far from being a partner in helping people move around cities, Uber regularly slots public transportation as ‘competition’ or an obstacle to the company’s ‘growth strategy.’”
Uber aims, on entering a new city, to “reach efficient scale and liquidity rapidly to attract consumers to use our platform as an alternative to personal vehicle ownership and usage of public transportation”. Jalopnik explains “the company lowers the price of each ride and juices driver incentives to make Ubers competitive with public transportation. And they’re happy to do so ‘in a negative margin’ - they lose money - ‘until we reach sufficient scale to reduce incentives.’” What is “sufficient scale”? We don’t know.
“Considering Uber is still offering incentives and promo codes in New York, one of its biggest markets, it’s not clear what that ‘sufficient scale’ actually is”. Also, marketing the money pit shows that it depends on taking market share away from under-pressure public transport services, which in London depend on huge investment commitments. Like new train fleets for Crossrail, and upcoming, replacement Piccadilly Line stock.
Uber’s IPO shows the prospect of Jam The Day After Tomorrow - providing it can screw over rather more than the London Cab trade. You have been warned.
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