FOR two of the past three weeks, Uber has offered customers in Perth a promotion: if you took at least four rides in a week, you’d get $5 off each ride for the next week.
This week, the offer is even better: take six trips by tomorrow and you’ll get $7 a ride off for the next week. The discounts represent tremendous value and make many trips cost-competitive with — or cheaper than — a bus fare.
They are all the more remarkable given Uber has never been profitable, not in Australia and not globally.
Uber is privately held and therefore does not have to publish its full accounts, but the information it has chosen to release shows it burns through its investors’ cash at an astonishing rate. Uber lost $US2.8 billion ($3.87 billion) in 2016 and $US4.5 billion ($6.2 billion) in 2017.
In the first three quarters of 2018, losses were about $US2.5 billion ($3.46 billion) and widening quarter-on-quarter. And revenue growth is slowing, too.
Uber’s chief executive, Dara Khosrowshahi, who replaced controversial founder Travis Kalanick amid a string of ethics scandals last year, is reportedly whipping the company into shape for a sharemarket listing in the second half of next year.
Its wild unprofitability is apparently no dampener on investor enthusiasm. According to the The Wall Street Journal, one recent valuation by a consortium of bankers put the company’s worth at $US120 billion ($166 billion).
It’s an astonishing sum for any enterprise — more than General Motors, Ford and Fiat Chrysler combined — let alone a raging cash bonfire that even the company’s own projections suggest won’t return a profit for at least three years.
And then there’s the drivers, none (in Western countries at least) who believe they can make a living by working on the platform.
Uber calls these people its “partners”, but in reality treats them as arms-length contractors, with no expense support, holiday pay, sick leave or equity share in the business.
In Perth, the happiest drivers I’ve met are retirees who do it for social interaction.
Other drivers are between “real” careers, and I am yet to meet a long-term driver who regards it as a viable profession.
Uber is wildly popular with customers because it undercuts on price and over-delivers on service compared to a heavily regulated taxi industry that, in aggregate, abused its monopoly and the traveling public for years.
But in Australia, unions — most notably the Transport Workers Union — are rallying to turn the tide of public opinion against the gig economy.
A law has been passed in New York guaranteeing ride-share drivers a minimum wage of $US17.22 ($24) an hour after expenses, an increase of 45 per cent for the average driver that will, one way or another, flow through to fares for the traveling public. There is also a class action alleging Uber engaged in a conspiracy, entering the Australian market by unlawful means.
In the capital markets, Uber is said to be a “disruptor” to the extent that the term long ago became a cliché, as every venture capitalist looked for the next Uber.
The technology layer of Uber’s app-based booking system is genuinely innovative and pro-customer.
But how much of the rest of its business model — and that of the other emerging tech giants — is really “disruption”, as opposed to the exercise of predatory pricing at global scale and the sidestepping of hard-won rights that lifted the average worker in the first half of the last century?