Mobile Commerce

Uber’s Losses Part Of A Bigger Plan

Uber is a powerful matchmaker with many stakeholders to keep happy on a good day — drivers, passengers and, of course, those state and local regulators. Now, it seems some of those stakeholders in some parts of the world are not that happy with Uber — drivers in the U.K., authorities in the Middle East.

This past Friday (Aug. 26), The Guardian reported that U.K. Uber drivers for UberEATS were protesting wage levels outside the company’s headquarters. The drivers want Uber to pay the independently backed London living wage of £9.40 an hour instead of the piece rate that is the current pay structure. UberEATS drivers earned as much as £20 during peak hours when it first launched in June but are now earning less than £10.

Not an uncommon way to seed the platform and get things off the ground — get drivers on board by paying them a subsidy in the form of higher wages.

Meanwhile, Reuters reported on Sunday (Aug. 28) that, in Abu Dhabi, United Arab Emirates, 50 drivers for Uber and its competitor, Careem, were arrested. Ride-hailing services were halted on Saturday with no indication of when they might resume.

A Careem executive stated: “In order to not inconvenience our customers and captains, we decided to temporarily limit our services until we obtain more clarity on the situation.” In the UAE, drivers often work for both companies, and Uber has been facing demands from traditional taxi service stakeholders to raise its fares and comply with licensing requirements that would limit the number of drivers available for work. It’s thought that these licensing issues might be connected with the arrests.

Uber launched services in Abu Dhabi in 2013 and had planned to invest $250 million in the Middle East and North Africa, its fastest-growing market region.

These contentions with drivers and possible authorities in the UAE are on the heels of the news that Uber lost a ton of money in the first half of the year. In Q1 2016, Uber lost approximately $520 million, according to Bloomberg, but losses in Q2 were over $750 million, with total losses for the first six months of 2016 at $1.27 billion.

The losses, however, can be confusing. According to Bloomberg, bookings were soaring in Q1 and Q2, increasing from over $3.8 billion to over $5 billion, with 18 percent growth in net revenue. So, what’s the bottom line?

Gautam Gupta, Uber’s head of finance, blamed driver subsidies for the company’s losses — again, not an uncommon thing for a matchmaker to do, but not necessarily one that is always well-understood by the drivers.

Robert Siegel, lecturer in management at Stanford’s business school, might have nailed it when he said, “I think what Uber is trying to do is, ‘Hey, look, we’re going to take the losses up front in order to get to disproportionate scale.’”

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