TechCentralTechCentral
    Facebook Twitter YouTube LinkedIn
    Facebook Twitter LinkedIn YouTube
    TechCentral TechCentral
    NEWSLETTER
    • News

      Unlawful Eskom strike costing South Africa three stages of load shedding

      1 July 2022

      Striking Eskom workers will face consequences: De Ruyter

      1 July 2022

      The AI tool that has changed my life as a developer

      1 July 2022

      Google.co.za is down and the domain is pending deletion

      1 July 2022

      US files charges over South African bitcoin fraud scheme

      1 July 2022
    • World

      Meta girds for ‘fierce’ headwinds

      1 July 2022

      Graphics card prices plummet as crypto demand dries up

      30 June 2022

      Bitcoin just had its worst quarter in a decade

      30 June 2022

      Samsung beats TSMC to 3nm chip production

      30 June 2022

      Napster plots crypto comeback

      29 June 2022
    • In-depth

      The NFT party is over

      30 June 2022

      The great crypto crash: the fallout, and what happens next

      22 June 2022

      Goodbye, Internet Explorer – you really won’t be missed

      19 June 2022

      Oracle’s database dominance threatened by rise of cloud-first rivals

      13 June 2022

      Everything Apple announced at WWDC – in less than 500 words

      7 June 2022
    • Podcasts

      How your organisation can triage its information security risk

      22 June 2022

      Everything PC S01E06 – ‘Apple Silicon’

      15 June 2022

      The youth might just save us

      15 June 2022

      Everything PC S01E05 – ‘Nvidia: The Green Goblin’

      8 June 2022

      Everything PC S01E04 – ‘The story of Intel – part 2’

      1 June 2022
    • Opinion

      Has South Africa’s advertising industry lost its way?

      21 June 2022

      Rob Lith: What Icasa’s spectrum auction means for SA companies

      13 June 2022

      A proposed solution to crypto’s stablecoin problem

      19 May 2022

      From spectrum to roads, why fixing SA’s problems is an uphill battle

      19 April 2022

      How AI is being deployed in the fight against cybercriminals

      8 April 2022
    • Company Hubs
      • 1-grid
      • Altron Document Solutions
      • Amplitude
      • Atvance Intellect
      • Axiz
      • BOATech
      • CallMiner
      • Digital Generation
      • E4
      • ESET
      • Euphoria Telecom
      • IBM
      • Kyocera Document Solutions
      • Microsoft
      • Nutanix
      • One Trust
      • Pinnacle
      • Skybox Security
      • SkyWire
      • Tarsus on Demand
      • Videri Digital
      • Zendesk
    • Sections
      • Banking
      • Broadcasting and Media
      • Cloud computing
      • Consumer electronics
      • Cryptocurrencies
      • Education and skills
      • Energy
      • Fintech
      • Information security
      • Internet and connectivity
      • Internet of Things
      • Investment
      • IT services
      • Motoring and transport
      • Public sector
      • Science
      • Social media
      • Talent and leadership
      • Telecoms
    • Advertise
    TechCentralTechCentral
    Home»In-depth»Despite looming IPO, Uber’s best days may already be behind it

    Despite looming IPO, Uber’s best days may already be behind it

    In-depth By Shira Ovide26 April 2019
    Facebook Twitter LinkedIn WhatsApp Telegram Email

    Remember this moment. Early 2019 may have showed us the ceiling for the business of selling car rides at the tap of a smartphone.

    In an updated financial document for its coming initial public offering, Uber Technologies disclosed that the total value of rides on its service was between US$11.3-billion and $11.45-billion in the first quarter of the year. At the midpoint of that range, that would be a 1% decline from the total value of rides the company recorded in the December quarter.

    Uber is a growth business whose largest business stopped growing, at least for now.

    It’s been clear from Uber’s disclosure of select financials even before its IPO filing that its on-demand ride business was slowing

    The quarter-over-quarter decline in what Uber calls “gross bookings” for rides in Uber cars, motorbikes and taxis needs context. Looking at Uber’s prior first-quarter growth rates for the total value of rides on its service, there is pattern of dips between the December quarter and the one ending in March.

    That seems logical. In many countries, November and December are busy months for travel, family visits and other activities that might call for an Uber ride. The US dollar is strong, which weighs down companies like Uber that generate a significant share of sales in places like Brazil with wobbly currencies. Those explanations shouldn’t, however, result in a decline for a turbocharged growth business.

    Stopped growing

    This dip in ride bookings didn’t come of the blue. It’s been clear from Uber’s disclosure of select financials even before its IPO filing that its on-demand ride business, which generates about 80% of the total value of its services, was slowing. Uber is asking investors to buy up to $9-billion in shares — valuing the company at up to $91.5-billion, including shares held by employees and others — just as on-demand rides have stopped growing.

    The fresh numbers from Uber take me back to the question I had when Lyft went public: what if demand simply isn’t very large for rides in de facto taxis? To be fair, 5.2 billion rides or food deliveries were made with Uber worldwide last year, and that’s not nothing. And the total number of car rides, scooter trips and food deliveries with Uber did increase about 4% in the first quarter from the December quarter.

    The picture that’s emerging is that future growth for companies like Uber and Lyft will be harder to come by.

    To keep growing their rides businesses, the companies will need to expand further outside the big cities that generate a significant share of demand for Uber and Lyft now. The companies will need to accelerate their efforts to get people into carpool-type shared rides, onto bicycles and electric scooters and other types of transportation that cost people less and therefore may expand the number of people likely to take a trip. Those are not easy tasks.

    It makes me wonder whether Uber started its business of delivering food from restaurants because it saw this ceiling for on-demand rides and needed to shift gears to maintain growth. Optimists will see that as a savvy move. Uber loves comparing itself to Amazon, so let’s say it was smart of Amazon to shift from initially selling books — surely not a long-term growth business — to selling every physical product possible.

    Investors in Uber’s IPO will essentially be betting that the company can find more markets to conquer

    That comparison assumes there is some commonality between connecting drivers with people who want a car ride across town and signing up restaurants who want to reach hungry people. I’m not convinced there is as much overlap as Uber pitches to investors.

    Yes, maybe if I’m used to taking Uber rides I will be more likely to try UberEats to order a burger and fries from my sofa. But I’m not sure Uber’s logistics expertise in rides gives it special advantages to help the burger restaurant in my neighbourhood reach potential diners. UberEats is the company’s only large fast-growing division, and a bet on Uber’s IPO is effectively a wager that the company can supercharge the food delivery industry and eventually turn a profit from burritos on-demand.

    This fresh information fuels investors to ask tough questions of themselves and Uber executives as the company pitches its IPO. Buying stock in a company going public is inherently a gamble. Now that Uber’s main business has reached a plateau, investors in Uber’s IPO will essentially be betting that the company can find more markets to conquer.  — (c) 2019 Bloomberg LP

    top Uber UberEats
    Share. Facebook Twitter LinkedIn WhatsApp Telegram Email
    Previous ArticleUber aims for $84-billion valuation in year’s largest IPO
    Next Article Amazon spent $1.7-billion on video and music in first quarter

    Related Posts

    Unlawful Eskom strike costing South Africa three stages of load shedding

    1 July 2022

    Striking Eskom workers will face consequences: De Ruyter

    1 July 2022

    Google.co.za is down and the domain is pending deletion

    1 July 2022
    Add A Comment

    Comments are closed.

    Promoted

    Billetterie simplifies interactions between law firms and clients

    30 June 2022

    Think herding cats is tricky? Try herding a cloud

    29 June 2022

    How your business can help hybrid workers effectively

    28 June 2022
    Opinion

    Has South Africa’s advertising industry lost its way?

    21 June 2022

    Rob Lith: What Icasa’s spectrum auction means for SA companies

    13 June 2022

    A proposed solution to crypto’s stablecoin problem

    19 May 2022

    Subscribe to Updates

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    © 2009 - 2022 NewsCentral Media

    Type above and press Enter to search. Press Esc to cancel.