When Uber CEO Dara Khosrowshahi announced Q2 2020 earnings last week, no one expected to hear great news. We all know how rough it’s been on the rideshare front.
With our cities in upheaval first by the pandemic, and then by urban unrest, the usual, “I think I’ll call a car to pick me up at the bar” crowd is nowhere to be found.
If you’ve been delivering, you’ve probably seen how that side of the business is more lucrative now than before all this started. Uber recognized that delivery’s positioning in the economy has become more prominent and permanent—but even that noticeable change for the better wasn’t enough to produce a real profit.
One challenge for Uber was the difficulty of motivating drivers to get back on the road. So, company officials figured if they offered incentives in the form of surges, bonuses, and quests, more drivers would want to return to driving, and this would result in a resurgence of business.
We can’t help it… any talk of driver incentives always makes our ears perk up. And it definitely looks like Uber will be handing out more carrots (so to speak) for drivers, particularly rideshare drivers. So we took a look at how you all might benefit from what Uber has done, and what the company has in mind for the future. This post covers:
- How Uber performed in Q2 2020 and why driver incentives will be important
- What Uber might do to incentivize drivers
- The long game: Uber’s outlook on delivery
- Is the shift to delivery real, and how will it affect you?
How Uber performed in Q2 2020 and why driver incentives will be important
First, let’s talk about how Uber performed in Q2 2020.
Here are the basics on Uber’s earnings, according to an August 6, 2020 post on Yahoo Finance:
- Gross bookings: $10.2 billion vs. $10.4 billion expected
- Rides gross bookings: $3.05 billion vs. $3.96 billion expected
- Eats gross bookings: $6.96 vs. $6.23 billion expected
- Losses per share: $1.02 vs. $0.84 expected
Fortunately for Uber, the earnings numbers are not too far off expectations. It’s apparent, however, that the company needs to work some kind of magic to keep the business and its stock viable. That, quite likely, will result in more focus placed on delivery than rideshare, at least over the short term.
Whether we’ll be able to keep making money working for Uber depends on the success of reopenings, especially in cities. In the meantime, Uber will look to the delivery business to balance out losses. On an August 7, 2020 earnings call, the transcript of which appears on the Motley Fool website, Dara Khosrowshahi said that when travel restrictions lift, “mobility trips rebound” He went on to say:
“If restrictions continue or need to be reimposed, our delivery business will compensate. And as a scaled global player, we get the recovery whenever and wherever it happens, even if some cities and countries lag behind others. We’ve leveraged these two factors to grow total company gross bookings at constant currency from the Q2 bottom of negative 45% year on year to about minus 12% in the month of July, driven by mobility being down 53% year on year and delivery up 134% year on year.”
That’s the kind of magic the company needs, but will it be enough? It’s apparent that Uber will still need to build up the rideshare side of the business, along with pumping up the delivery side, as it did with its recent acquisitions of Postmates and Cornershop.
If the goal is to bring both sides of the company into profit-making territory, how can Uber make rideshare more successful with the continued COVID-19 shutdowns?
What Uber might do to incentivize drivers
In terms of the sliding rideshare business, a lack of riders is only one side of the equation. Drivers, also, have been hard to come by, largely because many of them don’t want to risk riding with people in their cars during a pandemic.
Another factor is their ability to collect unemployment, which could make them less eager than they otherwise might be to return to driving.
In both cases, Uber is feeling the need to reach out to drivers in an effort to entice them to go back on the app.
How can the company do that? If you’ve been driving, you already know. Surges have been up for some time now, and they can be found at more times of the day than before. The table below is from Uber’s latest earnings report.
The line item here of particular interest is “Excess Driver Incentives,” or EDIs. This represents surges, quests, and consecutive rides bonuses given to drivers. During Q2 of 2020, EDIs jumped back up to where they were before COVID. In fact, they rose 11 percent over Q1.
Gridwise numbers also show that driver earnings are up over that time period, but that could be due to driver incentives, rather than a rise in business.
Again, those of us who are driving post-COVID, especially in states or cities that aren’t yet fully opened, know that rideshare is far from what it used to be. Increased driver incentives might help to get people back to work, and spur more business at the same time.
However, it’s not smart to rely on EDIs forever.
Historically, Uber has driven up their “take rate” (the amount they receive for each ride) by reducing EDIs. This post from 2019 demonstrates what was then Uber’s trend toward taking more by giving drivers less—but the year 2019 was an entirely different era. Now, as Uber tries to coax drivers back out and onto the road post-COVID, EDIs are on the way back up.
This can be very good news for drivers.
To some extent, it could help compensate for the extra risks of driving in the midst of a pandemic. Speaking of that, we hope you’re taking all possible safety precautions and are staying healthy. Keep up to date with Uber’s Coronavirus health and safety policies here.
The long game: Uber’s outlook on delivery
On the August 7, 2020 conference call, Khosrowshahi was clear about his intentions for expanding Uber’s delivery, far beyond the pandemic. “Consumers are quickly becoming accustomed to the magic of having anything delivered to their door in half an hour,” he said, “much like the magic of having a car show up in a few minutes.” Khosrowshahi went on to say that this opportunity “will be many times larger” than even Uber expected, and he is confident that the company is “uniquely positioned” to lead.
We interpret this to mean that delivery is here to stay, and those who want to succeed as gig drivers will probably have to incorporate delivery in some way into their business. Khosrowshahi envisions Uber delivering not just food, but many conveniences.
Speaking to CNBC on August 6, he stated his intention to expand Uber’s delivery operations to encompass grocery, convenience items, pharmacy deliveries, and small packages.
Is the shift to delivery real, and how will it affect you?
Uber is certainly pulling out all the stops in expanding its capacity as a delivery-based operation.
It’s getting clearer that as gig drivers, we have to adapt to changing trends and probably start working more than one angle in order to bring in the cash. That means, if you haven’t already, that you might start working delivery into your driving business. Uber is obviously going to offer more opportunities as time goes on—and there are other companies ready and willing to put your services to good use.
Now that we know about Uber’s bottom line for Q2 of the insane year of 2020, what do you think? Will driver incentives get you back out to work again? Are they enough to compensate for the risks you take? And what about delivery? Do you think it will be the future of gig driving?
Send us your comments below, or email your experience and reflections on driver incentives, the potential growth in delivery, and Uber’s chances for making a profit based on Dara’s leadership and vision.
And, if you do wind up driving for more than one company, don’t worry. Gridwise is here to help you track your earnings and mileage for all your gigs. There’s more than one reason why Gridwise is the ultimate rideshare and delivery driver assistant.
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