Last week, we published a blog post that outlined how Uber and Lyft’s latest IPO will affect rideshare drivers going forward. Well early last month, Uber announced its first financial results as a public company for its first quarter (ending March 31, 2019).
We know we’re a bit late on this one, but we wanted to take a deep dive into the report and understand what this means for drivers.
First, let’s take a look at the Financial and Operational Highlights provided by Uber:
Now let’s look at a few stats that stand out:
17 million trips per day
$59 billion in gross bookings (up 41% year over year when adjusted for currency rate fluctuations)
$3,099,000,000 in revenue (up 20% year over year)
$2,376,000,000 in revenue from Ridesharing
539,000,000 in revenue from Uber Eats
18% Take Rate
There are lots of big numbers here, but let’s take a deeper look at what these numbers mean and how they affect rideshare drivers.
The number to watch: 18% Take Rate
As a rideshare driver, the first number that you should look at every time you read about Uber’s earnings should be the take rate, because that is the amount of money that Uber makes from bookings (AKA takes from drivers). Uber defines take rate as follows:
We define Take Rate as Adjusted Net Revenue as a percentage of Gross Bookings. For purposes of Take Rate, Gross Bookings include the impact of our 2018 Divested Operations.
When Uber files it’s quarterly earnings report, the company doesn’t always explicitly state the take rate, but you can calculate it by simply dividing Adjusted Net Revenue by Gross Bookings.
So if we take a look at the financial results above, we can see that Uber’s Adjusted Net Revenue was 2.616 billion while gross bookings where 14.649 billion in Q1 2019.
So some quick math here looks as follows:
2018 Q1 Take Rate: 2.423/10.893 = 22.24%
2019 Q1 Take Rate: 2.761/14.649= 18.85%
So we have a decrease in take rate of about 4%, which means drivers made more money, right!?
Not so fast friends. Let’s take a deeper look at the numbers in Uber’s income statement by Offering and Segment.
We can see that Uber Eats grew pretty significantly year over year and that platform has a significantly lower take rate, which brought down the company’s overall take rate.
So seeing a 4% take rate may appear at first like Uber is taking less from drivers, but in reality that’s not the case.
So What Does This Mean for Drivers?
As a driver, don’t think for a second that Uber’s lower take rate this quarter is a result of them actually taking less from drivers. In reality, I would be surprised to ever see a lower take rate, so what we really want to do is watch how quickly the take rate increases and listen to what Uber tells investors about take rates.
1.55 billion rides given
Despite another quarter of huge bottom line losses, Uber reported that bookings and the number of users active on its platform increased by more than 30%. Both of these factors are signs of growth.
On its quarterly earnings call, executives explained that 2019 would be a year of investment, while not directly addressing the financial losses the company experienced. Instead, the focus was set on all of the ways Uber plans to expand its footprint in the rideshare, food delivery, and freight industries, fresh off the heels of its IPO.
“Our story is simple: We’re the global player,” CEO Khosrowshahi said on the call. “We’re the largest player in personal mobility…Our job is to grow fast at scale and more efficiently for a long, long time.”
In short, Uber is spending money to continue to increase growth across its platforms, while also trying to prove their worth to investors.
So What Does This Mean for Drivers?
The growth across bookings and users are nothing to scoff at, and basically means more passengers and rides for you at the current moment. More rides given means more money in your pocket, but of course it’s not that simple.
$1 billion loss
This is certainly the most cringe-worthy part of the report. Uber has certainly suffered an embarrassing debut since going public, after what was meant to be one of the largest initial public offerings in United States history. Uber’s stock plummeted, and then they reported a loss of over $1 billion.
The poor performance of the stock raises questions on whether gig-economy companies that lose this staggering amount of money per year are sustainable – and whether the intense pressure over profits puts a larger squeeze on the drivers themselves.
While this is definitely possible, Uber might first look to cut new driver bonuses/incentives in order to make the company more profitable. However, analysts indicated concern that if the company focuses on turning a profit, fares may go up and consumer incentives to attract riders could go down.
So What Does This Mean for Drivers?
Higher fares, higher turnover, and driver dissatisfaction could negatively affect passenger’s experiences, which will lead to a lower quality of service overall. A negative consumer experience means unhappy riders that look to other apps to meet their transportation needs.
Stronghold on market share
Uber’s hold on the market is strong, sure – but is it in decline?
In the Earnings Report, Uber touted that they had a 69% market share as a positive. However, New data suggests that Lyft has eaten into Uber’s U.S. market share, and continues to do so, so the strength of that statement should be in question.
Studies show that while Uber controls that majority of U.S. ride-hailing, Lyft is growing twice as fast. According to Second Measure, while both Uber and Lyft reported increased revenue as of last year, Lyft’s grew 32 percent, which is twice as fast as Uber did during the timeframe of October 2017 to October 2018. Going along with this, according to a report from The Information, Lyft’s U.S. and Canada revenue more than doubled in the first sixth months of 2018 to $909 million. Data from Second Measure reported Lyft’s U.S.-only revenue increased 71 percent in that period.
So What Does This Mean for Drivers?
The market share question is interesting for drivers because a more fragmented market means less influence from Uber and more competition for drivers.
Theoretically, drivers should be getting paid more in a competitive market, and drivers should be taking advantage of driving for other apps that are out there. Notable companies that are fragmenting the market include Veyo, which focuses on patient transportation to healthcare appointments. Juno and Safr redefine safer ridesharing for women, and Via aims to be eco-friendly with shared rides.
Is UberEats expected to continue to grow quickly?
The report showed that Uber Eats grew at a healthy pace – more than doubling from 2018. The food delivery service is even being expanded to Latin America and Japan. On the earnings call, the CEO said that they expected to remain the largest food delivery service (outside of China), achieved by either holding its position through competition or by the acquisition of a competitor. Uber seems to be confident in its ability to make Uber Eats into a truly successful branch of business.
Despite its inability to make a profit from the Uber Eats platform, Uber wants its drivers to deliver food as well. Uber drivers are often invited to deliver food after they’ve been active on the rideshare platform for a while. If you participate, requests for food delivery will be sent to you in between passenger trips. You are free to ignore these requests while driving or opt out.
So What Does This Mean for Drivers?
Uber desparately wants Uber Eats to be the worlds #1 food delivery service, and will be investing heavily in order to do that. That means they’ll be doing their best to make sure drivers are out there on the roads at peak hours driving for Uber Eats. So keep a look out for more driver bonuses for Uber Eats.
Expansion of drivers reward system
Uber has been long criticized for how it treats its drivers and the expansion of its driver’s reward system should be a step toward boosting incentives.
The reward system is called Uber Pro, and the company recently expanded the program to 20 more U.S. cities. Both drivers and UberEats couriers can participate, and the loyalty program rewards low cancellation rates and high ratings with incentives like higher take-home pay and free college tuition.
The expansion of UberPro seems to be timed perfectly with the IPO announcement, as Uber is looking for more ways to hook drivers, despite all of the recent complaints and strikes. Since Uber drivers lack many of the benefits and protections of salaried employees, the company is seemingly looking for every workaround possible to seem like they are making an effort to make drivers happy.
So What Does This Mean for Drivers?
While the incentives sound good on paper, critics claim that this is just another ploy from Uber to keep drivers working longer hours at the mercy of the algorithm and discouraging them from working for other apps.
In the coming weeks we’ll be writing a full breakdown on the benefits of Uber Pro, so keep a look out for that!
Let’s Summarize
Uber’s IPO stands to make a lot of people extremely rich, but its drivers aren’t among them. Let’s review what drivers should be aware of after Uber’s latest financial release.
- Take-rates will continue to increase and transparency will continue to decrease, which means less money in your pocket overall.
- Uber’s new Uber Pro incentives look nice on paper, but it remains to be seen how much they will actually help drivers.
- As the rideshare market fragments and competition increases, drivers should look to use other apps to earn more money.
So now that we’ve laid out all of the facts, what do you think? Give us your thoughts in the comments below!
