Hi, everyone. It's Shira. Wednesday was a big day for Uber Technologies Inc. Its shares crept above the price of the company's IPO almost one month ago. This capped a stretch of fairly good news that included a solid first financial report as a public company.
The optimistic idea about Uber's business is that car rides are the first step to becoming what its CEO last week called "a one-stop shop for the movement of people and powering local commerce around the world." The strategy means, in part, that Uber wants to more closely link its different offerings so people who take an Uber car ride are more likely to order restaurant delivery from Uber, or that someone who rides one of Uber's electric bicycles will also hop in an Uber car sometimes. The company also has a loyalty program that rewards people for using Uber regularly and using multiple Uber services.
This kind of cross-pollination is an utterly sensible strategy. It is also harder than it sounds, and Uber has given little proof that its existing efforts are paying off.
Uber told investors last week that it is "starting to experiment" with ways to convince people who use one Uber service to also use others. TechCrunch reported on hints of that effort, as Uber's app for car rides is starting to let people also order from Uber Eats, the food delivery offering.
Until now, if you wanted pizza rather than a car trip, you needed to download the Uber Eats app. Presumably Uber will offer people coupons or other incentives to pop over from the Uber rides side of the app to try having burgers delivered for dinner. Again, this seems smart, although in the U.S. there is a spotty track record for the kinds of multiple-tasks-in-one "super apps" that are prevalent in China and some other parts of Asia.
It's easy to understand why Uber is trying to nudge more Uber riders to try food delivery, and vice versa. Revenue growth has slowed significantly for Uber's car trips. And Uber's IPO filing disclosed that just 16% of people who used at least one Uber service in the fourth quarter were using Eats. There's upside if Uber can get people to use more than one of its services, and use them more often.
Uber has not shown evidence, however, that people use its services in this way. The best evidence the company could muster: People who use Uber for car, bicycle or scooter rides as well as Uber Eats in cities where all those offerings were available did an average of 11.5 rides or food deliveries each month. Customers who used only Uber for transportation or food got 4.9 Uber rides or deliveries a month, on average.
That was offered as proof that Uber's multiple offerings fuel a virtual cycle of more usage and more revenue. There are alternative explanations, though. Maybe people who use multiple Uber services are just really big fans of the company.
Even if Uber's transportation and food-delivery services feed growth in each other on the consumer side, it's not clear that there is synergy among Uber services on the supply side, meaning restaurants and car drivers. There are similar routing and logistics technologies, but signing up restaurants and keeping them happy is a different undertaking than attracting people to drive for Uber, offering them continual financial incentives to stick around, and making sure the company effectively handles their complaints and needs.
Uber has little choice but to find new markets to conquer and tout how having freight trucking, food delivery, scooters and car rides makes Uber more useful to people and a more valuable company. It's just not yet clear that Uber's pitch is true. --Shira Ovide
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