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When your brand’s name can double as a verb, you’ve hit the big time.

‘I Ubered there’ is now part of our everyday lexicon and many a night has turned into a biggie due to the ease of tapping a button and ordering a safe ride home.

It’s not all roses and unicorns at Uber, or its global competitor Lyft, with a recent Wall Street Journal article laying bare some of the troubling realities of business as things stand.

That one is behind a paywall but VICE has done a good job of summarising:

Two companies that went public with market capitalizations in the tens of billions of dollars despite never coming close to making money are jacking up prices and therefore cratering customer demand in a vain attempt to turn its service into one with huge markups to pay off a bloated corporate overhead structure, even though they offer services with several meaningful alternatives. Turns out, that’s a really shitty business proposition.

In the US, fares are now at a record high and ride numbers are tanking as a result.

That’s what happens when you have a functioning public transport system and it’s safe to walk the streets instead of catching a ride.

Uber losing money is nothing new but after so long in the market investors are starting to get jittery:

Since their foundings in 2009 and 2012, Uber and Lyft have raised more than $30 billion in private funding, according to Crunchbase. Even with that pile of cash, neither company has ever posted a real and consistent profit, only “adjusted” profits that exclude dozens of real expenses every company has like taxes and interest payments…

The fundamental problem Uber and Lyft keep running into is that most people are not willing to pay the fares it would cost to run a profitable taxi service with the overhead Uber and Lyft require, to say nothing of paying drivers a decent wage.

Ah yes, those driver wages.

As things stand, we’re looking at a monster fuel price hike this week. Perhaps the price of an Uber ride will go up, but these increases are often not enough to prevent driver earnings from being negatively impacted.

Go ahead and ask your next Uber driver how much they actually take home from the average R100 ride. You may be surprised (Uber takes a 25% commission on each ride), and you may realise why your shorter trips are being cancelled so often.

The VICE article deals largely with the US markets and ends by detailing two potential ways forward for both companies.

One involves partnering with taxi services that were popular before the rise of e-hailing services (like those famous yellow New York taxis), and the other is making it more upmarket, targeting people who would pay “for the extra convenience and luxury of black cars on demand”:

It won’t revolutionize the transportation industry and it won’t serve any equity goals both companies have long given lip service to. But it is a sensible business with an obvious if limited market and profit potential.

It is also an idea that has already existed, once run by a plucky startup that focused exclusively on Black Car services from experienced, fully licensed and insured drivers paid a living wage. You may have heard of it. It was called Uber.

Closer to home, Uber made a big song and dance last week about reaching the ‘one billion rides in Africa’ milestone.

Mpho Sebelebele, Uber South Africa’s Head of Communications, said the company has created “over three million economic opportunities in over 50 SSA [Sub-Saharan Africa] cities that we are present in”.

Each market comes with its own challenges. Here’s a Fin24 article from last week:

The service has faced numerous regulatory challenges from the different markets it operates in, including in large cities in Europe.

“The Uber model works differently in different markets,” explained [Uber’s general manager for Sub-Saharan Africa, Frans] Hiemstra.

At home, Uber drivers, as well as other e-hailing service providers, butted heads with metered taxi drivers, who complained that the new operators were taking their business.

This has led to an ongoing violent and sometimes deadly rivalry between metered taxi groups and Uber drivers.

A different set of problems to those faced across Europe and the US, but problems nonetheless.

I have no doubt Uber will continue to tick along but at some stage, it’s going to have to start posting actual profits.

[sources:vice&fin24]