Shulou(Shulou.com)11/24 Report--

The secret of making money is to raise prices and expand business.

Author | Core

Editor | Jingyu

Ten years after its establishment, Uber has finally made a profit.

Uber, the world's largest ride-hailing platform, reported its first-ever operating profit in the second quarter of 2023 on August 1, local time, calling it an "important moment" by its chief executive.

"the first thing that comes to mind when people mention Uber is not profit," Dara Khosrowshahi, Uber's chief executive, said on a conference call after the earnings report. Many people have boldly claimed for years that they will never make money, "but we know they are wrong. "

In the second quarter, Uber made an operating profit of $394 million, including income from equity investments, compared with a net loss of $2.6 billion in the same period last year.

This is the first time that Uber has reported a profit from its basic business since it was founded in 2009. Over the past decade, Uber and other industry companies have been burning money to capture the market, and according to S & P, Uber reported a loss of nearly $30 billion from at least 2016 to the first quarter of this year.

Uber's share price has doubled since the beginning of the year, falling more than 5% after the second-quarter results, amid concerns about whether Uber can maintain stable profitability in the future.

Meanwhile, Uber announced that the CFO would step down, saying that he did not leave because of any disagreement over financial disclosure or accounting matters. CEO Dara thanked him for bringing Uber into the first operating profit phase, saying that "profitability is a means, not just an end, and we face many challenges. "

Review of higher and higher fares in 2019, Uber began to cut costs, and then the car-hailing business was hit hard by the COVID-19 epidemic. Uber laid off its workforce and spun off non-core businesses such as self-driving cars during the epidemic.

After the blockade was lifted and the economy got back on track, Uber's business resumed. But compared with before the outbreak, overseas fares called Uber or Lyft have risen by an average of 50% this summer, with fewer subsidies and discounts.

In an interview with Wired magazine, Uber's current CEO Dara was surprised to learn that a 2.95-mile ride costs $51.69 (including a tip), compared with his original estimate of $20.

When it comes to price problems, Dara mainly blames inflation. "everything is getting more expensive. Inflation has become a part of our daily life. But there are also market analysts who point out that Uber fares are growing four times faster than inflation.

Dara also believes that high fares are the result of operating Uber as a real company, rather than focusing on savage expansion in the market.

"I think the era of price-based competition is over," says Dora. "that was three or four years ago, when it was all about scale, but now investors want profitable scale. "

In the past, the genetic key word for Uber was "growth". Travis Kalanick, the former CEO and founder of the company, used a lot of venture capital to subsidize taxi fares and destroyed the taxi industry, thus building a large group of Uber users. When Dara took over as CEO of Uber, he became more focused on making a profit.

Dora also said that when prices rise with inflation, the main beneficiaries are drivers. "at Uber, most of the fees are paid to drivers. Over the past four years, our drivers' weekly income has increased by 40% to 50% because of the cost of time and labor. I think this is positive. We are seeing audience growth, with 130 million people visiting our platform every month. So although the price is higher, people find our service more attractive. "

Drivers and couriers on Uber earned a total of $15.1 billion (including tips, about 107.6 billion yuan) in the second quarter of this year. Uber has about 6 million drivers and couriers worldwide.

However, a study by the UCLA Labor Center earlier this year found that median passenger fees for Uber and Lyft in New York City increased by 50 per cent from February 2019 to April 2022, while the median salary of drivers increased by only 31 per cent.

Uber Eats02, a growing platform, Uber had 137 million monthly active users in the second quarter of this year, up 12 per cent from a year earlier and 5 per cent month-on-month. The number of trips on the platform is 2.3 billion, an increase of 22% over the same period last year and 7% month-on-month, which means that an average of 2500 trips are completed per day.

Specifically, the number of Uber taxi-hailing and food delivery orders increased in the second quarter. The total order volume of the taxi-hailing business was 16.73 billion US dollars, up 25% from the same period last year, and the food delivery business was 15.6 billion US dollars, up 12% from the same period last year. Revenue from the two core businesses is $4.89 billion and $3.06 billion, respectively. Car-hailing orders in North America have exceeded pre-epidemic levels for the first time.

"taking a bus and delivering food is just the beginning. We are integrating more functions and services into the Uber platform. "Dora said.

From an industry point of view, Lyft, a rival to Uber's ride-hailing business, has not made a profit after years of loss reduction, while the biggest competitor to the food delivery business is DoorDash, a delivery platform, but Dara believes Uber has a "competitive advantage in terms of scale and platform".

According to Dara, Uber is building a network of passengers, diners, drivers and delivers, and does not rule out the possibility that "drivers and deliverers happen to be robots" in the future.

Dara's goal is to turn Uber into a big platform. Currently, Uber's two main services are taxi hailing and food delivery, but he also hopes that Uber can continue to expand to cover "all travel", just as Amazon is an one-stop shopping platform, and he hopes Uber can become an one-stop transportation platform.

However, despite the good performance of the taxi-hailing and food delivery business, Uber's freight business did not perform well in the quarter, with total transaction volume and revenue falling by 30%, well below market expectations and accounting for less than 1/4 of total revenue.

In the case of the freight business, Dora explained: "recent shipments have been low, at least globally. So far, this has been a low-margin business for the company. "

In addition, Uber has also expanded its advertising services in its applications. The company has launched ads on Uber, Uber Eats, Drizly and in-car tablets, and more than 400000 sellers took the initiative in the second quarter, with advertising revenue of $650 million.

In terms of cost reduction, in the second quarter, Uber's operating support, marketing and R & D expenses were the same as the previous quarter, but management expenses were down $450 million from the previous quarter, contributing to increased profits. And Uber has cut hundreds of jobs this year, mainly in human resources, freight and overseas food delivery, which is said to account for 3 per cent of the company's workforce.

03

Problems that need to be solved

After making a profit, Uber still "faces many challenges", as its CEO puts it.

In the era of Uber's predecessor CEO, many people questioned that Travis Kalanick was indifferent to security issues, the company was also caught up in sexual harassment cases, and he resigned under a lot of pressure.

After taking over, Dara admitted to security concerns, and now Uber introduces many security features, "which weakens our growth, but we have to make trade-offs. "he sees security as an upfront investment that helps build the brand." now we are growing faster and more profitable than our competitors. "

Ride-hailing accidents are not uncommon in recent years. As an industry giant, the misconduct of Uber drivers or the death of passengers will be the focus, and Uber's public image has also put pressure on Dara. "Human nature is not perfect," he said. Is it frustrating to see this? That's for sure. But in the end, I think it's good for the company. "

Uber also recently made a bold move to launch Uber Teen, which allows teenagers to ride alone. Adult parents can create special accounts for teenagers between the ages of 13 and 17 to request rides and order food through family files, which are said to have built-in security features, including PIN verification and real-time travel tracking.

"the world is unpredictable. Perhaps the safest thing to do is to stay at home. But if you choose to go out, we think Uber Teen is the safest way. "Dara said.

In addition, the role of Uber drivers is also a long-term historical issue, whether they should be regarded as independent odd jobs or enjoy the legal rights of employees, which is concerned by the legislatures of various countries. Dara responded: "for 80% of drivers, flexibility is the most important feature. They want to remain independent. We want politicians to really listen to drivers instead of trying to turn the clock back 20 years. "

Regardless of Uber's performance, Dara says he will always look for reasons why the company is not good enough. "We have a underdog mentality that I never want to lose." "

This article comes from the official account of Wechat: geek Park (ID:geekpark), author: core

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