|From: Glenn Petersen||7/29/2022 10:53:40 AM|
|Uber Eats, DoorDash Offer New Deals to Court Customers as Growth Cools|
Delivery apps look to move beyond food as they face high inflation, a potential economic downturn
By Preetika Rana
Wall Street Journal
July 20, 2022 2:02 pm ET
DoorDash says it expects the total value of orders placed on its app to grow about 20% this year.PHOTO: PATRICK T. FALLON/BLOOMBERG NEWS
Food-delivery companies have a lot on their plate. After surging growth during the pandemic, they are now facing their slowest growth in years while confronting high inflation and a potential economic downturn.
With their shares tumbling and expansion cooling, DoorDash Inc. DASH -5.36%? and Uber Eats have been offering new ads and deals to attract customers, tweaking their apps to trigger more spending and moving beyond food to give people more reasons to return. They are also trying to keep restaurants from ratcheting up delivery prices while offering them new services.
Investors are asking, “‘Is Delivery a good business and why?’ and ‘What happens if we enter a recession?’” Uber Technologies Inc. UBER -3.84%? Chief Executive Dara Khosrowshahi wrote in a staff memo in May. “We need to answer both of these questions with undeniably strong results.”
Inflation has risen to a four-decade high, and restaurants are raising prices, making food delivery more expensive. There are early signs some consumers aren’t ordering as much as expected.
On Monday, the U.K.’s Deliveroo PLC trimmed its full-year guidance on the value of orders placed on its platform. Order value was below analysts’ expectations in the three months through June because of “increased consumer headwinds,” the company said.
A KFC order for Uber Eats, whose parent company’s shares have fallen more than 50% in the past 12 months.PHOTO: DOUGLAS R. CLIFFORD/TAMPA BAY TIMES/ASSOCIATED PRESS
“I definitely have been cutting back on delivery and other excess spending,” said Nick Fong, a 29-year-old who lives in Los Angeles and starts business school in the fall. “My girlfriend has said multiple times, ‘Why are we ordering DoorDash? Let’s just go pick it up.’”
DoorDash CEO Tony Xu said on a May call with analysts, “Inflation is definitely a concern we certainly are taking very seriously.”
DoorDash and Uber collectively control more than 80% of the U.S. food-delivery market. While both increased their delivery revenue in the first quarter and are expected to expand during the full year, the pace of growth has cooled sharply.
The total number of orders at DoorDash, Uber Eats and the other delivery companies in the U.S. grew 11% in the three months through June compared with the same period last year, marking the slowest quarterly expansion in the two years since the pandemic struck, according to the market research firm YipitData. Orders grew 48% in the same three-month period last year and 88% in the corresponding period in 2020. Delivery spending rose at its slowest quarterly pace in two years in the three months through June, YipitData said.
The third-largest U.S. food-delivery company, Grubhub, weighed on overall industry growth, YipitData said. Grubhub’s parent company reported that the app’s orders fell in the first quarter ended in March compared with a year earlier. Its parent company, Just Eat Takeaway.com NV, is considering selling Grubhub less than a year after acquiring it.
DoorDash and Uber Eats said that the pandemic accustomed people to ordering everything at the touch of a button and that the shift in habits is here to stay. The companies said that they are still growing and that inflation hadn’t significantly crimped demand during the first quarter that ended in March. They are scheduled to announce results for the June quarter next month.
Uber’s and DoorDash’s shares have each fallen more than 50% in the past 12 months, compared with the less than 20% decline in the Nasdaq Composite Index. The apps, among the biggest pandemic winners, must now show investors that they can continue to expand in a tough environment while trimming their losses.
Trevor Noah, after biting into an apparently inedible item, in an Uber Eats ad.PHOTO: UBER EATS/ASSOCIATED PRESS
While analysts expected growth rates to slow from pandemic peaks, they are watching to see whether consumers treat the food-delivery apps like a necessity or luxury during what could be the industry’s first recession.
“There is more economic pain incoming for consumers,” said Matthew Goodman, a senior analyst at the data analytics firm M Science. “You have to wonder if more price-sensitive consumers are going to be willing to pay for that convenience as often as they have been,” he said.
DoorDash said when it released its first-quarter results that it expected the total value of orders placed on its app to grow about 20% this year, topping last year’s spending record. “Our strategy and operational efficiency has allowed DoorDash to outperform across market environments,” the company said.
Adam DeWitt discussed the company's growth outlook as Covid-19 recedes and customers return to previous habits, in a talk at the WSJ Global Food Forum. Photo: Ralph Alswang for The Wall Street Journal
In a big television and online ad campaign launched during the Super Bowl, Uber Eats is pushing the message that it offers more than just food.
“Get anything. Don’t always eat it,” Uber Eats’ campaign slogan says after showing Gwyneth Paltrow and Trevor Noah biting into orders of soap and candles.
Uber and DoorDash are increasing their focus on delivering groceries and alcohol to bump up revenue. These items also help limit labor costs because more orders can be combined together. Earlier this year, DoorDash said it was working with Albertsons Cos. to deliver goods to customers in under 30 minutes, targeting a market led by Instacart Inc. Uber Eats is redesigning the grocery section of its U.S. app, a spokeswoman said.
To rein in labor costs, DoorDash last week said it would raise the minimum order for free delivery on smaller household items. In May, Uber said it would slow its hiring plans.
The apps are sweetening deals to persuade users to become subscribers, who usually pay a monthly fee for discounts on food and free delivery. Subscribers are important for continued growth, according to analysts, because they typically spend more than nonsubscribers and generate recurring revenue.
Earlier this month, Uber said subscribers would receive a 10% discount on each Eats order—twice as much as before. Grubhub struck a deal this month to offer its monthly membership to Amazon.com Inc.’s more than 200 million Prime customers. DoorDash has rolled out a student plan at half the price of its regular subscription.
Last month, DoorDash launched new features—including letting customers write reviews of restaurants and rate dishes—to try to tempt people to use the app more.
Apps are also trying to cap what restaurants charge on delivery so they don’t scare off consumers. DoorDash has negotiated a deal with McDonald’s Corp. under which it reserved the right to stop working with outlets that marked up delivery prices by more than 30% of the in-store price.
To expand their reach, Uber and DoorDash recently introduced nationwide shipping on orders such as gourmet cakes.
DoorDash is diversifying by extending new services to restaurants. In March, it purchased a startup whose order-and-pay software lets customers order food from their mobile phones while seated at restaurants. DoorDash said the service would take the burden off understaffed eateries by helping them better manage staff. In February, it began lending money to restaurants based on their sales on the app.
While delivery held up stronger than expected last year, Lloyd Walmsley, a UBS analyst covering the sector, said that pattern could be broken by the state of the economy.
“There’s definitely growing concern that this is a very tough place,” he said. “There’s a lot of reasons to be worried.”
Write to Preetika Rana at firstname.lastname@example.org
Appeared in the July 21, 2022, print edition as 'Growth Cools at Once-Hot Uber Eats and DoorDash'.
Uber Eats, DoorDash Offer New Deals to Court Customers as Growth Cools - WSJ
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|To: Glenn Petersen who wrote (233)||8/2/2022 2:45:58 PM|
|From: Glenn Petersen|
|Uber reports another big loss but beats on revenue, shares pop 17%|
Published Tue, Aug 2 20227:02 AM EDT
Updated 1 Min Ago
Sofia Pitt @sofia_pitt
Uber reported a second-quarter loss on Tuesday but beat analyst estimates for revenue and posted $382 million in free cash flow for the first time ever.
- Uber reported a net loss of $2.6 billion for the second quarter, $1.7 billion of which was attributed to investments and a revaluation of stakes in Aurora, Grab and Zomato.
- Uber beat analyst estimates on revenue.
- CEO Dara Khosrowshahi said Uber continues to benefit from an increase in on-demand transportation and a shift in spending from retail to services.
Shares of Uber were up 17% at about 12:30 p.m. ET.
Here are the key numbers:
The company reported a net loss of $2.6 billion for the second quarter, $1.7 billion of which was attributed to investments and a revaluation of stakes in Aurora, Grab and Zomato.
- Loss per share: $1.33, not comparable to estimates.
- Revenue: $8.07 billion vs. $7.39 billion estimated, according to a Refinitiv survey of analysts.
But CEO Dara Khosrowshahi said in a prepared statement that Uber continues to benefit from an increase in on-demand transportation and a shift in spending from retail to services.
The company reported adjusted EBITDA of $364 million, ahead of the $240 million to $270 million range it provided in the first quarter. Gross bookings of $29.1 billion were up 33% year over year and in line with its forecast of $28.5 billion to $29.5 billion.
Here's how Uber's largest business segments performed in the second quarter of 2022:
Mobility (gross bookings): $13.4 billion, up 57% from a year ago in constant currency.
Delivery (gross bookings): $13.9 billion, up 12% from a year ago in constant currency.
Uber relied heavily on growth in its Eats delivery business during the pandemic, but its mobility segment surpassed Eats revenue in the first quarter as riders began to take more trips.
That trend continued during the second quarter. Its mobility segment reported $3.55 billion in revenue, compared with delivery's $2.69 billion. Uber's freight segment delivered $1.83 billion in revenue for the quarter. Revenue doesn't include the additional taxes, tolls and fees from gross bookings.
Despite the increase in fuel prices during the quarter, Uber said it has more drivers and couriers earning money than before the pandemic, and it saw an acceleration in active and new driver growth.
"Driver engagement reached another post-pandemic high in Q2, and we saw an acceleration in both active and new driver growth in the quarter," Khosrowshahi said in prepared remarks. "Against the backdrop of elevated gas prices globally, this is a resounding endorsement of the value drivers continue to see in Uber. Consequently in July, surge and wait times are near their lowest levels in a year in several markets, including the US, and our Mobility category position is at or near a multi-year high in the US, Canada, Brazil, and Australia."
Uber recently announced new changes that may help it continue to attract and keep drivers. They'll be able to choose the trips they want, for example, and will be able to see how much they'll earn before they accept a trip.
The company reported 1.87 billion trips on the platform during the quarter, up 9% from last quarter and up 24% year over year. Monthly active platform consumers reached 122 million, up 21% year over year. Drivers and couriers earned an aggregate $10.8 billion during the quarter, up 37% year over year.
Khosrowshahi said on a call with investors that new driver sign-ups were up 76% year over year. He said over 70% of drivers said inflation and cost of living played a part in their decision to join Uber.
"The most obvious effect of inflation seems to be getting more drivers on the platform," Khosrowshahi said on CNBC's " Squawk on the Street."
Uber also benefited from the resurgence in travel. It said airport gross bookings had reached pre-pandemic levels, at 15% of total mobility gross bookings, up 139% year-over-year.
For the third quarter, Uber expects gross bookings between $29 billion and $30 billion and adjusted EBITDA of $440 million to $470 million.
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|From: Glenn Petersen||8/19/2022 5:37:02 AM|
|It’s no surprise that Uber and Lyft are tapping into the ad business|
August 19, 2022
Making money by connecting users to rides is a notoriously tough business. Uber and Lyft are losing loads of cash each quarter.
When both companies were flooded with venture capital funding in their first few years of operation, that wasn’t much of an issue. Thanks to VC funding, Uber and Lyft were able to offer users extremely low rates while also paying their drivers.
Then they went public. Lyft made its market debut in March 2019; Uber followed with an initial public offering that May. Those IPOs meant that the two companies now had to prove to investors they possessed viable business models and could turn a profit.
That’s where advertising comes in.
Last week, Lyft announced the creation of Lyft Media, its advertising arm. Lyft, which acquired a company in 2020 that makes monitors to run digital ads atop cars, is looking to sell ad space on in-car tablets that riders use, on digital display panels and its bike docking stations, and through in-app sponsorships. Lyft will be competing against Uber, which entered the ad business in 2019 and sells ads through both its primary app and Uber Eats, as well as offering ad displays atop its cars.
That Lyft and Uber are both putting so many resources into advertising suggests the companies are entering a new phase in their path to profitability.
“We’ve seen rideshares go from [just] rideshares to the likes of Uber Eats and delivery mechanisms, to now maybe delivering beyond just food,” Arjun Kapur, managing director and founder of Comcast’s venture group Forecast Labs, tells Fast Company.
“But you know,” Kapur adds, “there are only so many things you can do with delivery. The question is, how do you then create the next billion-dollar revenue stream for the business that would leverage the assets and capabilities of the existing business?”
For the two largest U.S. rideshare companies, the answer appears to be advertising. It makes sense, considering millions of users are looking at their phones when they book trips. Uber and Lyft have captive audiences in their riders, who are either looking at their devices while being carted around, or sitting in cars that have ample room for digital advertisements.
“Essentially, it’s a ‘We have it so why not use it’ situation,” says Randy Nelson, head of mobile insights at mobile app market intelligence firm Sensor Tower.
It also helps that the two companies have unique access to their users. Uber and Lyft could boast to advertisers that they have the capability to target ads to certain customers, based on things like travel history or food orders.
“They probably know a little bit about the person and they can get more data access and try to make them a little bit more sophisticated than your general taxi cab advertising,” Kapur says. “Even the slightest layer of data on that can tip the scales on brand advertisers wanting to put a lot more of their dollars in this.”
This could be an extremely lucrative opportunity for the rideshare giants. Uber’s ad division generated $141 million in revenue in 2021, up from $11 million in 2020; Uber executive Mark Grether said at an investor day earlier this year that the company could reach $1 billion in ad revenue by 2024. Lyft hasn’t commented on what it expects from ad revenue with its new unit.
“The generation coming into their prime as consumers has notably different views on current-day advertising, so advertisers are reworking their strategies to connect with them, and that’s somewhere these in-vehicle ads could appear appealing,” Sensor Tower’s Nelson says.
It’s unclear where drivers will fit into all of this. Lyft said that a portion of revenue from its display and tablet ads will go to its drivers, though it didn’t specify how much. Grether said at the Uber investor day that some drivers who had installed ad displays atop their cars increased their earnings by about 20% on average.
Still, the advertising windfall likely won’t be significant for drivers in the beginning, says Jeremy Goldman, director of marketing and commerce briefings at Insider Intelligence, noting that as ad sales shoot up (giving drivers a new revenue source), companies could use that growth as reasoning to keep wages low.
“I don’t even expect that to happen all that soon,” Goldman says, acknowledging that it takes time to build market share and develop the technology. “It’s really much more of a tactic to say, ‘Look what we’re doing for you, we’re buying you into this whole program.’”
Kapur argues that ads could do the exact opposite, providing another mechanism by which rideshare companies will be forced to compete for drivers.
“There’s going to be a demand-supply issue between the two [companies] that they would have to fight,” Kapur says, “so I would imagine if one does it and it works and provides more income to the drivers, everybody’s going to rush to that because they don’t want to be the one place that the drivers don’t want to use anymore. . . . That could cripple the entire core business.”
The post It’s no surprise that Uber and Lyft are tapping into the ad business appeared first on Fast Company.
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|From: Glenn Petersen||10/12/2022 5:48:07 AM|
|Uber, Doordash plunge after Labor Department proposes change to gig worker classification|
Published Tue, Oct 11 202210:37 AM EDT
Updated 4 Hours Ago
Lauren Feiner @lauren_feiner
The Biden Labor Department released a proposal Tuesday that could pave the way for regulators and courts to reclassify gig workers as employees rather than independent contractors.
- The Biden Labor Department released a proposal Tuesday that could make it possible for gig workers to be reclassified as employees, rather than contractors.
- The proposed rule sent stocks of gig companies like DoorDash, Lyft and Uber down.
- It comes after a court reinstated a Trump-era rule Biden's Labor Department tried to block that would have made it easier to classify gig workers as contractors.
The proposed rule, if adopted, could raise costs for companies like Lyft, Uber, Instacart and DoorDash that rely on contract workers to pick up shifts on their own schedules. Shares of Lyft fell 12% on Tuesday, while Uber dropped 10.4% and DoorDash shed 6%.
The companies have argued that flexible schedules are attractive to workers, pointing to surveys showing the popularity of the model, which they say is made possible by the use of independent contractor status. Some labor experts and activists have disagreed, however, saying the companies use the contractor model to reduce their own costs while denying workers important protections such as health-care benefits, overtime pay and the ability to organize into unions.
In 2020, a California law went into effect requiring many companies to reclassify contract workers as employees, but later that year, voters approved a proposition that exempted app-based ride-hailing and delivery companies from the law.
Last year, the Biden administration rescinded a rule created under Trump's Labor Department that would have made it easier for gig companies to classify workers as independent contractors instead of employees. But after a legal challenge, a court reinstated the Trump-era rule.
Biden's Labor Department said in its notice in the Federal Register that it had considered waiting longer to see how the Trump-era rule played out. But it decided to move ahead with the proposed regulation instead because it believes keeping the earlier rule in place "would have a confusing and disruptive effect on workers and businesses alike due to its departure from case law describing and applying the multifactor economic reality test as a totality-of-the-circumstances test."
The proposed rule would allow the determination of whether to classify a worker as a contractor or employee to rely on a more holistic assessment, including whether the work is an "integral" part of the employer's business. The goal is to protect workers from being classified improperly while providing consistency for businesses that wish to employ independent contractors, the agency wrote.
The new proposed rule will still need to make its way through the formal regulatory process, including allowing time for the public to submit comments, before it is adopted.
Uber's head of federal affairs, CR Wooters, said in a statement that the proposed rule "takes a measured approach, essentially returning us to the Obama era, during which our industry grew exponentially. In a time of deep economic uncertainty, it's crucial that the Biden administration continues to hear from the more than 50 million people who have found an earning opportunity with companies like ours."
In a blog post Tuesday, Lyft wrote that there "is no immediate or direct impact on the Lyft business at this time," noting the 45-day public comment period. It added that the rule "Does not reclassify Lyft drivers as employees," and also doesn't force it to change its business model. Lyft said the rule simply reverts the standard to that used under the Obama administration, which previously applied to its company "and did not result in reclassification of drivers."
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|From: Glenn Petersen||11/1/2022 7:58:43 AM|
|Uber reports another loss but beats on revenue and the stock is up|
Published Tue, Nov 1 20226:59 AM EDT
Updated 1 Min Ago
Uber reported a third-quarter loss Tuesday but beat analysts' estimates for revenue and showed a surge in bookings. Shares were up about 9% in premarket trading.
- Uber reported third-quarter earnings that beat analysts' estimates for revenue Tuesday.
- The company suffered a net loss of $1.2 billion for the quarter, $512 million of which was attributed to revaluations of Uber's equity investments, according to a company release. In this article
Here's how the company did:
Uber reported a net loss of $1.2 billion for the third quarter, $512 million of which was attributed to revaluations of Uber's equity investments, according to a company release.
- Loss per share: 61 cents
- Revenue: $8.34 billion vs. $8.12 billion expected by analysts, according to Refinitiv.
In a prepared statement, CEO Dara Khosrowshahi said Uber delivered a "strong quarter" and benefitted from booming travel, easing lockdowns and shifts in consumer spending. He said October is tracking to be the company's "best month ever for both Mobility and total company Gross bookings." However, he cautioned that after the last few years, the company has learned not to take anything for granted.
"With continued rigor around costs, discipline on headcount, and a balanced capital allocation approach, all supported by our leading technical and operating capabilities, we are well positioned to deliver expanding profitability over the coming quarters," Khosrowshahi said.
The company reported a record adjusted EBITDA of $516 million, beating guidance of $440 million to $470 million and ahead of analyst estimates of $457.7 million according to StreetAccount. Gross bookings for the quarter came in at $29.1 billion, up 26% year over year.
For the fourth quarter of 2022, Uber said it expects gross bookings to grow between 23% and 27% year over year on a constant currency basis, and an adjusted EBITDA of $600 million to $630 million.
Here's how Uber's largest business segments performed in the quarter:
Mobility (gross bookings): $13.7 billion, short of analysts' estimates of $13.83 billion according to StreetAccount.
Delivery (gross bookings): $13.7 billion, short of analysts' estimates of $14.01 billion according to StreetAccount.
Uber relied heavily on growth in its Eats delivery business during the pandemic, but its mobility segment surpassed Eats revenue in its first and second quarters as riders began to take more trips. That trend continued during the third quarter, as Uber's mobility segment reported $3.8 billion in revenue while delivery reported $2.8 billion.
Uber's freight business booked $1.75 billion in sales.
The number of monthly active platform consumers climbed to 124 million in the third quarter, up 14% year over year. 1.95 billion trips were completed on the platform during the period, up 19% year over year.
Shares of Uber are down more than 36% so far this year. The stock tumbled more than 10% in October after the Biden Labor Department released a proposal that could pave the way for regulators and courts to reclassify gig workers as employees. The proposed rule could raise costs for companies like Uber, Lyft, Instacart and DoorDash that rely on contract workers to pick up shifts on their own time.
The companies have argued that flexible schedules are attractive to workers, but some labor experts and activists have disagreed, saying the companies use the contractor model to reduce their own costs and deny workers important protections.
Uber has also had to contend with high gas prices and inflation, but CEO Dara Khosrowshahi told CNBC's "TechCheck" in September that its supply side may actually be benefiting from the inflationary environment.
As expenses rise and people are paying more for essentials like groceries, he said they are also signing up to drive for Uber.
"If anything, 72% of drivers in the U.S. are saying that one of the considerations of their signing up to drive on Uber was actually inflation," he said.
Uber will hold its quarterly conference call with investors Tuesday at 8 a.m. ET.
--CNBC's Lauren Feiner contributed to this report.
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