By: John Cosculluela
You can follow John on Instagram: JohnCosculluelaIII
Uber Technologies Inc., a $68 billion dollar tech company, has revolutionized the driving industry since its inception in 2009.[1] For those unfamiliar with Uber, the company offers a ride-sharing service that works by means of an app that can be downloaded on most smartphones and enables the user to request car rides with the press of a button. Being the first of its kind, Uber enjoyed the benefits of early entry and was able to rapidly expand into new geographic markets achieving what some would describe as a monopoly. In the first quarter of 2015, Uber provided 46 percent of all total paid car rides; compare that to the first quarter of 2014, where that figure was just 15 percent.[2] Those numbers are even larger when we narrow the market and exclude taxicabs, limousine companies, and all other non-tech driven services. To put Uber’s size and impact on the market into perspective, its closest competitor, Lyft, is valued at just $5.5 billion dollars, hardly a threat to Uber’s $68 billion.[3] However, while Uber has done an exceptional job at capturing market share, the company has done little to maintain it.
In recent years the tech giant has come under fire for reasons spanning from politics to alleged history of sexual harassment.[4] On February 19, 2017, Susan J. Flower, a former employee, wrote a blog article describing the year she spent working for the company.[5] Susan stated that on her first day on the team, her manager used the company’s chat server to proposition her for sex.[6] Susan, feeling the message was out of line, took photos of the messages and sent them to HR.[7] HR responded by issuing a warning and giving a “stern talk” to the top producing manager, claiming that nothing more was warranted as it was his first offense.[8] However, as Susan began to interact with more women employed at Uber, she began to hear stories very similar to hers, some involving the same manager.[9] It was clear that both HR and management had not been truthful about it being the manager’s first offense.[10] The negative press caused the hashtag “#DeleteUber” to begin trending for the second time in one month.[11] Uber has since launched an internal investigation into Susan’s claims, however the damage to its reputation is already done.[12]
The first time the hashtag “#DeleteUber” began trending was in response to Uber’s reaction to President Trump’s highly controversial travel ban.[13] The NYC Taxi Worker’s Alliance responded to the executive order by halting all pickups from 6pm to 7pm at JFK airport, where two Iraqis were being detained, hoping to cause a disruption that could not be ignored.[14] Soon thereafter, Uber announced that it would be turning off its surge pricing at JFK airport, which rendered the strike completely ineffective as would-be taxi patrons could now enjoy a discounted ride using Uber. The public backlash was immediate and the trending hashtag resulted in more than 200,000 user accounts being deleted.[15] While Uber is still the largest player in the game, Lyft’s PR department knows that it is a game of chess and not checkers. Lyft capitalized on the bad press Uber was receiving by emailing all of its users a statement firmly opposing the executive order.[16] In addition, Lyft also announced that the company would be donating $1 million dollars to the American Civil Liberties Union (“ACLU”), a move that won the hearts, and more importantly, the business of thousands.[17]
These reputational punches could spell trouble for the future of Uber, as social data has shown Lyft growing exponentially over the past 2-3 years.[18] In fact, in 2016 Lyft’s growth rate was more than double that of Uber’s, keeping in mind that those figures reflected trends that were occurring long before the negative hit on Uber’s reputation.[19] Lyft has pierced Uber’s armor and hungry entrepreneurs are beginning to realize there is a real opportunity for profit in the Uber dominated market. With companies such as Google announcing their expansion into the ride-sharing market[20] and the concept of self-driving cars becoming more feasible by the day, is it only a matter of time before Uber loses its grip on the industry? Will this recent increase in competition result in lower prices for consumers? While natural market forces will eventually answer all of these questions, be on the lookout for new entrants and deals!
[1] Sara Ashley O’Brien, Lyft expands into 54 new cities, while Uber does damage control, CNN TECH, (Feb. 23, 2017, 9:13 am), https://money.cnn.com/2017/02/23/technology/lyft-launches-54-new-cities/index.html.
[2] Id.
[3] Id.
[4] Id.
[5] See Susan J. Flower, Reflecting On One Very, Very Strange Year At Uber, (Feb. 19, 2017), https://www.susanjfowler.com/blog/2017/2/19/reflecting-on-one-very-strange-year-at-uber.
[6] Id.
[7] Id.
[8] Id.
[9] Id.
[10] Id.
[11] Id.
[12] Greg Bensinger, Uber to Investigate Sexism, Harassment Claims, The Wall Street Journal, (Feb. 20, 2017, 8:00 pm), https://www.wsj.com/articles/uber-investigates-sexism-harassment-claims-1487567488?mg=id-wsj
[13] https://money.cnn.com/2017/02/23/technology/lyft-launches-54-new-cities/index.html.
[14] See Aimee Rawlins, Uber pushes back on Trump’s order after #DeleteUber starts trending, CNN TECH, (Jan. 29, 2017), https://money.cnn.com/2017/01/29/technology/uber-lyft-trump-muslim-ban/?iid=EL.
[15] See Mike Isaac, Uber C.E.O. to Leave Trump Advisory Council After Criticism, The New York Times, (Feb. 2, 2017), https://www.nytimes.com/2017/02/02/technology/uber-ceo-travis-kalanick-trump-advisory-council.html?_r=0.
[16] See Darrell Etheringotn, Lyft donates $1M to the ACLU, condemns Trump’s immigration actions, TechCrunch, (Jan. 29, 2017), https://techcrunch.com/2017/01/29/lyft-donates-1m-to-the-aclu-condemns-trumps-immigration-actions/.
[17] Id.
[18] See Andy Swan, Sorry Uber. Social Data Validates The Lyft Growth Story And Valuation Demands, Forbes, (Aug. 31, 2016, 1:40 pm), https://www.forbes.com/sites/andyswan/2016/08/31/sorry-uber-social-data-validates-the-lyft-growth-story-and-valuation-demands/2/#41d87da47201.
[19] Id.
[20] See Jack Nicas, Google’s Waze Plans Expansion of Ride-Sharing Service, The Wall Street Journal, (Feb. 22, 2017, 4:01 pm), https://www.wsj.com/articles/googles-waze-plans-expansion-of-ride-sharing-service-1487768582.
