Market Insight

Uber losses continue in transition from ride sharing to platform company

February 07, 2020  | Subscribers Only

Seth Wallis-Jones Seth Wallis-Jones Principal Analyst, Telecommunications, IHS Markit

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Uber has published its latest results, for Q4 2019, and while growth in users and revenues is significant and continuing, there is not sign that despite management assertions to move to a positive adjusted EBITDA by the end of 2020, net losses continued to grow at $1.25 billion. Including stock-based compensation, which ballooned in Q2 as a result of the IPO in May 2019 to $4.6 billion for the year, annual net losses (including non-controlling interests of which Uber has gained several In recent years) were reported at $8.5 billion. Significantly, user growth has slowed on the prior year even as costs appreciate.

While the Eats business has continued to grow, the 68% y/y growth in GAAP revenues, and 152% y/y  growth in adjusted revenues (which exclude excess driver incentives). On a quarterly basis that growth was also strong at 14%, though a 6% increase on adjusted terms may be indicative of high levels of driver incentives. The disposal of the Uber Eats India business looks to have been a wise move. The unit  somehow posted a net negative revenue of $4 million in the fourth quarter (and positive $24 million in revenues for the year) leading to an operating loss of $288 million for the year. That is a similar level of the loss to the $294 million posted by Zomato in 2019, while Zomato served 70 million monthly users to the declining 2 million monthly active users reported by Uber. Uber also withdrew from the South Korean market in October, which has been attributed to high levels of competition. In December local operator Baedal Minjok also sold up to Naspers backed DeliveryHero, which now operates delivery services under a range of brands in over 40 countries.

Overall, the Eats business accounted for 18% of GAAP revenues in Q4 2019, up from 15% a year earlier. The ride business has fallen from 81% to 75%, while other bets mainly the freight business $125 million to $219 million, or 4.2%, rising to 5.4% revenue share y/y) and ‘new mobility’ (bike and scooter sharing) and other bets  including mass transit, UberWorks  (a gig/shift work matcher) and other startups account for the remaining 1.5% of revenues.

With Uber concluding the acquisition of Careem on the 2nd of January, Uber is now listing as present in 70 countries and 830 cities across the world, that should begin to swing results away from reliance on the United States and Canada as key revenue sources. After the regions share of revenues by geography peaked at 63% in q3 2019, that dialled back to 62% in the fourth quarter.

Uber is ultimately looking to position its app after the ‘super-apps’ that have been an effective strategy for Tencent and Meituan in China, and the likes of Gojeck in Indonesia and Paytm in India – and indeed the recently acquired Careem in the Middle East. After integrating the Eats app into the main Uber app since the middle of 2019, Uber continues to build on the range of services that can leverage their local  logistics faculties and be reached through the main app. Towards that, In October Uber announced that it had to acquire the majority stake in grocery service Cornershop, active in Chile, Mexico, Peru and Toronto.

Key to the effectiveness of that strategy will be building the user base and then driving increasing use of the broadening range of services. At 111 million monthly active platform consumers, Uber added 8 million new users in Q4 2019, to total growth of 20 million for the year. While an improvement on the rest of the year, that growth is down by 1 million on Q4 2018, and by 3 million for the year.

CEO Dara Khosrowshahi appears sensitive to investor concerns that have clarified since the IPO launched into a more price sensitive market and stated that “We recognize that the era of growth at all costs is over”. He has stated that he will look to turn performance towards profitability, with a positive, if adjusted, EBITDA targeted by the end of 2019 rather than the following year. While that will undoubtedly be welcome news to some, it is difficult to square with the continuing increases in costs seen over 2019.

That strategic direction may entail further disposals, which as in India have been used to consolidate hyper-competitive markets while taking a minority stake in the market leaders. However, with a range of companies vying to compete in similar markets - often backed by Naspers, Tencent, Softbank (a key investor in Uber) and Alibaba- that may see some turbulence ahead. Softbank may be behind some of this change in direction with reports that it sought to promote merger talks with Doordash (a Softbank investee) last year.  Complicating that picture of potential accord however is the entry of Ola (another Softbank investee) to the London ride share market - a significant market for Uber.

That may be indicative of the longer-term outlook remaining one where it is difficult for a market leader in such a price sensitive product to retain dominance while raising prices to profitable levels.  There is little to lock-in the network of drivers and riders to a specific service. With Google maps, along with ‘ridesharing aggregators’ such as Bellhop or Ride Guru providing price comparisons across providers, loyalty is likely to be low. If that is the case, then the initial pursuit of growth at all costs will prove to be exactly the wrong strategy for long term sustainability. A super-app strategy may help to drive loyalty, or at least leverage user inertia effectively, but may not prove effective in markets with more established and fragmented app and retail ecosystems.





India (Eats business only)



9.99% stake in Zomato

South-East Asia (Cambodia, Indonesia, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam)



30% stake in Grab (taxis, food, payment), diluted to 23% then 19% following new funding rounds




37% stake and JV with Yandex.Taxi



Didi Chuxing

18.8% stake in Did Chuxing, reduced to 15.4% in subsequent funding rounds


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