Today we are going to talk about the Uber IPO (Initial Public Offering) and the 5 biggest challenges Uber faces as it moves forward as a company.
It’s been over a month since Uber went public. I read this article in the San Francisco Chronicle by Carolyn Said. She had some very, very valid points about Uber going public. So, what now? What happens with Uber now that the company is public? The Uber IPO price drop certainly reflected how investors felt.
She talked about Uber’s biggest challenges. I wanted to share these with you guys and definitely, I want to get your comments because if you’re driving it affects you.
1. Become Profitable
The first post-Uber IPO challenge and this is the biggest one, is making money. There are only two ways that can happen. One way is to cut driver’s rates further than they’ve been cut, already. Low pay rates are one of the big things the Uber and Lyft strikes have been about. It’s the race to the bottom both Uber and Lyft are doing by dropping the prices low because they make their money on volume.
That was one way to earn more money. The other way is they could raise passenger rates. Either one of these choices is going to have consequences in the market share for the company.
So, what does that mean? I look at it like this, guys, when I started five years ago the rates were more and people were willing to pay them. They were “willing”.
I know the company wants to get money in volume, but what’s that going to do to the driver fleet? It’s already a high turnover business model for drivers. The turnover is like being a McDonald’s employee, seriously.
Most people are not really trained properly as far as being a rideshare driver. They are not. And, I can speak from personal experience.
2. Improve Driver Relations
The second challenge actually piggybacks to the first: driver relations. Drivers just had a big strike before the Uber IPO. Some people want benefits and I’m going to talk about that too. That’ll lead into the next thing as far as driver relations but, right now driver relations are not the best.
I’m part of the beta program for Uber Pro and I think that’s a pretty good program. You have different tiers. There are Gold, Platinum and Diamond statuses and of course, you have your basic level, which is Uber Partner. Anybody can get Partner status just by driving. I made a video about Uber Pro. You can watch it by clicking here.
I think it’s a good program. I came in as Diamond status and I’ve experienced some serious benefits so far by just having some types of knowledge that most people don’t have.
But even still, driver relations are strained right now even though there was a major Uber IPO Driver Bonus given to plenty of drivers. That’s a big deal for the company because drivers are the backbone. And that piggybacks and flows right into number three.
3. Worker status.
We are independent contractors. Now, in places like New York, these drivers have been ruled to where they can get minimum wage, $17.00 an hour after tax. That’s a big deal. That’s a really big deal if you’re really paying attention to what’s going on.
And in California, there is also legislature like that too being discussed right now. As far as worker status is concerned, being an independent contractor versus being an employee, me personally, I want to stay independent contractor.
I like my freedom and I don’t want to have to be told when I have to be somewhere or what time I have to be there and for how long. I don’t want to have to deal with that. The flexibility is crucial to me and so many other drivers.
The fourth thing she talked about going forward after the Uber IPO was competition and not only just with Lyft. There are other companies. Anybody that knows how to code an app can basically start a rideshare company. It’s just that simple. That’s going to force Uber to offer more driver incentives like sign-on bonuses because anybody can start a rideshare company.
For instance, right now there are a couple of companies that have reached out to me called Tryp and Vibe. I don’t know what you guys’ experiences with those companies are. I’d be interested in definitely hearing what your experiences are with them.
I know neither one of them has really gotten started yet and they’re recruiting people with a network marketing type business model. Which, I’m okay with that. A lot of companies have started with network marketing business models.
The fact is there are other people trying to get in on the pie. Competition is always an issue.
5. Geographic Concentration
Said talked about geographic concentration and she listed five cities that generate 24% of Uber’s income. That’s pretty significant, especially with the laws changing. One of the cities was San Francisco. She also listed Los Angeles, New York City, London in the United Kingdom and Sao Paolo in Brazil. So, two international places and three domestic here in America.
She also mentioned airports contribute to 15% of Uber’s bottom line. Now, here’s why this is an issue. The regulations tend to change a lot with airports. Some airports don’t want Uber. Some want Uber, but they want certain regulations to happen. Certain things need to happen in order to pick up legally, from an airport.
Here in Atlanta, for instance, before Uber and Lyft fought for the right for drivers to pick up at Hartsfield-Jackson Airport, you had to call the customer in advance and find out what they were wearing. They had to get in the front seat of your car and you had to act as if you knew them already!
So, the airport wanted to put a stop to that. They knew it was happening and they really couldn’t control it so they wanted to put a stop to that and they charged both companies, Uber and Lyft.
I think it was like $40,000. Don’t quote me on that. It was some amount of money each company had to pay up front and then they charged for placards. You have to have that on your car in order to pick here or you will get a ticket.
They (the airport) charge each rider close to $4.00 per ride. I estimated that at Hartsfield-Jackson Atlanta airport, (the busiest airport in the world) both companies are picking up total about 5000 rides every single day.
That means the airport is getting residual income. The airport is probably hitting them for about $20,000 a day. They’re getting their money out of Uber and Lyft on the rideshare front seriously.
Those laws could change at any moment. For instance, the State of Georgia is now going to be taking over the airport instead of the City of Atlanta, so that may cause some changes. We don’t know.
What do you think some of Uber’s biggest challenges are? If you’re a driver, definitely chime in. If you’re not a driver, that’s okay too.
Everybody has an opinion and I welcome yours. It’s good to talk about these things. The more dialogue there is, the more we can affect change.
Watch The Video On The Challenges After The Uber IPO
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