Archive for May 18th, 2015

by William Skink

Until Uber is able to replace humans drivers with robots, problems between the company and the drivers will continue. To Uber, drivers are nothing more than portals to profit, and apparently Uber isn’t satisfied with its margin, so the company is “testing” a higher fee, 30%. From the link:

Uber Technologies Inc. is experimenting with taking 30% of the revenue from fares booked through its car-hailing app, the highest commission it has charged drivers.

The higher so-called take-rate quietly went into effect in April in two cities, San Francisco and San Diego, and only applied to drivers who signed up for its UberX service since then, a company spokeswoman confirmed.

Uber’s rise is stratospheric, and the numbers are mind boggling. Forbes digs into Uber’s 50 BILLION dollar valuation to try and understand what velocity of growth must be achieved for Uber to deliver:

If you assume a normalized long-term free cash flow margin of about 35% (yes, this is quite high, but Uber’s business model is very efficient), Uber’s $50 billion valuation means that they will need to generate about $35.7 billion dollars of gross revenue and about $7.1 billion dollars of net revenue to justify the recent valuation. Perhaps more interestingly, the company will have to have an annual growth rate of about 286% each year over the next five years to hit these numbers. To put those numbers into perspective for a moment, it means that Uber is currently valued at 125x trailing annual net revenue.

Uber’s massive market value surpasses 80%+ of all S&P 500 companies, many of which have been around for 20, 30, 50 or more years (Uber was started in 2009). At first glance, the $50 billion valuation seems absurd. However, if the company manages to continue its current growth trajectory (seemingly doubling revenue every 12 months or less), it is not as crazy as one might presume. Still, this sky-high valuation isn’t without risk.

Uber inching up its take-rate in select markets makes more sense now. Just imagine the take when those inconvenient human drivers, with those those sometimes inconvenient proclivities, can be removed from the equation. I think it’s safe to say these numbers will incentivize further take-no-prisoner tactics against anyone who stands in their way, be it journalist, regulator or aggrieved customer.

At Pando, Paul Carr reports on how a Clinton crony, David Plouffe, has been replaced by a Cameron crony, Rachel Whetstone. Carr does a deep dive on Whetstone, something his media peers have made little to no effort reporting on. And they should, considering Uber is tapping a Margaret Thatcher 2.0 type:

Everyone in UK politics who I asked about Whetstone was agreed on one thing: She’s the person you bring in if you need to convince everyone that your company isn’t quite as nasty as it appears, and if your current spin doctors aren’t delivering the results you want. First that was Google, and now comes the biggest challenge of her career: Uber.

I have low hopes when it comes to the American business press covering Uber, but even I was surprised at how few journalists bothered to share even the most basic details of Whetstone’s background with their readers. That stuff sits barely below the surface and speaks volumes about the famously ultra-libertarian Travis Kalbnick’s decision to replace Plouffe with her at Uber: An Obama liberal booted upstairs to make way for a multi-generation Cameron conservative/libertarian.

Less shocking is the American’s media’s unwillingness to delve any deeper into the other bizarre web of connections that link Uber with Whetstone and her British political pals. People who go up against those folks rarely come away unsmeared, and we all know what Uber is capable of on that front. In any case, it takes a whiteboard and a lot of patience to even begin to get the threads straight — and there’s little evidence that anyone in Washington, Wall Street or Silicon Valley really cares what lurks under Uber’s hood, so long as it keeps proving fancy limos and killer profits.

Closer to home, Pete Talbot wonders how progressives can get ahead of these times that be a-changin’. Unfortunately I think the way he frames this issue shows that the conversation is already passing him by:

On one side you have entrepreneurs, smart phones, and the trendy, on the other: unions, regulations and institutions.

What’s a progressive to do?

I will hazard an answer. Progressives should start by understanding the scope of what they’re dealing with. Uber has quickly grown beyond the trendiness of disruptive technology into a regulation-smashing juggernaut without concern for labor or consumer safety. Local support by Montana Democrats is short-sighted. The trendy are a fleeting lot, and opportunists who take advantage will just be on to the next self-serving opportunity, leaving the consequences of their short-sightedness for others to deal with.

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