Uber, Lyft and Airbnb cut thousands of jobs as pandemic batters Silicon Valley
The economic fallout from the coronavirus has come to Silicon Valley, with major tech firms announcing layoffs in recent weeks.
On Wednesday, Uber became the latest company to announce cuts, revealing in a filing to the Securities and Exchange Commission that it will lay off 3,700 workers – roughly 14% of its global workforce.
Uber cited the pandemic in its filing, saying Covid-19 had affected its entire business, including financial performance, investments in new products, ability to attract drivers, and corporate strategy.
Uber’s announcement came after several other tech companies said they were making cuts amid the crisis.
Uber’s biggest rival, Lyft, announced last week it would lay off 982 members of its staff and furloughing another 288.
The vaping company Juul announced in April it would lay off 800 members of its staff and move its headquarters to Washington DC.
Yelp announced last month it would lay off 1,000 employees and furlough 1,100 more.
WeWork announced in March it would lay off 250 employees and is expected to cut more jobs by the end of May.
Big tech companies are not the only members of the industry affected. About 375 startups have laid off more than 42,000 employees since 11 March, according to a layoff tracking site.
Yet not all tech firms are suffering in equal measure. In the first three months of 2020, Amazon made more than $33m per hour, according to its earnings report last week, boosted by a surge in ordering from customers locked down at home. The delivery startup Instacart had to hire 300,000 workers in less than a month as more people began to order groceries online. The online video conference tool Zoom, which was valued at $36 per share when it went public in 2019, is now valued at $150 per share and its user base recently surpassed 300 million.
But with closed borders, travel bans, and stay-at-home orders around the world, travel-related tech companies are disproportionately affected, said Carl Uminski, a tech industry analyst and co-founder of the digital consultancy Somo.
“It’s well understood now that the impact Covid-19 has had on the entire travel industry is absolutely colossal,” he said. “Not only has the industry stopped, it will never be exactly the same again and nobody knows exactly what it is going to look like.”
Uber is attempting to make more cost-cutting measures. Dara Khosrowshahi, its chief executive, said he would forgo his own salary for the rest of the year and the company would re-evaluate investments in new products. It will also permanently close 180, or 40%, of its driver resource centers around the world.
As another means of diversifying its revenue, Uber invested $170m in the scooter-rental startup Lime, which is now valued at $510m, Lime said in a statement on Thursday. Through the partnership, Lime will acquire Uber’s bike-sharing operation, called Jump, and the two companies will further integrate their apps.
The layoffs come as ridesharing companies face another major challenge in the form of a lawsuit from the state of California. The state attorney general, Xavier Becerra, announced on Tuesday that the state is suing the firms for misclassifying drivers as contractors rather than employees under a new law meant to address labor rights of gig economy workers.
The pandemic is testing the structure of the typical startup, said Uminski. The “move fast and break things” mentality central to new businesses in recent years relies on disrupting industries fast to gain marketshare, and focusing on profitability later. This only works when the market is doing well, he said.
“Uber, Lyft, Airbnb and many others have all done exactly this and then suddenly, almost overnight, their industry has stopped,” he said. “I believe these new giants will also be tested on their true agility and whether they still have that start-up culture within.”
Many of these companies also rely on sharing space, whether in vehicles or apartments. While there are no recent studies on attitudes towards ridesharing, more than half of Americans say they would not feel comfortable riding public transportation, a recent survey found, and 57% said they would not want to fly on an airplane.
As long as people remain wary of getting close to strangers, gig economy companies like Uber and Airbnb will suffer, said Daniel Ives, an analyst at Wedbush securities.
“Until there is a vaccine for the virus, the next one or two years is going to have some darker days ahead for these business models,” he said.
There is a chance the companies will adapt: Uber found that its delivery service Uber Eats has seen demand surge in recent months, even as its main business declines.
“Uber and Lyft and many other companies are trying to adjust their business models to the category 5 storm that is Covid,” Ives said. “The gig economy is right in the eye of it.”
In addition to the gig economy firms, other companies are facing a downturn as the economy struggles. WeWork has laid off hundreds of staffers as many Americans work from home, and workers may be wary of shared office spaces for some time.
Yelp, which bases much of its revenue on advertisements sold to restaurants and shops listing on the site, has felt the impact of countless businesses closing due to lockdown orders. Other companies, like Juul, may simply be feeling the broader impact of an economic downturn.
All told, Ives said, few companies will escape the effects of coronavirus. “There are some areas that are seeing growth, especially those that involve working from home and consumer-driven delivery, that are seeing unprecedented growth,” he said. “But those are fewer and far between.”