Uber reported losses that would make WeWork blush – and that’s the good news
It feels a bit Alice in Silicon Valleyland, but the good news for Uber this week was that it lost $1.2bn in the third quarter of 2019. While burning that kind of cash in 90 days would make even WeWork’s Adam Neumann blush, it is an improvement over the previous quarter’s jaw-dropping deficit of $5.24bn.
Uber’s latest financial results came just two days before its post-IPO lockup period expired on Wednesday, allowing early investors and employees to cash out and touching off a stock sell-off that saw the share price reach a new all-time low. Hundreds of Uber drivers across California marked the occasion with protests targeting some of the handful of people who have unambiguously benefited from the Uber economy. Drivers visited the home of the early investor and former board member Bill Gurley in Atherton and the $72.5m mansion of the co-founder Garret Camp in Beverly Hills.
The company’s fraught relationship with its workforce is only going to get more complicated over the next year, as the fundamental question of Uber’s existence – are drivers employees or independent contractors? – is put to the test in its home state.
Uber, together with Lyft and DoorDash, took the first steps this past week to fight back against a landmark bill, AB5, that would jeopardize the contractor status of ride-share and delivery drivers. On 28 October, the three companies filed the paperwork to begin a campaign for a November 2020 ballot measure that would exempt them from the new rules for classifying workers.
They were following through on their August pledge of $30m for the initiative – a last-ditch attempt to scare state lawmakers off passage of the bill. The legislature did not blink, and Instacart and Postmates have since thrown in $10m apiece of their own, putting the nascent campaign on track to be one of the most expensive in California history.
Uber and Lyft have wasted no time in leveraging their relationships with drivers to advance the campaign. Drivers who log on to Lyft to work are shown a screen urging them to sign up in support of a “ballot measure to preserve your freedom and provide new protections and benefits”, while Uber sent emails urging drivers to “vote yes to protect driver choice and flexibility”.
There are no limits on the amount of app-based campaigning like this that Uber and Lyft can do under California law, according to Bob Stern, former president of the Center for Governmental Studies. That means the ride-hail experience in California is likely to become heavily politicized over the next year. Think app notifications urging you to vote or campaign flyers delivered alongside your takeout food. Signature gathering is a quintessential, pre-gig-economy gig in California, and it may be only a matter of time before ride-hail companies begin offering drivers bonuses to carry petitions and gather signatures in their cars.
In conversations inside Facebook groups for Uber and Lyft drivers, workers are divided over support for AB5 or the ballot measure – and distrustful of any claims that that their working conditions will ever improve. The ballot measure promises an “earnings guarantee” of 120% of the minimum wage, provides a $0.30 per mile reimbursement for gas and other expenses, and offers a stipend for healthcare for those who drive at least 15 hours a week. But an analysis by the UC Berkeley Labor Center – dismissed as “absurd” by the campaign – found that loopholes in the initiative mean that drivers would only be guaranteed $5.64 an hour.
Uber has both claimed that AB5 does not apply to it – and treated it as an existential threat. In its financial filings, the company acknowledges that classifying drivers as employees would require it to “fundamentally change [its] business model”. Also acknowledged in those filings is another unhappy fact: over the course of its existence, Uber has lost $15.3bn.
At some point, another fundamental question will need to be answered: is this business model even worth preserving?