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Uber Pushes a Buffet of Services, But Will Users Belly Up?

Uber Pushes a Buffet of Services, But Will Users Belly Up?

(Bloomberg Opinion) -- Wednesday was a big day for Uber Technologies Inc. Its shares crept above the price of the company’s IPO almost one month ago. Predictably, the analysts at investment banks that worked on Uber’s IPO started telling people to buy shares. This capped a stretch of fairly good news for Uber that included a solid first financial report as a public company.

The optimistic idea about Uber’s business is that car rides are the first step to becoming what its CEO last week called “a one-stop shop for the movement of people and powering local commerce around the world.” 

The strategy means, in part, that Uber wants to more closely link its different offerings so people who take an Uber car ride are more likely to order restaurant delivery from Uber, or that someone who rides an Uber electric bicycle will also hop in an Uber car sometimes. The company also has a loyalty program that rewards people for using Uber regularly and using multiple Uber services. 

This kind of cross-pollination is an utterly sensible strategy. It is also harder than it sounds, and Uber has given little proof that its existing efforts are paying off. 

Uber Pushes a Buffet of Services, But Will Users Belly Up?

Uber told investors last week that it is “starting to experiment” with ways to persuade people who use one Uber service to also use others. TechCrunch reported on hints of that effort —  Uber’s app for car rides is starting to give people the option to also order from Uber Eats, the food delivery offering. 

Until now, if you wanted pizza rather than a car trip, you needed to download the Uber Eats app. Presumably Uber will offer coupons or other incentives for people using the Uber rides app to try ordering burgers delivered for dinner. Again, this seems smart, although in the U.S. there is a spotty track record for the multiple-tasks-in-one “super apps” that are prevalent in China and some other parts of Asia. 

It’s easy to understand why Uber is trying to nudge more Uber riders to try food delivery, and vice versa. Revenue growth has slowed significantly for Uber’s car trips, and Uber’s IPO filing disclosed that just 16% of people who used at least one Uber service in the fourth quarter were using Eats. There’s upside if Uber can get people to use more than one of its services and use them more often.

Uber Pushes a Buffet of Services, But Will Users Belly Up?

Uber has not shown compelling evidence, however, that people will seamlessly flow from one company offering to others and spend more with Uber along the way. The best evidence the company could muster: People who use Uber cars, bicycles or scooters as well as Uber Eats in cities where those offerings were available did an average of 11.5 rides or food deliveries each month. Customers who used Uber only for transportation or food got 4.9 Uber rides or deliveries a month, on average.

That was offered as proof that Uber’s multiple offerings fuel a cycle of more use and more revenue. There are alternative explanations, though. Maybe people who are using multiple Uber services are just really big fans of the company. It’s not clear that the company can persuade more casual users to use Uber in more ways. 

Even if Uber’s transportation and food-delivery services feed each other’s growth on the consumer side, it’s not clear that there is synergy among Uber services on the supply side, meaning restaurants and car drivers. There are similar routing and logistics technologies, but signing up restaurants and keeping them happy is a different undertaking from attracting people to drive for Uber, offering them continual financial incentives to stick around and making sure the company effectively handles their complaints and needs. 

Uber has little choice but to find new markets to conquer and trumpet how having freight trucking, food delivery, scooters and car rides makes Uber more useful to people and a more valuable company. It’s just not yet clear that Uber’s pitch is true.

Even at the $45 closing price on Wednesday, stock buyers who bought shares directly from the company in the three years before its IPO still have a loss on their investment.

To contact the editor responsible for this story: Daniel Niemi at dniemi1@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Shira Ovide is a Bloomberg Opinion columnist covering technology. She previously was a reporter for the Wall Street Journal.

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