Uber's London has Fallen
Uber's rise to infamy last year has been changed radically by the incumbent CEO, Dara Khosrowshahi. Khosrowshahi knows that the world is not polarized around Uber, nor himself. Unlike his megalomaniac predecessor who decided that everyone should bend to his will and desire.
Uber's biggest slap in the face came from the Transportation for London (TfL) last year when Sadiq Khan the Mayor of London signed a stay on Uber's license to drive in the UK Capital.
After the court appearance and the tribunal's decision, Sadiq Khan stated to the press that "After years of operating poorly in London, Uber has now accepted that TfL's action in refusing to renew their license was totally justified. Today our stance has been vindicated by the court. Uber has been put on probation; their 15-month license has a clear set of conditions that TfL will thoroughly monitor and enforce."
So what happened here?
Well, Uber and TfL both won, which is kudos to the court. The bottom line is this; Uber will continue to operate in London under a probationary license for 15 months, during this time they will be monitored closely by the TfL.
After the 15 months is up, based on Uber's performance and conformance to constraints, the TfL will either (most probably) extend their license to operate. This is a clear win for both sides, but especially for Uber.
The big win for the TfL is their money bonus; they were awarded by the court a sum of £425,000, which is a drop in the bucket for Uber and is another win for both sides.
The big winner is Dar Khosrowshahi, who's humble approach to local government is appropriate. The service industry has to live within the legal restraints set by society. Kalanick flaunted this blatantly, and while he was successful in globalizing ridesharing, he was also poisoning the well from which he drank, and it nearly killed him. (Uber).
With so many personnel changes, headed by Khosrowshahi, Uber has managed to turn around from a course of bankruptcy and is well on its way to a successful IPO next year.
With so much money at stake, the owners of Uber will not let it fall to the whims of megalomaniacs, and that is why Kalanick was ousted. Ever since Khosrowshahi stepped into the CEO shoes, he has made a string of solid decisions.
He started off by completing the SoftBank investment, putting SoftBank into a major board role with 17% of the company. This decision also included the buy out of shares of Uber employees and investors.
Finally, many of Uber's original employees became millionaires, and the workplace environment lit up. Investors also chased out, including Kalanick, who sold a billion dollars' worth of Uber.
The next step that Khosrowshahi took was to listen to SoftBank's advice and pull out of Asia. They had expanded to fast and too far; the operational expenses were enormous and were leading Uber to disaster.
By compartmentalizing Uber to three regions, Khosrowshahi could concentrate on optimizing the operations and reducing spend radically.
Today Uber is still the North American giant, with Mexico (under attack from Didi), Europe, Africa, and the Middle East. Uber is still strong in Australia too, for the moment.
Back in London, and why the court's decision is a lynchpin in Uber's future.
Uber's general manager for the UK, Tom Elvidge, stated that "We will continue to work with TfL to address their concerns and earn their trust while providing the best possible service for our customers."
This is the cornerstone of a successful operation in any country, but London is a major market, and investor's eyes were on London to see if Uber would stay or lose ground. The final decision is a 15-month stay of execution, which is tantamount to stating that Uber is now entrenched for life in London.
Uber can now concentrate on the IPO, and it's going to be a really big one. Take into account that Uber is not just a ridesharing service company, it is also a stakeholder in Russian Yandex ridesharing operations, Didi's Chinese ridesharing operations and also Singapore's Grab ridesharing operations in south-east Asia.
These alone make it the leading ridesharing service and investment company, but they also have their autonomous vehicle division, as well as a research and development team that branch out into avionics and freight.
Khosrowshahi is at the helm of an estimated $70 billion company, while it might lose around $3 billion per annum, it is improving its operational expenditure, and there is a light at the end of the tunnel.
The light is a successful IPO that will push Uber over the $100 billion limit, and then all Khosrowshahi has to do is make ridesharing a profitable business.
This is harder said than done, since the cost of transportation remains stable, the passengers still pay a reduced fee, which was inherited from the days when ridesharing had to compete with taxi's and make it a preferred service.
Today, when taxis are all but reduced by 60% in ride ownership, ridesharing companies need to start raising their prices up again, so that they can start to produce a profit.
Now, you might ask, wtf? Uber has no expenses; the driver owns all the costs, Uber gets a fee for just giving out access to their app. Well here is the clincher, sure, the open for developing and maintaining an app is not as high as many would think, even when using multi-server sites. BUT, marketing is a bitch.
Yup, it all comes down to how much Uber spends on marketing, PR and customer service. Now that it's a brand you might think they could reduce their marketing exposure. Well, the truth is the opposite, the bigger you get, the more competition you have, the more exposure you need. It's a cruel circle of expenditure.
So, what does this all boil down to? It boils down to Khosrowshahi drawing on his years of Expedia experience in maintaining a marketing lead but reducing costs of spending, while slowly increasing the costs of ridesharing so that eventually they can become a profitable company.
Let's wait and see what happens.