17 August 2021. Uber | Design

Uber is still unprofitable and cash is walking out the door; improving period poverty in refugee camps

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#1: Uber is still unprofitable and cash is walking out of the door

The indefatigable Cory Doctorow has a sharp eye for the darker practices of the tech sector—particularly the legal and financial practices that often underpin their margins. In that spirit, his daily newsletter pointed last week to some analysis of Uber’s latest published accounts that suggests it’s never going to make any actual money.

When I say, “some analysis,” I’m selling the analysis quite a long way short.

The transport analyst Hubert Horan has been writing a long-running series for the website Naked Capitalism on Uber’s finances. The most recent instalment is Part Twenty Six. 

The financial metrics he reports on in Uber’s Second Quarter Financial Statements aren’t pretty, although it takes some sleuthing to work this out, since the company doesn’t go out of its way to help you notice this. Here are some of the highlights from Horan’s article. 

First, it’s losing a lot of money on its current operations:

In the first half of 2021, Uber’s continuing operations had a negative 38% net margin, restoring loss levels Uber had experienced in 2019 prior to the pandemic. As discussed in Part Twenty-Four, Uber massively cut costs and eliminated activities not directly supporting their core taxi and food delivery businesses in 2020, but could not cut enough costs to match the pandemic driven revenue collapse.

In the accounts this is disguised by the inclusion of some gains in assets it got from selling businesses it backed out of.

It’s possible to tell a story around these numbers along the lines of ‘we had huge pandemic problems but things are coming back now’, but it wouldn’t be true. Because in the last non-pandemic affected quarter in 2019, Uber’s margins were gunning at a negative 40%. (That means it’s losing four dollars on every ten dollars of revenue).

What the pandemic has done, along with Uber’s attempt to stem losses, has created driver shortages, which of course has a knock-on effect on rider numbers, since it pushes prices up. In fact, it still looks as if the “ride share” business model is just fundamentally unprofitable. 

(Image by Shopblocks/flickr, CC BY 2.0)

Second—although it’s hard to extract any meaningful financial data on the food delivery businesses from the accounts, it’s losing more on that than it’s losing on its hire car business. In fact, the food delivery business is a terrible business to be in. It’s much worse than “rideshare.”

Food delivery is much more competitive than ridesharing, neither Uber or other incumbents have any discernable competitive advantage and (as Uber has demonstrated) there are no meaningful barriers to new competitive entry. Even though they serve half the market and have the longest experience, Doordash margins have continued to decline... Grubhub is refocusing on online services for restaurants; its CEO said that food delivery “is and always will be a crummy business.”

Uber’s cash in hand declined by almost a billion dollars in the first half of 2021. Some of the closures and other cost-cutting measures have stemmed the rate of loss, and it still has $6 billion dollars cash in hand, but $8 billion dollars has vanished out of the door since its IPO in 2019, when it had $14 billion cash in hand.

(This reminds me of the old finance joke about how to buy a small airline: you buy a big one and wait a few years.)

Lyft’s figures aren’t much better, by the way, but it did reach cash breakeven during the second quarter.

Of course, it’s hard to detect much of this from reading the regular press, where the careful massaging of the figures produces topline numbers that financial journalists seem happy to print. (And I have to make the usual disclaimer here: nothing that Uber is doing in the presentation of these accounts is legally wrong.) But the fundamentals don’t look good:

The question of how 2019’s gap between negative 40% margins and profitability has become more difficult. Anything that could be done in the near-term to address the needs of customers or drivers would make the negative margins even worse. There are no magical software or big data or other technological breakthroughs waiting in the wings that will dramatically reduce costs or boost productivity... It can no longer provide the subsidies to keep drivers and customers happy. 

#2: Improving period poverty in refugee camps

I like it when product designers try to solve a meaningful problem. So I was struck by a story in Deezen about a design student, Cheuk Laam Wong, who has created a kit that enables women in refugee camps to clean sanitary pads. 

Source: https://www.waveeedesign.com/

It’s not been manufactured at scale yet, but her Looop Can “includes a container for cleaning, 70 grams of baking soda and a reusable sanitary pad made from bamboo terry fabric called the Looop Pad.”

The kit has been designed so that women living in refugee camps can easily and discretely wash and dry their sanitary pads.

"Almost 60 per cent of female refugees suffer period-poverty problems as they spend their limited funds on food or nappies for their babies," Cheuk told Dezeen.

She reckons that the full kit can be made for £3 each, and there’s more detail about how it works in the article.

But what I especially liked about it was that the design concept was framed around improving a whole range of social outcomes for refugee women, as well as other outcomes. The design idea emerged after interviewing women in refugee camps in Greece. 

So the Looop Can is self contained, so the pads can be washed in the privacy of one’s own accommodation. They are square, so it’s not immediately obvious what they are if they need to be dried in a shared space. They are made from layered bamboo material, so they dry quickly. With care, they can last five years—which is, grimly, “the minimum time a refugee is likely to stay in a camp waiting for identity approval." And it eliminates the need for plastic pads, which require a stream of NGO donations and lack culturally sensitive disposable methods.

The Looop Can website is here. 

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