Let’s jam: Is it time to take stock of the Uber economy?

NEWS ANALYSIS

I don’t use Uber often, but when I do it seems like magic. You punch a few details into the app and, usually just minutes away, is someone ready to take you to your destination. You know the cost ahead of time, software finds the best route, there is no cash involved, payment is easy and, pretty much without exception, I enjoy chatting to the drivers.

This is how technology should be.

Not surprisingly, investors have eagerly been waiting for Uber to make its stock market debut. Investment advisers mooted a listed value as high as $120-billion. Uber’s initial public offering (IPO) price last Friday was set at $45. Instead, it debuted at $42, a market value of a relatively modest $69-billion.

Market conditions, dominated by United States President Donald Trump’s tweeted trade war with China, have been less than ideal. Pundits say it would have been far better if Uber had listed earlier in the year when conditions were buoyant.

Uber tied its listing to slick PR, offering its drivers a one-time cash payment of up to $10 000 each,about $300-million in total. The payout was made on April 27.

But, there are concerns about its profitability. Numbers supplied for its IPO show Uber made losses last year of $3-billion on revenues of $11.3-billion. Its prospectus advises it might never be profitable.

Uber has built an impressive platform, but at some cost. In the past three years it racked up losses of $10.3-billion. “Uber lost more money faster than any start-up in history, with no clear path to profitability,” Len Sherman, of the Columbia Business School, told Bloomberg.

Critics say Uber faces low barriers to entry, because it is easy to set up rival services. Supporters point to Amazon and others that took some time to find their financial mojo.

Although the app enhances mobility, does it make cities more efficient? Does it mean less energy is consumed? The answer appears to be no. A study in San Francisco reported by National Public Radio (NPR), comparing data from 2010 and 2016 and controlling for factors such as population growth and construction, found the time it took to get to a place comparing traffic with no traffic, increased by 60%. It said Uber and Lyft, another transport app, contributed half of the increase and that without ride-hailing congestion would have increased by 22%.

“In general, the researchers say many passengers taking Uber or Lyft rides would have otherwise taken public transportation and not used private cars,” NPR reported.

Uber’s supporters see a clear, early mover advantage and an open road ahead; its critics see the same road, but one which is increasingly congested and difficult to navigate.

Keep the powerful accountable

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Kevin Davie

Kevin Davie is M&G's business editor. A journalist for more than 30 years, he has worked in senior positions at most major titles in the country. Davie is a Nieman Fellow (1995-1996) and cyberspace innovator, having co-founded SA's first online-only news portal, Woza, and the first online stockbroking operation. He is a lecturer at Wits Journalism. In his spare time he can be found riding a bicycle, usually somewhere remote.

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