Uber (UBER) – Spring Product Event – May 18, 2024
Spring Product Event
Uber announced a slew of products and partnerships at its spring Go-GET event. The show stopper was the new UberEats partnership with Costco. Like Domino’s, these types of deals enhance the breadth of the Eats offering and should be material for overall volumes. Interestingly, like on Costco.com, non-members can also order through UberEats. Costco members can plug their information in to receive discounts.
For increasingly price-sensitive consumers, Uber is debuting a shuttle reserve product. It will partner with local fleets to allow people to more affordably book transportation from concerts, sporting events, conferences, airports etc. Riders can book up to a week in advance and get a seamless QR code ticket to redeem upon arrival. Shuttle location is also trackable and this product is much cheaper than its core UberX offering. Along these same lines, Uber is rolling out student discounts for Uber One. It will cost these students $4.99 per month vs. $9.99 for non-students. Apple Music executed this playbook perfectly to get young consumers into their ecosystem with less friction. It then upsold these consumers after they graduated and likely had more disposable income to pay a higher bill. That’s the parallel in my view.
For back-to-work, Uber is adding UberX Share. This allows users to reserve shared-ride spots in high density cities like New York and LA. A key priority for Uber in the coming years is to become more of a daily use case. That will be executed through things like grocery and retail delivery expansion, but also through initiatives like this one. It’s clear to me how this could become popular as back-to-work returns to style. Sort of an adult version of riding a school bus to class. Finally, Uber announced Uber Caregiver. This gives these caregivers more autonomy in booking appointments and scheduling deliveries for their patients.
There’s a key theme throughout all of this news: Broadening the depth and breadth of its product offering. That is how it stands out from the pack. It’s how it enjoys superior cross-selling levels and a coincidingly superior margin profile. It’s how it motivates stronger retention than its peers. It’s how it gives drivers higher occupancy rates, more earnings and more success. It’s how it turns those happier drivers into shorter wait times and lower surcharge rates for riders. This. Helps. Everywhere. It spins all of the positive flywheels that have made Uber so historically successful to date. This is more of the same. Whatever Uber can do to turn its massive network into another use case simply nurtures this compelling differentiation.
M&A
Uber is buying Foodpanda’s Taiwan operations to strengthen its market share in that nation. Foodpanda was its fiercest competition, and now they’re an asset. Uber is paying $950 million in cash. One of the many reasons why I love Uber’s free cash flow (FCF) trends. It gives them significant flexibility to do things like this, while investing in the core business, buying back shares and growing its liquidity position. Foodpanda will be merged into Uber Eats when/if this closes next year. Foodpanda’s merchant roster is arguably better than Uber in that nation.
“In order to build a world-leading service, we have come to the conclusion that we need to focus our resources on other parts of our global footprint, where we feel we can have the largest impact for customers, vendors and riders.” – Delivery Hero Co-Founder/CEO – “Niklas Östberg
Uber will also invest $300 million in Delivery Hero (Foodpanda owner) as part of this news. Delivery Hero is quite large, and this investment represents less than 5% of its overall equity.
