Paris Marx Uber's second quarter losses another red flag for the 'Amazon of transportation'

Monopoly, or at the least oligopoly, is central to the company’s strategy, but should residents really want Uber to play such a dominant role in their future?
Image: A driver uses the Uber car service app in Washington, D.C., in 2017.
Uber lost $5.2 billion in the second quarter of 2019, more than analysts had expected.Andrew Harrer / Bloomberg via Getty Images file
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By Paris Marx

Last week, Uber reported its results for the second quarter of 2019 — and they were not great. The company lost $5.2 billion over just four months, which sent its stock tumbling days later to a new low. Executives say $3.9 billion of the loss is stock-based compensation from an initial public offering in May — which seems excessive when it was seen as a disappointment — but that still leaves a $1.3 billion hole that’s much larger than the $878 million the company lost in the same quarter last year.

The loss was larger than analyst expectations, while revenues fell short and sales growth declined to the slowest rate in the company’s history. That’s particularly bad news because these losses are supposed to be about gaining the dominance that will be necessary to pay investors back at some point.

Uber has a long history of misleading the public about its services, suggesting it can’t be trusted with the power that would come with such a position.

Monopoly, or at the least oligopoly, is central to the company’s strategy, but should residents really want Uber to play a dominant role in the future of transportation? Uber has a long history of misleading the public about its services, suggesting it can’t be trusted with the power that would come with such a position.

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After years of claiming it was a “last-mile” service that complemented public transit, Uber admitted in its IPO filing that it sees other forms of transit as competition and intends to replace them with its own services. Similarly, researchers have warned that ride-hailing services increase congestion and emissions and worsen transit service in cities — and Uber and Lyft now concede that’s true. And a North Carolina State University study found scooter sharing, which Uber (through its Jump brand) and Lyft have embraced in the past year, isn’t as green as they’ve been saying. (Essentially, scooters only produce fewer emissions if they replace car trips, which is only the case for a third of scooter rides.)

CEO Dara Khosrowshahi’s renewed vision for the company to become the “Amazon of transportation” also needs a lot more critical attention.

Khosrowshahi says his goal is for Uber to become an indispensable platform for transportation like Amazon has become for ecommerce (and fulfillment, cloud computing and beyond). But Amazon’s size has come with a lot of concerns about anticompetitive practices, including how it uses the data it collects from third-party sellers to promote its own products at their expense. The European Union is pursuing a formal antitrust investigation into the allegations and the U.S. Justice Department began an antitrust review into major tech companies in July that is expected to examine Amazon’s practices.

In service of this vision, Uber opened its platform to some third-party companies offering transit tickets, car rentals and scooters. It says this is about offering customers more choice, but it’s really about data and power. Offering more services helps cement Uber’s position as the leading transportation platform and brings in more customers, both of which allow it to capture even more data.

Offering more services helps cement Uber’s position as the leading transportation platform and brings in more customers, both of which allow it to capture even more data.

Control of vast amounts of data is central to the platform business, but there are legitimate concerns about the power it grants to those who control it, as the Amazon case illustrates. There’s also the question of privacy, another area where Uber has stumbled. Several years ago employees at the company used a “God mode” feature to track journalists, ex-partners and even Beyoncé; the company was forced to change its policy in 2016. However, a version of the feature was still in use in 2017 to track Uber drivers also using Lyft. The company also developed a tool called Greyball to deceive law enforcement in cities where it broke the rules — that only stopped once it was revealed by The New York Times in 2017.

Yet while privacy is important, there are broader factors that need to be considered because of the power that comes with big data. Lawyer Lizzie O’Shea writes in “Future Histories” that privacy is often used as an overarching concept that also refers to “notions such as agency, spiritual nourishment, and freedom from control.” Big Data companies use data to make a whole range of assumptions about their users, who rarely have any power to know if the system gets something wrong, let alone correct it. Algorithms then present things to people based on those assumptions, which can have real-world consequences.

If Uber controls much of the transportation system, or at least functions as an indispensable intermediary, how might it treat a customer that travels between high-income areas in its ride-hailing or black-car services differently from one that uses the platform to buy individual transit tickets in a low-income neighborhood? How might the options shown to those two people differ? What about the promotions they’re offered? And beyond the algorithm, how might pervasive tracking of transportation that’s linked to one’s identity make people reconsider how they get around? Urban residents, platform users and especially regulators need to consider these and many other questions.

Uber is a massively unprofitable company that wants to control urban transportation — and by extension the data detailing how people get around — in order to pay its wealthy shareholders. But O’Shea argues users should be the ones deciding when and with whom they share their data. Ownership of an integral piece of future transportation infrastructure can’t be left to companies driven by profit and monopoly power. Transportation needs to be controlled by transit agencies that are beholden to voters and other democratic checks. That would be better for people and for cities, and it would be a positive step forward in the push to rein in Big Tech.