Ticket to ride - Uber and Lyft see a booster in the Vaccine Economy

One possible glimpse of the Vaccine Economy taking hold might be seen in the bounce in people wanting a ride to somewhere, as indicated in the upturn in fortune for both Uber and Lyft this week. The two digital champions of the gig economy each turned in quarterly numbers that suggest that their business models have survived the pandemic slump when no-one had anywhere to go!

Uber turned in a Q4 profit of $892 million, against a loss of $968 million for the same period last year, while revenue shot up 83% from the prior year to $5.78 billion. Lyft’s still turning a net loss - $1 billion across 2021, although that’s down on $1.8 billion for the previous year - but Q4 revenue was up 70% year-on-year to $969.9 million.

But the shadow of COVID still hangs over both firms. CEO Dara Khosrowshahi noted, albeit in a less damaging form:

Of course, COVID remains a part of our lives. We started to see some impact of the Omicron wave late in December. The silver lining is that the impacts are becoming more muted as we learn to live with the virus. Lockdowns are less strict and vaccines are available across the world.

Omicron also arrived at a time of year when we usually see seasonal declines. Toll on Mobility gross bookings decreased 21% from December to January, that's only about 10 points worse than what we typically see at this time of year.

On a trips basis, the decline was even more muted, down just 15% month-on-month, with pricing coming down meaningfully as marketplace balance improved. It appears that the Omicron impact on our Mobility business has come and gone relatively quickly, even faster than the global case counts. We're beginning to see several major economies in Europe relaxing COVID restrictions, including the UK, the Netherlands, Denmark and Norway, with more countries expected to take similar actions soon. 

Uber benefitted from its burgeoning delivery business which turned a EBITDA profit for the first time with Khosrowshahi hailing it has “the fastest growing delivery player in America”:

Overall trends continue to be very healthy, and there's no question now that Delivery's here stay, both in food and other verticals…With this milestone accomplished, delivery is well positioned to self-fund growth in grocery, retail and local commerce…We continue to make progress in improving non-restaurant merchant selection in the U.S. And as a result, the U.S. grew at 3x the rate of our global new verticals business during the quarter.

Internationally, we continue to have a strong lead in grocery and other verticals. We're working to build on that lead with new quick commerce offerings, and we're intentionally taking a partner-led approach here with encouraging signs of adoption. For example, in France, Carrefour Sprint stores have represented nearly 20% of new verticals, orders in Paris and with significantly higher per store productivity than other new verticals merchants in market.

And in another sign of a return to some form of ‘normality’, questions around regulation of the gig economy sectors are back on the agenda, with the UK and California getting particular attention. While California’s efforts to regulate are “running through the process”. Khosrowshahi says he’s hopeful that Uber’s licence to operate in London will be renewed in March on the back of the firm’s reclassification of workers rights following a court defeat last year:

The worker reclassification that we underwent in the U.K. was the right thing to do. There isn't a level playing field yet. We believe there should be a level playing field. We're paying it for financially now because our earners in the UK are workers are getting lots of benefits that are competition essentially doesn't have to pay.

But sometimes the right thing to do is expensive. And in this case, in the UK, it's expensive. But we think with time, there will be a level playing field there's no question about it. The only question is when it happens…Long term, short term, being a good citizen, being a good company on the ground, sometimes hurts financially. The long term, you get gains. We want to be in the UK. We want to be in London for the next 10, 15, 20 years and that means doing the right thing, and I think we are in the UK. It will resolve itself. I can't tell you when.

Improvement 

It’s the same basic story at Lyft where co-founder and CEO Logan Green says the operating environment has improved as more people got vaccinated, although the firm also suffered a blip with the rise of Omicron. Nonetheless, the firm’s Q4 numbers saw a new ride-share high since the onset of COVID, with October being the strongest month. Total active riders grew 49% year-on-year, reaching 18.7 million in Q4 where new riders were up 42% year-over-year. The goal now is to make Lyft "top of mind for any kind of transportation trip that somebody is planning”.

Delivery is also an area of interest for the firm, said John Zimmer, co-founder and Lyft President, but it’s early days and in a different space to Uber:

I just want to make sure it’s clear - our focus is on a B2B product offering, not a consumer-facing marketplace. As we’ve said for many years, we’re a transportation-focused company. We want to have one main consumer that we’re building for. And again, we will not know the consumer-facing marketplace for groceries or food. We are live in a number of pilot markets…We really feel strongly that because we are one of, call it, three-or-so national networks of driver communities that have national coverage, but we’re the only one not competing with the retailer for that end consumer. 

Zimmer also pointed to changes in the way people work in the Vaccine Economy as having a positive impact with periods of peak demand being more evenly spread:

There is more off-peak times. Peak periods of rides are less profitable rides for us because we have to manage a marketplace that at 9 am everyone wants to ride at the same time. So, with kind of the spreading out of commute behavior, with the change in kind of when people are willing to go, not only will the products like Wait & Save [where if consumers willing to wait a longer-than-normal amount of time to be picked up, they save on the cost of their trip] help us, but also just having more of that off-peak time allows us to better manage the overall marketplace.

My take

Signs of life.