Uber has been in the news a lot lately. Unfortunately, most of the stories have been negative. The latest news paints a picture of a company culture that has tolerated sexual harassment and discrimination. This comes on the heels of #DeleteUber protests on social media that pressured Travis Kalanik to leave Trump’s Advisory Council.
What underlies Uber’s value
From day one, Uber has had a target on its back because it provides a product that many believe is superior to established taxi and shuttle services. Many users love Uber because it provides a more convenient, easier-to-use, and often less expensive way to get from A to B. As expected, these advantages have incurred the wrath of the well-entrenched interests that feel threatened - taxicab companies, shuttle services, rental car companies, unions, car manufacturers, and regulators. What is not expected is Uber has, of late, been helping its adversaries by shooting itself in the foot. Moreover, it has not done a very effective job of managing the corporate image damage that has resulted. Before recommending what Uber should do to protect its image, it is useful to remind readers what the company does (marketers never assume that everyone knows even though you might be thinking they do) and why this 7-year-old company is valued between $28 and $66 billion – a higher valuation than 80% of S&P 500 companies. Why the big range? The higher number is based on its most recent round of funding, and the lower number is based on risks and profitability issues.
Why users love Uber
Uber started in 2009 to fill the needs of those that want an on-demand taxi service but were unhappy with the alternatives. In many cases, taking a taxi is not pretty. You call a cab company or try to hail a cab as it passes by. Sometimes they stop or show up, and sometimes they don't. Too many cabs are less than clean and comfortable and often require cash payment. Having enough cash for the fare and tips often requires inconvenient advance planning. When riders do not know the area, many fear that drivers will take them "for a ride" to inflate fares. With Uber, you set up an account in advance using a computer or smart phone. You can summon a car on demand and see the location of available cars in the area on your smartphone. Uber gives you the approximate time the car will pick you up, the name of the driver, and the car make and model with license plate. The entire process takes a few minutes. Unless you summon Uber in very high demand periods, the fares are often less than a taxicab, and you are automatically billed on your credit card and notified of the amount charged shortly after you are dropped off at your destination. At that time, you are given the opportunity to rate the driver. Drivers rate passengers too.
While many believe Uber's sky-high valuation is Fantasyland, others believe it makes sense for the following reasons:
- Uber has a good business model. The company started by taking 20% off the top of the gross proceeds from each fare – paying the driver 80%. Drivers that signed up after 2015 report that Uber now takes 25 to 28%. The driver provides his/her own car, and is responsible for car expenses. Customers market the service for Uber by telling their friends and getting points toward discounts on future rides.
- It has positive cash flow potential. Uber collects the money from the user's credit card, and pays drivers from that. With more and more drivers in a growing number of locations around the world being added to the mix, Uber's cash flow has the potential to grow rapidly. Since Uber’s financials are a closely held secret, it is hard to know for sure, but according to Bloomberg, Uber lost $1.2 billion in the first half of 2016.
- Positioned as high-tech and disruptive. Uber's official name is Uber Technologies, Inc. This name and the fact that users summon rides via a smartphone app combine to position Uber as a high-tech company that is part of the sharing economy. This distinguishes them from their low-tech taxicab, shuttle, and rental car rivals similar to the way Tesla and Linked In are valued much higher than their lower-tech competitors. Investors also remember that Amazon didn’t make money for roughly 20 years as it was building sales and market share.
- Platform that can easily expand into other markets. While Uber is often considered as an alternative to taxis and shuttles, it has positioned itself for expansion into other business areas. According to CEO Travis Kalanick, Uber wants to replace private automobiles. In the nearer term, it hopes to be an alternative to rental car companies. Its name and business model allows for expansion into many other business areas, such as delivery and messenger services.
While Uber is creating a platform for providing a lot of services that customers might like to summon on-demand, all is not rosy in Uberland.
There has been a history of events that have caused damage to Uber's corporate image.
- Uber driver protests. Despite the fact that Uber says their drivers can average $74,000 per year, some drivers say that you have to work 80-hour weeks to earn that amount. They also complain that their costs drive their earnings down to $3 to $4 per hour. Other sources peg the number to 3-times that depending on the city. They have organized protests around the country that have attracted news media attention.
- Customers injured by Uber drivers. A man in San Francisco claimed an Uber driver attacked him with a hammer. He has serious injuries and is in danger of losing his sight in one eye. In another case, a woman claims she was raped by an Uber driver even though Uber says the man was not working for Uber at the time of the rape. There are also reports of passengers attacking drivers.
- Uber executive suggested digging up dirt on journalists. During a private dinner back in 2014, Senior Vice President Emil Michael suggested that the Company should invest money to smear journalists that make disparaging comments about Uber. He said he wanted to give journalists a taste of their own medicine. Of course, when this got out in the media, journalists had a field day - magnifying the negative impact on Uber's corporate image.
- Privacy concerns. According to Venturebeat,“What once was looked upon as a brilliant and disruptive grass-roots company is now being seen as an arrogant bunch of whiz kids who may be willing to play it fast and loose with the privacy of its users.”
What Uber has to do to protect its corporate image
In light of the negative publicity, Uber needs to use the following procedures to protect its image.
If allegations are true, it needs to use the Fact Procedure, which includes the following steps:
- Admit the mistake and apologize.
- Limit the scope, or put the situation in perspective. For example, "We have X thousand drivers around the world, and we have had far fewer incidents with drivers than competitive alternatives."
- Propose a solution so the mistake is unlikely to reoccur.
If allegations are not true, Uber should employ the following Rumor Procedure steps.
- Do not publicize, or mention, the rumor.
- Promote the opposite of what the rumor says.
- Provide proof to support #2.
All businesses have a batting average
No business is perfect, and every company is going to have problems it will have to address in the media. Uber is no exception. The fact that Uber is disrupting entrenched businesses is likely to cause many of those businesses (and the vested interests that aim to protect them) to look for ways to retaliate. While Uber executives are smart enough to know that, some have not been very smart in some of their statements and in allowing a questionable company culture. They should know that if the company has tools that could be used to invade the privacy of journalists, employees, and customers, their constituents are likely to have similar tools for sharing questionable practices with the media and marketplace.
Uber needs to do a better job of managing its image
Bad things are likely to happen to all companies. When they do, company executives need to be savvy enough to use the Fact and Rumor procedures to protect the Company’s image. Journalists have a job to do, and many do it well. Sometimes they get it wrong. Even if they do, there is a proper way for the Company to handle the situation. For Uber to blame journalists for reporting bona fide issues and problems, the attacks are likely to backfire and do further damage to a very valuable asset - the Company’s reputation. I wish Uber the best of luck because I am one of those that really likes their service. However, I am also not a fan of how they have handled their problems in the media. The good news is this is fixable – especially if they fix it sooner rather than later.