2017 ends much the same as it began for Uber: With more bad news
Didi is playing chess, while Uber plays checkers
Why should 2017 end any differently for Uber than it began?
Yesterday, news came out that the EU has ruled Uber must be regulated as a transportation company, not an information services company. It’s a move that opens Uber up to the same local regulations as all transportation companies throughout Europe— and one they’ve fought hard against all over the world. It’s also a move that new CEO Dara Khosrowshahi spun as no big deal at all:
This ruling will not change things in most EU countries where we already operate under transportation law
If each Uber market operated as an island, perhaps. But there is a difference between saying the ruling will change how Uber has already been forced to operate in many of those markets, and how it could impact Uber in other markets. As the Financial Times reported, the ruling could have implications in other markets as the regulatory tide is turning for Uber and Internet companies in general:
Wednesday’s decision is the latest sign of resistance from courts, regulators and politicians to the technology industry’s claim that it does not offer services or employ workers directly, but simply acts as platforms where businesses and people can find each other.
In the UK, for example, Uber recently failed to overturn an employment tribunal ruling that requires it to treat its drivers as “workers” entitled to the minimum wage and holiday pay. In the original decision, a British judge wrote that “the notion that Uber in London is a mosaic of 30,000 small businesses linked by a common ‘platform’ is to our minds faintly ridiculous”.
Uber’s new classification as a taxi company like any other in Europe will also have implications on other areas of its business, such as the rights of its drivers and its tax treatment. Jim Harra, the assurance commissioner for the UK’s tax authority HMRC, said in November that the ECJ ruling could affect Uber’s value added tax bill. Uber currently claims it has no obligation to collect VAT on journeys because it only acts as an agent for self-employed drivers rather than a service provider. It is fighting a UK court case from an activist who is trying to argue otherwise. EQ
So is Khosrowshahi saying that after eight or so years of “disruption!”, it is no longer business model-destroying for Uber to become a licensed cab company? Remember: Uber and Lyft both fought even doing fingerprinting in Austin, because they worried any extra steps in the process of someone becoming a driver would wreck their growth plans and destroy their edge in transportation. That was just one American City.
Meantime, Uber’s rival, Didi Chuxing, has raised another $4 billion. Why not? Last year, Didi became the largest ride sharing company in the world by volume, and in 2017 Didi has clearly unseated Uber in momentum and likely in valuation, depending on whether you are talking about primary or secondary shares. There’s been a ton of FUD about what Uber is actually worth right now, as it desperately tries to cling to its nosebleed paper valuation from 2016.
One of the stated goals of Didi’s round is international expansion, which the business press is positioning as the next “stage” of Didi’s war against Uber. Considering Didi has $12 billion in cash reserves, far more ride volume in its home country where it’s market dominance is undisputed, and investments in pretty much every non-Uber global player, the continued characterization of Didi as some hopeful Uber-spoiler is something only an American-centric audience could claim.
In fact, Didi’s global strategy is yet another example of how Didi has plain out-executed Uber. Like chess vs. checkers kind of out-executing. Didi focused all of its operational rigor on China, first merging two companies together to become an unbeatable local giant, and then beating Uber. It placed equity bets on other markets, through its investments in Ola, Grab, Lyft and Brazil’s 99, essentially putting a pin in the whole world domination thing. And now, it seems, Didi is ready to go after international more directly. I wouldn’t be surprised if acquisitions came next, starting with Grab.
Didi has gone after the global market with a shit load of cash and savvy partnerships and a strategy. Uber just tried a shit load of cash. It lost China, and is a taxi company in Europe. It hasn’t exactly gone well.
Worse: It was a shit load of cash combined with a shit load of arrogance. Uber so took its US market share for granted, that it distracted itself with multiple international markets, Uber Eats and all sorts of vaporware announcements about self-driving cars and even flying cars. And so here we end 2017: It’s lost China. It can only be a cab company in Europe. And Lyft is gaining market share in the US, eroding the cushion Uber once had, and raising billions more now that Uber is wounded.
Dan Primack of Axios Tweeted the most possible pro-Uber spin on yet another week of bad news:
Underplayed part of Didi funding: When Didi's valuation rises, it positively impacts Uber's valuation.— Dan Primack (@danprimack) December 21, 2017
That isn’t wrong, but it’s certainly not what Uber has ever considered #winning.
Hot Asian assets certainly wasn’t enough to save Yahoo. And it certainly doesn’t justify being the highest valued private company in Silicon Valley history.