Amid dismal demand, Uber and Lyft seek road to a profitable future
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During the daytime, Jonathan Miller is a 10th grade English teacher in Austin, Texas. But for the last couple of years, at night and on the weekends he drove for Uber and Lyft to supplement his teacher’s salary. Then, the second week of March hit.
“I would say like 90% of it just stopped,” Miller said.
Uber and Lyft sent him emails about how to stay safe and how to earn money elsewhere because right now, the demand for rides just isn’t there.
“If it was, I would totally do it. I would just wear a face mask the whole time, but it’s just totally not worth it doing rideshares,” he said.
Miller is still in the gig economy, delivering food for Uber Eats instead.
The two biggest rideshare companies, Uber and Lyft, have quarterly earnings calls this week — Lyft after the markets close Wednesday and Uber on Thursday. Ridership is way down for both, and both have furloughed and laid off full-time employees. What lies ahead for these companies?
Daniel Ives, an equity analyst at Wedbush Securities, said numbers for Uber and Lyft are down about 60% from last year. And Uber Eats is only a small hedge against that decline.
“I think about 10 to 15% of it can be made up by Uber Eats,” Ives said.
It’s worth pointing out, though, that Uber Eats still isn’t profitable.
Uber and Lyft, like many other businesses in the gig economy, have to assure investors they’re set up for growth over the short and long terms, which Ives said might be a tough sell.
“We think about 30% of revenue from the gig economy, which is Airbnb, Uber, Lyft, is what gets cut over the next one to two years, and maybe half of that disappears, never comes back,” he said.
But Gene Munster, a founding partner at Loup Ventures, is a little more optimistic.
“I think human behavior is moving to these ridesharing networks. I think there’s just a lot of friction around car ownership, and all the things that existed before, all those growth themes, exist after,” he said.
Munster said the next six months to two years are going to be tough for Uber and Lyft.
This week, the California attorney general sued both firms, claiming that under a new state law, Uber and Lyft had misclassified their drivers as independent contractors.
For drivers, applying for unemployment benefits in the gig economy is complicated.
Alexandrea Ravenelle wrote a book about the sharing economy called “Hustle and Gig.” She said Uber and Lyft have to verify how much money an individual driver was making for the contractor to file with the federal government.
“Many of these platforms are very much dragging their feet to do this,” Ravenelle said.
They’re dragging their feet because they don’t want to give states like California more ammunition to claim that Uber and Lyft drivers are employees and not contractors.
“And if workers are unemployed, due to not getting work off of these platforms, the platforms might be required to contribute to the unemployment insurance funds,” she said.
Another expense for gig economy companies that are already struggling.
COVID-19 Economy FAQs
How many people are flying? Has traveled picked up?
Flying is starting to recover to levels the airline industry hasn’t seen in months. The Transportation Security Administration announced on Oct. 19 that it’s screened more than 1 million passengers on a single day — its highest number since March 17. The TSA also screened more than 6 million passengers last week, its highest weekly volume since the start of the COVID-19 pandemic. While travel is improving, the TSA announcement comes amid warnings that the U.S. is in the third wave of the coronavirus. There are now more than 8 million cases in the country, with more than 219,000 deaths.
How are Americans feeling about their finances?
Nearly half of all Americans would have trouble paying for an unexpected $250 bill and a third of Americans have less income than before the pandemic, according to the latest results of our Marketplace-Edison Poll. Also, 6 in 10 Americans think that race has at least some impact on an individual’s long-term financial situation, but Black respondents are much more likely to think that race has a big impact on a person’s long-term financial situation than white or Hispanic/Latinx respondents.
Find the rest of the poll results here, which cover how Americans have been faring financially about six months into the pandemic, race and equity within the workplace and some of the key issues Trump and Biden supporters are concerned about.
What’s going to happen to retailers, especially with the holiday shopping season approaching?
A report out recently from the accounting consultancy BDO USA said 29 big retailers filed for bankruptcy protection through August. And if bankruptcies continue at that pace, the number could rival the bankruptcies of 2010, after the Great Recession. For retailers, the last three months of this year will be even more critical than usual for their survival as they look for some hope around the holidays.
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