Is Uber’s money-losing trip finally coming to an end?

Uber posted a $5.9 billion loss in the first quarter of 2022.

Philip Pacheco | AFP via Getty Images

In this weekly CNBC series, the companies that made the first Disruptor 50 list 10 years later are featured.

Creation Uber after the 2008 financial crisis can be compared to an earlier disruptive innovation: the supermarket.

In 1930, during the early months of the Great Depression, Michael J. Cullen rented an empty garage in Queens, New York and built King Kullen, considered by many to be the world’s first supermarket and example “resource integration” model that created the Uber ecosystem.

Like King Cullen, Uber is the result of “smart resource integration” by its founders, serial entrepreneurs Travis Kalanick and Garrett Camp.

At the time of Cullen’s innovation, none of the existing major grocery chains, including two of Cullen’s former employers, Kroger and A&P, thought to do what he did. But its merits were clear, and the idea caught on quickly—the textbook definition of breakthrough innovation.

Unfortunately for Uber, the comparison doesn’t end there.

King Cullen’s business model proved easy to replicate, and eventually the big chains did just that. Today, Kroger is the largest supermarket chain in America, with a national market share of 16.1%; King Kullen remains a local chain.

Since the inception of Uber, there have been several competitors in what we now know as the gig economy, whether it be Disruptor 50 companies like Lyft in taxis, DoorDash in food delivery, or Convoy in trucking and trucking.

Over the past ten days Uber faces a range of hurdles, both internal and external. These include allegations of sexual harassment, multiple layoffs related to corporate culture investigations, alleged distribution of medical records of rape victims; as well as unflattering videos and emails from former CEO and co-founder Kalanick. In addition, there was political pressure and fights with regulators; union tensions, legal battle with Alphabetsteep losses and struggle between investors.

Then, in 2017, CEO Dara Khosrowshahi, who previously headed expedition since 2005 and is credited with expanding its global presence with several online travel booking brands including Expedia.com, Hotels.com and Hotwire. This decision ended a long Uber search for a replacement Travis Kalanickwho retired after shareholder revolt and became one of Silicon Valley’s most famous and infamous startup founders. Like Theranos’ Elizabeth Holmes and WeWork’s Adam Neumann, his rise and fall at Uber has been the subject of TV drama.

How Uber succeeded in the post-Travis era

By most accounts, Kalanick was obsessively single-minded about Uber. But in 2019, when he stepped down from the board of directors and sold all his shares in the taxi company, Kalanick severed his last ties with the company he co-founded. Two years later he was on the New York Stock Exchange during Company IPOalthough he was not on a high ground with company executives.

The company immediately got an $80 billion valuation and then collapsed like a rock. This experiment—bringing a company public with a huge valuation that said its S-1 filing said there was a chance it would never turn a profit—triggered a massive shift in sentiment among savvy investors and retail buyers alike. Josh Brown of Ritholtz Wealth Management called it a “moment in time” at the time.

Of course, not even Brown could have foreseen that this moment could come a year later in the form of a global pandemic that would put nearly every business into survival mode.

Taxi companies have struggled with supply and demand ever since Covid-19 forced drivers off the roads. Uber had to rely on incentives to bring drivers back, which ate into the bottom line. The situation seemed to have stabilized in recent months, but war in Ukraine led to a significant increase in fuel prices. Analysts feared that companies would have to invest millions in keeping drivers.

“Our need to increase the number of drivers on the platform is nothing new and unsurprising… we have a lot of work ahead of us, but this is a working machine,” Khosrowshahi recently said on a conference call with investors. The company expects this to continue without “significant additional stimulus investment.”

Company announced its first quarterly profit at the end of 2021, but then announced a big loss through investment in the first quarter of this year.

During Khosrowshahi’s tenure, the company invested heavily in the food, beverage and FMCG delivery segment through acquisitions such as an alcohol delivery service. Drizzly last February, and Postmen, after unsuccessful negotiations to acquire food delivery service Grubhub. Shares of Uber fell 4.3% yesterday on news that Amazon agreed to acquire a stake in Grubhub in a deal that would give Prime subscribers Annual membership to the food delivery service.

Focusing acquisition efforts on the Eats segment during the pandemic has allowed the company to retain some of its business despite reduced travel. Investors believe that this will also boost the stock.

Another key element in the future is the regulatory environment for the company.

Lawmakers are pushing for gig workers to be reclassified as full-time employees to secure things like minimum wage and benefits. But classifying drivers as contractors allows companies to avoid costly benefits associated with full-time employment, such as unemployment insurance.

Gig economy companies, including Uber, won a temporary victory in 2020 in California when voters voted in favor of Proposition 22 by a majority. This vote effectively exempted several gig economy companies from a recently passed state law, Assembly Law 5, which was aims to classify their employees as full-time employees.

But in fact, Uber has one overriding goal from a market perspective, and it has become urgent: to generate “significant positive cash flows” for all of 2022, a first for the company.

Khosrowshahi says Uber is on track to do so.

– CNNBC David Spiegel as well as Jessica Bursztynski contributed to this story.

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