Gigwork Was Always a Transition Phase For Tech Companies

Good Morning,

First, as always, thank you for joining.

Cost cutting and restructuring are once again dominating the headlines. 42,261 people have lost their jobs in the tech industry since January. For operations and logistics, we are sitting shy of 15,000.

40% of C-Suite Executives shared their thoughts in a survey earlier this year that they expect layoffs at their company through 2024.

AI and automation is a leading cause, coupled with continuing pressures on business to perform on the balance sheet.

Here’s what this issue brings:

• Featured Article: An Uber self-driving sports utility vehicle killed a 49 year old woman in Phoenix when it smashed into her. Despite the incident, Uber is still doubling down on AVs.
  

• Broader Focus: Ever wonder how much revenue a $0.99 charge could make you?
  

• From the Community: The coolest thing I saw last week

Driverless Taxis Will Destroy Jobs, And Consumers Will Love Them Anyways

$138 Billion.

That’s how much revenue Uber generated in 2023. They have been able to scale and achieve profitability with a multi-product platform that is gaining significant traction when it comes to customer lifetime value (CLV).

Rideshare remains a key part of their core business. It contributed $70B to their revenue stream and is growing at 30% YoY. Uber takes the leading position in over 70 countries when it comes to rides. It’s not a part of their business they have any intention to lose ground on.

Despite their success, the rideshare model has major challenges it battles on a daily basis.

1. Cost to operate

2. Reputation & Trust

In order to maintain their growth and continue to be a world leader, Uber has to address risks that impact those two areas.

Cost to Operate

If you use gigworks who supply their own vehicle, how much risk is Uber exposed to?

A lot.

Rideshare is a more expensive model to operate versus food delivery because drivers actually get a (slightly) bigger piece of the pie. With growing demand and increased competition, Uber knows that it not only has to attract more drivers, but it also has to be able to hold onto them.

Currently, they offer all kinds of incentives to keep drivers signing into the app. They offer boost promotions for peak hours, bonuses based on certain trip counts by period, Uber Pro which gives more perks based on the driver’s status as well as rolling sign on bonuses.

Different cities have started to implement minimum wage guarantees for gigworkers. Basically these programs ensure that drivers earn at least minimum wage for equivalent hours worked.

While this doesn’t really have a negative impact on rideshare during peak hours, it certainly hits those mid-day lulls. And while Uber would love people to only work when there is enough demand, if you are offering an on-demand service, you have to have drivers available all the time - not just during the business commute or late night bar scene.

Lastly, inflation is killing everyone. Continued growth means that you need to be the defacto option for the vast majority of potential users. Like many businesses, Uber has to support regular promotions in order to keep attracting more people to use the service. More discounts equals less revenue.

Reputation & Trust

With more drivers than ever on the platform, it’s a never ending cycle of analysis, vetting and pruning of the driver pool to ensure paying customers get the right quality of service.

If you’ve taken an Uber recently, you may have noticed that the days of drivers going to “extreme” lengths to prepare their vehicles and offer ‘perks for tips’ are all but gone. Rides are pretty straightforward transactions of point A to point B service - a lot of drivers won’t even try to speak with customers anymore.

Uber’s membership program (Uber One) has become a massive part of their business. Members of the program spend 3X the amount of money on services than non-members. The two major benefits for rideshare are a 5% cashback using Uber Cash and the priority to get matched with top drivers servicing your area.

Growing this user base and having more of its recurring revenue is an absolute must for Uber’s continued success.

Autonomous Vehicles

What’s the best way to ensure a re-produceable high quality of service?

More control.

For Uber to continue to grow, they need to be a top consumer choice. For Uber to become more profitable however, they have to be the best option.

If you are going to be the best rideshare option, you need to eliminate customer frustrations and do everything you can to mitigate risk.

What are customer pain points?

• Not having a ride when they need it (irrespective of time of day or location)

• Protection against high fees or surges

• Quality of service

• Cleanliness

• Safety (Last week, a Lyft driver in California was arrested after allegedly sexually assaulting a female passenger when taking her home)

Whether you agree or not with the impact to jobs that AVs will have, from a service perspective, they address all of those customer pain points (and even the extremely unlikely risks like Lyft is dealing with right now).

Ask yourself, if you had the choice when you signed into your app to hail a ride and were given the option for a driver based service or an autonomous vehicle, which would you choose.

For myself, I would pick the AV 100% of the time.

Uber knows that the majority of the population would have that preference too.

They currently have 10 partnerships with AV companies. Instead of building their own product, they are making sure that other people building them can have their cars on the Uber platform. This move all but ensures Uber will play a pivotal role in the AV market as it continues to develop.

Why Uber Wins And the Impact It Will Have To Other Market Activity

By being an integrator versus a asset builder, Uber will not only be able to grow their piece of the AV rideshare market, but they will become the preferred platform for asset providing companies as well as the next generation of Uber “driver”.

For businesses, Uber will be the software that powers other businesses to own a fleet of cars providing service to different cities. We may even see something similar to the cab companies you see today - with some brands being the clear provider for a particular area.

What’s more interesting to me though, is generation 2 of the Uber “driver”. Today a gigworker makes money by actually doing the work for Uber. They can try to make it their full time gig or they do it just when they want to try to make some extra cash. The next generation of driver won’t be in the car though. They’ll be the people that have bought their own EV, that is augmented with AV capability. For that generation, their cars will be making money for them while they are already at work, or at home or even sleeping.

One thing that’s not being talked about however is the impact that this will have to other parts of the service network that have transitioned or expanded to include gigwork.

Uber knows this is going to happen. And they are already taking steps to make sure other parts of their product don’t suffer. They are expanding their partnership with Waymo - focusing on autonomous food deliveries. Since restaurant delivery is something that requires the person to be home, the fact that the customer has to retrieve it from the trunk isn’t exactly a dealbreaker.

But with rideshare activity and volume moving to AVs, things like meal delivery won’t be able to pay enough to keep drivers interested.

In fact, that will be the reality of most on-demand activity that you see today. Gigworkers on these platforms jump from app to app trying to create a profitable series of activity. A strong percentage of drivers do base themselves in rides first though.

When that revenue is gone, it will either force other services to pay drivers more in order to keep them interested and engaged on the platform, or they will have to expand their service offering to include things like routed package delivery.

If you are working in a business that has been built on or is benefiting from the current gigwork environment - keep an eye on this space as it will change very quickly as the EV/AV products flood the market over the next few years.

You Think Your Customers Would Be Mad To Pay $0.99 For Shipping. Are You Really That Sure?

I’m taping a podcast this week.

One thing they asked me is if I would be willing to explain the tagline I use on LinkedIn.

To save you a click, here it is:

My explanation of what the status quo is, is simple.

It’s when you stop questioning why you are doing things the way you are.

Getting prepared for the podcast, it brought to mind a conversation I had with a small retail / eCommerce brand I am working with.

We were talking about shipping options and what strategies could be put in place to reduce the spend.

I suggested that they should eliminate their free shipping and charge $0.99 instead.

You would have thought I had just killed someone…

Immediately we got into a conversation about how that can’t be done. That customers expect free shipping and that there is all kinds of data supporting that.

Fair. There is a lot of data that supports customers liking free shipping. But is that honestly a surprise? Who doesn’t want to avoid paying for it if they can?

I asked them how their sales used to be when they charged shipping. What was their cart abandonment? How many frustrated emails did they get from customers? How much did their sales change going to free shipping? How did free shipping impact their returns?

“We’ve never charged for shipping, customers don’t like it”

Why don’t you try an A/B test and see what happens?

Needless to say, it’s an ongoing conversation but there’s at least curiosity around it now.

It’s a great example of why I say I destroy the status quo. There’s probably something not wired right in my brain, but I’m always asking “why”.

The other thing is that I have a great appreciation for the role timing plays in success. Sometimes great ideas die just from coming up too soon, or too late. But just because you may have explored something before and it didn’t work, that doesn’t mean that it won’t work at some point in the future.

So first try.

Then try again.

The worse thing that happens is that you confirm it doesn’t work or that the timing still isn’t right and you go back to what you were already doing before anyways.

Do You Feel Spoiled By Things Look Google Maps But Wish It Could Do Even More?

John Andrews posts great stuff to LinkedIn.

Last week he shared a cool video from a piece of mobile wayfinding technology from RouteMe.

Basically their app generates a step by step path taking you to your final destination (outdoor/indoor) using an overlay to an open camera view. Think Pokemon Go.

Indoor navigation technology is a huge area of development for a lot of companies.

We are so used to being able to accurately get from place to place thanks to tools like Google Maps, we now find ourselves stuck when we actually arrive!

This technology opens up a world of possibility for improving experiences in so many ways.

I was in Iceland earlier this year (yes, it’s absolutely incredible). After getting settled through security, it was onto the rental car. Reykjavík’s airport isn’t exactly JFK, which is good and bad.

While I have no doubt the explanation of how to get to the car was 100% accurate from the desk agent’s perspective, as a first time visitor to the country and being wildly unfamiliar with the airport - what she said didn’t exactly connect.

Eventually the car was found and the trip continued, but something as simple as that would have been totally different with this type of navigating technology in place.

I’m interested to see how quickly this space grows.

That’s it for this week. Thanks for being here.