What’s new in Uber’s business model: Q2 2023 investor update
The latest on Uber’s Business Model (Aug ‘23) and highlights from their Q2 2023 investor update from 02 August ‘23.
The key topics covered in this update are relating to Uber’s business model, economic, financial and strategic updates on their main revenue-generating business segments:
Uber Mobility
Uber Delivery, including Uber Eats, grocery and other verticals
Uber Advertising
Uber One (the subscription model) and their new App
Interesting updates from a business model perspective pertained to:
You can also check out our articles on the Uber Business Model Canvas and Porter 5 Forces Example Uber for more details (you can complete this article first).
Sources
Our key sources for this article are:
3rd party data, e.g. Similarweb, TechCrunch, Entrepreneur and other insights portals
We are highlighting direct quotes from these sources in “blue italics”
Check out the video version of this article
You can also just watch the video version of this article. It contains more info than the article.
You can also jump to the video chapters:
00:00 Financials
06:39 Economics, Business Model & Strategy
09:35 Business Model Canvas
11:33 Uber Mobility: Biz Model highlights
14:55 Uber Mobility: Growth Opportunities
17:17 Uber Delivery: Biz Model highlights
22:19 Uber App: biz model relevance
22:36 Uber One Subscription highlights
23:20 Uber Advertising highlights
Revenue & Key Economic Metrics
Key call outs were the first-ever gross profit on a quarterly basis.
Q2 2023 key metrics grew in line with their forecast:
Gross Booking: $33.6b +16% YOY
Revenue: $9.2b +14%
Trips: 2.3b +22% YOY
Monthly active consumers: 137m +12%
We see that the number of trips grew faster than gross bookings and revenue which means that the booking value per trip has reduced. This can have several contributors, such as larger growth in lower yielding offers & countries and shorter trips. Currency adjustment has contributed 2% to this but that doesnt explain the full gap.
Looking at a business segment level, we see that Mobility has grown faster than Delivery with freight booking in a disastrous result.
Q2 Revenues by business segment:
Uber Mobility: $16.7b +25% YOY
Uber Delivery: $15.6b +12% YOY
Uber Freight: $1.3b -31% YOY
The notable point here is that Delivery had overtaken Mobility in revenue last year. The moderated growth is therefore a bit of a negative surprise.
Key Strategies
The key call-out from a strategic perspective as in Uber’s words:
“Our strategy remains to build best-in-class verticals across Mobility and Delivery and to amplify that leadership position through the power of our platform.”
“We’re extending our common technical foundations by sharing marketplace innovations across all of our products, driving both cost efficiencies and more reliable marketplaces.”
These aspects become very obvious in the business model canvas as well as the details by business segment.
From a biz model perspective, this addresses:
Key Activities: being development or marketplace technologies and usage thereof across various business segments and verticals therein
Key Assets: constituted by the underlying platform technologies
Value Propositions: consisting of reliable marketplaces for their key Value Propositions (Mobility & Delivery)
Artificial Intelligence (AI) supports all these activities by improving customer experience, the value propositions and providing efficiency
Key Economic Metrics - Mobility
Demand side key economic metrics
Mobility: Monthly Active Consumers grew 12% YoY to 137 million
Mobility Trips grew 26% YoY (excl Delivery & Freight)
⇒ monthly trips per MAPC growing 9% YoY 5.6; → indicating increasing returning users
Supply side key economic metrics
6m active drivers and couriers earned $15.1b (incl tips) = $US2,51/qtr = $US839/mth (note this is and average across all geographies and driver segments, part/full-time)
Mobility active drivers up 33% YoY. → supply growth > demand growth
“Driver engagement (or monthly supply hours per active driver) was up 7% YoY, while driver churn continued to be down substantially.”
Business Model Highlights Uber Mobility (Aug '23)
Business model highlights of the Q2 Earning Call were relating to following themes:
Increasing Level of Differentiation consisting of the new/growing products: Uber HCV, Uber Moto, UberX Share, Uber Taxi
Uber is known to be more popular in younger, urban, affluent populations. These offerings here are however targeting lower-income customer segments as well as non-core UberX segments.
They also stated that Uber HCV, Moto and UberX Share see significantly higher engagement (trips / user) and thus higher customer lifetime values than UberX. This certainly makes sense the perspective of demand elasticity. In addition, they shared that non-UberX products grew at >80% YOY Bookings.
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Growth Opportunities - Mobility
Uber states the following growth opportunities (see image below for more details):
Growth in their major markets due to yet low penetration: The are now providing any economic modelling for this claim, hence it’s not really clear if there’s a valid point. Stating that their product hasnt reached 10% penetration, does not allow the reverse conclusion that it will grow much further. Economic modelling could help to provide more tangible details.
Growth in non-core cities in the major countries: They state that they can grow in the large cities of their major countries and state to have seen large growth there. This is certainly believable with the only caveat that the growth they have seen was based on improved pricing (i.e. incentives). The key question is whether these incentives can be provided in the long run profitably (and did these come from sales & marketing or lower income for drivers?)
Growth in major economies with current low penetration: Based on the assumption that such countries should be able to reach similar levels of penetration than the US. This does make sense and certainly there will be truth in this. The only caveat is that not all the listed coutrnies are as consum-driven as the US. Hence market penetration may stay below US-levels. Nevertheless, on an overall level a source of growth that seems common-sensical.
Growth in developing countries and from lower-income segments: This was not stated in their Earnings Call but makes sense based on the new products (HCV, UberX Share, Moto) that were called out. They might be saving this until they see more stable data on these offerings.
Business Model Highlights Uber Delivery (Aug '23)
Please check out the images below and our video for more details on some exciting updates on Uber Delivery.
Delivery is the business segment seen by many as potentially the biggest growth driver. But learn in the video that it is also the most fiercely competed over area. In addition, there are questions around the supply side economics in comparison to some of the other competitors. the moderate growth rate in Q2 YOY may be indicative of a lot more efforts having to go into this space (incl sales & marketing costs).
17:17 Uber Delivery: Biz Model highlights
The new Uber App
The New Uber App released in March ‘23 combines both Uber Mobility & Delivery. The Uber Eats app still exists but we would not be surprised if Uber will try to move m ore and more people to the one app. In the Service tab & screen there are now many new offers, spanning food, grocery delivery and more.
22:36 Uber One Subscription highlights
Uber One Subscription Model
Uber One is their Subscription and Loyalty program. It provides benefits for frequent users for a monthly fee ($9.99). It has cashback benefits that (a) can only be redeemed in future transaction and (b) on Uber’s platform only. Thereby it fulfils the two most important criteria for successful loyalty programs that stimulate consumption.
In addition, it should be called out that it’s a cross-platform offering, i.e. Mobility & Delivery. They see 14% of Cash earned on Mobility being spent on Delivery.
Please check out the images below and our video for more details on some exciting updates on Uber One
22:36 Uber One Subscription highlights
Uber Advertising
Please check out the images below and our video for more details.
Further reading on Uber
If you want to learn more about Uber’s biz model check out our articles on the Uber Business Model Canvas and Porter 5 Forces Example Uber.