The Gig Economy Dipped Again in the Fall. But How Bad Was It?
In a year turned upside down by the pandemic, Roberto Moreno’s experience as a hail driver in San Diego reflected the fate of the companies he drove for.
In March, he stopped picking up passengers more because he was more concerned about getting sick than losing money. He took to the streets again in June as the California pandemic receded. But when the number of coronavirus cases began to rise again, he closed them again.
This week Lyft and Uber, the largest hail-fighting companies, are due to announce their financial results for the past year and are expected to look very much like Mr Moreno’s roller coaster.
Investors are also expected to focus heavily on signs of improvement this year and whether Uber and Lyft, who have carried out two of the most iconic IPOs in recent years, will be an indicator for the rest of the travel industry. And they’re looking at Airbnb, which is slated to report its profits in the coming weeks, for clues about consumer habits.
“Ride sharing is in the eye of the storm,” said Daniel Ives, director of equity research for Wedbush Securities. “While it was better than expected, you’re still down 50 to 60 percent with permanent bans in cities and states.”
The picture of the second corporate slump towards the end of last year is becoming clearer. There is some good news: It wasn’t supposed to be as bad as the first one. People continued to travel despite lockdowns. In Uber’s case, an aggressive pursuit of the grocery delivery business paid off.
However, the second downturn was another setback to hopes that the companies that never made a profit and had billions in annual losses in the past could turn profitable this year. And drivers who stayed on the road said their earnings fell despite paying more for safety equipment like masks and disinfectants.
Companies declined to comment on the business impact of the pandemic, citing the dormant period before the outcome. Investors and analysts believe that once a vaccine becomes widely available, companies will be on the verge of recovery and their stocks stayed high on Friday. Uber ended the day at $ 58 and Lyft at $ 53 – up 295 percent and 230 percent from their lows last year.
Uber’s rides, the core of its business, fell 80 percent in April and 53 percent in the third quarter of 2020, the last period data was released.
To contain its losses, Uber doubled its grocery delivery service Uber Eats and acquired competing service Postmates. In the third quarter of last year, Uber said grocery store revenue rose 125 percent. Last week, Uber also acquired Drizly, an alcohol delivery service, for $ 1.1 billion.
Uber also cut costs by ditching its money-losing businesses like its self-driving car unit, which aimed to develop fully autonomous vehicles but burned at least $ 400 million a year. Analysts now expect Uber’s fourth-quarter revenue to drop around 12 percent year over year.
Lyft, which had avoided expanding to food delivery, didn’t have a large delivery business to fall back on, although it would test a small program that transported some “essential” items like medical supplies and groceries. Lyft recently said that trips were down 75 percent in April and about 50 percent in November.
Apr 8, 2021 at 2:39 am ET
Analysts expect Lyft’s fourth-quarter revenue to drop around 44 percent year over year. The company said in a December filing that it would lose less money than its originally anticipated $ 190 million to $ 200 million, and forecast a loss of more than $ 185 million.
Airbnb, another tech darling that went public in December, also saw a second slump. In the last week of December, usually a vacation travel season, Airbnb bookings fell 18 percent nationwide, according to Transparent, a vacation rental intelligence company that tracks bookings through Airbnb and other services. An Airbnb spokesman declined to comment.
Many drivers who left the hailstorm apps in March have not returned yet. They are concerned about the risk of spending their days in cars with strangers. For those who have returned, the work has been difficult.
Gridwise, an earnings tracker service for gig workers, said driver earnings were down about 10 percent in November, a double decrease reminiscent of the 24 percent drop in earnings drivers in March before it hit the Christmas break recovered. And drivers spend more time sitting in their cars waiting for the next trip, while drivers tip less, Gridwise said.
However, a Lyft spokesperson said driver profits had increased in several of the company’s top 10 markets. With fewer drivers on the move during the pandemic, “those who are still driving will get more of the available trips and earn more while they drive,” said Eric Smith, the Lyft spokesman.
Some drivers said they were more selective in choosing rides, targeting high quality rides, and declining short rides. Sometimes that means looking for drivers who have left illegal gatherings.
“I’m looking for superspreader events,” said Ben Valdez, an Uber driver in Los Angeles. “A house party in the Hollywood Hills or remote areas of LA – we’re actively looking for it because we can count on people to pay the highest dollar to get out of there.”
Mr. Valdez built a plastic wall in his car to separate the front and rear seats. Despite the risk, Mr Valdez said it is worth driving if he can secure valuable rides. “I have a choice between living on my credit cards or going out and risking myself for the money,” he said.
Although Uber and Lyft do provide some cleaning products and masks to drivers, Mr. Valdez, who spends between $ 40 and $ 60 a week on masks and disinfectants, and other drivers who spoke to the New York Times, said that they ran out of supplies and had to supplement what they got from Uber and Lyft with their own purchases.
Uber said it had distributed more than 21 million Masks and disinfectants for over one million drivers and couriers in the US and Canada, and 3,726 drivers for “repeated violations” of their masks policy. Lyft said it provided more than half a million face masks, cleaners and partitions in the car for drivers.
Many gig workers have switched to delivery services like DoorDash and Instacart, viewing them as safer options than moving passengers. Mr Moreno, who runs a WhatsApp group for Spanish-speaking drivers in the San Diego area, said many of the drivers in his group have switched to grocery delivery as a safer choice.
“From a delivery standpoint, you have more of a safety net. Are you going for more security but less income, or are you taking more risk and making more money? “Said Ryan Green, General Manager of Gridwise. “It’s a tough decision for drivers to make.”