Uber is beating projected growth expectations to the joy of investors, but there’s a catch. A couple of catches actually. Uber’s spending is significant, and its profitability is based on adjusted EBITDA.
Consumer and market intelligence can cut Uber’s operating costs, while increasing profitability, which could allow Uber to do away with EBITDA margins as its profitability measure sooner than projected. And that’s certainly worth exploring, as the rideshare/food delivery company is burning money on marketing.
Uber’s Financial Projections
Analyzing 3,212 news stories and blog articles about Uber published during the past three months, we see conversation focused on many areas beyond its Q4 earnings preview and purely financial happenings.
Although its sale of its service (for stock) to India’s Zomato is super significant, there’s lots to note from a consumer standpoint (which we’ll get back to in a moment):
And, as reported by Real Money, although many headlines give the impression that Uber is forecasting Q4 profitability, it’s not. And there are nearly as many pieces speaking to this fact, as there are claiming victory on its behalf:
Uber is predicting an adjusted positive EBITDA, but “consensus 2020 and 2021 FCF estimates stand, respectively, at negative $2.45 billion and negative $641 million, and positive FCF is expected to be achieved in 2022.”
Adjusted EBITDA indicates the profitability of a company before it pays expenses, taxes, depreciation, and amortization.
And positive adjusted EBITDA definitely isn’t the same as positive free cash flow (FCF). Uber posted 2019 FCF of negative $4.9 billion — some one-time events were partly, but not fully, responsible for this cash burn. Meanwhile, consensus 2020 and 2021 FCF estimates stand, respectively, at negative $2.45 billion and negative $641 million, and positive FCF is expected to be achieved in 2022.
The Real Trouble with EBITDA
So, what’s wrong with EBITDA, as it’s obviously a valid measurement. Well, when Charlie Munger warns against it, valid or not, it’s certainly something to make note of. And, exploring the belly of the EBITDA beast, its key flaw is clear: “EBITDA doesn’t take into account all business aspects and it might overstate the cash flow.”
It makes sense that the measure “minimizes the impact of factors outside of their scope of control and focuses on what can be controlled.” But it potentially distracts from key areas that can be controlled – like spending billions on arguably misguided marketing or R&D that could be laser-focused on consumer concerns – and isn’t.
Billion Dollar Marketing Metrics
Armed with the ability to quickly and accurately surface meaningful and actionable insight offers brands automatic savings potential – and that applies to Uber as much as any other consumer-facing brand.
According to Statista, in 2019, “Uber spent $4.6 billion on sales and marketing and $4.8 billion on R&D.” But was it efficiently allocated? That’s the rub.
With that kind of promotional power at play, one would expect a certain amount of consumer buzz to be happening. And we do see mentions of Uber numbering in the millions, with potential impressions capturing an exceptional number of eyeballs. We also see Net Sentiment at a respectable 21% (measure from -100 to 100) for such a heavily service-focused function:
What Consumers Aren’t Saying About Uber
But what we aren’t seeing is conversation around key promotional opportunities – things that Uber should want consumers talking about (and mentioned above) – its train rider app, driverless cars, and even its futuristic flying taxi concept. Each is really cool and should be generating lots of excitement when we explore the consumer side of the Uber conversation.
But instead, we see mentions dominated with folks talking about Uber driver and Uber Eats experiences that are often less than flattering:
But there’s a bright side – and one that shows lots of potential. Exploring popular posts, we see influential folks sharing experiences that can help humanize, and bring humor to, the brand:
Uber could connect with some of these users to create promotional campaigns that shift the conversation away from negative aspects to something positive.
- The wonder of exploring a new city with a local driver as your guide.
- The amazing commitment of Uber drivers to go above and beyond to deliver your food . . .
And create new campaigns with consumers who have proven, engaged followings. Influencers are crucial to helping any brand generate excitement and shift narratives. And Uber can use a boost in that department, for sure. Folks to spread awareness about all it has to offer consumers beyond food deliveries and getting where you need to go with a human at the wheel.
CX, Innovation and More
But that’s really just the tip of the iceberg, as we didn’t even get to the innovation, brand health, consumer understanding, competitive intelligence, crisis response, white space capturing and category-creating capabilities that real-time consumer and market analytics offers brands.
The potential for Uber to connect meaningfully and become part of consumers’ experience in way they (Uber) direct is very real. Much more so than an EBITDA projection, one might argue. They – and you – should reach out to see a demo of it all in action!