By on November 10, 2020

Uber is launching a new feature that allows riders book trips up to 30 days in advance. While supposedly innovative, it smacks of desperation following years of multi-billion-dollar losses and an inability to account for pandemic-related lockdowns. The company reported a $1 billion loss in the third quarter of 2020, noting that gross bookings declined by 10 percent year-over-year. While the assumption is that business will improve as more cities reopen, only its business-baked bookings and its increasingly popular delivery services seem to be making any headway.

Reserve, which is what Uber is calling its new booking program, seeks to be another round in its corporate magazine by allowing customers to schedule rides far in advance. But having it serve as a new revenue stream seems wishful thinking because it doesn’t appear to offer much beyond the typical Uber experience since one could already pre-book rides. What Reserve changes is how this is done. The new service adds a flat fee to booked trips that’s dependent upon location and demand.

According to Uber, most fees will range between a five spot and around fifteen bucks. That’s clearly not benefiting riders but they will be able to take advantage of the fare being presented upfront and having the ability to select drivers (including creating a pool of favorites) in the days ahead of the trip. Cars are also supposed to be waiting at the meeting point at the exact scheduled time whilst providing riders with a 15-minute grace period. If the company fails to meet those expectations, it’s supposed to offer customers $50 back in Uber Cash.

This is basically the ride-hailing firm adopting its own version of the same tactics regular car services have been using for a century. It’s not particularly innovative and doesn’t even make strong use of the app-based service that Uber’s entire existence is predicated upon. It also doesn’t appear to provide much more utility than the core business, which typically arrives promptly and where you’ve dropped your pin. But it is a clever way of allowing the company to add charges, even though the driver gets 72 percent of the fee, and bilking you for the full amount the trip if you cancel within the last hour.

Perhaps I’m being too critical of Reserve but it doesn’t seem to be bringing much to the table that wasn’t already there. You pay a bit more to be issued the company’s assurance that a driver will be present at the specified time and that’s about it. Meanwhile, Uber can leverage it as a way to convince businesses to use its services instead of local (and presumably financially hobbled) black car agency as it frames Reserve as this novel concept to the press.

I think Uber is running out of ideas as years of it being a financial black hole — propped up entirely by faithful investors — has taken its toll on goodwill. It’s core service remains decent, especially if you just need to make hassle-free trip across town. But it’s not making it any money, which is why you see it investing so heavily into food delivery and fighting tooth and nail to push through protective ballot initiatives like California’s Proposition 22.

Uber Reserve launches next week, starting with the premium Uber Black and Black SUV/Premier. The company said it believes UberX, Comfort, and XL will be incorporated into the program by the end of the year.

[Image: MikeDotta/Shutterstock]

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12 Comments on “Opinion: Uber’s Reserve Program is Mildly Troubling...”


  • avatar
    Cicero

    It’s hard to understand why Uber is losing money so prodigiously. Its basic product requires only a functioning app and the money should just roll in as users pay for their rides. Really, how much physical infrastructure and staff do you to keep the app running and vet driver applications?

    Are Uber’s efforts to develop autonomous rides are driving the huge losses? If so, I’d like to see the projections on what kind of ROI this would deliver if it’s ever perfected and whether its worth the ongoing flood of red ink. Maybe Uber would be better off trimming its sails and just aiming to be the very best rideshare service out there.

    • 0 avatar
      SCE to AUX

      If Uber can’t produce an ROI plan for autonomous vehicles, then nobody can (looking at Ford, GM, Tesla, and the other AV dreamers).

      Uber’s AV program is not cheap, and they’ll probably achieve SAE Level 5 autonomy about a decade after they go out of business.

    • 0 avatar

      CEO and other big honchos alone can eat all profits. And there are other high paying positions you need to keep and award with benefits and stock options.

  • avatar
    cwallace

    This plan is not really about product, or creating a new revenue stream, but being able to recognize sales earlier on the balance sheet. It’s not a tactic that healthy companies use, because it raises red flags with investors (if they’re paying attention,) and it can get out of control very quickly.

    If you’ve not heard of “Chainsaw” Al Dunlap, his shenanigans may be worth a quick search if you’re curious about what comes of a plan like this when the music finally stops.

    • 0 avatar
      Rick T.

      As a CPA, I am fairly certain that the company cannot recognize that revenue until they have provided the related service due to the fundamental matching principle of income and expense.

      And not to be a pedant but sales are on the income statement.

      • 0 avatar
        cwallace

        Hey, as long as one of us is a CPA… maybe you can explain pulling sales forward, and how what Uber wants to do is not an example of that.

      • 0 avatar
        ToolGuy

        @ Rick T.,

        Scratchy needle lift:
        https://youtu.be/zRfmFdaBdyk

        As Professor ToolGuy (completely unqualified) steps to the chalkboard…

        If they are doing what we are told they are doing, it would be “Unearned Revenue.”

        https://www.investopedia.com/terms/u/unearnedrevenue.asp
        [Pedantic *emphasis* added]
        “If a publishing company accepts $1,200 for a one-year subscription, the amount is recorded as an increase in cash and an increase in unearned revenue. *Both are balance sheet accounts*, so the transaction does not immediately affect the income statement.”

        Period matching is why the liability lives on the balance sheet until the revenue is earned. The cash went on the balance sheet immediately.

        • 0 avatar
          Rick T.

          Sounds about right if they are collecting cash up front.

          In your example if for a magazine 1/12 of the unearned revenue each month would be amortized to the income statement as sales or revenue as the subscription is fulfilled. The costs related to publishing and distributing the magazine are deducted, leaving the revenue matched with the appropriate costs and a net profit (hopefully).

    • 0 avatar
      Cicero

      It’s called “earnings management” in the great tradition of leading companies like Enron.

    • 0 avatar
      baggins

      Sales arent recognized on the balance sheet. That’s Accounting 101. And

      Since users can only book max of 30 days in advance, even if they are able to book revenue upon reservation (which I highly doubt they will achieve), this approach is only going to pull revenue forward a small amount,most of the revenue would not even move into a new quarter.

      So, I am going to say this actually has nothing to do with manipulating the timing of revenue, and is just a way to try to grow it.

      • 0 avatar
        ToolGuy

        “Sales aren’t recognized on the balance sheet. That’s Accounting 101.”

        HORATIO
        O day and night, but this is wondrous strange!

        HAMLET
        And therefore as a stranger give it welcome.
        There are more things in heaven and earth, Horatio,
        Than are dreamt of in your philosophy.

        – Hamlet, Act 1 Scene 5

        There are accounting classes beyond 101. My favorite accounting professor’s very favorite answer to accounting questions was “It depends.” Refer to Morningstar’s actual balance sheet shown at the link above and see if revenue appears in any form whatsoever on the balance sheet ($287 million ‘exception’ to the ‘rule’).

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