In the past few years, Uber has become the poster child for companies with solid fundamentals but problematic executive outlooks.
Though the company itself has disrupted many major industries and become a heavyweight in the peer-to-peer services industry, it has not been able to grow its revenue in some time due to internal issues.
After facing serious inquiries regarding the company culture of Uber, the previous CEO Travis Kalanick has resigned and been replaced by Dara Khosrowshahi, Expedia CEO since 2005. This may set the stage for a new evolution of the currently floundering company.
Saving the Revenue
Consumers today have a tendency to vote with their dollars when it comes to company ethics. In 2017, Uber found its market share plummeting due to an internal expose regarding a “sexist work environment” and further allegations of sexual harassment.
In two years the ridesharing service saw its market share drop from 90% to 75%, with Lyft swiftly picking up the slack. But the sexual controversy wasn’t the only negative press that the company received. The company was also lambasted for accidentally underpaying drivers and a series of issues with leaked videos and self-driving cars.
With 90% of the market share, it was understandable that Uber would find itself being the de facto standard; Lyft comparatively faced very little scrutiny. But the controversy after controversy painted a picture of a company that may have been on the cutting edge of technology but was not refining its business processes or public perception.
Following these controversies, CEO Travis Kalanick initially took time off to deal with an ailing family member, and ultimately resigned entirely — though he remains on the board of the ridesharing giant. Uber continues to grow, with sales doubling to $1.75 billion in the second quarter of 2017. However, this also amounted to an adjusted net loss of $645 million.
Dara Khosrowshahi Takes the Helm
Well before Uber made an official announcement, the Internet had already spoken: Dara Khosrowshahi of Expedia Inc was to take the place of Travis Kalanick as CEO.
Khosrowshahi has headed Expedia since 2005, and has been able to help the then-struggling business substantially expand, rebrand, and grow. Expedia has become a leader in the travel industry and has been able to complete some major acquisitions within the last few years. The company was able to achieve $8.7 billion in revenue in 2016, and shares of Expedia have grown 34% year-over-year from 2016.
In short, the selection of CEO may have come as a surprise, but it makes sense to the currently struggling ridesharing business.
Khosrowshahi has also faced business disruption before, when Expedia was forced to compete with new peer-to-peer homesharing services such as AirBNB. This familiarity with the peer-to-peer market, in addition to the competition Uber is facing from Lyft, will likely create a positive synergy between the new CEO and the organization. Though Uber may be a ridesharing service, it is still well-related to the travel industry, which also creates additional opportunities for networking and integration.
As Uber has faced repeated controversies regarding diversity and inclusion, the Iranian native is also deemed an excellent choice to spearhead the company’s new cultural changes. In the past, Khosrowshahi has spoken out against policies that he has perceived to be prejudiced, including some of the policies of the Trump administration. This could bring a new level of sensitivity into Uber’s company culture and reduce some investor fear.
On the other hand, it may also signal interesting changes for Expedia, which is now losing the CEO that brought it its rapid expansion and current branding.
Expedia has not yet commented regarding Uber’s new CEO and it remains to be seen what the impact will be on the company moving forward. Uber faces some important legal battles, potential financial losses, and ultimately will require a revamp of its company culture from the top down. But despite controversy, Uber still has over $6 billion in cash reserves and 75% of the market share within its industry, making it a solid investment if these issues can be addressed.
Meanwhile, there has not yet been a selection for the new Expedia CEO, though some names — such as John Kim — have been floated by industry analysts.
Regards,
Ethan Warrick
Editor
Wealth Authority
