Uber has been in the news a lot lately. Unfortunately, most of the stories have been negative. From day one, Uber has had a target on its back because it provides a product that many believe is superior to established taxi and shuttle services. Users love Uber because it provides a more convenient, easier-to-use, and often less expensive way to get from A to B. As expected, these advantages have incurred the wrath of the well-entrenched interests that feel threatened - taxicab companies, shuttle services, rental car companies, unions, and regulators. What is not expected is Uber has, of late, been helping its adversaries by shooting itself in the foot. Moreover, it has not done a very effective job of managing the corporate image damage that has resulted. Before recommending what Uber should do to protect its image, it is useful to explore what the company does and why this 5-year-old startup is already being valued between $17 and $18.2 billion - greater than the value of Hertz and triple that of Avis.
Why users love Uber
Uber started in 2009 to fill the needs of those that want an on-demand taxi service that were unhappy with the alternatives. Taking a taxi is not often pretty. You call a cab company or try to hail a cab as it passes by. Sometimes they stop or show up, and sometimes they don't. The cabs are often less than clean and comfortable and usually require payment including a tip in cash. Having enough cash often requires inconvenient advance planning. Customers fear that drivers will take them "for a ride" to inflate fares - especially when riders do not know the area. With Uber, you set up an account in advance using a computer or smart phone. You can summon a car on demand and see the location of available cars in the area on your smartphone. You can request an estimate of what the fare is likely to be in advance. Uber gives you the approximate time the cab will pick you up, the name of the driver (who confirms by phone), and the car make and model with license plate. The entire process takes a few minutes. Unless you summon a cab in very high demand periods, the fares are usually less than a taxicab, tip is included, and you are automatically billed on your credit card and notified of the amount charged shortly after you are dropped off at your destination. At that time, you are given the opportunity to rate the driver.
High valuationWhile many believe Uber's sky-high valuation is Fantasyland, others believe it makes sense for the following reasons:
- Uber has a good business model. The company takes 20% off the top of the gross proceeds from each fare, and pays the driver 80%. The driver provides his/her own car, and is responsible for all car expenses. Customers market the service for Uber by telling their friends and getting points toward discounts on future rides.
- It has positive cash flow. Uber collects the money from the user's credit card, and pays drivers from that. With more and more drivers in a growing number of locations around the world being added to the mix, Uber's positive cash flow has the potential to grow rapidly.
- Positioned as high-tech. Uber's official name is Uber Technologies, Inc. This name plus the fact that users summon rides via a smartphone app combine to position Uber as a high-tech company that is part of the new sharing economy. This distinguishes them from their low-tech taxicab, shuttle, and rental car rivals similar to the way Tesla and Linked In are valued much higher than their lower-tech rivals.
- Platform that can easily expand into other markets. While Uber is often considered as an alternative to taxis and shuttles, it has positioned itself for expansion into other business areas. According to CEO, Travis Kalanick, Uber wants to replace private automobiles. In the nearer term, it hopes to be an alternative to rental car companies. Its name and business model allows for expansion into many other business areas. It has already started testing UberRush - a messenger service, UberFresh - a service that delivers meals, and UberCorner Store for delivery of daily staples. It has also inked deals with companies, such as Home Depot for delivery of their products.
An onslaught of negative publicity
There have been a series of events that have caused damage to Uber's corporate image.
- Uber driver protests. Despite the fact that Uber says their drivers can earn upwards of $90,000 per year, some drivers complain that their costs drive their earnings down to $3 to $4 per hour. They have organized protests around the country that have attracted news media attention.
- Customers injured by Uber drivers. A man in San Francisco claimed an Uber driver attacked him with a hammer. He has serious injuries and is in danger of losing his sight in one eye. In another case, a woman claims she was raped by an Uber driver even though Uber says the man was not working for Uber at the time of the rape.
- Uber executive suggests digging up dirt on journalists. Recently, during a private dinner, Senior Vice President Emil Michael suggested that the Company invest money to smear journalists that make disparaging comments about Uber. He said he wanted to give journalists a taste of their own medicine. Of course, when this got out in the media, journalists had a field day - magnifying the negative impact on Uber's corporate image.
- Privacy concerns. According to Venturebeat,
Uber has just finished the worst public relations week in its history. What once was looked upon as a brilliant and disruptive grass-roots company is now being seen as an arrogant bunch of whiz kids who may be willing to play it fast and loose with the privacy of its users.
What Uber has to do to protect its corporate image
In light of the negative publicity during its "worst public relations week," Uber needs to use the following procedures to protect its image.
- Admit the mistake and apologize.
- Limit the scope, or put the situation in perspective. For example, "We have X thousand drivers around the world, and we have had far fewer incidents with drivers than competitive alternatives."
- Solution so it is unlikely to reoccur.
- Do not publicize, or mention, the rumor.
- Promote the opposite of what the rumor says.
- Provide proof to support #2.
All businesses have a batting average
No business is perfect, and every company is going to have problems it will have to address in the media. Uber is no exception. The fact that Uber is disrupting entrenched businesses is likely to cause many of those businesses (and the vested interests that aim to protect them) to look for ways to retaliate. While Uber executives are smart enough to know that, some have not been very smart in the statements they have made - even at private dinners. They should know that if the company has tools that could be used to invade the privacy of journalists and customers, others may have similar tools to share their "private statements" in the media. This is what has apparently happened in the last week with Uber.
While bad things are likely to happen to every company, if they do, company executives need to be media savvy enough to understand how to use the Fact and Rumor procedures to protect its image. I wish Uber the best of luck because I am one of those that love their service. However, I am also not a fan of how they have handled their problems in the media. Journalists have a job to do, and many do it well. Sometimes they get it wrong. Even if they do, there is a proper way to handle it to improve your corporate image instead of doing unnecessary damage to a very valuable asset - the Company's reputation.