Here’s What To Expect From Uber’s New CEO
After months of internal drama and boardroom infighting, Uber has picked a new CEO. The current head of Expedia, Dara Khosrowshahi, has been offered the role—and he accepted. Khosrowshahi brings a neat package of experience to Uber’s very messy table. In the 12 years that he’s worked at Expedia, which ignited online travel booking and the demise of the travel agent, Khosrowshahi vastly improved the company’s value. The stock has gone from roughly $15 per share to $143 as of this writing, delivering steady returns for investors.
That’s likely what he’ll do for Uber, says Arun Sundararajan, professor at NYU Stern Business School and author of The Sharing Economy. “My guess is that the board has brought him in as someone who can rapidly take them to short-term profitability,” he says.
Last year, Uber lost $2.8 billion, not including its China business. In an interview with Betakit last February, former CEO Travis Kalanick said the company’s China business was losing $1 billion a year. This year, the company has begun to control its spending. In first quarter of 2017, losses totaled a little over $700 million, according to Axios. In the second quarter, Uber reduced losses to $645 million. Uber investors like Benchmark Capital, which is currently suing former CEO Travis Kalanick for eschewing his fiduciary responsibilities, are probably giddy to get someone at the top who can ready Uber for a public offering.
Innovation, Profits, Or Both?
The question is, at what cost will profitability come? Uber has so far invested in two longer-term projects: autonomous driving and a platform for connecting truckers with freight loads. Both projects face heavy competition. In the race to develop self-driving cars, there are no clear winners. By contrast, UberFreight faces a lot of incumbent competition. Neither will prove profitable in the near term, but both could be crucial to its future. As Khosrowshahi tries to bring Uber’s financials under control, some of these projects could get less support.
That’s in part because investors are antsy. Kalanick left a big mess in his wake, including a spate of negative headlines and a lawsuit with Google’s self-driving car unit Waymo. Board members are suing each other. To quell some of the dissent on the board, Khosrowshahi will likely refocus on Uber’s core products just to regain trust in the company. He might not have the luxury of pursuing projects that don’t have a clear path to profitability.
“The kind of options that a company like Google has are very different, because Google has a multi-tens-of-billions-of-dollars-a-year profitable business already,” says Sundararajan. Not only is Google investing in self-driving cars, but a whole cornucopia of other projects in the healthcare and urban development sectors that may never pay off. Sundararajan says Google, which produces results for shareholders, has earned the right to make these kinds of innovative investments.
But not all companies are concerned with their shareholders. Amazon, as an example, lost money for years paving the road to digital retail. But Jeff Bezos is a rare kind of CEO, and Khosrowshahi seems less likely to take this particular route.
That’s not to say he won’t invest in innovation. After all, at Expedia, Khosrowshahi facilitated an important investment in hotel comparison tool Trivago, as well as the purchase of Airbnb competitor HomeAway. As a result, UberEats and UberEverything are likely to get a boost. But more outlandish bets may come after Uber’s house is in order, and there’s no telling how long that will take.
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