Uber Struggles to Retain Drivers, Develops Plans to Do Better (Apr 20, 2017)

The Information has quite a bit of both data on Uber’s driver retention rates and on its efforts to do better in keeping drivers. The headline I’ve seen shared is that it retains just 4% of drivers, but that’s a bit misleading because it’s based on those that apply to be drivers, only 20% of which make it through that process. The more meaningful retention rate is the 25% of those who drive at least once for Uber who are still driving for it a year later. That’s still low, but far better than 4%. Still, Uber is sometimes compared to an early stage SaaS company, many of which exhibit the same low margins and high growth rates as Uber, and which generally become profitable over time as recurring revenue from earlier cohorts of customers offsets customer acquisition costs. Uber’s problem with such low retention rates is that it continually has to spend massive amounts to attract and retain drivers even as its business matures. In addition, better retaining those drivers going forward ultimately means paying them more, and if it’s also to reduce its subsidies for rides that’s going to mean large price increases, which in turn may well affect demand unless it’s squeezed out all its competitors by that stage, which seems unlikely. As such, even though VCs commonly scoff at the notion that Uber should worry about its lack of profits, I do think there are some legitimate concerns over its current finances.

via The Information

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