Stopping At The Drive-Thru On The Road To An Uber IPO

After thinking about writing a book and then ditching that idea in favor of a much simpler and more rewarding weekly newsletter (signup here), I have used so many different sources and tools to keep track of all the news worldwide about Uber. Like Apple is a boon for bloggers by generating tons of  traffic, writing about Uber and putting the word into a headline is likely to increase the click rate and lift on any article or piece of media. I feel as if I’ve now seen every headline related to Uber possible. This isn’t to say the company isn’t without room for improvement, but the headlines are getting tired now. At this point, the only story left to write of Uber as a private company relates to its impending IPO.

Speaking of IPOs and stories, I believe Uber will need a story alongside ridesharing to go public at the $100B+ valuation they’d likely seek and command. A few years ago, when Facebook was preparing to go public, analysts remarked at the then state of its mobile app (it was bad!). Facebook famously acquired Instagram before its IPO, a move that is now obviously so genius (and valuable) in retrospect. Part of that acquisition was inherently defensive, part was strategic, and part of it helped Facebook tell a bigger story leading up to its IPO.

This isn’t to say Uber needs to do something for its own sake, but I do believe these stories and narratives play a big part in the process of preparing an IPO, going on the road shows, and selling a vision that the broader public can buy into. So, this got me thinking, in the context of an impending IPO, what will be Uber’s Instagram?

The analogy breaks down a bit because, credit to Instagram, it could’ve really threatened Facebook in some deep ways. But if we focus just on the “mobile story” angle, the issue for Uber as it marches toward IPO is to show the depth and strength of its platform and brand to help move things other than people from Point A to Point B. Along the way, Google Shopping Express has tried to win share by offering steep discounts, while Amazon has quickly beefed up it’s Prime delivery with many available on the same day. Amazon’s execution here has improved dramatically, so much to the point where I don’t think Uber can compete right now on traditional CPG and e-commerce.

That leaves one thing: food.

We have to eat. If we are lucky, we’ll have three meals a day, and we’ll visit the grocery store once a week. As a result, startups have dug hard into this space, and the VCs have followed. I’ve written about all of this many times before, so won’t rehash it here. The issue for Uber is that while the unit economics are strong and network effect is insurmountable, some users may not use the app as frequently as they may others related to food. And, despite what you may see on Twitter, there are some startups in the food delivery space which not only have positive unit economics and plans to expand, they’re also on pace to haul in massive revenues. I know Uber likes to build things within (and EATS seems to be doing well), but I think in this case it’s a bit more complicated and requires a different flavor of customer service and software for the food companies that would take time to be built.

So, when I add this all up, my right brain says “Uber will make at least one, if not two, big acquisitions before the IPO” as way to tell a better story for the IPO, as a way to increase frequency of use, and as a way to bolster its bottom line and brand in the mind of consumers as it wages more war with Amazon and Google.

Haystack is written by Semil Shah, and is published under a Creative Commons BY-NC-SA license. Copyright © 2018 Semil Shah.

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