The results are in for the sharing economy. They are ugly – ETtech

By Kate Conger and Erin Griffith
The coronavirus pandemic has gutted the so-referred to as sharing economy. Its most precious corporations, which began the yr by promising that they’d quickly turn into worthwhile, now say client demand has all however vanished.

It isn’t more likely to return anytime quickly.

In earnings experiences this week, Uber and Lyft disclosed the depth of the monetary injury. The corporations mentioned their experience-hailing companies all however collapsed in March, the final month of the first quarter, as shelter-in-place orders unfold via Europe and the United States.

The purple ink extends past experience hailing. Home-sharing firm Airbnb, which buyers valued at $31 billion, had deliberate to go public this yr. Instead, the firm has slashed prices and raised emergency funding, and on Tuesday it laid off 1,900 employees, about 25% of its workers. It additionally decreased its income forecast for this yr to half of what it introduced in final yr.“While we know Airbnb’s business will fully recover, the changes it will undergo are not temporary or short-lived,” Brian Chesky, Airbnb’s chief government, wrote in a memo to staff.

The corporations, based on the notion that they need to turn into as large as attainable as rapidly as attainable and fear about making a revenue someplace down the line, now face an unsure future. And their timelines for turning a revenue seem — for now — to have been tossed apart.

Even when folks return to the workplace and begin touring, the pandemic may change how they behave for years to come back. Thirty p.c of gig-economy income may disappear over the subsequent one to 2 years, with a portion of it unlikely to return, mentioned Daniel Ives, managing director of fairness analysis at Wedbush Securities.

“Based on our analysis of the gig economy and the overall pie of consumers, unfortunately, there’s a slice that — until there’s a vaccine — will not get in a ride-sharing vehicle or use an Airbnb,” Ives mentioned.

On Tuesday, there was one other menace to Uber and Lyft: California’s legal professional common sued the corporations, claiming that they misclassified their drivers as unbiased contractors. If the lawsuit is profitable, the corporations may should pay tons of of tens of millions of {dollars} in civil penalties and again wages for drivers.

Airbnb faces a distinct problem. How will hosts — most of them providing leases as a aspect enterprise — cope with virus security? In an effort to bolster confidence in its listings, the firm introduced a set of recent cleansing requirements for its leases in April. Guests also can choose for a 72- or 24-hour emptiness interval earlier than they enter.

There isn’t a lot to look ahead to in the present quarter for the corporations, in keeping with monetary analysts. Ives mentioned he anticipated Uber’s income to contract 69% and Lyft’s 66% throughout the interval, which covers April via June.

Lyft mentioned rides on its service fell almost 80% in late March and remained down 75% in mid-April. In May, passengers started to return cautiously to Lyft, however rides had been nonetheless down 70%, Lyft executives mentioned on a Wednesday earnings name with monetary analysts.

If passengers continued to keep away from the service at related charges, Lyft predicted it might lose almost $360 million on an adjusted foundation, which excludes inventory-based mostly compensation and different bills, throughout the present quarter. Its adjusted loss in the first quarter was $97.four million.

“These are the hard truths we’re facing,” Logan Green, Lyft’s chief government, mentioned Wednesday. In late April, Lyft laid off 17% of its staff. Executives took a 30% pay reduce, and worker pay was trimmed 10%.

On Thursday, Uber mentioned revenue in the first quarter grew 14% from the identical quarter final yr, however the firm’s losses ballooned 190% to $2.9 billion. That deficit was largely pushed by a $2.1 billion loss attributable to its investments in worldwide experience-hailing companies, like Grab and Didi, that are additionally experiencing low demand due to the virus.

The results are in for the sharing economy. They are ugly
“I won’t sugarcoat it. COVID-19 has had a dramatic impact on rides,” Dara Khosrowshahi, Uber’s chief government, mentioned Thursday in a name with buyers. Use of Uber’s experience service was down 80% in April, he mentioned. But Uber noticed a vivid spot in its meals supply, which grew 89% since the earlier yr, excluding India.

Although Uber has not but given a brand new date by which it expects to turn into worthwhile, Khosrowshahi mentioned the pandemic “will impact our timeline by quarters, not years.” Before the outbreak, Uber mentioned it might be worthwhile, excluding some prices, by the finish of this yr.

Uber laid off 14% of its staff Wednesday because it cut 3,700 people from its recruiting and customer support organizations.

Khosrowshahi is not going to take a wage for the remainder of the yr. He mentioned in an electronic mail to remaining staff, seen by The New York Times, that the firm continued to look for methods to chop prices and should eradicate extra jobs over the subsequent two weeks.

While Uber Eats, the meals supply service, has skilled elevated demand and restaurant signal-ups in some markets, the firm additionally shut down Uber Eats in a number of worldwide markets the place it had been burning money and laid off 50 staff from that division.

Financial analysts anticipate the corporations to start to get well as customers return to work. They are nonetheless sitting on some huge cash. Uber has $9 billion, and Lyft has greater than $2 billion. Before the virus, Airbnb had $three billion in money on its stability sheet; since then, it has raised $1 billion in funding and secured a $1 billion time period mortgage.

Despite the downturn in enterprise, Lyft’s inventory was up greater than 20% on Thursday because it exceeded buyers’ expectations for income in the first quarter and reassured them with its layoffs final month that it might reduce prices. Uber’s inventory was up greater than 8% in after-hours buying and selling Thursday.

But buyers nonetheless query the corporations’ claims that they’ll turn into worthwhile as they faucet the $1.2 trillion that Americans spend annually on transportation prices like automotive possession and upkeep.

Although Uber and Lyft mentioned they supplied a preferable transportation possibility over public transit, some analysts fearful that buyers would select to drive themselves relatively than share a automotive with a experience-hail driver and threat spreading the virus.

“All investors are trying to figure out industries that the pandemic will permanently transform for the better or permanently transform for the worse,” mentioned Tom White, a senior analysis analyst with monetary agency D.A. Davidson.

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