Reality Check: Are Food Delivery Apps Actually Awful Businesses?


This post is by Amir Efrati from The Information

In the past week, Uber’s attempt to buy Grubhub and a memorable story about DoorDash’s money-losing tactics have sparked a wave of critical press and social media dunks on the U.S. restaurant delivery industry.

It’s easy to understand why. Countless mom-and-pop restaurants fighting to survive amid the Covid-19 downturn are complaining about the commissions they pay to DoorDash and its ilk. The delivery apps also sell food from some restaurants without their permission, leading to a poor experience for some customers when the food arrives cold. And the delivery businesses themselves don’t have much to brag about yet: On average, they lose a lot of money on each delivery they handle.

But investors who back the leading players will have the last laugh. One can look at the online restaurant delivery business in China, led by now-profitable Meituan, and to some extent in Europe to come to that conclusion. Or look at Uber’s ride-hailing business, which after years of heavy losses and skepticism from the business community turned a net operating profit in each of the last three quarters before the coronavirus crisis. (And with a sudden Covid-19–related surge in volume, grocery-delivery leader Instacart in a matter of weeks went from burning through tens of millions of dollars a month to turning a monthly net profit.)

Two Senior Engineers Quit Kalanick’s CloudKitchens


This post is by Amir Efrati from The Information

Two senior engineers who last year joined CloudKitchens, the commercial kitchen startup founded by former Uber CEO Travis Kalanick, abruptly resigned this week, The Information has learned. Their departures raise questions about whether the company could lose other engineers at a time when it is seeking to significantly expand its operations. 

The two executives, Shen Jackson and Charles Mwangi, had recruited roughly 50 engineers—most of them based in the San Francisco Bay Area—to design and oversee the prefabrication of materials to build kitchens around the U.S. for the startup. The duo both came to CloudKitchens from Tesla, where they were engineering directors. The startup buys property, remodels it and rents the resulting kitchen space to restaurant tenants that serve customers of food delivery services such as DoorDash and Uber Eats.

Uber Managers Asked for Pay Cut to Save Jobs. The CEO Said No


This post is by Amir Efrati from The Information

In late April, Uber CEO Dara Khosrowshahi called a meeting of the executives in charge of the ride-hailing firm’s nearly 4,000-person engineering department to tell them they needed to plan to cut headcount by 20%. 

Some of the engineering leaders responded that they and other managers would be willing to cut their own pay if it meant they could save at least some engineers’ jobs and spare those who remain from having to take on too much work. Khosrowshahi turned down the idea, according to people with knowledge of the situation, saying that layoffs would be the best way to cut costs and make sure Uber was in a stronger position in the long run. Part of that would involve remaking the engineering team so that over time more jobs would be located overseas, the CEO has told the group.

Instacart Weighs New Financing That Would Boost Valuation by at Least 50%


This post is by Amir Efrati from The Information

Instacart, the grocery delivery company whose business has surged amid Covid-19 lockdowns, is in talks to raise several hundred million dollars from existing and new investors, according to two people with knowledge of the situation.

The deal would put the company’s pre-money valuation at between $12 billion and $14 billion, one of these people said, an increase of at least 50% over Instacart’s valuation during its last financing in late 2018. 

Zoox, Self-Driving Car Startup Valued at $2.7 Billion, Is for Sale


This post is by Amir Efrati from The Information

Zoox, one of the most ambitious self-driving car developers that was valued at $2.7 billion in 2018, is contemplating a sale.

The startup, which has raised $1 billion in equity, has hired Qatalyst Partners to help it find a buyer, said two people familiar with the situation. At the same time, however, it is also trying to raise fresh equity in a deal that would allow it to remain independent, at least for the moment. Zoox executives have talked to representatives of several automakers about a potential deal or financing, one of the people said. 

Uber Discusses Plan to Lay Off About 20% of Employees


This post is by Amir Efrati from The Information

Executives at Uber are discussing plans to cut around 20% of the company’s employees, as it copes with a sharp decline in its ride-hailing business due to the coronavirus pandemic, The Information has learned.

Layoffs of that magnitude, which haven’t been finalized but could be announced in stages in the coming weeks, could result in more than 5,400 of Uber’s 27,000 employees losing their jobs. Separately, Uber’s chief technology officer Thuan Pham—who joined Uber in 2013 and is the longest-serving senior executive at the company—has resigned from the company, said a person with knowledge of the situation. Pham has notified managers who report to him of his plan to leave, which comes as the 3,800-person Uber engineering group could be slashed by nearly 800 people in the coming weeks under the proposed job cuts.

Instacart Swings to First Profit as Pandemic Fuels Surge in Grocery Delivery


This post is by Amir Efrati from The Information

Instacart’s financial picture has been completely redrawn by the pandemic.

In recent weeks, the online grocery delivery service has turned profitable for the first time ever, thanks to skyrocketing sales. Instacart sold about $700 million worth of groceries per week in the first two weeks of April, up 450% on sales in December, according to a person familiar with its performance. 

Kalanick’s CloudKitchens, Ideal Bet for Pandemic, Hits Snags


This post is by Amir Efrati from The Information

This should be Travis Kalanick’s moment.

The Uber co-founder not only sold out of Uber ahead of the pandemic that has cratered that company’s ride-hailing business, but switched his money and energy to a real estate startup that leases space to restaurants for meal preparation. The firm, CloudKitchens, is well positioned to benefit from the pandemic lockdowns. Its tenants serve the fast-growing online food-delivery market, which has gotten a big boost from stay-at-home orders that prevent people from going out to eat.

But CloudKitchens is struggling to overcome early challenges, limiting how much it can take advantage of the crisis, at least in the U.S. Certain properties it has bought have turned out to be in worse shape than anticipated, making some of them unusable and sharply raising the costs of renovating others, say people with knowledge of the problems. Meanwhile, some key managers have quit, including one of Kalanick’s longtime former colleagues at Uber, Matt Atkin, who for the last two years was responsible for launching CloudKitchens’ business in new markets. While CloudKitchens has bought at least 70 U.S. properties, only about 10 appear to be operational.

AWS Holds the Line on Cloud Bills as Customers Ask for Relief


This post is by Amir Efrati from The Information

Public cloud providers like Amazon Web Services, Microsoft Azure and Google Cloud have had to cope with a surge in demand in recent weeks as huge numbers of people work from home. But the cloud providers are also facing requests from many customers for financial relief, while others are cutting their cloud spending.

So far, AWS has been the least willing to offer flexible terms on customer bills, according to numerous customers. That stands in contrast to Microsoft and Google which have shown some flexibility, partners say. How each of the cloud providers responds to customers asking for help has big implications, for both their near-term revenue and their long-term relationships with customers. They could lose business in the long run if they aren’t flexible with customers that are struggling and have already obtained price concessions or payment deferrals from other suppliers, such as landlords and software or networking providers.

Managing Google During the Coronavirus Crisis


This post is by Amir Efrati from The Information

Google, which began humbly in a garage in Palo Alto, California, has unexpectedly gone back to its domestic roots. 

Like other tech companies, Google last month sent nearly all of its employees—around 114,000 of them in total—to work from home with the aim of curbing the spread of the coronavirus. It is one of many ways the pandemic has upended the company’s business almost overnight. The organizational chart that accompanies this story, The Information’s first to cover all of Google’s divisions, shows more than 400 of the top leaders charged with navigating the maelstrom. 

Outbreak Strains Microsoft’s Cloud, but Issues Began Earlier for Customers


This post is by Amir Efrati from The Information

As the Covid-19 outbreak prompted a surge in people using the internet, Microsoft late last month warned its customers that it was seeing so much usage of its cloud computing service, Azure, that it would have to give priority to first responders and health care organizations if Azure became overloaded. Days later, it said some free cloud services might not be available to users to ease the burden on Azure.         

Here’s what Microsoft didn’t say: its fast-growing cloud computing service struggled to meet the capacity needs of some customers even before the outbreak. Some large Azure customers, like Adobe Systems, have experienced performance issues with Azure services in recent years. Others, like Walmart and Chevron, have had trouble getting access to Azure services in the past year, leading to frustration for people who worked for those companies on cloud projects, according to those people.

Virus Cuts Uber, Lyft Ride Business by More Than 50%


This post is by Amir Efrati from The Information

The ride-hailing businesses of Uber and Lyft have shrunk by more than half in recent weeks compared with a year ago as a result of the coronavirus pandemic, according to people at the companies with knowledge of the figures. 

The overall contraction could worsen for both companies as the pandemic’s toll grows and more people stay indoors. For now, the value of fares Uber and Lyft collect from passengers has fallen by more than 50%. At Uber, the impact on ride-hailing revenue could be somewhat smaller because Uber has been paying drivers a lower share of passenger fares than it did last year. Taking that change into account, Uber’s revenue from passenger rides, after paying drivers, is likely to be less than $450 million a month. That compares with about $800 million in monthly passenger revenue that Uber generated in last year’s first quarter.

Facebook Strikes Deal for AR Displays, Squeezing Out Apple


This post is by Amir Efrati from The Information

Facebook has struck a deal to buy all of the augmented reality displays made by British firm Plessey, as the social network looks to build AR glasses capable of overlaying virtual objects onto the real world. The deal could give Facebook an edge over Apple, which recently looked at buying Plessey, one of the few makers of AR displays, according to two people familiar with the matter. 

Instead, Plessey will license its technology to Facebook and dedicate its U.K.-based factory to supplying Facebook over several years, both companies confirmed. Facebook could have tried to buy Plessey to gain access to its AR displays, but that would likely have brought intense regulatory scrutiny. Striking an exclusive supply deal speeds up the work and gives Facebook the benefits of an acquisition without a lengthy regulatory review.

Uber Eats’ U.S. Sales Surged 10% Last Week Thanks to Quarantines


This post is by Amir Efrati from The Information

Uber Eats’ U.S. sales surged by around 10% last week from the week before, a nearly unprecedented uptick for this time of the year, particularly given the substantial size of the business, said a person with knowledge of the figure. It shows how the quarantining of people at home amid the coronavirus pandemic has given Uber’s food-delivery service a boost even as its ride-hailing business has dried up.

The data are the first evidence of how the quarantines are helping food-delivery services, at least in revenue and new customers. In addition to gaining extra business, Uber Eats has been able to cut back on financial incentives to sign up drivers, which helps its margins. Last week, Uber Eats saw a 30% increase in people signing up to deliver food, said a person familiar with the figure. That’s likely because gig workers who previously drove for Uber’s ride-hailing business and other such services in the U.S. now have fewer options for work. Meanwhile, Uber Eats is signing up new restaurant chains that previously only worked with rivals like Postmates, as restaurants look for new ways to reach customers.

Virus Lockdowns Pose Serious Threat to Lyft, Uber


This post is by Amir Efrati from The Information

There’s little doubt that the coronavirus crisis will eventually subside. But it’s not as certain that the two major ride-hailing giants will survive the pandemic in their current form—particularly if it persists for more than a couple of months.

Stock traders seem to think that Lyft, in particular, faces the biggest question about its future. Shares of the No. 2 U.S. ride-hailing firm fell 20% on Monday, taking its decline in the past three weeks to nearly 60%. Uber is down by about half in the same period. An investor could acquire Lyft for $3.8 billion, while Uber would cost $32 billion.

Uber’s Leadership Is Stretched Thin as Departures Mount


This post is by Amir Efrati from The Information

Uber is acting more like a startup these days. 

For the past two and a half months, CEO Dara Khosrowshahi has been doing two jobs at once—overseeing the ride-hailing company while also serving as chief product officer. One of his deputies, strategic finance chief Dennis Cinelli, for months also has been running Uber’s electric bike and scooter rental arm. And Uber’s Europe and Asia business chief, Pierre Dimitri Gore-Coty, just moved to oversee Uber Eats, meaning Uber must find someone else to lead those big regions.

As executives juggle multiple responsibilities, some employees are worried that drawn-out vacancies and a lack of succession planning in a few key roles is taking a toll, several managers at the company said. Four of Khosrowshahi’s direct reports have departed since last June. Uncertainty tied to coronavirus could add to the strain. The Information’s updated Uber org chart, which includes the top 100 or so managers at the company, reflects the latest changes to the executive lineup. One notable arrival is that of customer engagement and business strategy chief Zhenya Lindgardt, who has been involved in the development of an “Uber for kids” service for transporting unaccompanied children, according to a person with knowledge of the proposed product, which hasn’t been previously reported. 

Inside Waymo’s Hiring Binge


This post is by Amir Efrati from The Information

Alphabet’s Waymo still hasn’t perfected a self-driving car. So it is throwing more money at the problem.

Waymo nearly doubled its headcount to 1,500 employees, known as “Waymonauts,” from 800 about a year ago, said a person with knowledge of the figure. Much of the expansion came from the hiring of hundreds of engineers Waymo hopes will help it achieve a technological breakthrough in developing a reliable self-driving vehicle.

The workforce expansion suggests Waymo’s annual cost is nearing $1 billion, while its brand-new automated taxi business is yielding just hundreds of thousand dollars a year in revenue. One signal that Waymo is a long way from developing into a business was the departure last fall of Waymo’s first chief commercial officer, Amee Chande, after just 10 months on the job. Her departure hasn’t previously been reported.

Inside Waymo’s Hiring Binge


This post is by Amir Efrati from The Information

Alphabet’s Waymo still hasn’t perfected a self-driving car. So it is throwing more money at the problem.

Waymo nearly doubled its headcount to 1,500 employees, known as “Waymonauts,” from 800 about a year ago, said a person with knowledge of the figure. Much of the expansion came from the hiring of hundreds of engineers Waymo hopes will help it achieve a technological breakthrough in developing a reliable self-driving vehicle.

The workforce expansion suggests Waymo’s annual cost is nearing $1 billion, while its brand-new automated taxi business is yielding just hundreds of thousand dollars a year in revenue. One signal that Waymo is a long way from developing into a business was the departure last fall of Waymo’s first chief commercial officer, Amee Chande, after just 10 months on the job. Her departure hasn’t previously been reported.

Uber CEO Khosrowshahi Struggles to Find Formula for Success


This post is curated by Keith Teare. It was written by Amir Efrati. The original is [linked here]

As 2020 begins, Uber CEO Dara Khosrowshahi faces what is shaping up to be a year of reckoning. Uber’s market capitalization has dropped $29 billion since it went public in May. It likely lost five to six times as much money in 2019 as it forecast in presentations to banks two years ago. And it has lost ground in its ride-hailing, scooter and food-delivery businesses, while regulators in cities like London are threatening its ability to operate.

Some early investors who want faster cost cutting have privately contacted the company, suggesting the possibility of a more public challenge if things don’t improve, said an Uber executive briefed about the situation. Meanwhile, senior Uber employees as well as some outsiders are increasingly questioning whether Khosrowshahi, who took over from Uber co-founder Travis Kalanick in 2017, is the right person for the job.