Brandon Donnelly

Daily insights for city builders, delivered every morning at 6 AM ET. I’m Brandon Donnelly — a Toronto-based real estate developer and founder of Globizen. I’ve been writing here since 2013.

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Tag: $uber

  • Uber to close 45 of its offices

    On Monday it was reported — by the Wall Street Journal, Tech Crunch, and others — that Uber will be laying off another 3,000 employees and closing 45 of its offices around the world. Here is a quote from TechCrunch:

    “I knew that I had to make a hard decision, not because we are a public company, or to protect or stock price, or to please our Board or investors,” Uber CEO Dara Khosrowshahi wrote to employees today in a memo, viewed by TechCrunch. “I had to make this decision because our very future as an essential service for the cities of the world — our being there for millions of people and businesses who rely on us — demands it. We must establish ourselves as a self-sustaining enterprise that no longer relies on new capital or investors to keep growing, expanding, and innovating.”

    According to this SEC filing, the company expects to pay approximately $110 million to $140 million in severance and other termination benefits, and somewhere between $65 million to $80 million in costs related to closing its offices.

    All of this is, of course, being driven by a steep decline in ride bookings, which is about 70% of the company’s revenue. Ride bookings were down 80% in April from a year earlier. For Q1 2020, they were down about 5% compared to 2019.

    Uber Eats has seen a spike in demand with people staying at home. Bookings were up 52% in Q1 2020 from a year earlier. The problem is that, unlike its rides business, their food delivery business is far from profitable. That’s the point of the possible merger with Grubhub.

    The company has said that they are seeing some signs of a recovery in markets that have begun to reopen. But it’s too early to predict what that will really look like. The hole is pretty deep.

    Pre-COVID, ride hailing demand tended to surge on the weekends as people went out to restaurants, bars, and clubs. So presumably those activities will need to return for its revenue to return. But I also think we could see a spike because of people being nervous to take public transit.

    Either way, the company is making some really tough decisions right now. But it seems to be doing what it needs to do in order to get to the other side of this and become a self-sustaining and profitable business. Full disclosure: I own some $UBER.

    Chart: Uber Q1 2020 results

  • City guides in the pre-smartphone era

    I came across this stack of old Wallpaper city guides while reorganizing a few things over the weekend (because that’s what happens on the weekends now). They are pretty beat up and color faded from travel. It looks like these guides are still being published by Phaidon (along with an app), but it’s been well over a decade since I bought one.

    I know the exact time period of the above books because I used to do really nerdy things like date and location stamp them when I got them. The Rome book was July 2007 and I picked it up in Dublin, while I was there working for a real estate developer before the global financial crisis. I also discovered old phone numbers and email addresses written inside of them. Usually it was a Hotmail address.

    What I liked about these guides is that they were fairly condensed — good for a long weekend — and they were generally design-focused — perfect for architecture nerds like me. Their restaurant, bar, and club selections were also just fine as a jumping off point. After that it was up to you to make your own adventure.

    I sent this photo to my friend Alex Feldman over the weekend — he also went without any sleep in Berlin — and he reminded me what it was like at this time. This was 2007. The first iPhone was just being released. Its map functionality was nowhere near what it is today (or didn’t exist). And I certainly didn’t have one. I had a Blackberry with a plastic wheel on the side. It was basically a giant pager.

    To navigate a city at this time meant using a physical map. It also meant getting repeatedly lost and having to ask real people where to go. Alex also reminded me that I made him wander all around Berlin so that I could buy a new pair of glasses. What can I say, this was pre-laser Brandon and I needed cool architect glasses. They ended up being red.

    As frustrating as this must have been at times, there’s something nice about traveling without knowing each and every step and without being able to summon an Uber at any point in time to take you exactly where you want to go. In fact, this is probably the central ingredient of all good travel: you need to allow yourself to be open to new experiences.

    One of the great lessons of Anthony Bourdain was that you have to get out of your comfort zone. Cities have both highs and lows, but there’s real value and authenticity in the lows if you’re willing to engage beneath the surface. Perhaps that is the irony of old fashioned guide books in the pre-smartphone era. They were supposed to tell you exactly where to go, but they actually helped you find the opposite.

    The only city that I never actually got around to visiting from the above stack is São Paulo. As you can tell, Brazil has been on my list for many years. I did make it to Rio de Janeiro a few years ago and São Paulo was supposed to be October 2020. But I’m pretty sure that trip will need to wait. Maybe I should leave my phone at home.

  • Sidewalk Labs, Uber, Lime, and the demise of urban density

    Today I am going to talk about 3 things that recently happened and/or that are on my mind.

    Sidewalk Labs pulled out of Toronto. I think this is sad. A lot of people have said that they’re surprised, but not surprised. The official reason is that this unprecedented environment has made it financially infeasible for them to develop the 12-acre site, while still adhering to their core principles. I don’t have any inside knowledge of the situation, but I can’t help but think that this is probably just an opportune excuse. They were getting beat up pretty badly by Toronto on all fronts, even though they had put forward an incredibly ambitious development proposal. As I said before, I can’t imagine many (or any) “conventional” developers coming forward with something like this. The last plan I saw was 1/3 non-residential, and 40% of the residential component was to be priced below market. And never mind all of the other innovations that were being contemplated.

    In other tech news, Uber just led a $170 million investment in Lime (the micromobility scooter company). I think this is smart — both from an overall mobility standpoint and, selfishly, as a shareowner of $UBER. It is being reported that this round of investment values Lime at about $510 million. This is a 79% decline from April 2019 when it raised its last round. So presumably, Uber is getting a pretty good deal here. The bet is that the urban landscape demands multi-modal transportation solutions, everything from bikes and scooters to cars and public transit. There is also an argument to be made that in the short-term, our post-pandemic world is going to gravitate toward individual mobility and away from things like public transit. I’ve heard a few people say that, as we re-open the global economy and try to maintain social distancing, we’re going to face two major mobility bottlenecks: transit and elevators. Sounds like more testing would be a prudent idea.

    Above, I was very careful to say “in the short-term” because I think the narrative that is emerging around the demise of urban density is entirely overblown. Few of us are clamoring to jump back into a mosh pit right now (perhaps a metaphorical mosh pit), but I also don’t believe that we will suddenly look to sprawling Brasilia as a source of urban inspiration. While it is true that “disease did shape architecture in the 20th century” (Alex Bozikovic wrote a good piece on this over the weekend) and that there have been oscillations in terms of how we view urbanity, I also know that this isn’t the first pandemic that our cities have lived through. The Hong Kong flu of 1968 is thought to have killed one million people around the world after, allegedly, emerging in one of the densest cities ever created. Hong Kong’s relationship with Beijing is a tenuous one right now, but it still remains one of the world’s most important global cities.

    Perhaps cities are more resilient than we give them credit for.

    Photo by Touann Gatouillat Vergos on Unsplash

  • The ride-hailing red herring

    There’s a lot of data/speculation out there about the impact of ride-hailing apps. Many dense urban centers are claiming that they have increased traffic (slowed average speeds) and pulled people away from public transit. The University of Toronto published this study last year. And the WSJ recently published this chart for Chicago:

    To be honest, I’m not sure how much of the above is a result of ride-hailing apps, overall urban growth, e-commerce deliveries, public transit disinvestment, or other factors. But what is clear is that ride-hailing is pretty convenient and most (if not all) cities are seeing massive growth in this space.

    But all of this feels to me like a bit of a red herring. People will obviously choose what is most convenient and relatively affordable. And congestion was a problem well before people started using these apps (demand > road supply). The only solution I have seen work is to price congestion/roads.

  • SHARE NOW exits North America (and a few European cities)

    Last week, SHARE NOW — which was previously known as Car2Go — announced that it will be exiting the North American market entirely come February 29, 2020, and that it will also cease operations in London, Brussels, and Florence. A couple of reasons were cited, including the “volatile state of the global mobility landscape,” but that really translates into low adoption:

    Further, despite our best efforts and investments in Brussels, London and Florence over the years, we are unable to continue operations in a manner that’s sustainable for our business due to low adoption rates.

    Moving forward, SHARE NOW will focus on the remaining 18 European cities. We, along with our shareholders, believe these markets show the clearest potential for profitable growth and mobility innovation.

    There was a period of time when I used to use Car2Go here in Toronto. My network did as well. But that quickly stopped with the rise of Uber and Lyft. I mean, why bother finding a Car2Go and then parking it, when there’s a much lower friction option? I would imagine that’s how most people feel. (Maybe there’s a care share advantage for longer trips.)

    At the same time, companies such as Uber and Lyft have, as you know, not performed well as public companies. The market is nervous about their path to profitability. In my view, they’re largely an undifferentiated offering right now, and it’s pretty easy to switch across them. So yeah, I guess the global mobility landscape is pretty volatile.

  • Ride hailing in Toronto

    Earlier this year, the University of Toronto Transportation Research Institute (UTTRI) published this report on the impacts of ride hailing services in the City of Toronto.

    And then today, the Ryerson City Building Institute leveraged it to opine on how “on-demand tech” might improve transit going forward. That’s how I discovered it.

    What is clear from the report is that ride-hailing services — which they refer to as Private Transportation Companies (PTC) — are driven by two dominant use cases: 1) going out at night and 2) commuting to and from work.

    Friday and Saturday nights are by far the busiest periods for PTC travel, with the peak usually happening around midnight on Sunday morning. About 13,100 trips per hour, mostly concentrated in the core.

    Overall, it is estimated that Toronto does about 176,000 daily PTC trips (as of March 2019). That places it behind New York and Chicago in terms of the size of the market. But Toronto also didn’t complete its first PTC until 2014. Here’s a comparison chart:

    Another diagram that I found interesting was the proportion of shared ride trips by neighborhood. It shows that much of the inner suburbs are hailing shared rides — sometimes as high as 45% of all trips. This is interesting because it is people effectively gaming the system.

    Because the population densities are lower in the suburbs than in the core, you’re a lot less likely to get paired with other riders when you select that option. So what tends to happen is that you end up getting a private ride for the price of shared ride. I know I’ve played the odds before.

    If you’d like to download a full copy of the report, click here.

  • Is Toronto’s tech ecosystem too US-centric?

    The Wall Street Journal’s recent piece about “Silicon Valley invading Toronto” is, in my view, describing a generally positive outcome.

    We are one of the largest cities in North America (the exact ranking depends on where you draw the urban boundaries).

    We have more enlightened views around foreign and high-skilled workers (I was given a short window in which to leave the US after I finished my first graduate degree there).

    And we have a large and highly educated pool of tech talent (the salary differential discussed in the article looks to be, at least partially, a result of the weaker Canadian dollar).

    US companies are gobbling up office space in Toronto. And presumably, this is one of the reasons why 139 new flights were added between Toronto and Francisco over the last two years. (Source: WSJ)

    However, I do agree with the remarks from people like Jim Balsillie (Blackberry) and Harley Finkelstein (Shopify) that a better outcome would be the creation of more massively successful Canadian tech companies.

    As Finkelstein points out, there’s a big difference between 100,000 square feet of space for the HQ of a new and growing Canadian tech company and 100,000 square feet for a new branch or satellite office.

    The stats we read in the papers about the number of tech jobs being created in Toronto generally don’t speak to composition. Where in the value chain do these people sit? Where is the value accruing?

    The intellectual capital is here. And we should be doing everything we can to foster and finance new homegrown ideas and businesses.

    Image: WSJ

  • Gender earnings in the gig economy

    Last year, 5 economists published a research paper called “The Gender Earnings Gap in the Gig Economy: Evidence from over a Million Rideshare Drivers.” The authors are 2 economists employed by Uber; 2 professors at Stanford University; and the chairman of the University of Chicago’s economics department.

    The findings were widely discussed, including on Steven Levitt and Stephen Duber’s Freakonomics podcast (Episode 317). What’s interesting about Uber’s ridesharing data is that their compensation algorithm is believed to be entirely gender-blind.

    The formula is pretty simple. It takes into account distance, time, and sometimes a surge multiplier when demand is spiking. Gender does not factor. And the same goes for the actual dispatching of rides. The software doesn’t know who is male and who is female.

    What they discovered is that on average male Uber drives earn about 7% more per hour compared to females. And that 50% of this wage gap can be (apparently) explained by one variable: Men tend to drive a little faster than women. So they complete more rides per hour.

    It’s also worth noting that across the US, only about 27% of Uber drivers are female (at least at the time the report was published). Women also have a higher 6-month attrition rate; 76% compared to 63% for men. In other words, more female drivers drop off the platform.

    If you’re interested in this topic, you should probably have a listen to the Freakonomics podcast. They deliberate on the above in a lot more detail. You can also download a full copy of the research paper, here.

    Photo by Luke Stackpoole on Unsplash

  • Uber Movement introduces new Speeds product

    Since we’re on the topic of large-scale data collection, I thought some of you may be interested in Uber Movement‘s new “Speeds” product.

    First launched in 2017, Uber Movement aggregates anonymized data from their ride-sharing business to create data sets and tools that can help cities make better transportation decisions.

    Below is a (hex cluster) map of Toronto showing average travel times from downtown. I dropped the pin at Toronto City Hall. What is shown is the average for all days of the week during the month of January 2018.

    Uber Movement’s new Speeds product looks at how specific streets are performing relative to their “free-flow speed.” Uber defines this as “the average speed of traffic in the absence of congestion or other adverse conditions.” (The 85th percentile of all speed values.)

    As of right now, Speeds is only available in 5 cities: New York City, Seattle, Cincinnati, Nairobi, and London. Here is a snapshot of London during the same time period as above, January 2018:

    In comparison to what we were talking about yesterday, I have few concerns with the fact that my Uber rides around town have likely contributed to these mappings. With these use cases, the value really only emerges once you aggregate the data.

  • Uber’s seed investors made this much money

    $UBER went public on Friday. Notwithstanding the initial stumble, Uber will go down in history as one of the most lucrative venture capital investments of all time.

    The stock is down from its IPO price of $45 per share, but at that price, the initial seed investment of $510,000 that First Round Capital made back in 2010 was worth about $2.5 billion on Friday.

    Here is a list of some of the other notable investors from Uber’s seed round and what their initial investments grew to over the course of 9 years (chart from the WSJ):

    Of course, for every Uber, there are many more failed companies. And for every investor who turns $5,000 into nearly $25 million, there are many more who decided to pass on the opportunity.

    In the case of Uber, many early investors couldn’t see how the product could go mainstream. It initially started upmarket with limousines, which was actually a clever way to hack the chicken-and-egg problem that plagues marketplaces.

    Many also wondered how many metro areas outside of San Francisco had the kind of urban density and supply and demand drivers to support this kind of a service.

    Today, some nine years later and many billionaires later, lots of people — including myself — are still wondering: Will Uber turn out to be a great (i.e. profitable) business? Hindsight is always 20/20.