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Uber CEO Dara Khosrowshahi Outlines New Road Map To Achieving Profitability On A Free Cash Flow Basis

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Read the email CEO Dara Khosrowshahi recently sent to employees

Team Uber —

After earnings, I spent several days meeting investors in New York and Boston. It’s clear that the market is experiencing a seismic shift and we need to react accordingly. My meetings were super clarifying and I wanted to share some thoughts with all of you. As you read them, please bear in mind that while investors don’t run the company, they do own the company—and they’ve entrusted us with running it well. We get to set the strategy and make the decisions, but we need to do so in a way that ultimately serves our shareholders and their long term interests.

1. In times of uncertainty, investors look for safety. They recognize that we are the scaled leader in our categories, but they don’t know how much that’s worth. Channeling Jerry Maguire, we need to show them the money. We have made a ton of progress in terms of profitability, setting a target for $5 billion in Adjusted EBITDA in 2024, but the goalposts have changed. Now it’s about free cash flow. We can (and should) get there fast. There will be companies that put their heads in the sand and are slow to pivot. The tough truth is that many of them will not survive. The average employee at Uber is barely over 30, which means you’ve spent your career in a long and unprecedented bull run. This next period will be different, and it will require a different approach. Rest assured, we are not going to put our heads in the sand. We will meet the moment.

“Investors finally understand that we are a completely different animal than Lyft and other ridesharing-only platforms”

2. Investors finally understand that we are a completely different animal than Lyft and other ridesharing-only platforms. They are incredibly excited about the pace of our innovation, how quickly we are rebounding, and huge growth opportunities like Hailables and Taxi. While they acknowledge that we are winning, they don’t yet know the “size of the prize.” Their questions run the gamut from, “Has anyone other than you made money in on-demand transport?” to “Ridesharing has been around for awhile, why isn’t anyone else profitable?” They see how big the TAM is, they just don’t understand how that translates into significant profits and free cash flow. We have to show them.

3. Investors are happy with Delivery’s growth coming out of the pandemic and see that we have performed better than many other pandemic winners. I must admit that was a bit of a surprise for me because I firmly believe Delivery should be growing even faster. The primary questions were: “Is Delivery a good business and why?” and “What happens if we enter a recession?” We need to answer both of these questions with undeniably strong results.

4. Investors who asked about Freight love Freight. However, less than 10% of them asked about it. Freight needs to get even bigger so that investors recognize its value and love it as much as I do.

5. Meeting the moment means making trade-offs. The hurdle rate for our investments has gotten higher, and that means that some initiatives that require substantial capital will be slowed. We have to make sure our unit economics work before we go big. The least efficient marketing and incentive spend will be pulled back. We will treat hiring as a privilege and be deliberate about when and where we add headcount. We will be even more hardcore about costs across the board.

“The market is experiencing a seismic shift and we need to react accordingly.”

6. We have started to demonstrate the Power of the Platform, which is a structural advantage that sets us apart. As you know, our strategy here is simple: bring in consumers on either Mobility or Delivery, encourage them to try the other, and tie everything together with a compelling membership program. The advantage here is obvious, but we have to show the value of the platform in real dollar terms. We are serving multi-trillion dollar markets, but market size is irrelevant if it doesn’t translate into profit.

7. We have to do all of the above while continuing to deliver an outstanding and differentiated experience for consumers and earners. Whether someone is booking rides for a summer trip with friends, or a new parent relying on Uber Eats for everything from groceries to dinner and diapers, it’s on us to make every interaction excellent. The same goes for anyone who comes to Uber to earn. We responded to the pandemic by becoming earner-centric in a way we’d never been before. We are innovating for earners, thinking deeply about their experience, and putting ourselves in their shoes—literally—by driving, delivering and shopping ourselves. Because of hundreds of improvements in this area, people who want to earn flexibly are now coming to Uber first, where they benefit from our scale, diversification, and commitment to treating them with respect.

I’ve never been more certain that we will win. But it’s going to demand the best of our DNA: hustle, grit, and category-defining innovation. In some places we’ll have to pull back to sprint ahead. We will absolutely have to do more with less. This will not be easy, but it will be epic. Remember who we are. We are Uber, a once-in-a-generation company that became a verb and changed the world forever. Let’s write the next chapter of our story, working together as #OneUber, and let’s make it legendary.

GO GET IT!

Dara

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Businessuite News24 International

TELSTRA Officially Acquires DIGICEL PACIFIC

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TELSTRA, Australia’s leading telecommunications and technology company, today announced it has officially acquired Digicel Pacific in partnership with the Australian Government. Telstra will continue to invest in and operate the business across its six South Pacific markets – Papua New Guinea, Fiji, Nauru, Samoa, Tonga and Vanuatu.

Oliver Camplin-Warner, Telstra International CEO, said the deal was an exciting milestone for the Digicel Pacific business and its customers in Papua New Guinea.

“We’re very pleased to welcome Digicel Pacific into the Telstra family. The Digicel Pacific team in PNG have amazing local expertise and are leaders in digital experiences for their customers. Together, we’ll work to ensure Digicel Pacific remains the top provider in PNG,” he said.

Mr Camplin-Warner confirmed there would not be any local job losses in the Pacific as part of the acquisition and the current Digicel Pacific team would continue the day-to-day running of the business.

“Digicel Pacific will still have the same people and products that their PNG customers know and love today,” he said.

“Telstra will add to these strengths with our more than one hundred years’ experience building and operating the largest mobile network in Australia, and our operations in more than 20 countries world-wide.”

“As part of our commitment to building a strong and sustainable PNG, Digicel Pacific will invest in an additional 115 towers which will be built across PNG over the next two years,” Mr Camplin-Warner added.

“This investment will mean continued improvements to 4G coverage, particularly in rural areas, which will bring with it opportunities to improve health, education, agricultural, commerce and cultural outcomes through the use of technology.”

Colin Stone, CEO, Digicel Papua New Guinea, said Telstra’s expertise in rolling out world-class networks and connecting remote communities would greatly enhance the work to date of Digicel and benefit the people and businesses of PNG.

“Telstra has experience connecting regional and remote customers in challenging geographies across mountains, deserts, rainforests and coastlines,” Mr Stone said.

“We’re looking forward to Telstra applying its network experience as well as its innovation and technology solutions to PNG to continue increasing connectivity in the region as Digicel has been doing for the past 14 years.”

Mr Camplin-Warner said the values of both Telstra and Digicel Pacific were a natural fit, with the companies committed to working together to build a connected future for everyone.

“We strongly believe we are “better together”, and this includes how we both work to support some of the most vulnerable in our communities,” he said.

“Telstra strongly supports Digicel Pacific’s grass roots community investments through the Digicel Foundation, and we are committed to seeing this work continue.”

Photo: Collin Stone, Digicel PNG CEO

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Tiktok’s Battle-Tested Business Model, Unconventional In The West But Well-Practiced By Its Chinese Parent Bytedance.

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“There are several ways to measure TikTok’s success: It took just four years to reach 1 billion monthly users; its average user in the US spends more time with the service than with Facebook and Instagram put together; and its most popular video, an 18-second clip of someone flying on a magic broomstick, has claimed 2.2 billion views.

But what of TikTok’s moneymaking power? I wrote about the ways that the app’s operators are turning its popularity into a huge business in the latest issue of Bloomberg Businessweek. To rival and outdo social and ad giants like Meta Platforms Inc. and Alphabet Inc.’s Google, TikTok relies on a battle-tested business model that’s unconventional in the west but well-practiced by its Chinese parent ByteDance Ltd. Here’s a look at the ingredients.

At the core of TikTok’s appeal is Its Algorithm, the ability to discern a user’s likes and dislikes from their activity on the platform, picking up on how long you watch, say, a cat video or a cooking tutorial. The same model of content distribution is now being used on ads and sponsored content, helping TikTok serve more appealing ads and triple its ad revenue to an estimated $12 billion this year. Even Meta is now trying to rewrite the algorithms of Facebook and Instagram, so its services can surprise and delight people with videos they didn’t know they wanted to see. It’s a departure from Meta’s old approach of filling a user’s feed based on their social connections.

The other key thing is Branding. TikTok’s most lucrative ad accounts feature companies more interested in building their brands than stimulating direct sales. McDonald’s Corp., for instance, won’t count on TikTok to sell burgers, but it will likely want to use the platform to woo the young people using it. TikTok connects brands with influencers and helps them create viral challenges, goofy camera effects and immersive full-screen videos. That’s why its motto goes, “Don’t make ads. Make TikToks.”

On top of all that, TikTok is jumping into E-Commerce in ways that could challenge Amazon.com Inc. It’s rolled out an in-app marketplace in regions like Southeast Asia and the UK, where users can jump from live streams and short videos to shopping portals without friction. The idea is to create a closed loop where TikTok handles each and every step from a user discovering something to actually purchasing it — instead of directing them to an Amazon listing or a Shopify Inc.-powered web store.

To be sure, TikTok and ByteDance still have enormous challenges ahead. For one thing, commercial success across the globe demands navigating fragmented markets that don’t share the same culture, user preferences, regulations or tech infrastructure. And politics remains a big risk, even after TikTok survived President Donald Trump’s attempted ban. The perceived security threat from TikTok’s handling of US user data probably won’t go away as long as Beijing and Washington keep tussling in the geopolitics arena.”

Source: TikTok Turns On the Money Machine By Zheping Huang

 

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Businessuite News24 International

India Is Fast Emerging As A Global Leader In A New Type Of Online Retailing: Quick Commerce.

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Big investors including Google, Reliance Industries, and SoftBank Group have poured billions of dollars into startups promising to bring that next order of curry-ready chicken, cat food, or crunchy aloo bhujia chickpea snacks within minutes, rather than hours or days. Relying on discounts and free delivery to woo customers who make purchases through mobile apps, the companies fill orders at neighborhood warehouses called dark stores, then use algorithms to send drivers on the fastest routes through the crowded roads of Delhi, Mumbai, Bengaluru (formerly known as Bangalore), and other cities.

Although groceries sold online account for just 2% of all grocery retail sales in India, they’re one of the fastest-growing segments of commerce and are considered essential for anyone dreaming of dominating e-commerce. And in a country where food and daily necessities—categories tailor-made for get-it-now delivery—make up about two-thirds of the $1 trillion in annual retail spending, startups are wagering that quick commerce can change grocery shopping habits and make them rich in the process.

Source: Bloomberg

https://www.bloomberg.com/news/articles/2022-06-22/swiggy-zepto-power-india-s-ultrafast-grocery-delivery-boom?cmpid=BBD062322_TECH&utm_medium=email&utm_source=newsletter&utm_term=220623&utm_campaign=tech

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Businessuite News24 International

Amazon Launches Buy with Prime, A Direct Threat To Shopify

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In April, Amazon unveiled the service, called Buy with Prime, currently available on an invite-only basis. It extends the familiar Prime brand to third-party websites and offers shipping through Amazon’s logistics network—exactly the piece that Shopify’s service is missing. It also threatens to supplant Shopify’s popular payment tool, Shop Pay, and undercut one of the company’s strengths in the eyes of Wall Street. “Buy with Prime is about the brand, and the price of that brand is Amazon Payments,” wrote Ben Thompson in his daily newsletter, Stratechery.

Source Brad Stone @ Bloomberg

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Businessuite News24 International

Shopify’s Lack Of Fulfilment Support Leaves Merchants On their Own

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Among the many issues now weighing on Shopify, is the matter of fulfilment.

Shopify helps merchants make online sales, but when it comes to storing and shipping their products, it either brokers deals with third-party warehouses and transportation companies or leaves the last mile entirely to the seller. When asked about this, founder-CEO Lütke admitted logistics “is a tough nut to crack for byte companies” and suggested Shopify would shy away from owning and operating Amazon-style warehouses.

But he’s in a tricky position. Shopify merchants need help delivering parcels quickly and reliably. At the same time, investors tremble at the massive expense of operating fulfillment centers and delivering packages.

Shopify merchants need help delivering parcels quickly and reliably.

Last month, the company said it was buying a fulfillment company called Deliverr Inc. for $2.1 billion, and merging its capabilities with a robotics company it had previously acquired, 6 River Systems.

Shopify’s stock is down 30% since news of the acquisition talks broke last month, far exceeding market-wide declines. Whatever it does, Shopify risks antagonizing either its customers or investors.

Source Brad Stone @Bloomberg

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