Uber’s burgeoning in-app ads business drives first profitable quarter in its history
The ride-hailing and delivery service’s latest quarterly earnings, filed on Tuesday morning, suggest positive roads ahead.
Uber's growing advertising business is fueling its financial success / Charles Deluvio
Uber has posted a positive operating profit for the first time in its nearly decade-and-a-half-long history.
The company’s second-quarter earnings, representing performance for the three months through June, were filed on Tuesday morning. They document the company’s first-ever operating profit. Additionally, the company saw gross bookings up 16% year-over-year (YoY) to $33.6bn, with ride bookings up 25% YoY and delivery bookings up 12% YoY. On average, this equates to an average of 25m trips a day across the company’s various markets. Uber also posted an adjusted Ebitda (earnings before interest, tax, depreciation and amortization) of $916m, representing a $552m YoY lift.
Although revenue fell short of Wall Street analysts’ projections, increasing 14% YoY to $9.2bn, the company’s leadership expressed confidence in the company’s financials.
“Robust demand, new growth initiatives and continued cost discipline resulted in an excellent quarter, with trips up 22% and a Gaap [Generally Accepted Accounting Principles] operating profit, for the first time in Uber’s history,” said Dara Khosrowshahi, the company’s chief executive, in a statement. “These results also translated into strong driver and courier engagement, with 6 million drivers and couriers earning a record $15.1bn during the quarter.”
Though Uber’s increasing profits can be attributed to a number of factors – including layoffs that affected about 3% of its staff and a cutback on discounts and incentives for both riders and drivers – among the largest influences has been its burgeoning advertising business.
The company created new advertising opportunities on its app in recent months, achieving a revenue run-rate from advertising exceeding $650m during the quarter. The company has said publicly that it plans to grow its ads business into a $1bn operation by 2024.
Though Uber introduced display ads on Uber Eats in 2019 and cartop ads in 2020, it didn’t begin testing in-app video ads on its ride-hailing platform until last year, launching its inaugural Journey Ads program in October.
And it’s this part of Uber’s advertising business that offers the most potential, according to Mark Grether, Uber Advertising’s general manager. In an interview with The Drum in June, he said: “On average, it’s about two minutes that the consumer has the app open. So, it’s 100% share of voice in those two minutes, which is so much more than an advertiser sees on a social platform. And therefore, the engagement rates are super high, north of 3%. So, it’s really powerful – especially based on the data that we have about the consumers and how we can combine Rider and Eats data to really make ads relevant.”
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At the time, Grether explained that his vision for Uber’s in-app advertising business involves shifting toward targeted, high-production video placements much like those found on television and video streaming platforms today. “The idea here is really to go into more CTV types of advertising campaigns. It’s basically your TV placement,” he said. “In the US at least, we spend about eight hours a week in the car – and in the future, you’ll either be driven by an Uber driver or it will be self-driving. As a consequence, the car will become your living room and the screen will become your next TV screen. And that’s a really powerful idea if you think about it.”
The company’s leadership appears bullish on the direction of the business. On an investor call Tuesday morning, Khosrowshahi said: “With continued rigor around costs and a balanced capital allocation approach, we are well-positioned to sustain strong incremental profit generation. We also know that expectations – rightly – are only getting higher.”
Despite the strong results, the company’s stock – which has nearly doubled this year already – fell more than 5% in the hours following the announcement Tuesday.
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