Uber's Secret Gold Mine

Uber Eats could make up a tenth of the ride-hailing giant’s revenue this year, impressive news for investors in its IPO. But well-capitalized rivals are already trying to tap the same vein.

- Biz Carson

WHEN EARLY INVESTORS WERE PITCHED ON UBER’S ORIGINAL plan for a car-service app in 2008, it wasn’t until the second-to-last slide that they heard delivery could be another money-maker for the business. Ten years later, delivery is no longer an afterthought. According to projections from its CEO, Dara Khosrowshahi, Uber Eats is on track to deliver some $10 billion worth of food worldwide this year, up from an estimated $6 billion-plus last year. Uber takes a 30% cut and a delivery fee, then pays drivers, suggesting that Uber Eats could generate at least $1 billion in revenue this year, or an estimated 7% to 10% of the total. That means Uber Eats is already among the planet’s largest food-delivery services and ranks second in the U.S. behind rival Grubhub (likely $1 billion in 2018 revenue) and ahead of competition like Caviar, Postmates and DoorDash.

Uber could certainly use the extra calories. The money-losing San Francisco-based company was valued at some $76 billion when it last raised money, in August 2018, and bankers hope its IPO, slated for later this year, could boost that to $120 billion. The problem is, there is no way Uber’s core ride-hailing business is worth that much. Its explosive growth is showing signs of slowing, and internationally, the taxi service has struggled, selling its China operations to local rival Didi Chuxing in August 2016, as well as its stakes in Southeast Asia. Uber’s self-driving-car business, once considered the answer to rising driver costs, suspended testing and fired workers after an autonomous Uber killed a pedestrian in March 2018. Now, as Uber prepares to tell investors why they should buy its stock instead of rival Lyft’s, Uber Eats looks like a distinguishing factor.