With Kalanick Gone, Uber Scales Back Its Global Ambitions – Vanity Fair
Last year, after a Napoleonic battle for market dominance in China that cost billions of dollars, Uber waved the white flag. In 2015, C.E.O. Travis Kalanick had called taking over the People’s Republic his “number-one priority”; months later, the company announced that it would be selling Uber China to local rival Didi Chuxing, creating a new entity worth $35 billion. At the time of the merger, the dramatic concession seemed to mark a turning point for Uber: an acknowledgement of the limits of Kalanick’s dreams of world domination. Now, just weeks after Kalanick stepped down from the company he co-founded amid a wide-ranging sexual harassment and workplace culture scandal, Uber is scaling back its global ambitions once again. On Thursday, Uber announced plans to merge its Russia operation with Yandex, the Russian search giant that also operates a ride-hailing service in the country. The new entity, which has yet to be named and is subject to regulatory approval, would value the new company at $3.4 billion, The New York Times reports.
Uber’s second major concession in the last year reflects a new reality for the world’s most valuable private tech company. For years, Uber expanded aggressively across the globe, raising money, entering new markets (often trampling local laws and regulations), raising more money, and sabotaging its rivals. Its valuation ballooned to $70 billion based off a series of bullish assumptions about its future growth, ability to dominate local ride-hailing markets, and expectations that it would soon begin rolling out driverless cars that would dramatically cut its labor costs. But as Uber grapples with a sexual harassment problem at home—and a lawsuit from Google that has targeted its self-driving program—it also seems to be right-sizing its ambitions abroad. Dozens of major competitors have gained strength in foreign countries Uber once hoped to colonize, with several of them teaming up to form anti-Uber alliances.
Uber’s own spin on the news is positive. “The new company’s goal will be to serve the needs of riders, drivers and cities as we develop a fast-growing, sustainable ridesharing, food delivery and logistics business in the region,” Pierre-Dimitri Gore-Coty, head of Uber’s business in Europe, the Middle East, and Africa, said in a statement announcing the news. “Combining Yandex’s local expertise in search, maps and navigation with our leading global experience in ridesharing will enable us to build the best local services and provide a credible alternative to car ownership across the region.” Last month, the two companies completed more than 35 million rides in Russia, combined; with the new deal, customers can participate in a kind of “roaming” program, wherein Yandex customers can use their app in Uber-dominated countries to hail Uber vehicles, and vice versa.
And in many ways, the partnership is good news for Uber. Yandex not only has a hometown advantage in Russia, Armenia, Azerbaijan, Belarus, Georgia, and Kazakhstan, it also has its own mapping database. And, unlike Uber, Yandex can market itself to its users on its other Internet properties. Instead of competing, the two companies will buttress each other.
Another merger may be less good news for riders, who have enjoyed below-market rates as Uber and its rivals have bloodied themselves battling for market share. But it offers one vision for how companies like Uber can escape the vicious cycle of competing to subsidize rides in a money-losing race to the bottom. Uber’s deal with Yandex shows a company developing a more nuanced, realistic view of the world—one in which Uber must now contend with a legion of local and regional copycats. As Uber searches for a replacement for Kalanick and other executives, the company seems to be coming to grips with the fact that Kalanick’s plans for global domination will have to be downsized if it is to maintain its global foothold.