At first glance, yesterday’s bombshell that Uber had slashed 400 people from its marketing department—this on the heels of an $8.1 billion IPO that drove its total marketing value to $75.5 billion—felt counterintuitive. If Uber’s goal is to be the leader in on-demand mobility, recapture some of the public esteem of its early days and, ultimately, turn a profit, why would it take a hatchet to the department that can help get it there?
Look under the hood, however, and the move makes more strategic sense. According to industry watchers, not only do Uber’s layoffs signal a logical (if perhaps severe) step toward its goals, they also underscore many of the problems that have plagued the ride-hailing app for a long while now.
Monday’s layoffs reduced Uber’s marketing team by roughly a third. It was also not the first time that the Grim Reaper came calling in recent weeks.
Thanks in part to Wall Street’s reservations over Uber’s prospects for long-term profitability and Uber’s stock taking a tumble on its very first day of trading on May 10, CEO Dara Khosrowshahi handed walking papers to CMO Rebecca Messina, who was a mere nine months into her tenure.
In June, Khosrowshahi reorganized the marketing department under communications chief Jill Hazelbaker, explaining in an email to staffers that it was both “increasingly clear that it’s crucial for us to have a consistent, unified narrative,” and that, coming off the IPO, it was “a good moment to simplify our org and set us up for the future.”
In light of yesterday’s move, Khosrowshahi sent staffers another email, part of which Uber sent to Adweek in response to a request for a comment on its strategy. It read in part: “We are not making these changes because marketing has become less important to Uber. The exact opposite is true: we are making these changes because presenting a powerful, unified, and dynamic vision to the world has never been more important. Under Jill’s leadership, Marketing will soon be operating at full strength.”
While such phrasing might sound like the usual corporate boilerplate, there is a real-world grounding to it. For one thing, Uber does appear to need a more unified approach. Its marketing department had grown overweight, muddling its decision-making structure. As the New York Times reported, one organizational chart had stretched to 388 pages.
And, bloating issues aside, it’s also the case that when companies look for places to cut, marketing is often the first place they begin.
“Uber is obviously striving to contain costs as a publicly traded company, and marketing is historically a target for any publicly traded business trying to contain costs,” notes brand consultant David J. Deal. “In that regard, I wasn’t terribly surprised [at the layoffs]. Marketing is always a big target when companies have to cut costs.”
But Deal adds that Uber’s staff-reduction move makes strategic sense for reasons that go well beyond simple fat trimming. Foremost among them: Lyft has eaten its lunch.
After introducing the tagline “It matters how you get there” in 2017, Lyft turned out funny and popular pieces of advertising that stressed how life choices are more important than carfare. Meanwhile, its “Round up and donate” initiative (which allowed riders to donate the rounded-dollar amounts of their fares to charities including Black Girls Code) positioned Lyft as the socially conscious hero of ride-booking companies. These efforts made Lyft look like a big thinker and category leader—helping to push Lyft’s market share from 2016’s 22% to the 39% it claimed earlier this year.
“Uber is trying to regain control of its own brand narrative,” Deal said. “For years it was known as the disruptive innovator driving the growth of the on-demand economy. Lyft has stolen that narrative, and Uber is trying to regain control of it.”
What’s more, yesterday’s marketing staff cuts speak not only to Uber’s need to regain control, but how Uber is likely to regain it.
Uber has increasingly devoted its marketing resources to ad tech, and yesterday’s reduction in staff would seem to confirm that the future direction of its brand will increasingly depend on emerging technologies.
“Not only has Uber been investing more in ad tech, but it hired Mike Strickman,” said Deal, referring to the former TripAdvisor executive who has assumed the role of vp of performance marketing and and growth at Uber. “It’s notable that his job [will] focus on performance marketing. That says it all. [At TripAdvisor] he was in charge of measurement. This is another sign that Uber is moving toward the automation of marketing.”
Uber has been moving in this direction for some time now. After poaching Bennett Rosenblatt from programmatic firm MediaMath in 2015, Uber shifted most of its ad-tech operations in house. As Rosenblatt explained last year, the move was driven by Uber’s desire to steer its ad-tech strategy toward reinvigorating its existing consumer base instead of the more customary casting about for new riders.
Another development that might be informing the change is Uber’s unfolding series of lawsuits against many of its agency and ad-tech partners. Last month, the suit it filed in 2017 against ad agency Fetch expanded to include five mobile ad-tech firms that had worked with Fetch.
Whatever direction Uber decides to move with its marketing, yesterday’s layoffs also point to the company’s need to address deeper, more systemic problems with its business model.
“Despite all the cash that Uber has brought in from investors and the IPO, it clearly is struggling financially,” observes veteran auto-industry watcher Paul A. Eisenstein, publisher of The Detroit Bureau. Uber, he says, “has to start functioning like a real business rather than a technology firm that can almost ignore the financials that you would normally think a business has to focus on.”
What would functioning like a real business mean? For one thing, Eisenstein says, Uber is likely realizing that it’s time to reassess a business model that presumes that self-driving cars (which would allow the company to eliminate the major cost center of human drivers) are just around the next bend.
According to J.D. Power’s just-released Mobility Confidence Index Study, developed from the input of 10,000 drivers and technology authorities, autonomous vehicles are still at least a decade off—not just the technology itself, but consumers’ confidence in it.
“As automakers head down the developmental road to self-driving vehicles and greater electrification, it’s important to know if consumers are on the same road—and headed in the same direction,” wrote J.D. Power’s executive director of driver interaction, Kristin Kolodge, in a statement. “That doesn’t seem to be the case right now.”
If Power’s findings are accurate, it means that Uber’s dream of profitability could be even further off than many believed. And, in turn, Wall Street’s demands for black ink will put even more pressure on Uber to strategize its way to profitability—including having a marketing department in step with that pressure.
Uber’s recent layoff, Eisenstein ventures, “may reflect a bit of reality about the timing of its long-term plans. Uber has been of the mindset that it needs to get fully driverless vehicles out there before it would be able to truly turn a profit. And as a new J.D. Power study has emphasized, it’s going to take a lot longer than a lot of people had thought. So that may be leading the folks who are running Uber to take another look at their strategy—and start to say they need to base their brand more on the realities of today than the promises of a high-tech tomorrow.”
With additional reporting by Shoshana Wodinsky.