Uber, the ride-sharing service that wants to disrupt the taxi business around the world, has provided an impressive demonstration of how a smart technology startup can shake up an established industry in record time.
Now it's offering a new example – of how a few outrageous comments can smash a company's reputation and turn it from admired rebel to widely condemned bully in less than a week.
The comments in question came from Emil Michael, an Uber executive, who told a group of reporters at a Friday night dinner that the company was prepared to dig up dirt on critical journalists and launch a smear campaign against one critic in particular. Clueless only begins to describe Mr. Michael's behaviour.
He has since apologized, but the damage from his comments will persist. At the very least, it's going to encourage the anti-Uber movement in cities from Seoul to Brussels. In Toronto, city staffers were already seeking to ban the company, seeing it as an unregulated taxi service that flouts municipal regulations. Mayor-elect John Tory disagrees, but it's by no means certain his opinion will prevail.
Whoever wins that particular fight, many people will find it difficult to look at Uber the same way in the aftermath of Mr. Michael's comments. No longer is it the cool app that lets you summon a ride at will while avoiding smelly taxis and surly drivers. Now it's the company that gets nasty with critics.
The furor may wind up focusing attention on probably the weakest point in Uber's business model – its treatment of drivers. For all the company's talk about technology, its true genius lies in finding a convenient way for people to undercut one another. Uber isn't cheap primarily because of software; it's cheap because its legions of independent drivers work for not that much money.
While the company boasts that a driver makes a median income of $90,000 (U.S.) a year in New York and up to $60,000 in Dallas, those numbers appear to ignore all the expenses involved in operating a vehicle, from gas and bridge tolls to insurance and car payments. Buzzfeed, the site that was the first to report Mr. Michael's comments, followed up with an article that surveyed 11 random Uber drivers. It concluded that a more reasonable estimate of how much a full-time driver might make after expenses is around $34,000 a year.
Those modest salary figures punch a hole in Uber's preferred narrative, which is all about harnessing the power of mobile communications to create better possibilities for riders and more business for drivers. If Buzzfeed's salary estimates are right, Uber drivers don't actually do so well after all.
But how about riders? Many of us cheered for Uber because we were tired of the old system. There's no good reason for a few taxi companies to hold a monopoly on a city's cars-for-hire. As Uber and competitors like Lyft demonstrate, there are better technological alternatives.
But Uber's arrogance is likely to spark a search in many cities for new alternatives, one that might involve minimum compensation guarantees for drivers and limits on the "surge" pricing that the company likes to employ to hike fees at times of maximum demand.
Uber, which was valued at $17-billion this summer, is big enough to make concessions. And it would be wise to do so, before opposition hardens.