Uber’s presumptive new CEO, Dara Khosrowshahi, has an impressive résumé, including stints as an investment banker, chief financial officer, and CEO. He’ll need all of those skills and more to help the ride-hailing company overcome scandals, internal dissension, and depleted executive ranks.
Uber upended the decades-old taxi industry and grew to be the world’s most highly valued startup by connecting drivers and passengers through a smartphone app. But it now faces resistance from some drivers unhappy with their cut of fares and some passengers put off by reports of spying on riders and allegations of harassment by executives. Cofounder and former CEO Travis Kalanick stepped down under pressure from the board in June, and the company has been run by committee for the past two months. In the boardroom, directors are openly squabbling over the future of the company.
Uber remains the most popular ride-hailing app. Axios reported last week that Uber’s bookings grew 17 percent in the second quarter, compared with the prior quarter. Adjusted revenue after paying drivers totaled $1.75 billion, up from $800 million the year before.
But Khosrowshahi must find a way to stem Uber’s losses, which totaled $645 million in the quarter, according to Axios. Uber has essentially been using its $8.8 billion war chest to subsidize rides.
“The stain of all their crises is, at least in the short term, almost entirely removable by reducing prices,” says Richard Levick, who runs the crisis communications firm Levick. In the long run, though, cutting prices will hinder Uber’s ability to turn a profit. Plus, Levick says, much of Uber’s goodwill from its early days is long since gone, leaving it brittle to any future scandals or problems. “Apple and Amazon win the trust of the customers and built up a trust bank,” he says. “Uber has spent its trust bank.”
Competition is intensifying. The Information reported earlier this month that rival Lyft has been gaining market share in many US cities, and now controls 20 to 30 percent of the market in some places. Analytics company App Annie says Uber’s lead over Lyft in new downloads has been shrinking.
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The 48-year-old Khosrowshahi has proved himself an adept dealmaker across a nearly three-decade career in finance and consumer-internet businesses. He spent eight years at technology-and-media focused investment bank Allen & Co., then joined IAC Interactive after helping company founder Barry Diller acquire travel website Expedia in 2001. He became CEO of Expedia as it went public in 2005, and led the company through a decade of acquisitions, growth, and stock appreciation. One measure of his impact: Expedia shares fell 4.5 percent Monday on news that Khosrowshahi was leaving.
When Khosrowshahi joined Expedia, he inherited a troubled business model. Technology analyst and blogger Ben Thompson says Khosrowshahi took a big risk by rebuilding, rather than patching, the system. Thompson wrote Monday that Khosrowshahi’s “patience and resolve to fix problems at their root,” could prove crucial at Uber. The transformation Khosrowshahi spearheaded at Expedia moved the travel company away from the “merchant model” of buying rooms at a wholesale rate and then selling the rooms to users, towards an “agency model,” where Expedia collects a commission on rooms booked through its site. Uber essentially operates on an agency model, collecting a commission on each ride.
Thompson says Uber’s system for paying drivers—offering lower rates per ride but bonuses for hitting specified targets—deters part-time drivers. He says Uber’s need to reform this system is similar to Khosrowshahi’s experience transitioning Expedia’s business model.
A bigger problem in the short term, says David Yoffie a professor at Harvard Business School, is the need to fill out Uber’s executive ranks. Kalanick is among more than a dozen executives to leave their jobs this year, including president Jeff Jones, head of finance Gautam Gupta, and senior vice president of engineering Amit Singhal. “You can’t run a company by committee which is how they’ve been run for three months now,” Yoffie says.
Khosrowshahi may be well positioned to solve this problem. Although he’s is based in Bellevue, Washington, where Expedia is headquartered, Khosrowshahi has significant ties to Silicon Valley and “one of the most extensive family networks of anyone working in the technology industry today,” says the Washington Post. His brother, Kaveh Khosrowshahi is managing director of Allen & Co., and his twin cousins, Ali and Hadi Partovi, are early investors in Uber, Airbnb, Dropbox, and Facebook, and cofounded the nonprofit Code.org.
Reforming the top level of management would also be the first step towards reforming the company’s corporate culture, which is at the root of its many scandals. But Levick says Khosrowshahi should also make efforts to attract more a more diverse talent pool through aggressive–and highly visible–recruiting programs. “Uber needs to become synonymous with opportunity, not misogyny,” he says.
Khosrowshahi may have one other thing going for him: The many people who have never used, or heard of, ride-hailing. A survey by Pew Research published last year found that only 15 percent of respondents in the US had used a ride hailing app like Uber or Lyft, and about one-third percent of respondents had not heard of either company.