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Uber conquered taxis. Now it’s going after everything else

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Uber conquered taxis. Now it’s going after everything else

There’s no shortage of companies claiming to be the Uber of their industry, whether it’s food delivery, flowers, mattresses or medicinal marijuana.

But what happens when the real Uber — the one with a $62.5-billion valuation and a global footprint — decides that it wants to expand into other on-demand markets?

“That puts these new start-ups in an interesting position,” said Ted Graham, coauthor of “The Uber of Everything,” a book about the on-demand economy.  “If you’re pitching yourself as the X for Y, then the real X for Y is X,” he said.

With the March rollout of the food delivery app UberEats and last year’s launch of UberRush — an on-demand package delivery service for online sellers in San Francisco, Chicago and New York — the San Francisco company, which rose to prominence transporting people, is now seeing if it has what it takes to be the Uber of everything.

Diversification wasn’t always on the cards for Uber, though. According to Bill Gurley, an Uber investor and partner at Benchmark Capital, investors see the size and potential of Uber’s core business as being so massive it doesn’t need to expand into other fields. As recently as last year when the company was fundraising, Gurley said it didn’t even mention expanding beyond ride-hailing when pitching investors.

But the better Uber got at moving people, the more it made sense for it to move other things, too. The company — which is a gorilla in the ride-hailing world, dwarfing its nearest U.S. competitor, Lyft, in valuation by more than 10-fold — now has a division called UberEverything, whose job is to identify opportunities outside of its rides business.

“It might be the fastest-growing company in the history of Silicon Valley,” Gurley said. “They’re diversifying out of opportunity.”

For pundits in Silicon Valley, Uber’s expansion into everything else was never a matter of if but when. If the company could figure out how to transport people in a quick and reliable way, why couldn’t it do the same for a sandwich?

“If you look at why Uber’s valuation is more than [10 times that] of Lyft, it’s driven by three things,” said Kyle Lui, an investor at venture capital firm DCM Ventures, which has not invested in Uber.

First, he said, it’s because Uber is much bigger than Lyft. Second, it has a bigger presence internationally.

“And third, growth in areas such as logistics and food delivery may account for a relatively small part of the valuation uptick, but it’s not trivial,” Lui said. “Even if you value it at $5 billion, that’s the entire valuation of Lyft.”

Analysts say the opportunity is too tempting for Uber not to take, considering that the company already boasts a significant head start.

Millions of people already have the Uber app installed on their phones. Uber has more than 400,000 drivers in the U.S. who could just as easily start delivering food or parcels as they do passengers. Most of the infrastructure — the mapping technology, the algorithms, the workforce — is already there.

“Everything we’re building is on top of a platform that already exists,” said Jason Droege, a former Taser executive who joined Uber two years ago to head up UberEverything.

More importantly, Uber boasts something few competitors can claim: It’s a household name that customers already know and trust.

“It’s not much work to say, ‘Hey, if you’re going to trust us to move you around, which is maybe the highest bar for trust, will you trust us to move your food to you quickly, efficiently and inexpensively?’” Droege said.

While companies looking to get into food or package delivery have to persuade potential customers to download their app and sign up for the service, Uber simply needs to update its app, and “when people open the Uber app the next morning, poof, it’s a food delivery company too,” said Paul Barter, who co-wrote “The Uber of Everything” with Graham.

Which is exactly what the company did when it launched UberFresh, now known as UberEats, in Los Angeles in 2014. It started by adding a tab within the main Uber app, from which users could order a meal on demand. Having gained traction, UberEats is now a stand-alone app available in more than a dozen cities. The day it launched, it shot to No. 1 in the Apple App Store’s food and drink category, ahead of McDonald’s, Starbucks and Domino’s Pizza.

This spells trouble for smaller players.

This year Berkeley start-up SpoonRocket was among the first on-demand food companies to close shop, citing intense competition and a tough funding environment. The company coincidentally ceased operations in the same week that Uber launched the UberEats app.

Sidecar, an Uber competitor that also moved into package delivery, sold its assets to General Motors late last year, citing stiff competition from Uber.

But just because a company excels at one thing does not mean that it will dominate another.

Google is irrefutably the king of search, yet its social network Google Plus struggled to compete with Facebook and Instagram, and is now widely regarded as a failure. Amazon is a giant in e-commerce, but even it stumbled in its foray into hardware. Its Fire phone was such a flop it was discounted from $199 to $1 on a two-year plan.

Diversifying is risky, and Uber could stumble. It’s hard to maintain freshness when food is sitting in a car. Food safety issues could be a sticking point. As the company expands into other industries, Gartner analyst Jennifer Polk said it will naturally run into competitors. And unlike the transportation industry, where Uber ran into slow-moving taxi incumbents, the food and package delivery space is already full of tech-savvy start-ups bent on disrupting their industry.

“They’re going to run into competition potentially as innovative as Uber is,” Polk said. “So the question is going to be what gives them an edge in that space. They need to think critically about what problems they’re solving.”

It’s too soon to know whether Uber will succeed outside of ride-hailing. Droege says the company doesn’t even think in such terms — his division is simply identifying problems that it can solve. Its ambition isn’t to be the Uber for everything.

The name, though, suggests otherwise.

tracey.lien@latimes.com

Twitter: @traceylien

 


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