When early investors were pitched on Uber’s original plan for a car-service app in 2008, it wasn’t until the second-to-last slide that they heard delivery could be another moneymaker for the business. Ten years later, delivery is no longer an afterthought. According to projections from its CEO, Dara Khosrowshahi, Uber Eats is on track to deliver some $10 billion worth of food worldwide this year, up from an estimated $6 billion-plus last year. Uber takes a 30% cut and a delivery fee, then pays drivers, suggesting that Uber Eats could generate at least $1 billion in revenue this year, or an estimated 7% to 10% of the total. That means Uber Eats is already among the planet’s largest food-delivery services and ranks second in the U.S. behind rival Grubhub (likely $1 billion in 2018 revenue) and ahead of competition like Caviar, Postmates and DoorDash.
…But despite the growth, Uber Eats is losing lots of money, and even Khosrowshahi doesn’t know when it will be profitable. Potential Uber investors will have to decide: Is food delivery a smart bet on future growth or a fool’s errand in a crowded market?
…Making money on delivery isn’t easy. Sure, Uber Eats gets a hefty chunk of a restaurant’s bill and charges a delivery fee, generally between $2 to $8. But Uber has to pay the driver to pick up and drop off the food, plus market the service. Uber’s share of the bill is lower, on average, than in the ride-hailing business. Restaurants are, at best, semi-willing partners that can ill afford a 30% blow to their bottom lines. And since Uber isn’t (yet) willing to have your meal share a ride with a paying customer, there are fewer network efficiencies to capitalize on.