Uber Flywheel Effect: 34% of Users are Now Multi-Service
February 25, 2024
This Week in The Autonomy Economy, The Road to Autonomy Index returned 1.99%, the Uber flywheel effect became more evident and NVIDIA reported Q4 FY 2024 GAAP earnings per diluted share of $4.93, up 33% from the previous quarter and up 765% year-over-year.
Bloomberg reported Cruise is looking to restart their robo-taxi service in Texas and the California Public Utilities Commission (CPUC) put Waymo’s expansion plans on hold until June 19th.
Cruise parent GM, NVIDIA and Waymo parent Alphabet are The Road to Autonomy Index component companies
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What’s Moving the Markets
The Uber Flywheel Effect
The Uber flywheel effect is working. 34% of Uber customers are now actively using multiple Uber services each month, up from 21% in Q1 2021. These users spend over 3x more than single-product customers, up from 3x in Q4 2021.
We expect more Uber customers to convert to multiple product customers over the coming quarters and to further accelerate in the future when Uber fully flushes out their Uber One membership program.
Today, the Uber One program currently has 19 million members paying $9.99 a month, generating over $189 million in yearly revenue. Membership has grown 3x since Q4 2021.
If this pattern holds, Uber One membership could grow to 57 million members by Q4 2025, generating an estimated $569.4 million in yearly membership revenue.
Yearly membership revenue could reach $1.498 billion if Uber were able to convert all 150 million monthly active platform customers (Q4 23) to Uber One memberships.
In comparison, American Express generated $7.3 billion in annual membership revenue (FY 2023). Kevin Barker, Equity Research Analyst at Piper Sandler expects American Express to refresh the Platinum Card this year with new benefits for customers, while increasing annual card fees. Mr. Barker sees AMEX card fee revenue growing 15% in FY24.
In our opinion, Uber should look to replicate the American Express Rewards Program by adding new features and creating a uniquely Uber rewards program. Replicating this model would enable Uber to increase the price of Uber One further accelerating revenue growth.
Uber One could become the next growth opportunity for Uber behind advertising. Currently Uber has 550,000 advertisers on the platform, generating $900 million in yearly advertising revenue.
Advertising revenue is projected to surpass $1 billion in 2024 and could further accelerate if Uber expands off-platform. Advertising is a high-margin business that could increase Uber’s recently announced $7 billion share buyback program.
When Uber’s core business of Rides and UberEats is combined with Uber One and advertising and you have a flywheel effect that will continue to grow and compliment each business.
Now factor in their asset-light approach to autonomous vehicles where Uber collects a transaction fee for each ride conducted on their platform, you have the next potential element of the flywheel after membership and advertising.
Our take: The Uber flywheel is merely getting started. Big things are coming as Dara Khosrowshahi and Prashanth Mahendra-Rajah continue to execute the Uber business model of being an asset-light platform that grows free-cash flow quarter-over-quarter.
Uber is a The Road to Autonomy Index component company
Soon To Be On The Road Again
On February 22nd, Bloomberg reported Cruise is preparing to restart testing of autonomous vehicles with safety drivers in Houston and Dallas. Testing in Houston with safety drivers is excepted to start in the coming months.
This is another step in the right direction for Cruise 2.0 after the hiring of Steve Kenner as Chief Safety Officer on February 12th. Pivoting away from the bureaucracy and regulatory environment of California to Texas was the right decision. It was a decision that Cruise 1.0 considered, but ultimately did not make.
If Cruise 1.0 went through with their plans to move the company’s headquarters to Miami and make the city their base of operations in 2021, the unfortunate incident from October 2nd might not have never occurred.
That unfortunate incident could end up being a blessing in disguise for GM and Cruise. Cruise 2.0 leadership appears to have a clear understanding of the regulatory environment and where the best locations are to test and commercialize a robo-taxi service.
But is scaling and operating a robo-taxi service the ultimate goal for GM? At the Citi Global Industrial Tech and Mobility Conference on February 22nd, Paul Jacobson, Chief Financial Officer at GM offered some insight.
During the Q&A section of the presentation, Itay Michaeli, Citi Auto Analyst asked Mr. Jacobson the following question; Maybe tying Cruise back into GM and software, I think in the past there was a plan for Cruise to play a future role in GM, sort of personal AVs, maybe at some point mid-to-late decade. But you still think about Cruise as being part of your kind of GM personal AV solution? Or will Cruise be kind of 100% focused now on the robotaxi and delivery vertical?
In which Mr. Jacobson responded:
I’ve always thought that at the end of the day, robotaxi was a really creative paid form of R&D and development, to get the cost down to ultimately create personal autonomy options. And that’s certainly where we think the long-term future is.
And I think we’ve got a decent lead in that in terms of the OEM space, et cetera. So, I think it’s something that we’re going to continue to invest in.
We’ve found ways to actually increase the sharing between GM and Cruise, and Mike Abbott and his team have done a really good job of building those bridges. And Mo Elshenawy on the Cruise side has done a really good job of working with the company to figure out what those synergies are and to harness it, both for the benefit of GM and for Cruise. So, more to come on that. But like I said, it’s in a good spot. We just got to figure out the right commercial deployment.
– Paul Jacobson, Chief Financial Officer, GM comments at the Citi Global Industrial Tech and Mobility Conference, February 22, 2024
Mr. Jacobson’s comments offer some clarity on GM’s ultimate plans for Cruise. If Cruise ends up becoming an R&D robo-taxi service that develops the technology for GM personally owned autonomous vehicles, what does that say about the passenger experience?
Will GM invest in the Cruise passenger experience or will they operate it lean with no thrills? If GM does not invest in the Cruise passenger experience and pivot away from the Chevy Bolt, Waymo will continue to dominate the market.
The experience of riding in a Waymo Jaguar iPACE is a lot more enjoyable then riding in the Cruise Chevy Bolt. At the end of the day, the experience will be the determining factor as to which company ultimately wins in robo-taxis.
Our take: GM has a lot of choices to make with Cruise. The big question remains, what are GM’s ultimate plans for Cruise?
Cruise parent GM and Waymo parent Alphabet are The Road to Autonomy Index component companies
CPUC Delays Waymo Expansion
On February 21st, the California Public Utilities Commission (CPUC) put Waymo’s planned Los Angeles and San Francisco Bay Area expansion on hold when the agency posted the following message on their site:
Suspended for further staff review for up to 120 days. Deadline to issue disposition or resolution: 6/19/2024
While the hold is set to expire on June 19th, the reasoning behind the hold is unknown at this time. The hold is giving special interests who want to see the autonomous vehicle industry collapse more ammo to protest, raise unfound grievances, and influence the conversation.
Following the decision by the CPUC, the Teamsters issued a bombastic press release full of mischaracterizations.
While today’s decision by the CPUC marks a step in the right direction, Waymo’s application to expand its robotaxi operations should never have been on the table — not when we’ve seen the chaos and destruction that autonomous vehicles can cause.
The CPUC and DMV have failed to listen to community members who are fearful of these dangerous vehicles and proven they’re not willing to take action to protect the public from dangerous AVs until after incidents occur. Autonomous vehicles are not ready for prime time, and do not belong on our streets.
– Chris Griswold, Teamsters International Vice President At-Large and President of Teamsters Joint Council 42
Autonomous vehicles do not cause destruction. Vandals who hit autonomous vehicles with hammers and burn them to the ground with fireworks cause destruction. Autonomous vehicles are not dangerous. Drunk and distracted drivers are dangerous.
Every day, 37 people in the United States are killed in drunk-driving crashes — one person every 39 minutes. In 2021, 13,384 individuals died in alcohol-impaired driving traffic deaths. That same year, distracted driving claimed 3,522 lives. Overall 16,906 individuals were killed in preventable crashes in 2021 according to NHTSA.
Autonomous vehicles do not drink. Autonomous vehicles do not get distracted. Autonomous vehicles will prevent these unfortunate incidents from ever happening again. Let’s get the facts straight and usher in the future of autonomy for the benefit of society.
Our take: It is going to take a big effort from Waymo’s government relations team to get the California expansion approved. Waymo is facing an uphill battle with all of the pending anti-autonomous vehicle legislation currently being debated in the California State Legislature.
Waymo parent Alphabet is a The Road to Autonomy Index component company
NVIDIA is a Data Center Business
On February 21st, NVIDIA reported Q4 FY 2024 GAAP earnings per diluted share of $4.93, up 33% from the previous quarter and up 765% year-over-year.
NVIDIA’s growth is being driven by their data center business. In Q4 FY 24, NVIDIA reported data center revenue of $18.4 billion, up 27% quarter-over-quarter and up 409% year-over-year.
Full year data center revenue was $47.5 billion— accounting for 77.9% of FY 24 revenue. In FY 24, NVIDIA generated overall revenue of $60.9 billion, up 126% year-over-year.
NVIDIA is not a diversified business. It’s a data center business, that is benefiting from the growth of AI applications. Non-data center revenue came in at $13.4 billion (22.1% FY 24).
Automotive accounted for only $1.1 billion (1.8% FY 24) of revenue.
In Q4 FY 24, Automotive generated $281 million in revenue, up 8% quarter-over-quarter. The increase in Q4 automotive revenue was driven by autonomous driving platforms.
Today, 80 vehicle manufacturers are using NVIDIA’s AI infrastructure for autonomous driving and AI cockpit applications. As autonomous driving applications scale, NVIDIA’s automotive revenues will increase.
The questions remains; How large can the automotive business grow? Can it move the needle as NVIDIA currently has a $1.97 trillion dollar market cap and undiversified business that is in the process of being disrupted by their largest customers — Microsoft (15% of revenue), Meta (13% of revenue), Amazon (6.2% of revenue) and Alphabet (5.8% of revenue). Combined 40% of FY 24 revenue.
It’s time to diversify. Is automotive and autonomous driving the solution? Only time will tell.
Our take: NVIDIA needs to start diversifying their business now or their largest customers will end up disrupting them.
NVIDIA is a The Road to Autonomy Index component company
Social Buzz
Andy Jassey Visits Zoox
On February 21st, Amazon CEO Andy Jassy visited Zoox HQ in Foster City, CA. The timing of Mr. Jassy’s visit comes as Zoox is preparing to launch commercial service in Las Vegas. We are hearing that the initial Zoox commercial service in Las Vegas will be off-strip. An odd move considering that the Las Vegas Strip is heavily congested with traffic.
From a business perspective, the ultimate goal for any autonomous vehicle service that operates in Las Vegas on day one is to connect the airport to hotels and casinos. On day two, the objective transforms into an autonomous gambling experience.
Imagine you are staying at the Wynn Las Vegas and you want to go to Spago at the Bellagio (MGM) for dinner and Wynn provides a complementary autonomous vehicle that offers Wynn gaming. You hit the jackpot. You can gamble through Wynn’s gambling system and drink on your way to dinner, making the 1.4 mile autonomous vehicle ride profitable for Wynn and enjoyable for you and your companions.
In our opinion, in-vehicle gaming is the killer app for the deployment of autonomous vehicles in Las Vegas. If Amazon does not want to partner with Wynn or another Casino Owner/Operator, they could simply expand their off-platform advertising platform.
Further expanding their highly profitable growing advertising business that generated $14.65 billion in Q4 23 revenue, up 26.8% year-over-year.
Amazon is also expanding its off-platform advertising capabilities and has significant optionality to attract incremental advertising spend from non-endemic advertisers. The company should continue to benefit from secular growth trends favoring retail media, and we model 2024 advertising growth of +23.3% Y/Y.
– Scott Devitt, Equity Research at Wedbush Securities, Consumption Optimization Behind, Profit Optimization Ahead; Best Idea, $220 TP, February 2, 2024 Report
Amazon has a lot of ways to monetize Zoox. The question is what path will they chose? Will it be the traditional path of charging for rides? Or will it be the path of developing an experience layer that can be monetized?
If you are interested in learning more about Zoox and our thoughts on autonomous vehicle gambling experiences in Las Vegas, we would recommend the following The Road to Autonomy podcasts:
- Big Dreams, Big Idea: Zoox, A Conversation with Bert Kaufman (August 31, 2021)
- The Vegas Experience, A Conversation with Chris Anderson, President, Sala Consulting (November 29, 2021)
Our take: Amazon has choices to make. Zoox has to catch up to Waymo. It’s time for Amazon to commercialize Zoox and bring the product to market.
Zoox parent Amazon is a The Road to Autonomy Index component company
A Princess Takes a Ride
Waymo continues to take the lead when it comes to developing trust with foreign leaders. Over the past several months, Waymo has hosted Prime Minister Mark Rutte of The Netherlands, Michael McGrath, Ireland’s Minister for Finance and now Crown Princess Victoria of Sweden.
Waymo’s strategy of offering rides to elected officials and foreign leaders is smart. It gives Waymo a chance to develop trust, showcase the technology, while clearly demonstrating the potential impact that autonomous vehicles will have on society.
Our take: Well done, Waymo. More autonomous vehicle companies should follow Waymo’s lead when it comes to showcasing the future of autonomy.
Waymo parent Alphabet is a The Road to Autonomy Index component company
JB Hunt Acquires Walmart’s Intermodal Container and Chassis Fleets
On February 22nd, J.B. Hunt announced it has entered into a long-term intermodal deal with Walmart which includes volume and capacity commitments. As part of the agreement J.B. Hunt will acquire Walmart’s intermodal container and chassis fleets.
Wolfe Research estimates the acquisition is around 15,000 containers, bringing J.B. Hunt’s container account to 133,000 without adding incremental capacity to the industry. The company’s container target currently stands at 150,000.
Walmart is J.B. Hunt’s largest customer, comprising 12% of revenue in 2022 with business across each of J.B. Hunt’s five segments. This is a growth transaction for J.B. Hunt and one that could help accelerate J.B. Hunt’s plans for autonomous trucking.
This is a move that plays to J.B. Hunt’s strengths as far as optimizing their intermodal network which has had one of the best operating ratios in all of their business segments. It shows a confidence that they can integrate Walmart’s intermodal business into their operating model in a cost effective and network optimized manner.
The intermodal network with optimized drayage will be a key commitment to successful autonomous trucking networks in the future.
– Lee White, President of LM White Consulting
If you are interested in learning more about J.B. Hunt and their intermodal business, we would recommend the following The Road to Autonomy podcast:
- Decarbonizing the Supply Chain, A Conversation with Craig Harper (May 4, 2022)
Our take: We will be watching as J.B. Hunt integrates Walmart’s intermodal assets and how they will complement their plans for autonomous trucking.
J.B. Hunt and Walmart are The Road to Autonomy Index component companies
The Road to Autonomy Index® / Weekly Performance
The Road to Autonomy Index® is a high-definition lens into the emerging world of autonomous vehicles. It is the world’s first and only pure-play index designed to measure the performance of the autonomous vehicle/truck market.
For the week of February 19, 2024, The Road to Autonomy Index returned 1.99%, the S&P 500 returned 1.66% and the NASDAQ 100 returned 1.27%.
The Road to Autonomy Index outperformed the S&P 500 by 0.33% and outperformed the NASDAQ 100 by 0.72%.
The top performing stocks in The Road to Autonomy Index this week were:
- NVIDIA returned 8.48%
- Micron returned 8.18%
- Ryder System returned 6.31%
S&P Dow Jones Indices is the custom calculation agent for The Road to Autonomy Index
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The Road to Autonomy Index Component Companies
Latest The Road to Autonomy Podcasts
The Road to Autonomy podcast hosted by Grayson Brulte is a podcast featuring unconventional conversations about the future of mobility and the emerging autonomy economy. New episodes every Tuesday.
The Year of Autonomous Drone Delivery
Shannon Nash, Chief Financial Officer, Wing, an Alphabet company joined The Road to Autonomy podcast to discuss Wing’s operations in the Dallas Fort Worth (DFW) region and why 2024 is the year of autonomous drone delivery.
Listen on The Road to Autonomy | Apple Podcasts | Spotify
Tuesday, February 20, 2024
It All Comes Down to Unit Economics
Matt McLelland, VP of Sustainability and Innovation, Covenant joined The Road to Autonomy podcast to discuss why it all comes down to unit economics when fleets are evaluating new trucking technologies such as battery electric trucks and autonomous trucks.
Listen on The Road to Autonomy | Apple Podcasts | Spotify
Wednesday, February 14, 2024
The Current State of The Mobility Markets
Pete Bigelow, Senior Reporter, Automotive News joined The Road to Autonomy podcast to discuss the current state of the mobility markets. Markets that are in flux with EV sales falling, GM rebooting Cruise, while Waymo scales robo-taxi operations and the autonomous truck industry prepares to launch commercial operations.
Listen on The Road to Autonomy | Apple Podcasts | Spotify
Tuesday, February 6, 2024
Subscribe to This Week in The Autonomy Economy™
A weekly newsletter featuring insight and commentary on the autonomy economy™ and how the financial markets are viewing its emergence.
All price references and market forecasts are as of the date that this newsletter has been sent. The Road to Autonomy is not providing any financial, economic, legal, accounting, or tax advice or recommendations in this newsletter. The information contained in this newsletter does not constitute investment advice and should not be relied upon to evaluate any potential transaction.
Inclusion of a security within The Road to Autonomy Index® is not a recommendation by The Road to Autonomy Indices LLC to buy, sell, or hold such security, nor is it considered to be investment advice.
