Uber is implementing tipping, but how well it works will be critical
On the heels of what must feel to employees like the longest six months in Uber’s eight-year history, the company last week tried ending relentless news reports about its corporate misbehavior by encouraging its CEO, Travis Kalanick, to take a leave of absence. (He has obliged, for now.)
This morning, Uber took things a step further, introducing an initiative that it’s calling “180 Days of Change” and announcing, most notably, that it will start allowing riders to tip drivers in the app.
This is no small thing. Uber has long rejected the idea of tipping for numerous reasons. The company had suggested, for example, that tips could lead to unpleasant consequences, such as drivers who might forego pick-ups in poorer neighborhoods in favor of wealthier enclaves where they might generate heftier tips.
Tipping also threatened to make a very clean experience too messy for Uber’s liking. (In the company’s words, it said it would create a confusing measure of uncertainty for customers.)
While its change of heart has been welcome by most, others were quick to assign ulterior motives to the company, whose business has been impacted — at least in the U.S. — by its abundance of poor publicity in recent months.
Indeed, though its global revenue surged to $3.4 billion in the first quarter — triple what the company saw in the first quarter of 2016 — it is right now losing market share in its own backyard to its much smaller rival, Lyft, according to report in yesterday’s Financial Times. It stated that Uber’s annual growth in the U.S. slowed to 40 percent at the end of May, down from 55 percent from the same period last year. Uber’s U.S. market share had also fallen, said the report, from 84 percent in early January to 77 percent by the end of May. (The FT cited data from Second Measure, a research firm that examines anonymized credit card data to draw its conclusions.)
Alas, it’s hard to turn around public perception. Slate wondered if we should ” even be discussing this cosmetic change in the driver-customer-company relationship, when the business model is dependent on cheap labor made possible by treating the drivers as contractors?”
Numerous other outlets cited writer Michael Lewis’s 20-year-old tirade against tipping, which he equated in some cases as a “shakedown.” As Lewis wrote at the time, “more discretion you have in the matter [of tipping] the more unpleasant it is.”
He was right, as anyone who has ever tipped another individual can attest — which makes getting it right imperative for Uber. One wrong step, and the already beleaguered company has unhappy riders and unhappy drivers. Done well, it could be a much-needed boon for the company.
Unsurprisingly, Uber seems to appreciate this. It also has a playbook, thanks to how Lyft — which already offers the option to tip drivers through its app — has managed the process. In fact, it’s probably no coincidence that this latest Uber development comes just one day after Lyft announced that its drivers have collectively earned $250 million in tips across Lyft’s four-year- history.
To be on the safe side, Uber is rolling out tipping in three cities to start — Seattle, Minneapolis, and Houston. But like Lyft, the company is providing riders with pre-determined options to tip $1, $3, or $5, or to select a custom amount. Uber is also copying a feature of Lyft that provides riders with up to 72 hours to tip a driver, though it’s extending that period to a full 30 days. (This belated tipping feature benefits the forgetful; it also creates distance between drivers and riders who may be fearful of retribution if they haven’t tipped or tipped generously.)
Whether the moves are enough to slow the momentum of Lyft — which has expanded into 150 new cities this year — won’t be clear straightaway. Implemented well, however, it does take a powerful tool out of the hands of its detractors — no matter how tempted they are to question the company at every turn.