Uber is expanding its offerings for Uber One members, including exclusive events, as part of its strategy to increase subscription revenue.
“We will be introducing more member-exclusives in the future, giving our valued members access to unique events and experiences that will pleasantly surprise and delight them,” stated Prashanth Mahendra-Rajah, Uber’s chief financial officer, during the company’s first-quarter earnings call on Wednesday morning.
According to Uber CEO Dara Khosrowshahi, the membership fees for Uber One are currently over $1 billion on an annual basis. Put simply, Uber is using its current subscription revenue as a basis to project $1 billion in annual revenue. Uber has released run-rate numbers for its subscription service, marking a significant milestone for the company. Uber launched the service in November 2021.
As a business owner, you can enjoy the benefits of Uber One for just $9.99 per month or $99.99 annually. With this subscription, you’ll receive perks such as waived delivery fees on eligible food and groceries, discounts of up to 10% on select deliveries and pick-up orders, better pricing on specific rides, and more.
Uber has announced plans to provide additional details about these experiences in the coming days. However, Uber has already notified a select group of members via email about exciting exclusive offers, including the chance to attend a party with renowned rapper Post Malone at the prestigious Fontainebleau in Las Vegas.
Other companies have previously provided events for their members. Business owners, such as Chase, offer exclusive perks to their members in New York City. For instance, they provide access to a luxurious Sapphire Lounge at the South Street Seaport and VIP entry to concerts at Pier 17 during the summer.
In 2022, Uber introduced a new pilot feature that allows customers to conveniently book events and make reservations at restaurants. Uber has not provided any updates on this limited pilot, but it’s possible that Uber One members will have access to these events.
Introducing member events is a strategic move to appeal to a larger audience of subscribers, who have a tendency to spend more on the platform and utilise more of Uber’s products.
“I’ll remind everyone that our members spend 3.4 times more per month than non-members. This makes it an excellent opportunity for us to increase adoption and foster strong connections with our diverse range of services,” stated Mahendra-Rajah.
Members now contribute 32% of mobility and delivery gross bookings, with delivery gross bookings alone accounting for over 45%.
Uber Cash is one factor contributing to the rise in delivery costs. Starting in 2023, Uber made changes to its membership benefits by replacing the 5% discounts on rides for Uber One members with a new cash-back scheme. Mahendra-Rajah reports that Uber currently uses a significant portion of its Uber Cash earned from rides in the U.S. for delivery purposes. Uber Business riders exhibit a high redemption rate, allocating 60% of the Uber Cash earned on rides for delivery purposes.
Membership is a powerful tool for expanding our reach in the marketplace and driving consistent growth, according to Mahendra-Rajah.
Uber has been actively cross-selling its various offerings to create in-app stickiness. This strategy involves enticing customers to explore different services, such as food delivery, grocery shopping, alcohol, and mobility, all within the Uber app. The Uber One membership brings together all of these efforts.
As a savvy entrepreneur, the company is also promoting its annual pass for Uber One, offering users a more affordable monthly option when they commit to a year-long subscription. Mahendra-Rajah noted that the annual pass has led to a significant increase in retention, with nearly 200 basis point growth year-on-year in March.
Instacart’s expansion into suburban areas is driving significant growth for the company.
During Wednesday’s earnings call, Khosrowshahi mentioned that the platform, particularly Uber Eats, is experiencing faster growth in the suburbs compared to urban areas, where Uber has a stronger presence.
“It’s crucial to focus on the fundamentals: establishing a loyal customer base and a strong brand, expanding our product offerings, ensuring competitive pricing, and maintaining a top-notch level of service,” stated the CEO.
According to him, the recent partnership between Uber and Instacart will contribute to Uber’s expansion in suburban areas. This collaboration enables Instacart customers to conveniently order from Uber Eats restaurants all over the United States. Khosrowshahi also pointed out that Uber’s existing partnerships with Domino’s and other merchants give the company a strong advantage in expanding its services to suburban areas.
Mahendra-Rajah emphasized the growing popularity of new products like Uber for Business, Uber Health, UberX Reserve, and shared rides, which have seen an impressive 80% growth year-over-year. Furthermore, the CFO noted that the introduction of these new products accounts for a significant portion, precisely 20%, of our new customer acquisition.
Despite growing demand, Uber continues to face financial losses.
In the first quarter, Uber reported revenue of $10.1 billion and gross bookings of $37.7 billion, representing a 15% and 21% increase compared to the previous year. However, despite the surge in demand, the company incurred a loss of $654 million, which came as a surprise to analysts. This unexpected result follows Uber’s first full-year profit in 2023.
Uber explained that the loss was due to legal settlement payments and equity investments.
