If press reports are to be believed, ridesharing company Uber has been playing a grown-up version of Knock Down Ginger (Ding Dong Ditch to US readers). Lyft, a competitor to Uber, claims that Uber employees have ordered and cancelled more than 5,000 rides since last October. That’s a huge drain on resources, effectively taking drivers off the road and potentially sending customers to Uber.
Where the rides aren’t cancelled, Uber employees take short journeys for the explicit purpose of recruiting the driver for themselves.
Lyft claims 177 Uber employees (likely temps on commission) around the US have participated in this activity suggesting this is a coordinated marketing effort from Uber. The Verge even has internal communications from Uber apparently supporting the campaign (codenamed SLOG),
I don’t necessarily have a problem with a company trying to recruit “employees (drivers)” from a competitor, but the practice of purposely wasting competitor resource for your own gain seems morally dubious from a marketing perspective.
Regardless, it was a hugely risky decision:
- Regulatory lobbying: Ride-sharing companies are continually battling city regulators. In the US, taxi companies have used their local and state level leverage to protect the status-quo and restrict the operation of ride-share operators; or at least ensure they are regulated in the same way as a traditional taxi service. Uber has recently hired lobbyists to fight its case, but it’s an up-hill battle and negative publicity surrounding business practices will do nothing to make the process any easier.
- Awareness for Lyft: Outside of the [US] West Coast the Lyft brand was relatively unknown until last week. The PR surrounding SLOG has raised awareness of a competitor. This is never a desirable outcome.
- Negative brand perception: Uber has been riding the wave of the sharing economy. This movement has inherently become virtuous in its nature. Unethical marketing tactics put the Uber brand on the back-foot and risk diluting the virtuous elements of its brand. For many consumers this publicity will be their first exposure to the brand…and first impressions count.
- Valuation & funding: Uber is one of the fastest growing tech companies to come out of Silicon Valley since Facebook. In June this year it raised a further $1.2bn, helping to value the company at over $18bn. There’s a serious group of investors behind Uber – from Fidelity Investments to BlackRock Inc. Those are names that won’t want to see their multi-million dollar investments put at risk by negative press commentary and consequent.