Why Uber needed to buy Postmates

July 7, 2020, 12:57 PM UTC

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Investors cheered Uber’s $2.65 billion acquisition of Postmates Monday, bidding up the buyer’s shares by 6%. That rise was an endorsement of the deal, perhaps, but also a reflection that Wall Street values cost cutting. The company said it can take out $200 million in costs once the deal closes next year.

There’s the expression “horses for courses,” and Dara Khosrowshahi, the CEO of Uber, is a dealmaking horse on an industry-consolidation course. He cut his teeth at Allen & Co. and helped build Expedia into an M&A-fueled collection of online travel brands. Now he is running the same playbook at Uber. Its food-delivery business is the only pandemic-resistant line it has, so after failing to buy Grubhub, he’s adding Postmates to the stable. Uber is also in the process of buying Cornershop, a Latin American grocery delivery business.

Postmates was rumored to be going public itself, but that was far from certain. Indeed, Uber said it will provide “bridge financing” to Postmates until the deal is finalized. This means Postmates needs to raise new money to stay afloat. In other words, Uber is marrying a money-losing business, Uber Eats, with another money-losing business—and still won’t make cash while facing fierce competition. As Breakingviews put it, “What this [deal] won’t do, therefore, is change the woeful economics of food delivery.”

The near-term future is bleak for Uber. Mark Mahaney, an analyst with RBC, notes that Uber said second-quarter ride-hailing bookings declined 75% from the year-earlier period, and that even more recently, even as various parts of the world emerged from lockdowns, its year-over-year declines were 60%. Mahaney says Uber’s updates clearly indicate the “recovery will be slow and sluggish, with ongoing risks related to the pace of re-openings.”

What’s certain: There will be more deals.

Adam Lashinsky



This edition of Data Sheet was curated by Aaron Pressman.


Headliners. It's official, so you can mark your calendars: Apple CEO Tim Cook, Amazon CEO Jeff Bezos, Facebook CEO Mark Zuckerberg, and Alphabet CEO Sundar Pichai will appear at a hearing of the House Judiciary Committee's antitrust subcommittee on July 27. Today is the day Zuck, Sheryl Sandberg, and Chris Cox meet with the leaders of the "Stop Hate for Profit" advertising boycott campaign. Stay tuned.

You couldn't make this up. New York Times columnist Kevin Roose made the brilliant observation on Monday that he's so obsessed with the story of Quibi leaders Jeffrey Katzenberg and Meg Whitman, aka KBerg and the Whit, that he'd subscribe to a whole newsletter focused on the richly funded startup's travails. Can't help him there, but Roose's tweet was prompted by the latest deep dive behind the hilarity curtain at Quibi by Vulture's Ben Wallace. Sure, sure, Wallace's repeating old hits like the rejected Omakase name, but he's got lots of fresh LOLZ and some more serious charges. “If we have a show that’s going to be a huge hit, you pitch to Netflix, HBO,” one producer with a project at Quibi tells Wallace. “If it doesn’t get traction, you pitch to Quibi.” Also, Kberg reportedly told actress Gal Gadot she should do Jane Fonda-like workout videos and made troubling comments about a Black man's hair.

Burning down the house. Speaking of short video apps, TikTok is withdrawing from Google and Apple app stores in Hong Kong due to China's strict new security law governing the region. Facebook, Twitter, Google, and Telegram have stopped processing user data requests from Hong Kong authorities while they review the law, and Apple said it is "assessing" it, which went into effect on June 30.

The quest stands upon the edge of a knife. Peter Thiel's original unicorn startup, or great eagle to VC fans of Middle Earth, is Palantir. On Monday, the 17-year-old data analysis and security startup valued at $20 billion said it filed to go public. Despite the pandemic, it's been a good year for tech IPOs. In recent days, insurance fintech startup Lemonade went public and promptly tripled its share price. Same story for Chinese communications app developer Agora. Online used car seller Vroom hasn't quite tripled yet and cloud sales software provider Zoominfo has only doubled, poor kid.

When you come to a fork in the road, take it. In other wheeling and dealing news, satellite radio service SiriusXM is planning to buy podcast platform Stitcher from E.W. Scripps for about $300 million. Stitcher's top shows include Conan O’Brien Needs a Friend and Freakonomics Radio. It's the latest in a long line of ritzy podcast deals. Scripps itself bought Stitcher for under $5 million in 2016 and combined it with Midroll Media, purchased for $50 million in 2015.

Criss-cross applesauce. The Moving Pictures Expert Group, better known as MPEG, has some new coding standards for video that could help reduce the traffic jam from high-resolution video on the Internet. The VVC codec, more formally called MPEG-I Part 3 or H.266, offers the same quality as the currently popular HEVC or H.265 standard while transmitting half as much data.


I thought "Neolution" was just a bunch of biotech weirdos on Orphan Black, but truth is stranger than fiction. Wired co-founder Jane Metcalfe argues in a new essay that we should consider reengineering our own DNA to make humans healthier and more resistant to diseases like COVID-19.

Our ability to manipulate RNA and DNA, bacteria, viruses, algae, and fungi gives us the power to engineer life. Advanced imaging technologies allow us unprecedented views inside the body while big data sets, machine learning, and AI are helping us read those images and giving us correlations and predictions ... and ultimately root causes. The only problem is, as Edward O. Wilson so succinctly put it, “we have Paleolithic emotions, medieval institutions, and godlike technology.” So how do we overcome our Paleolithic emotions (like fear, jealousy, and greed) and our medieval institutions (US health care, anyone?) to deploy our godlike technologies?...Some people thought IVF was outrageous and unnatural 40 years ago, but today, many would consider it a basic human right. What are we shocked by today that will be considered a basic human right in another 40 years? Or maybe it will only take 10.


Struggling AR/VR startup Magic Leap hired Microsoft exec Peggy Johnson as its new CEO. Founder and current CEO Rony Abovitz said he was stepping down in May...Former Apple and Uber marketing exec Bozoma Saint John, who also has the kickass Twitter handler @badassboz, joins Netflix as CMO. Saint John, who most recently held the same title at Endeavor, replaces former BBC exec Jackie Lee-Joe, who stayed less than one year at Netflix...One of the founders of fast-growing Chinese e-commerce platform Pinduoduo, Colin Huang, resigned as CEO, though he will remain chair. Co-founder Lei Chen takes over as CEO...MongoDB appointed Mark Porter as CTO. A former Oracle and Amazon engineer, Porter was most recently CTO at Grab Holdings...Here's a new one: Salesforce appointed Darryn Dieken as its first chief availability officer, which is apparently about keeping the company's cloud services up and running. Dieken joined Salesforce more than three years ago after a long career at Microsoft.


Colin Kaepernick’s transition to TV continues with Disney first-look deal By Aric Jenkins

Will food delivery prices rise following Uber’s purchase of Postmates? By Danielle Abril

Why shares of Tesla, Nio, and other electric-vehicle makers are skyrocketing By Aaron Pressman

The DoJ may bring an antitrust suit against Google. But are Americans ready to break up Big Tech? By Lance Lambert

Samsung made a closet that disinfects your clothes By Rachel King

David Schwimmer and costar Nick Mohammed on their new workplace comedy ‘Intelligence’ By Radhika Marya

(Some of these stories require a subscription to access. Thank you for supporting our journalism.)


The Wall Street Journal's occasional feature "Anatomy of a Song" is always great, but it's Gen X-great this week, with a look into how the Talking Heads crafted their 1983 hit "Burning Down the House." Not many bands approached the creativity and joyousness of the Talking Heads at their height. How did lead singer David Byrne craft those crazy lyrics? "Driving occupies one part of your brain, freeing up the other," he tells the Journal. "As I drove, I scatted the melody and recorded every random phrase I could think of that fit the song’s groove." The live version of the song from the movie Stop Making Sense remains an all-time classic. Hold tight, we're in for nasty weather.

Aaron Pressman



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