News / As Uber bleeds cash, it eyes a saviour in tie-up with freight platform

© Dennizn - Uber Freight

Uber has piled more misery on its investors with another quarter in the red, but it is hoping to gain traction in the freight market through its hook-up with transport management system (TMS) software provider MercuryGate International.

On Tuesday, a partnership was announced that puts Uber Freight’s carrier network on the MercuryGate platform, giving the TMS firm’s shipper customers instant access to Uber Freight’s real-time pricing and guaranteed freight lane capacity.

Albert Saphir, president of logistics consultancy ABS Consult, called the tie-up a win-win for both sides.

He said MercuryGate could offer its clients additional trucking resources to muster, while Uber gained access to a large new potential customer base. For digital freight brokerages, it has been a costly challenge to broaden their clientele in a fragmented market.

As such, the deal is of greater benefit to Uber, he noted, pointing to its new partner’s stature in the market.

“This has a considerable upside for Uber. MercuryGate has many large and mid-sized shippers with a lot of truckload business,” he said. “It may help Uber grow much quicker.”

And being accepted by MercuryGate sends a signal of endorsement of Uber Freight to the market, pointed out Cathy Morrow Roberson, founder and chief analyst of research and consulting firm Logistics Trends & Insights.

“MercuryGate has name recognition, and is highly thought of by many. This partnership is a validation for Uber Freight. It legitimises the business proposal that Uber Freight offers,” she said.

Both players stand to benefit from the publicity of the announcement, she added. “This is the season for getting funding.”

Moreover, digital freight brokerages need to stand out from a crowded field to attract attention in the market, she said.

“The whole freight brokerage market is looking for publicity. There are so many players in that market. It is fragmented.”

By her estimate, digital freight brokerages’ market share of the freight brokerage scene is still below 10% in the US.

“Last year put them on the map,” she said. “Last year saw a rise in digital brokers because of the freight capacity situation. Shippers were scrambling for capacity. That’s when they really started making headway.”

According to Ms Morrow Roberson, digital freight brokerages have had a positive impact on the market.

“What they have brought to the freight market is technology; they brought visibility,” she said. “And they’ve given truck drivers the ability to tap into these apps to find loads for backhaul.”

Some market observers have predicted that DFBs would take the freight brokerage business by storm. However, traditional freight brokers and 3PLs have beefed up their digital capabilities and are fighting back. Moreover, many shippers have additional service ties with their providers and are less likely to embrace third-party platforms, especially in a crowded field of players with limited reach.

Uber CEO Dara Khosrowshahi expressed optimism about his outfit’s potential in the freight sector in a call with investors in May, after the presentation of the company’s first quarter results.

“The Uber brand is a brand that everybody knows all around the world, we have already built two multi-billion dollar services on it and we think freight will be a third,” he said.

In terms of revenue, the freight subsidiary appears to have gone backwards in the last three months, however. Yesterday, Uber reported $25m revenues in the Other Bets bracket, under which freight is grouped alongside rentable bikes and scooters under New Mobility. This was down from $26m in the first quarter.

At least Uber Freight fared better than the core business, which plunged the company further into the red with an operating loss of $5.48bn on revenues of $3.17bn – short on expectations of $3.36bn.

The result, announced after market hours, sent Uber’s stock down more than 12% in after-hours trading, but the long-term fall-out could be worse.

Coming on the heels of a $1.01bn net loss in the first quarter and a disastrous IPO in the spring (apparently the biggest first-day IPO flop since 1975, and the stock has struggled ever since), the result reinforces doubts about the viability of Uber’s business model. It also raises questions about management’s focus and resources to advance the freight subsidiary