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Google-Uber Spat Exposes Uber’s Achilles Heel

Uber is vulnerable to rivals unless it can build defensible technologies.

Google-Uber Spat Exposes Uber’s Achilles Heel
[Photo: Flickr user Sam Churchill]

The technology behind on-demand taxi services is relatively cheap and easy to develop–a fact that has spurred dozens of startups and forced Uber to chase dizzying growth in the hopes of winning first-mover advantage in new markets.

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But with local authorities tapping the brakes and competitors gaining momentum, Uber for the first time is acknowledging that achieving critical mass in cities around the world is a short-term fix, not a long-term strategy. To win over the long-term, the company–recently valued at $40 billion–needs to invest in proprietary technology.

Awkwardly and perhaps inevitably, those investments are taking the form of projects related to mapping and driverless cars–both areas that Google, which invested $258 million in Uber via its venture capital division, has pioneered. When Uber announced yesterday that it would be partnering with Carnegie Mellon University in order “to do research and development, primarily in the areas of mapping and vehicle safety and autonomy technology,” commentators were quick to pounce.

“There are signs that the companies are more likely to be ferocious competitors than allies,” Bloomberg said, reporting in an exclusive that the companies were “going to war over self-driving taxis.” Bloomberg even claimed that Google was already testing a ride-hailing app prototype and predicted that David Drummond, the search giant’s chief legal officer, would have to resign from his seat on the Uber board of directors.

Google refuted those rumors yesterday by voicing its continued support for Uber (and Lyft) in a tweet.

Then the Wall Street Journal weighed in, reporting that Bloomberg’s story had been “blown out of proportion”; that Google prototype, the newspaper said, is for employee carpooling.

Even so, the short-lived brouhaha serves as yet another reminder that Uber’s scale does not make it invincible. While the startup fights legal and regulatory battles, it needs at the same time to wean itself off technologies like Google Maps that rivals can use with equal ease. No wonder the company has been aggressively stocking its war chest, last month adding another $1.6 billion to its coffers.

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Uber’s interest in driverless cars has raised eyebrows for other reasons as well. The company has been telling city officials that its drivers are literal drivers of economic growth, and likes to celebrate its “partners” (Uber drivers are contractors, not employees) as digital-age entrepreneurs. But it’s hard to square that messaging with the company’s new Carnegie Mellon investments.

[via AFP, Wall Street Journal, Bloomberg]

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About the author

Staff writer Ainsley (O'Connell) Harris covers the business of technology with a focus on financial services and education. Follow her on Twitter at @ainsleyoc.

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