Uber shifts incentives to drivers as rider prices face pressure
Uber is redirecting more of its incentive spending toward drivers and delivery couriers as it works to raise trip and delivery supply in the U.S. and overseas. The change marks a reversal from last year’s focus on rider promotions and could translate into higher prices for customers in some markets.
Highlights
- Uber is reallocating rider promotion funds to driver incentives in 2023, reducing rider-side promotions to address a severe driver shortage.
- Emerging markets like Brazil and India are seeing increased Uber incentives for drivers and couriers due to recent spikes in fuel prices impacting driver supply.
- Uber uses artificial intelligence trained on billions of trips to optimize the deployment of incentive spending and maximize returns.
Driver incentive strategy shifts spending focus
As reported by Business Insider, Uber executives say on the company’s third-quarter earnings call on Wednesday that the group is using funds previously aimed at rider incentives to encourage more drivers to take trips and deliveries.Chief Executive Officer Dara Khosrowshahi says the company is reducing rider promotions this year and reallocating that spending to driver incentives. He adds that the move sometimes leads to higher prices for riders, a consequence the company is monitoring.
Uber has not faced a driver shortage this severe in years. The company last discussed stepping up extra payments for drivers in 2021, when it was dealing with a pandemic-era shortfall as many gig workers stayed off the road.
Supply pressures extend beyond the U.S.
The issue is not limited to the U.S. Khosrowshahi says Uber is also investing to attract more delivery workers for Uber Eats, while Chief Financial Officer Balaji Krishnamurthy says drivers and customers in emerging markets such as Brazil and India are being squeezed by higher fuel prices.Executives say Uber is offering incentives in those markets as well. The pressure comes as fuel prices spike in recent months, adding to operating costs for drivers and couriers and complicating efforts to balance supply, pricing and demand.
Uber also says artificial intelligence is helping determine where incentive dollars are deployed. Khosrowshahi says the company’s algorithms are trained on billions of trips and are used to predict where each dollar spent can generate the highest return.
In our earlier article on the conflict-driven surge in oil shipping costs, we explained how disruptions on key tanker routes pushed freight and insurance rates sharply higher, turning transport into a major component of crude prices. We also noted that these increases can filter through to higher gasoline and consumer prices, hitting import-dependent markets hardest while boosting tanker owners’ earnings.
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