Uber is testing the limits of a long public leash

Ethan Wolff-Mann
Writer

London’s transportation licensing body, Transport for London, announced today that it will not renew Uber’s license to operate when it expires on Sept. 30. The decision is a shot across the bow to Uber, which has flirted with controversy yet had little actual blowback thus far.

The London agency deemed the ride-hailing company not “fit and proper to hold a private hire license.” Uber has the right to appeal the decision within 21 days, and the company will be able to operate until the appeal process is finished.

This isn’t the first time a city has broken up with Uber. Uber previously left Austin after a city referendum directed the company to use fingerprint-based background checks, a deal breaker for the company. (Uber returned in 2017 after Texas overruled a municipal ride-sharing law.)

Up until now, the convenience that Uber provides has been embraced by the public so much that scandal upon scandal has not seriously affected its business. Like most companies that provide essential services, people are really reluctant to drop it if the alternative is inconvenient.

But London’s move shows that even if attrition of a company’s reputation doesn’t affect consumer choices, it can still embolden regulators who otherwise would not take the political risk of slapping the wrist of a beloved company for a sin that is difficult for consumers to understand.

A photo illustration shows the Uber app on a mobile telephone, as it is held up for a posed photograph in central London, Britain September 22, 2017. REUTERS/Toby Melville

Tech goodwill

Uber’s app made getting taxi orders easier, and the convenience gave the company substantial goodwill with the public, as most things that make life easier do. Hailing a taxi from a phone and automating payment options saves time, energy, and has brought efficiency to an age-old business.

Many game-changing tech companies enjoy similar goodwill, which has given them some slack. Creating life-changing products has shielded these firms because the public hesitates to acknowledge their sins.

For instance, Amazon’s warehouse conditions and cannibalization of smaller companies is easily ignored in favor of “free” two-day shipping. Apple’s contractors’ hellish factories were glossed over and forgotten. Facebook CEO Mark Zuckerberg acknowledged on Thursday that its platform was used by Russia to influence the presidential election, but with the exception of growing cries and Congressional interest for Facebook to deal with its bot problem, there appears to be little to no consequences. It doesn’t matter that Facebook, along with Google, has basically created a duopoly in the ad business.

That’s because all these companies are in a realm that’s within the limits of a long leash due to the utility and popularity of the products they’ve created.

Uber’s scandals have tested the limits of its long leash

Scandal after scandal has brought Uber’s goodwill closer to the end of its leash. Its alleged workplace culture of sexual harassment, scabs during a taxi strike over the travel ban that resulted in the “#DeleteUber” hashtag, a confrontation between Uber’s ex-CEO Travis Kalanick and a driver caught on video, have done little to damage the company.

Looking at ridership statistics, Yahoo Finance noted that ridership had not particularly changed or declined following these continued scandals, suggesting that perhaps an Uber-scandal fatigue was setting in. As one rider told Yahoo Finance, he’ll enjoy Uber’s venture-capital subsidized rides until he can’t anymore.

London said it decided to drop Uber because of safety, specifically its approach to reporting crime during rides, driver background checks, and its software tool “Greyball,” which Uber used to stymie government regulators by showing them a different map than regular riders.

Consumer sentiment

Uber may remain relatively confident that the strength of its product will continue to carry it through the scandals, as it has already. Despite the troubles, it still dominates its nearest rival Lyft in terms of use. But London’s move — perhaps also emboldened by a strong Black Cab lobby — shows what can happen to a company if it loses its shield of public support through scandal.

Even if scandals don’t change user behavior much, it does rewire the company’s narrative in the consumer’s brain. If it doesn’t actually prevent people from firing up the app and hailing a cab, the dings to its reputation will make the public less likely to go to bat for the company and bring out #JusticeForUber signs to put pressure on politicians and regulators.

Companies like Uber recognize the importance of public support and seek it out with strong messaging campaigns. Another giant pre-IPO company, Airbnb, has had similar regulatory issues over its business of home-sharing, and it employed strong marketing campaigns to drum up support.

Uber turning into a ‘big bank’

Uber’s loss of support thanks to scandal has turned the company into something viewed less like a tech company and more like a big bank. Banks are essential, and the “big banks” — as they are called with the evil eye — still enjoy plenty of business no matter how much bad press they get. This is also linked to convenience; it is extremely irritating and difficult to change banks. Many of these customers may stay, but they will not have Wells Fargo’s back when they’re dragged before Congress to answer for their crimes.

Uber may very well regain its status in London and capitulate by meeting its demands for security. But the company is likely watching how people in London react to the government’s decision. If Uber is indeed cut off from a massive global city, who will show up with a sign?

Ethan Wolff-Mann is a writer at Yahoo Finance. Follow him on Twitter @ewolffmann. Confidential tip line: emann@oath.com.

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