At first glance, yesterday’s bombshell that Uber had slashed 400 people from its marketing department—this on the heels of an $8.1 billion IPO that drove its total marketing value to $75.5 billion—felt counterintuitive. If Uber’s goal is to be the leader in on-demand mobility, recapture some of the public esteem of its early days and, ultimately, turn a profit, why would it take a hatchet to the department that can help get it there?
Look under the hood, however, and the move makes more strategic sense. According to industry watchers, not only do Uber’s layoffs signal a logical (if perhaps severe) step toward its goals, they also underscore many of the problems that have plagued the ride-hailing app for a long while now.
Monday’s layoffs reduced Uber’s marketing team by roughly a third. It was also not the first time that the Grim Reaper came calling in recent weeks.
Thanks in part to Wall Street’s reservations over Uber’s prospects for long-term profitability and Uber’s stock taking a tumble on its very first day of trading on May 10, CEO Dara Khosrowshahi handed walking papers to CMO Rebecca Messina, who was a mere nine months into her tenure.
In June, Khosrowshahi reorganized the marketing department under communications chief Jill Hazelbaker, explaining in an email to staffers that it was both “increasingly clear that it’s crucial for us to have a consistent, unified narrative,” and that, coming off the IPO, it was “a good moment to simplify our org and set us up for the future.”
In light of yesterday’s move, Khosrowshahi sent staffers another email, part of which Uber sent to Adweek in response to a request for a comment on its strategy. It read in part: “We are not making these changes because marketing has become less important to Uber. The exact opposite is true: we are making these changes because presenting a powerful, unified, and dynamic vision to the world has never been more important. Under Jill’s leadership, Marketing will soon be operating at full strength.”
While such phrasing might sound like the usual corporate boilerplate, there is a real-world grounding to it. For one thing, Uber does appear to need a more unified approach. Its marketing department had grown overweight, muddling its decision-making structure. As the New York Times reported, one organizational chart had stretched to 388 pages.
And, bloating issues aside, it’s also the case that when companies look for places to cut, marketing is often the first place they begin.
“Uber is obviously striving to contain costs as a publicly traded company, and marketing is historically a target for any publicly traded business trying to contain costs,” notes brand consultant David J. Deal. “In that regard, I wasn’t terribly surprised [at the layoffs]. Marketing is always a big target when companies have to cut costs.”
But Deal adds that Uber’s staff-reduction move makes strategic sense for reasons that go well beyond simple fat trimming. Foremost among them: Lyft has eaten its lunch.
After introducing the tagline “It matters how you get there” in 2017, Lyft turned out funny and popular pieces of advertising that stressed how life choices are more important than carfare. Meanwhile, its “Round up and donate” initiative (which allowed riders to donate the rounded-dollar amounts of their fares to charities including Black Girls Code) positioned Lyft as the socially conscious hero of ride-booking companies. These efforts made Lyft look like a big thinker and category leader—helping to push Lyft’s market share from 2016’s 22% to the 39% it claimed earlier this year.
“Uber is trying to regain control of its own brand narrative,” Deal said. “For years it was known as the disruptive innovator driving the growth of the on-demand economy. Lyft has stolen that narrative, and Uber is trying to regain control of it.”