Uber, the transportation monopoly

*This is not financial advice. All content should be considered opinionated. We are not responsible for any of your gains and losses. I am neither a licensed nor registered financial expert. Please see a financial advisor before making any investment decisions.

Recently, Uber has announced that it will acquire Routematch, an Atlanta-based company that develops software for public transportation agencies. Routematch has partnerships with more than 500 public transportation companies and its products help transportation companies with route matching and ticket purchasing. Last month, Uber decided to venture into the software business by letting the Transportation Authority of Marin subscribe to use Uber’s software. Venturing into the SaaS industry can be competitive but because Uber’s software is really unique and many companies aren’t trying to replicate it, with its household brand, Uber has been able to move in smoothly.

Honestly, if Uber was a SaaS company from the beginning and didn’t decide to compete directly against taxi companies, who knows what the world would’ve looked like. Maybe taxis would be more convenient for consumers and more efficient in their operations. The gig economy would be a lot smaller as taxi drivers would continue to provide most Americans with personal transportation services. The world would be a lot different if Uber was a SaaS business than a rideshare platform.

Going back to the original topic, Uber has been venturing into public transportation for quite some time. After years of contributing to the decline of public transportation, Uber is now helping public transportation companies. In May of last year, Uber gave Denver customers the option to buy bus and train tickets. This was the start of many plans by Uber to sell public transportation tickets to customers. Then in September of last year, Uber confirmed that they wanted to provide all methods of transportation to its customers. After noticing that customers would frequently calculate their commute for the next day while taking the train during the night, Uber gave customers the option to buy tickets from railroad companies in the San Francisco Bay Area and Long Island, New York.

Acquiring Routematch changes the dynamics of Uber drastically. No longer is Uber a transportation platform, it’s becoming a software business and a ticket-selling platform. Along with food delivery, rideshare, freight, and scooters, Uber is now selling software to public transportation companies and is providing them a platform where they can sell tickets to commuters.

With rideshare and scooter demand plummeting because of the pandemic, Uber is looking for other sources of revenue. The move into public transportation and in the software business makes Uber a more stable business. While some shareholders worry that the acquisition of Routematch will add more pressure to their balance sheet, because Routematch makes Uber’s software business more attractive, I believe the ROI from the acquisition will be better than most of Uber’s acquisitions.