Uber – Wheel re-invention.

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HERE offers much more for $500m. 

• I think that $500m would be much better spent in becoming a meaningful shareholder of HERE and getting a leading seat at the table of the only independent game in town.
• It appears that Uber intends to invest $500m in creating its own map in order to remove its dependency on Google, a company looks set to be its competitor one day.
• As Uber’s business stands today, Google is not really a threat as its maps are really only used for passenger location and routing but when autonomous vehicles become a reality, it will be a different story.
• Uber has already assembled some mapping assets having acquired deCarta, a turn by turn directions company, as well as some assets from Microsoft and personnel from Google.
• The problem as I see it is that throwing just $500m at building map is very unlikely to produce the desired results.
• If Uber was to spend $600m per year for 6 years and utilize the services of 6,000 people, then it would probably come up with an asset as good as Google’s.
• However, it would have carry on spending this amount every year and quite possibly more (see below) just to keep its head above water
• Given my bearish view on the timing of autonomous vehicles (see here), I think Uber has the time but I am far from convinced that reinventing the wheel is a very good use of its resources.
• The general consensus is that autonomous vehicles require a very high quality map, which given Uber’s presence in 60 countries, it is going to have to cover them all.
• Furthermore, simply covering the cities will not be enough, Uber will have to have this level of quality everywhere if it wants to offer a fully-fledged autonomous ride hailing service.
• HERE and Google are only just embarking on this now and I think that Uber may end up having to invest even more than $600m a year if it wants to keep up.
• With Google becoming a competitor for much of the technology industry, many technology companies have already switched to using the HERE map and I think this trend will continue.
• Google is also emerging as a competitor for the automotive industry which is pushing HERE to become a coalition of all Google’s competitors.
• HERE has to tread very carefully to ensure it remains independent and that everyone is fairly treated (see here) but I see that some of the initial hurdles of competitors sharing anonymous data have already been overcome.
• Hence, I think that Uber joining the HERE consortium would be mutually beneficial as Uber would have a first rate map from day 1 while the consortium would benefit from Uber’s rich data set.
• I am sure the conversations are already happening.