Ride-sharing company Uber has released its S-1 securities form ahead of its upcoming public IPO. The S-1, filed with the U.S. Securities and Exchange Commission, gives some interesting insights into the company’s licensing agreements — specifically, its deals with Google.
The S-1 reveals that Uber paid Google approximately $58 million for the use of Google Maps between January 1, 2016 and December 2018. Uber relies on Maps as part of its app to help drivers navigate and give customers a visualization of their journey.
In the filing, Uber said Google Maps functionality was critical to its platform, adding: “We do not believe that an alternative mapping solution exists that can provide the global functionality that we require to offer our platform in all of the markets in which we operate.”
$58 million seems like a small fee for functionality Uber cannot exist without — especially since $58 million is little more than a rounding error for Google, which took home $39.2 billion in revenue for Q4 2018 alone last year.
Uber’s revenue of $7.93 billion in 2017 and $11.27 billion in 2018 is strong, although it continues to lose money, and says itself it may never make a profit. Overall, the Google Maps agreement is a fundamental necessity for its riders and 3.2 million drivers.
How did Uber get such a good deal?
There are two good reasons why Uber pays relatively little for Maps. Firstly, Google doesn’t just benefit from the direct fee for Maps — Uber is another huge promotion for it. Uber said had “1.5billion trips” in the last quarter of 2018 alone; that’s billions of users accessing — and becoming accustomed to — Google Maps even with the Uber-styling over the top.
The other reason relates to Google’s parent company Alphabet Inc. Alphabet has a 5.2 percent stake in Uber, which has resulted in “various marketing, advertising, and technology service agreements with affiliates of Alphabet Inc.” That might mean Google offers a discount on its Maps services.
Regardless, it’s in Alphabet’s best interests for the companies to play nice, and it’s not all one-way traffic: Google also pays Uber approximately $3.1 million for the privilege of promoting Google Pay.
Whether Google Maps is the only option for Uber or if the Alphabet affiliation just makes it the logical option, I’m not totally convinced. What I am convinced of, though, is that those people trying to cut Google out of their lives are set for an increasingly tough time.