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Mon 25 Nov 2019 12:16 PM

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Video: Why did Uber spend $3.1 billion on a Middle Eastern rival?

After Uber's disastrous IPO, 2019 proved to be a rough year for the ride-sharing giant.

But there was one bright spot for Uber - its $3.1 billion acquisition of the Dubai-based ride-sharing service Careem. Acquiring its former competitor gives Uber a major win in the Middle East and North Africa region, where Careem has gained a loyal user base thanks to its deep knowledge of the local market.

2019 was a rough year for Uber. First there was the disastrous IPO, where the company's share price declined straight out of the gate and never recovered. Then came a string of gigantic quarterly losses, leadership shakeups, and layoffs,further rattling investor confidence.

But a mere month and a half before things headed south, Uber announced a major acquisition, paying $3.1 billion for the Dubai-based ridesharing service Careem, giving many investors hope that the Middle East and North Africa could represent a major growth opportunity for the company.

Careem's deep knowledge of the local market has helped it gain a loyal userbase of 33 million, and allowed it to expand into 87 cities in 14 countries, including places like Iraq and Palestine, where Uber previously had no presence.

Now, Uber is projecting profitability by 2021. If it's going to get there, Careem and the greater Middle East and North Africa region may have an important role to play.

(Source: CNBC YouTube channel)