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Uber Loses at Least $1.2B in First Half of 2016

241 points by brandonlipman 10y ago

rnernento 10y ago
So if they're relying on driver subsidies to be competitive but can't make money that route is there a plan for them to make money without relying on autonomous vehicles? Or is that the bet?
- thesimon 10y ago
  >So if they're relying on driver subsidies to be competitive but can't make money that route is there a plan for them to make money without relying on autonomous vehicles? Wait until others (taxis, Lyft) are out of the market and raise prices?
- Cacti 10y ago
  That would be a ridiculous bet. Autonomous driving in any wide-spread form is still years if not a decade away. Losing money for a decade while awaiting the glorious future to redeem you is a sure way to go bankrupt, and quickly. Uber did not start with plans to use autonomous vehicles and so far their plans amount to little more than "well, yeah, we'll shift to autonomous cars when they come." Well, yeah, so will everyone else on the planet. I don't think it's a coincidence that all of this came up around the time Uber started to lose money... when they were in the black all the talk was about the "rise of the freelancer economy."
  - harpastum 10y ago
    As crazy as it sounds, they might not actually go bankrupt even if they continue to lose hundreds of millions per year. They've received $11.5B in total funding. They've averaged $1.6B in funding per year of operation and $4.65B in the last 3 months. It's likely that they're actually building up a war chest at this point, getting ready for extra spending on self-driving cars.
    - sdenton4 10y ago
      According to the article, their world wide loss for the first HALF of 2016 is $1.2 billion. So $1.6B per year ain't gonna cut it at the current burn rate.
      - dragonwriter 10y ago
        OTOH, $4.65B per 3 months more than suffices... But at some point there's got to be a limit to the tolerance of investors.
    - kamaal 10y ago
      >>It's likely that they're actually building up a war chest at this point, getting ready for extra spending on self-driving cars. They are waiting for self driving cars to arrive. Not building it themselves. Once someone does all the hardwork, they just want to buy and use them. Not going to happen any time soon.
  - misiti3780 10y ago
    serious question for someone that knows the answer to it - isnt google much further ahead than UBER/CMU in the whole autonomous driving technologies ?
    - probe 10y ago
      Yes, but it doesn't mean that Uber cannot catch up. As Musk said, it's very easy (relatively) to get to 99% driverless cars, but it's the 1% that is truly difficult (with all edge cases). Furthermore, say driverless car technologies for all companies come around the same time (plus/minus a year) - don't you think Uber would have the distinct network effect advantage that Google would have to build from scratch? Said another way, would you rather bet that Uber can make up the 1 year technology lead (ex. aggressively hiring and more R&D) in driverless car FASTER than Google can make a uber-like driver/rider worldwide car share network? That being said I don't think Google (who is also an investor in Uber) would - they're mainly looking to license out the software. This is also leading to problems because car companies are realizing how pivotal this is going to be and want to control the entire process rather than be downgraded to a mere OEM.
  - deleted 10y ago
    [deleted]
- brentm 10y ago
  Truly autonomous vehicles are probably the best and worst thing that will happen to Uber. One of Uber's greatest strength is having all of those drivers, it would be very hard to create a competing service and recruit that kind of fleet. If tomorrow it was legal to put truly autonomous vehicles on the road what is stopping anyone with a few billion dollars (e.g. Apple, Google, etc) to enter the market and compete on price per ride? I don't think many people are loyal to Uber, they are loyal to whatever is easiest, cheapest and quickest.
  - sharemywin 10y ago
    There's no differentiation. a car ride is a car ride.
    - madeofpalk 10y ago
      If that were true then taxis would be fine and Uber wouldn't exist.
      - toomuchtodo 10y ago
        Uber isn't competing with taxis. They're competing with anyone who can launch a ride sharing app.
      - taxicabjesus 10y ago
        Taxis were fine in Arizona, but we only had 'Electronic Dispatch v1.0' [1]. The upstarts upgraded the dispatching system to v1.1. The main advantage of their upgraded system (over v1.0) was providing instantaneous feedback of the to the passenger's mobile computer. v1.1 also gave the passenger the ability to 'rate' their driver, which was also not a feature of v1.0. [1] http://www.taxiwars.org/electronic-taxi-dispatch-v1.0/ http://www.taxiwars.org/electronic-taxi-dispatch-v1.0/
      - sharemywin 10y ago
        uber beats them on price. that's not product differentiation.
  - 10y ago
- pyrale 10y ago
  Dumping usually ends once you've killed competition. Looking at Lyft's results this strategy appears to be succesful.
  - justinv 10y ago
    But is Lyft really the competition for Uber in the long run? This almost feels like the Blu Ray and HD DVD war - yeah, Blu Ray beat HD DVD, but digital beat out both. At what point do self driving cars mean that Uber no longer has a competitive advantage in transportation? Aka if you remove the need to sign up drivers, then you're just competing on cost of a vehicle + overhead as the cost to a customer to switch from Uber to say 'FordNow!' is so low - I just download another app. Uber is competing with all forms of transportation and to beat everyone there is a long time to try to wait and stay solvent for.
    - peatmoss 10y ago
      > the cost to a customer to switch... I think this is the key here. Network effects are powerful, but are highly contingent on switching costs. It costs drivers and passengers next to nothing to switch between providers. A relationship between driver and passenger only exists for a single ride. By contrast, look at Facebook's network effect. The switching cost to obtain a comparable service is talking all your friends and elderly relatives into Something New. Hence G+ making roughly zero gain against the Book.
      - rhino369 10y ago
        Ubers treatment of their drivers as "contractors" has hurt their network effect. Because they can't make them exclusive to uber. All the uber drivers in DC also use lyft. And they'd use another service if that popped up. I bounce around between the two based on whoever gave me a discount.
    - rnernento 10y ago
      It's not that easy to get in though, you need a huge investment in a sufficient number of autonomous vehicles for any area you want to enter.
- privateersman 10y ago
  I don't understand it personally. They sort-of remind me of how the US brought cable TV to the UK. There was huge investment on infrastructure and an amazing service. The funding ended, service declined but that infrastructure, which was decades ahead of anything else still existed. Uber is similar, but anyone can set up a taxi service. Their own taxi drivers can even do it. Existing competitors can take over when the discounts disappear. It just doesn't make sense, it's like a pyramid with no foundation.
smeyer 10y ago
I think the $100MM is just the US losses, not the global loss. >In the second quarter the losses significantly exceeded $750 million, including a roughly $100 million shortfall in the U.S., those people said.
- manarth 10y ago
  Only a few months ago, they were reporting that they had hit their Q2 2016 goal (of running profitably in the USA) [1][2]. Guess that didn't last long. [1] http://uk.businessinsider.com/uber-says-its-profitable-in-the-us-2016-4 http://uk.businessinsider.com/uber-says-its-profitable-in-th... [2] http://www.bloomberg.com/news/articles/2016-04-14/lyft-is-gaining-on-uber-as-it-spends-big-for-growth http://www.bloomberg.com/news/articles/2016-04-14/lyft-is-ga...
  - JonFish85 10y ago
    Profitable can have many more meanings than you'd think. On the surface, to me, profitable means you make more money than you spend (subtracting all the costs of doing business, acquiring customers, taxes, payroll, etc). Depending on who you're talking to, however, that can mean things like "it costs less to acquire a new customer than they're likely to spend", or that excluding things like salaries, rent, taxes and such, they're profitable. In this case I'd guess it means that Uber pays less to drivers than the user pays them, and ignore everything else (marketing, salaries to employees, taxes, etc).
    - tdees40 10y ago
      I want to put this comment in a time capsule so I can tell my kids what start-up life was like in 2016.
      - deleted 10y ago
        [deleted]
      - objectivistbrit 10y ago
        I see from your comment history you know finance, so - um, what? There are different definitions of "profit".
justaman 10y ago
This article fails to mention Uber's potential to disrupt the trucking industry. Uber has been heavily invested in automated driving since inception. They will not see true profit until this hits the market.
- thesimon 10y ago
  And what prevents car or truck manufacturers from doing the same? It's not like they are just happy sitting around and doing nothing. Also looks like the large losses are coming from subsidizing drivers, not R&D.
  - kbart 10y ago
    "And what prevents car or truck manufacturers from doing the same?" They are already doing that: http://qz.com/656104/a-fleet-of-trucks-just-drove-themselves-across-europe/ http://qz.com/656104/a-fleet-of-trucks-just-drove-themselves...
- readhn 10y ago
  Mercedes already drives a bunch of self driving trucks in Europe. Volvo is in the game as well etc. Uber is just a service provider. They don't build anything. Anyone can be a service provider with enough funding.
mbloom1915 10y ago
and this co. is going public next year? might want to rethink that
- 0xmohit 10y ago
  Isn't it good to go public until valuations are high?
  - mbloom1915 10y ago
    A $60B valuation pre-IPO isn't high?
    - 0xmohit 10y ago
      What I meant was that given the current valuation is high, it's right to go ahead with an IPO. But you lead me into thinking: In order to justify $60B valuation, I'd have expected them to blow up much more than $100M.
    - parthdesai 10y ago
      That's VC valuation though right? I maybe wrong, but are you sure market will value this same company at $60B when it is not even profitable? I genuinely have no knowledge about this, so feel free to correct me if i'm wrong.
untilHellbanned 10y ago
Ahh, good old morning breakfast of {hot button issue}. Here's how this comment thread will play out so no need to read further: - Advocates will wonk it out by saying something along the lines of "this doesn't matter b/c they are building a logistic network, self driving cars, these figures are incorrect for reasons x, y, z, or b/c startup=growth!=profit" - Dissenters will say something along the lines of "it's a bubble, Detroit or tesla is gonna crush them, look they failed in China, Austin Tx, or that it's a commodity product so get those SV-funded rides while you can!" - Both sides will downvote this comment for showing them how cliched their contribution is. But I'm a special snowflake!
kapilkale 10y ago
Pretty sure this is not a Webvan scenario. The question at hand should be "if Uber ran out of funding, would they die" For Webvan, it was yes. The answer for Uber is no, at least in the short term. a) Uber would stop subsidizing drivers, and then would overnight be cash flow positive b) The driver subsidies probably wouldn't matter anymore, because if Uber's funding ran out, so would that of their competitors. Lyft is already on the brink (source: http://www.nytimes.com/2016/08/20/technology/lyft-is-said-to-fail-to-find-a-buyer-despite-talks-with-several-companies.html http://www.nytimes.com/2016/08/20/technology/lyft-is-said-to...) c) they'd exit markets where they were burning cash (e.g. China, which already happened) Long term, no idea.
- wpietri 10y ago
  What's your data on A? I'm not sure it's true. The article says net revenue was $1.1 billion in Q2. Losses were "significantly" more than $750m. So we're talking a scenario where either they lose a lot of drivers or raise prices drastically. I'd expect a fair bit of damage either way, meaning still-lower revenues. And they have very large fixed costs. Because they've already shifted most of their operating expenses to drivers, they have relatively little room to cut costs. They have a lot of expensive staff. They have a whole robot car research operation, which can't be cheap; Toyota has committed a billion dollars to figuring that out. So it's not clear to me that they'd be able to get to break-even. I also think C is risky for them. Their valuation is "astronomical" by Bloomberg's standards; they're supposedly worth well more than, say, Ford. That's been based on a hard charge for global dominance, not just getting by in a few markets. And getting into the black might require big cuts in their marketing budget. If their growth numbers tank, their stock will lose the "dominate the market" premium. So even if they could somehow get into the black, I'm not sure they would still be Uber at the end of it. They might not be the next Webvan, but they certainly could be the next Groupon.
- rtpg 10y ago
  They might be cash flow positive but would they have enough to pay back all the leveraged debt they've taken on? If they pulled out of a bunch of markets (why is Uber wasting its time in places like Japan where taxis are basically fine?), then they could no longer justify their valuation. Their prices are going to go pretty high up, meaning they'll only survive in places where taxis are super awful (so, basically the US). All that stock they've handed out would start dropping like a rock in the private valuations of the institutional holders, I bet some loan conditions will trigger, and they're going to suffer quite a bit. Not to mention the talent exodus. It's like austerity. If your company is suffering due to a lack of growth to meet ambitions, is cutting costs going to make growth go faster or slower? That said, I think Uber will figure something out, even if it ends up not hitting its goals.
readhn 10y ago
Uber will fall 1st victim to its own success. They are facing strong competition, id be surprised if they survived (but even then they will lose a significant market share).
- adventured 10y ago
  They're not facing strong competition, they're facing extremely weak competition (Lyft is heading toward bankruptcy and can't even manage to sell itself off). They aren't going to lose significant market share, they're going to end up with a modest monopoly, replicating the positions acquired by: Google, Microsoft, Facebook, eBay, Amazon, PayPal, Intel, Cisco, etc. The same story plays out over and over again in tech, and it does so for very obvious reasons. Who else is threatening Uber in the US for example? Nobody. Who is going to spend billions to take the market away from Uber? Nobody.
  - sharemywin 10y ago
    groupon couldn't make it work. This seems more like hundreds of local markets and not 1 big market. And that company that has only women drivers for women passengers seems like it might be able to carve out a niche. and if it gets to profitable what's to stop grub hub, task rabbit or another deliver company to make a run at the market.
  - thesimon 10y ago
    >Who else is threatening Uber in the US for example? Taxis? Car manufacturers? >Who is going to spend billions to take the market away from Uber? Doesn't look like it's a very profitable market Uber is operating in, so why should anyone spend billions to do so?
  - ruipgil 10y ago
    The competition may not come directly from technology companies, but from car companies. Tesla might be one of them.
  - moefogs 10y ago
    Uber is wildly overvalued. If there was a reasonable way to short it, I would. Heavily. They're building an airline. It will stabilize as a large business with minuscule (at best) margins.
kbart 10y ago
I'm no economics expert, but if Uber loses money on subsidiaries, that's dumping(1) against local Taxi companies and these companies actually might have some valid points, no? 1. https://en.wikipedia.org/wiki/Dumping_(pricing_policy) https://en.wikipedia.org/wiki/Dumping_(pricing_policy)
- funkyy 10y ago
  With all the shady tactics from Uber so far including lobbying etc. I think Taxi companies have no case here...
- legitster 10y ago
  Dumping is really only applicable if they are undercutting their prices in specific regions. If I am under-charging across my entire lineup, that's just on me.
  - bryanlarsen 10y ago
    Which they absolutely do. AFAICT, Uber doesn't subsidize rides in Europe because predatory pricing is illegal there. But they do in new markets in the US and used to subsidize heavily in China, which opens them up to charges of dumping, it seems to me.
    - an_account 10y ago
      Dumping is for products that are being exported. Uber isn't exporting anything.
    - 67726e 10y ago
      > because predatory pricing is illegal there Legality hasn't exactly been a problem to Uber's expansion. Why would this particular situation be different?
      - DavidHm 10y ago
        There's a bit of a difference on which government body enforces which rule. In quite a few countries, taxi rules are governed by cities - so the municipality government is the enemy. Anti-monopoly/ predatory pricing rules are at least national level - and if you are unlucky you can go against the EU itself, which historically has not been afraid to slap companies with gargantuan fines that would never be allowed from the pro-business USA SC.
readhn 10y ago
Singapore just launched self driving taxi. Other competitors are doing the same. To me it does not matter where I get a cab ride from as long as it is cheap, safe and fast.
- mgrpowers 10y ago
  And clean please.
  - Grue3 10y ago
    Judging by automatic toilets, a self-driving taxi would be anything but that.
    - jannyfer 10y ago
      Zipcars are actually fairly clean, in my experience. Professionally cleaned regularly and it's easy to track who caused a mess if the next person in the car reports it.
greghendershott 10y ago
This reminds me of what Richard Branson supposedly said: If you want to be a millionaire, start with a billion dollars and launch a new airline. (To be fair, airlines pay humans... as employees... unionized.) I understand the rationale for spending $2 of marketing/whatever to buy $1 of sales. Grab market share. Step 3, profit like it's 1999. We'll see.
- ctack 10y ago
  Branson's statement reminded me of the old joke: Q: How do you make a small fortune in farming? A: You start out with a large one.
  - compiler-guy 10y ago
    So many old jokes like this. My favorite variation: How do you restore a <classic car of your choice> so it is worth $100,000? Buy one with good bones for $20K and spend $200,000 fixing it up.
jokoon 10y ago
What are uber expenses? Is there z large hotline? Apart from devs and servers, i dont see it.
- prawn 10y ago
  At many times, they pay drivers minimum amounts to enter the pool even if there might not be enough jobs out there. They also hand out loads of vouchers to promote the service. Plus lobbying, marketing, PR, etc. Multiply by however many countries they're in.
- aetherson 10y ago
  They pay their drivers more for each drive than passengers pay.
ctdonath 10y ago
For a company with practically zero expenses, losing $1.27 billion in 6 months astounding. Charge a client whatever the driver is willing to work for, plus a small overhead ... what's to lose money on?
- leothekim 10y ago
  It's a Fabian strategy to establish market dominance. Uber is spending like crazy to expand for market share. On the surface at least, they are similar to how Amazon was operating in its early days - investing in itself early to expand and not expecting to generate a profit for many years.
  - sharemywin 10y ago
    the problem is most of amazons profits are in cloud services. moving something from point a to b is expensive and hard to get economy of scale.
    - wastedhours 10y ago
      Part of the argument is the Uber is building product infrastructure of their own - Amazon built AWS as part of their everyday working, Uber could roll out delivery, autonomous tech or even their financial services as separate strands once they've reached pervasiveness.
      - SyneRyder 10y ago
        Indeed, Uber already has their UberEATS program where they offer home delivered food from restaurants that don't yet have their own delivery service. So they're already experimenting with providing delivery & mobile payment processing services.
        Guyag 10y ago
        I'd be interested to see how UberEATS turns out. Deliveroo has had a year on them, and at least where I am I think the latter is still the favourite.
eof 10y ago
How is it possible that uber is losing money? It must all be research? If I take a $20 uber ride, uber gets $4 at a marginal cost of close to zero. They are selling other people's time, it seems like a flawless business model if you're winning the game..
- colinbartlett 10y ago
  In many markets, Uber pays the driver more than they charge the customer.
- dagw 10y ago
  Uber, at least in the past, has been offering subsidies to its driver in many markets to grow its market share, Basically making up the difference between what customers are willing to pay and what drivers are willing to work for. The driver may very well be earning $25 for that $20 ride with Uber making up the difference.
  - oceanofsolaris 10y ago
    So in the longer run, either the drivers will have to work for less than they are willing to or the customers have to pay more than they are willing to. Or Uber has to keep paying the tab.
    - dagw 10y ago
      I imagine the plan is that once Uber has become ingrained enough in peoples lives that they have hard time imagining life without it, they can start slowly turning up the price without losing too many customers.
- prawn 10y ago
  They often guarantee drivers a minimum hourly rate to ensure there is a pool of available drivers for their users. If they don't do this, users will get frustrated at times and give up on the service. They're essentially loss-leading until a few things happen: - fuel prices drop away - self-driving cars are available - their competitors die out
intrasight 10y ago
I've been seeing the Uber robots driving around Pittsburgh in the last week. They can still loose a lot of money in the short to mid-term if they succeed in fundamentally changing the nature of mobility with autonomous people movers.
baybal2 10y ago
So much for a lossy taxi company
0xmohit 10y ago
Wonder what were the revenues from the monetization of collected data?
- _pmf_ 10y ago
  Do they actually collect anything that Google could not infer purely from location and time data?
  - 0xmohit 10y ago
    I suspect that you never checked what information they collect. On Android, apart from location the app requires following permissions [0]: - SMS (read, send, receive) - Photos/media/files (read, modify, delete SD card contents) - WiFi connection information - Full network access - View network connections - Read Google service configuration - Modify system settings Moreover, they have access to your payment information. [0] https://www.uber.com/legal/other/android-permissions/ https://www.uber.com/legal/other/android-permissions/
unixhero 10y ago
That's nothing. Move along.
dublidu 10y ago
Why does Uber spend billions to subsidize drivers if self driving cars are on the horizon?
- kolbe 10y ago
  Maybe someone who knows can answer this better, but my guess is that the primary purpose of drivers is to draw (then try to lock in) consumers to their ecosystem. So, their investment isn't in getting drivers for the long haul, but rather paying drivers to offer a temporary service that will help their business further down the line.
sdenton4 10y ago
"We're losing a dollar in every transaction, but we'll make it up on volume!"
- eddieplan9 10y ago
  It's not as simple as that. The market becomes more efficient as the volume goes up. The simple example is uberPOOL. Many driver subsidies kick in only when a driver does not earn enough.
- r00fus 10y ago
  Wasn't that said of Amazon? Apparently the model has precedent for success (assuming you consider Amazon is successful).
JOnAgain 10y ago
I'm surprised that Bloomberg failed to account for inflation in their comparisons. Amazon's 1.4 Billion loss in 2000 is almost exactly 2 Billion in today's dollars (1,956,479,674.80 according to http://www.usinflationcalculator.com/ http://www.usinflationcalculator.com/). So this loss is not unprecedented.
- alttab 10y ago
  An important difference about Amazon in 2000 was it was a public company by then.
  - hyperbovine 10y ago
    Another difference: I'm not sure that Amazon ever lost money on the margin. Their losses were always attributed to reinvesting whatever profits they made back into the business (and then same). Uber by contrast appears to be losing money on every ride. People will say that they can just jack up the price once they have annihilated Lyft or whatever, but I'm not so sure that is going to work. A big appeal of Uber for a lot of people is that it's currently only slightly more than public transit. Raise the price and your back to being a taxi service, and we've seen how that goes.
    - FT_intern 10y ago
      Amazon wasn't losing money on margin even with $25 free shipping back then?
      - tedunangst 10y ago
        Maybe, but I doubt they were losing $25 on each order. For at least some promotions/cities, Uber's losses seem to exceed revenue.
    - aetherson 10y ago
      People tend to think of this in black-and-white terms. The actual deal is that if Uber jacks up its prices significantly, on the margin people will ride with Uber less. Will their number of rides go to 0? No, of course not. But even if there is no other ride service available, there's still taking public transit, driving yourself, or, you know, not going out to whatever you're going to. Remember also that even if Uber fully defeats Lyft and Lyft's service shuts down, there are plenty of companies out there better capitalized than Uber itself is. Those companies have so far decided to stay out of a "lose $2b per year" business, but if Uber can demonstrate that this is a "gain $2b per year" business, then Google, Amazon, one of the car companies, maaaaybe Apple, and probably a bunch of other companies can at that point launch their own service.
yusiboyz 10y ago
How is uber able to survive with losing so much of money? Is it because of all the contributions?
imron 10y ago
Don't worry, they'll make up for it in volume!
PatentTroll 10y ago
"Uber is just waiting until driverless cars are a thing and then they will own transportation." I hear this all the time, but realisticly that's at least a decade away. Are Ubers investors prepared to pour $24bn into the company waiting for this nirvana? They certainly could, but I'm not so sure they will.
- hashberry 10y ago
  Realistically, Uber faces major competition from Google and Apple, both who are investing heavily in self-driving cars and have easy access to loyal consumers.
  - up_and_up 10y ago
    > Google ... loyal consumers Name one physical consumer product that has garnered them loyal customers? Apple on the other hand...
    - dragonwriter 10y ago
      > Name one physical consumer product that has garnered them loyal customers? Transportation is a service, not a physical consumer product. Google has plenty of consumer services (including some "meatspace" services, like Google Express) that have garnered them loyal customers. EDIT: But perhaps most relevantly to competing with or commoditizing Uber, Google has Google Maps, which not only has a huge user base, but already has a ridesharing button in it. Now, AFAIK, all that does right now is give an estimated Uber price and a link out to the Uber app -- but its a fairly trivial move for Google either to include their own autonomous car service (if they launch one) or other Uber competitors in that link, and either eat Uber's business directly or at least weaken Uber's moat.
      - petra 10y ago
        you're correct. Google maps has added new options to it's ridesharing:"New partners include 99Taxis in Brazil, Ola Cabs in India, Hailo in the U.K. and Spain, mytaxi in Germany and Spain and Gett in the U.K. They will sit alongside listings from Uber," Also, don't forget Google now surfacing a notification saying: "would you a half price shared taxi for your predicted route ? click to open Google maps" - sounds like a great way to form new habits for users.
LordHumungous 10y ago
Uber's premise is that it is a mere facilitator of service providers and customers, and therefore it can scale like a tech company and not like some oversized yellow cab with thousands of employees and vehicles on the books. It's a shell game. Uber may not call it's drivers employees, it may not claim ownership of the vehicles, but those drivers and vehicles represent overhead all the same. At the end of the day, the cars must be maintained. High quality drivers must be recruited and paid. If they aren't, Uber goes out of business. At this point Uber is looking suspiciously like a large traditional company that provides a taxi service, with a nice app. Maybe a potentially profitable one. But worth $60 billion? Nope.

241 points by brandonlipman 10y ago

So if they're relying on driver subsidies to be competitive but can't make money that route is there a plan for them to make money without relying on autonomous vehicles? Or is that the bet?

thesimon 10y ago
>So if they're relying on driver subsidies to be competitive but can't make money that route is there a plan for them to make money without relying on autonomous vehicles? Wait until others (taxis, Lyft) are out of the market and raise prices?
Cacti 10y ago
That would be a ridiculous bet. Autonomous driving in any wide-spread form is still years if not a decade away. Losing money for a decade while awaiting the glorious future to redeem you is a sure way to go bankrupt, and quickly. Uber did not start with plans to use autonomous vehicles and so far their plans amount to little more than "well, yeah, we'll shift to autonomous cars when they come." Well, yeah, so will everyone else on the planet. I don't think it's a coincidence that all of this came up around the time Uber started to lose money... when they were in the black all the talk was about the "rise of the freelancer economy."
- harpastum 10y ago
  As crazy as it sounds, they might not actually go bankrupt even if they continue to lose hundreds of millions per year. They've received $11.5B in total funding. They've averaged $1.6B in funding per year of operation and $4.65B in the last 3 months. It's likely that they're actually building up a war chest at this point, getting ready for extra spending on self-driving cars.
  - sdenton4 10y ago
    According to the article, their world wide loss for the first HALF of 2016 is $1.2 billion. So $1.6B per year ain't gonna cut it at the current burn rate.
    - dragonwriter 10y ago
      OTOH, $4.65B per 3 months more than suffices... But at some point there's got to be a limit to the tolerance of investors.
  - kamaal 10y ago
    >>It's likely that they're actually building up a war chest at this point, getting ready for extra spending on self-driving cars. They are waiting for self driving cars to arrive. Not building it themselves. Once someone does all the hardwork, they just want to buy and use them. Not going to happen any time soon.
- misiti3780 10y ago
  serious question for someone that knows the answer to it - isnt google much further ahead than UBER/CMU in the whole autonomous driving technologies ?
  - probe 10y ago
    Yes, but it doesn't mean that Uber cannot catch up. As Musk said, it's very easy (relatively) to get to 99% driverless cars, but it's the 1% that is truly difficult (with all edge cases). Furthermore, say driverless car technologies for all companies come around the same time (plus/minus a year) - don't you think Uber would have the distinct network effect advantage that Google would have to build from scratch? Said another way, would you rather bet that Uber can make up the 1 year technology lead (ex. aggressively hiring and more R&D) in driverless car FASTER than Google can make a uber-like driver/rider worldwide car share network? That being said I don't think Google (who is also an investor in Uber) would - they're mainly looking to license out the software. This is also leading to problems because car companies are realizing how pivotal this is going to be and want to control the entire process rather than be downgraded to a mere OEM.
- deleted 10y ago
  [deleted]
brentm 10y ago
Truly autonomous vehicles are probably the best and worst thing that will happen to Uber. One of Uber's greatest strength is having all of those drivers, it would be very hard to create a competing service and recruit that kind of fleet. If tomorrow it was legal to put truly autonomous vehicles on the road what is stopping anyone with a few billion dollars (e.g. Apple, Google, etc) to enter the market and compete on price per ride? I don't think many people are loyal to Uber, they are loyal to whatever is easiest, cheapest and quickest.
- sharemywin 10y ago
  There's no differentiation. a car ride is a car ride.
  - madeofpalk 10y ago
    If that were true then taxis would be fine and Uber wouldn't exist.
    - toomuchtodo 10y ago
      Uber isn't competing with taxis. They're competing with anyone who can launch a ride sharing app.
    - taxicabjesus 10y ago
      Taxis were fine in Arizona, but we only had 'Electronic Dispatch v1.0' [1]. The upstarts upgraded the dispatching system to v1.1. The main advantage of their upgraded system (over v1.0) was providing instantaneous feedback of the to the passenger's mobile computer. v1.1 also gave the passenger the ability to 'rate' their driver, which was also not a feature of v1.0. [1] http://www.taxiwars.org/electronic-taxi-dispatch-v1.0/ http://www.taxiwars.org/electronic-taxi-dispatch-v1.0/
    - sharemywin 10y ago
      uber beats them on price. that's not product differentiation.
- 10y ago
pyrale 10y ago
Dumping usually ends once you've killed competition. Looking at Lyft's results this strategy appears to be succesful.
- justinv 10y ago
  But is Lyft really the competition for Uber in the long run? This almost feels like the Blu Ray and HD DVD war - yeah, Blu Ray beat HD DVD, but digital beat out both. At what point do self driving cars mean that Uber no longer has a competitive advantage in transportation? Aka if you remove the need to sign up drivers, then you're just competing on cost of a vehicle + overhead as the cost to a customer to switch from Uber to say 'FordNow!' is so low - I just download another app. Uber is competing with all forms of transportation and to beat everyone there is a long time to try to wait and stay solvent for.
  - peatmoss 10y ago
    > the cost to a customer to switch... I think this is the key here. Network effects are powerful, but are highly contingent on switching costs. It costs drivers and passengers next to nothing to switch between providers. A relationship between driver and passenger only exists for a single ride. By contrast, look at Facebook's network effect. The switching cost to obtain a comparable service is talking all your friends and elderly relatives into Something New. Hence G+ making roughly zero gain against the Book.
    - rhino369 10y ago
      Ubers treatment of their drivers as "contractors" has hurt their network effect. Because they can't make them exclusive to uber. All the uber drivers in DC also use lyft. And they'd use another service if that popped up. I bounce around between the two based on whoever gave me a discount.
  - rnernento 10y ago
    It's not that easy to get in though, you need a huge investment in a sufficient number of autonomous vehicles for any area you want to enter.
privateersman 10y ago
I don't understand it personally. They sort-of remind me of how the US brought cable TV to the UK. There was huge investment on infrastructure and an amazing service. The funding ended, service declined but that infrastructure, which was decades ahead of anything else still existed. Uber is similar, but anyone can set up a taxi service. Their own taxi drivers can even do it. Existing competitors can take over when the discounts disappear. It just doesn't make sense, it's like a pyramid with no foundation.

smeyer 10y ago

I think the $100MM is just the US losses, not the global loss. >In the second quarter the losses significantly exceeded $750 million, including a roughly $100 million shortfall in the U.S., those people said.

manarth 10y ago
Only a few months ago, they were reporting that they had hit their Q2 2016 goal (of running profitably in the USA) [1][2]. Guess that didn't last long. [1] http://uk.businessinsider.com/uber-says-its-profitable-in-the-us-2016-4 http://uk.businessinsider.com/uber-says-its-profitable-in-th... [2] http://www.bloomberg.com/news/articles/2016-04-14/lyft-is-gaining-on-uber-as-it-spends-big-for-growth http://www.bloomberg.com/news/articles/2016-04-14/lyft-is-ga...
- JonFish85 10y ago
  Profitable can have many more meanings than you'd think. On the surface, to me, profitable means you make more money than you spend (subtracting all the costs of doing business, acquiring customers, taxes, payroll, etc). Depending on who you're talking to, however, that can mean things like "it costs less to acquire a new customer than they're likely to spend", or that excluding things like salaries, rent, taxes and such, they're profitable. In this case I'd guess it means that Uber pays less to drivers than the user pays them, and ignore everything else (marketing, salaries to employees, taxes, etc).
  - tdees40 10y ago
    I want to put this comment in a time capsule so I can tell my kids what start-up life was like in 2016.
    - deleted 10y ago
      [deleted]
    - objectivistbrit 10y ago
      I see from your comment history you know finance, so - um, what? There are different definitions of "profit".

justaman 10y ago

This article fails to mention Uber's potential to disrupt the trucking industry. Uber has been heavily invested in automated driving since inception. They will not see true profit until this hits the market.

thesimon 10y ago
And what prevents car or truck manufacturers from doing the same? It's not like they are just happy sitting around and doing nothing. Also looks like the large losses are coming from subsidizing drivers, not R&D.
- kbart 10y ago
  "And what prevents car or truck manufacturers from doing the same?" They are already doing that: http://qz.com/656104/a-fleet-of-trucks-just-drove-themselves-across-europe/ http://qz.com/656104/a-fleet-of-trucks-just-drove-themselves...
readhn 10y ago
Mercedes already drives a bunch of self driving trucks in Europe. Volvo is in the game as well etc. Uber is just a service provider. They don't build anything. Anyone can be a service provider with enough funding.

mbloom1915 10y ago

and this co. is going public next year? might want to rethink that

0xmohit 10y ago
Isn't it good to go public until valuations are high?
- mbloom1915 10y ago
  A $60B valuation pre-IPO isn't high?
  - 0xmohit 10y ago
    What I meant was that given the current valuation is high, it's right to go ahead with an IPO. But you lead me into thinking: In order to justify $60B valuation, I'd have expected them to blow up much more than $100M.
  - parthdesai 10y ago
    That's VC valuation though right? I maybe wrong, but are you sure market will value this same company at $60B when it is not even profitable? I genuinely have no knowledge about this, so feel free to correct me if i'm wrong.

untilHellbanned 10y ago

Ahh, good old morning breakfast of {hot button issue}. Here's how this comment thread will play out so no need to read further: - Advocates will wonk it out by saying something along the lines of "this doesn't matter b/c they are building a logistic network, self driving cars, these figures are incorrect for reasons x, y, z, or b/c startup=growth!=profit" - Dissenters will say something along the lines of "it's a bubble, Detroit or tesla is gonna crush them, look they failed in China, Austin Tx, or that it's a commodity product so get those SV-funded rides while you can!" - Both sides will downvote this comment for showing them how cliched their contribution is. But I'm a special snowflake!

kapilkale 10y ago

Pretty sure this is not a Webvan scenario. The question at hand should be "if Uber ran out of funding, would they die" For Webvan, it was yes. The answer for Uber is no, at least in the short term. a) Uber would stop subsidizing drivers, and then would overnight be cash flow positive b) The driver subsidies probably wouldn't matter anymore, because if Uber's funding ran out, so would that of their competitors. Lyft is already on the brink (source: http://www.nytimes.com/2016/08/20/technology/lyft-is-said-to-fail-to-find-a-buyer-despite-talks-with-several-companies.html http://www.nytimes.com/2016/08/20/technology/lyft-is-said-to...) c) they'd exit markets where they were burning cash (e.g. China, which already happened) Long term, no idea.

wpietri 10y ago
What's your data on A? I'm not sure it's true. The article says net revenue was $1.1 billion in Q2. Losses were "significantly" more than $750m. So we're talking a scenario where either they lose a lot of drivers or raise prices drastically. I'd expect a fair bit of damage either way, meaning still-lower revenues. And they have very large fixed costs. Because they've already shifted most of their operating expenses to drivers, they have relatively little room to cut costs. They have a lot of expensive staff. They have a whole robot car research operation, which can't be cheap; Toyota has committed a billion dollars to figuring that out. So it's not clear to me that they'd be able to get to break-even. I also think C is risky for them. Their valuation is "astronomical" by Bloomberg's standards; they're supposedly worth well more than, say, Ford. That's been based on a hard charge for global dominance, not just getting by in a few markets. And getting into the black might require big cuts in their marketing budget. If their growth numbers tank, their stock will lose the "dominate the market" premium. So even if they could somehow get into the black, I'm not sure they would still be Uber at the end of it. They might not be the next Webvan, but they certainly could be the next Groupon.
rtpg 10y ago
They might be cash flow positive but would they have enough to pay back all the leveraged debt they've taken on? If they pulled out of a bunch of markets (why is Uber wasting its time in places like Japan where taxis are basically fine?), then they could no longer justify their valuation. Their prices are going to go pretty high up, meaning they'll only survive in places where taxis are super awful (so, basically the US). All that stock they've handed out would start dropping like a rock in the private valuations of the institutional holders, I bet some loan conditions will trigger, and they're going to suffer quite a bit. Not to mention the talent exodus. It's like austerity. If your company is suffering due to a lack of growth to meet ambitions, is cutting costs going to make growth go faster or slower? That said, I think Uber will figure something out, even if it ends up not hitting its goals.

readhn 10y ago

Uber will fall 1st victim to its own success. They are facing strong competition, id be surprised if they survived (but even then they will lose a significant market share).

adventured 10y ago
They're not facing strong competition, they're facing extremely weak competition (Lyft is heading toward bankruptcy and can't even manage to sell itself off). They aren't going to lose significant market share, they're going to end up with a modest monopoly, replicating the positions acquired by: Google, Microsoft, Facebook, eBay, Amazon, PayPal, Intel, Cisco, etc. The same story plays out over and over again in tech, and it does so for very obvious reasons. Who else is threatening Uber in the US for example? Nobody. Who is going to spend billions to take the market away from Uber? Nobody.
- sharemywin 10y ago
  groupon couldn't make it work. This seems more like hundreds of local markets and not 1 big market. And that company that has only women drivers for women passengers seems like it might be able to carve out a niche. and if it gets to profitable what's to stop grub hub, task rabbit or another deliver company to make a run at the market.
- thesimon 10y ago
  >Who else is threatening Uber in the US for example? Taxis? Car manufacturers? >Who is going to spend billions to take the market away from Uber? Doesn't look like it's a very profitable market Uber is operating in, so why should anyone spend billions to do so?
- ruipgil 10y ago
  The competition may not come directly from technology companies, but from car companies. Tesla might be one of them.
- moefogs 10y ago
  Uber is wildly overvalued. If there was a reasonable way to short it, I would. Heavily. They're building an airline. It will stabilize as a large business with minuscule (at best) margins.

kbart 10y ago

I'm no economics expert, but if Uber loses money on subsidiaries, that's dumping(1) against local Taxi companies and these companies actually might have some valid points, no? 1. https://en.wikipedia.org/wiki/Dumping_(pricing_policy) https://en.wikipedia.org/wiki/Dumping_(pricing_policy)

funkyy 10y ago
With all the shady tactics from Uber so far including lobbying etc. I think Taxi companies have no case here...
legitster 10y ago
Dumping is really only applicable if they are undercutting their prices in specific regions. If I am under-charging across my entire lineup, that's just on me.
- bryanlarsen 10y ago
  Which they absolutely do. AFAICT, Uber doesn't subsidize rides in Europe because predatory pricing is illegal there. But they do in new markets in the US and used to subsidize heavily in China, which opens them up to charges of dumping, it seems to me.
  - an_account 10y ago
    Dumping is for products that are being exported. Uber isn't exporting anything.
  - 67726e 10y ago
    > because predatory pricing is illegal there Legality hasn't exactly been a problem to Uber's expansion. Why would this particular situation be different?
    - DavidHm 10y ago
      There's a bit of a difference on which government body enforces which rule. In quite a few countries, taxi rules are governed by cities - so the municipality government is the enemy. Anti-monopoly/ predatory pricing rules are at least national level - and if you are unlucky you can go against the EU itself, which historically has not been afraid to slap companies with gargantuan fines that would never be allowed from the pro-business USA SC.

readhn 10y ago

Singapore just launched self driving taxi. Other competitors are doing the same. To me it does not matter where I get a cab ride from as long as it is cheap, safe and fast.

mgrpowers 10y ago
And clean please.
- Grue3 10y ago
  Judging by automatic toilets, a self-driving taxi would be anything but that.
  - jannyfer 10y ago
    Zipcars are actually fairly clean, in my experience. Professionally cleaned regularly and it's easy to track who caused a mess if the next person in the car reports it.

greghendershott 10y ago

This reminds me of what Richard Branson supposedly said: If you want to be a millionaire, start with a billion dollars and launch a new airline. (To be fair, airlines pay humans... as employees... unionized.) I understand the rationale for spending $2 of marketing/whatever to buy $1 of sales. Grab market share. Step 3, profit like it's 1999. We'll see.

ctack 10y ago
Branson's statement reminded me of the old joke: Q: How do you make a small fortune in farming? A: You start out with a large one.
- compiler-guy 10y ago
  So many old jokes like this. My favorite variation: How do you restore a <classic car of your choice> so it is worth $100,000? Buy one with good bones for $20K and spend $200,000 fixing it up.

jokoon 10y ago

What are uber expenses? Is there z large hotline? Apart from devs and servers, i dont see it.

prawn 10y ago
At many times, they pay drivers minimum amounts to enter the pool even if there might not be enough jobs out there. They also hand out loads of vouchers to promote the service. Plus lobbying, marketing, PR, etc. Multiply by however many countries they're in.
aetherson 10y ago
They pay their drivers more for each drive than passengers pay.

ctdonath 10y ago

For a company with practically zero expenses, losing $1.27 billion in 6 months astounding. Charge a client whatever the driver is willing to work for, plus a small overhead ... what's to lose money on?

leothekim 10y ago
It's a Fabian strategy to establish market dominance. Uber is spending like crazy to expand for market share. On the surface at least, they are similar to how Amazon was operating in its early days - investing in itself early to expand and not expecting to generate a profit for many years.
- sharemywin 10y ago
  the problem is most of amazons profits are in cloud services. moving something from point a to b is expensive and hard to get economy of scale.
  - wastedhours 10y ago
    Part of the argument is the Uber is building product infrastructure of their own - Amazon built AWS as part of their everyday working, Uber could roll out delivery, autonomous tech or even their financial services as separate strands once they've reached pervasiveness.
    - SyneRyder 10y ago
      Indeed, Uber already has their UberEATS program where they offer home delivered food from restaurants that don't yet have their own delivery service. So they're already experimenting with providing delivery & mobile payment processing services.
      - Guyag 10y ago
        I'd be interested to see how UberEATS turns out. Deliveroo has had a year on them, and at least where I am I think the latter is still the favourite.

eof 10y ago

How is it possible that uber is losing money? It must all be research? If I take a $20 uber ride, uber gets $4 at a marginal cost of close to zero. They are selling other people's time, it seems like a flawless business model if you're winning the game..

colinbartlett 10y ago
In many markets, Uber pays the driver more than they charge the customer.
dagw 10y ago
Uber, at least in the past, has been offering subsidies to its driver in many markets to grow its market share, Basically making up the difference between what customers are willing to pay and what drivers are willing to work for. The driver may very well be earning $25 for that $20 ride with Uber making up the difference.
- oceanofsolaris 10y ago
  So in the longer run, either the drivers will have to work for less than they are willing to or the customers have to pay more than they are willing to. Or Uber has to keep paying the tab.
  - dagw 10y ago
    I imagine the plan is that once Uber has become ingrained enough in peoples lives that they have hard time imagining life without it, they can start slowly turning up the price without losing too many customers.
prawn 10y ago
They often guarantee drivers a minimum hourly rate to ensure there is a pool of available drivers for their users. If they don't do this, users will get frustrated at times and give up on the service. They're essentially loss-leading until a few things happen: - fuel prices drop away - self-driving cars are available - their competitors die out

intrasight 10y ago

I've been seeing the Uber robots driving around Pittsburgh in the last week. They can still loose a lot of money in the short to mid-term if they succeed in fundamentally changing the nature of mobility with autonomous people movers.

baybal2 10y ago

So much for a lossy taxi company

0xmohit 10y ago

Wonder what were the revenues from the monetization of collected data?

_pmf_ 10y ago
Do they actually collect anything that Google could not infer purely from location and time data?
- 0xmohit 10y ago
  I suspect that you never checked what information they collect. On Android, apart from location the app requires following permissions [0]: - SMS (read, send, receive) - Photos/media/files (read, modify, delete SD card contents) - WiFi connection information - Full network access - View network connections - Read Google service configuration - Modify system settings Moreover, they have access to your payment information. [0] https://www.uber.com/legal/other/android-permissions/ https://www.uber.com/legal/other/android-permissions/

unixhero 10y ago

That's nothing. Move along.

dublidu 10y ago

Why does Uber spend billions to subsidize drivers if self driving cars are on the horizon?

kolbe 10y ago
Maybe someone who knows can answer this better, but my guess is that the primary purpose of drivers is to draw (then try to lock in) consumers to their ecosystem. So, their investment isn't in getting drivers for the long haul, but rather paying drivers to offer a temporary service that will help their business further down the line.

sdenton4 10y ago

"We're losing a dollar in every transaction, but we'll make it up on volume!"

eddieplan9 10y ago
It's not as simple as that. The market becomes more efficient as the volume goes up. The simple example is uberPOOL. Many driver subsidies kick in only when a driver does not earn enough.
r00fus 10y ago
Wasn't that said of Amazon? Apparently the model has precedent for success (assuming you consider Amazon is successful).

JOnAgain 10y ago

I'm surprised that Bloomberg failed to account for inflation in their comparisons. Amazon's 1.4 Billion loss in 2000 is almost exactly 2 Billion in today's dollars (1,956,479,674.80 according to http://www.usinflationcalculator.com/ http://www.usinflationcalculator.com/). So this loss is not unprecedented.

alttab 10y ago
An important difference about Amazon in 2000 was it was a public company by then.
- hyperbovine 10y ago
  Another difference: I'm not sure that Amazon ever lost money on the margin. Their losses were always attributed to reinvesting whatever profits they made back into the business (and then same). Uber by contrast appears to be losing money on every ride. People will say that they can just jack up the price once they have annihilated Lyft or whatever, but I'm not so sure that is going to work. A big appeal of Uber for a lot of people is that it's currently only slightly more than public transit. Raise the price and your back to being a taxi service, and we've seen how that goes.
  - FT_intern 10y ago
    Amazon wasn't losing money on margin even with $25 free shipping back then?
    - tedunangst 10y ago
      Maybe, but I doubt they were losing $25 on each order. For at least some promotions/cities, Uber's losses seem to exceed revenue.
  - aetherson 10y ago
    People tend to think of this in black-and-white terms. The actual deal is that if Uber jacks up its prices significantly, on the margin people will ride with Uber less. Will their number of rides go to 0? No, of course not. But even if there is no other ride service available, there's still taking public transit, driving yourself, or, you know, not going out to whatever you're going to. Remember also that even if Uber fully defeats Lyft and Lyft's service shuts down, there are plenty of companies out there better capitalized than Uber itself is. Those companies have so far decided to stay out of a "lose $2b per year" business, but if Uber can demonstrate that this is a "gain $2b per year" business, then Google, Amazon, one of the car companies, maaaaybe Apple, and probably a bunch of other companies can at that point launch their own service.

yusiboyz 10y ago

How is uber able to survive with losing so much of money? Is it because of all the contributions?

imron 10y ago

Don't worry, they'll make up for it in volume!

PatentTroll 10y ago

"Uber is just waiting until driverless cars are a thing and then they will own transportation." I hear this all the time, but realisticly that's at least a decade away. Are Ubers investors prepared to pour $24bn into the company waiting for this nirvana? They certainly could, but I'm not so sure they will.

hashberry 10y ago
Realistically, Uber faces major competition from Google and Apple, both who are investing heavily in self-driving cars and have easy access to loyal consumers.
- up_and_up 10y ago
  > Google ... loyal consumers Name one physical consumer product that has garnered them loyal customers? Apple on the other hand...
  - dragonwriter 10y ago
    > Name one physical consumer product that has garnered them loyal customers? Transportation is a service, not a physical consumer product. Google has plenty of consumer services (including some "meatspace" services, like Google Express) that have garnered them loyal customers. EDIT: But perhaps most relevantly to competing with or commoditizing Uber, Google has Google Maps, which not only has a huge user base, but already has a ridesharing button in it. Now, AFAIK, all that does right now is give an estimated Uber price and a link out to the Uber app -- but its a fairly trivial move for Google either to include their own autonomous car service (if they launch one) or other Uber competitors in that link, and either eat Uber's business directly or at least weaken Uber's moat.
    - petra 10y ago
      you're correct. Google maps has added new options to it's ridesharing:"New partners include 99Taxis in Brazil, Ola Cabs in India, Hailo in the U.K. and Spain, mytaxi in Germany and Spain and Gett in the U.K. They will sit alongside listings from Uber," Also, don't forget Google now surfacing a notification saying: "would you a half price shared taxi for your predicted route ? click to open Google maps" - sounds like a great way to form new habits for users.

LordHumungous 10y ago

Uber's premise is that it is a mere facilitator of service providers and customers, and therefore it can scale like a tech company and not like some oversized yellow cab with thousands of employees and vehicles on the books. It's a shell game. Uber may not call it's drivers employees, it may not claim ownership of the vehicles, but those drivers and vehicles represent overhead all the same. At the end of the day, the cars must be maintained. High quality drivers must be recruited and paid. If they aren't, Uber goes out of business. At this point Uber is looking suspiciously like a large traditional company that provides a taxi service, with a nice app. Maybe a potentially profitable one. But worth $60 billion? Nope.