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I remember reading plenty of thought pieces a few years ago saying this was impossible, and that Uber was a house of cards gaining market share by subsidizing r

I remember reading plenty of thought pieces a few years ago saying this was impossible, and that Uber was a house of cards gaining market share by subsidizing rides with investor money. That there were no economies of scale to bring costs down, etc., etc. I would love to see a "what we got wrong, and what we still have right" post from one of these people, but I won't hold my breath.

smcl 3y ago
Is a profit of $394m one quarter sufficient indication that this kind of criticism was wrong? As far as I recall, Uber lost quite a bit more money than this each year since 2016 so they'd have to repeat this a few times if we're to believe this is them hitting long-term profitability. Also my memory of Uber critiques weren't that they'd never be profitable, but that as a business they aren't quite as unique and untouchable as their valuation suggested (which, given the number of competing companies that operate in my city, is correct).
mjburgess 3y ago
I don't think the claim would be about quarterly profits. It has had profitable quaters before. Consider, eg, >Uber on Tuesday posted a profit of $394 million during the second quarter, compared with a loss of $2.60 billion a year earlier This really doesn't answer or refute any questions around their business model. The final question is: what's the moat? It's trivial to create these "automate contract labour" apps, and many now exist. It seems an industry designed to reach, at its height, tiny profit margins. I suspect regulation is heading in the direction of making it easier for people to move their data between apps too -- if that happens, the "social-data" moats of these bizes will disappear. They'll be left with IP that teens could compete with
- mi_lk 3y ago
  > It's trivial to create these "automate contract labour" apps Just another HN Tuesday I see. It’s so easy that it’s still duopoly in US since the inception of the market.
  - larksimian 3y ago
    It's so easy that there's like 5 or 6 of them that I know of in Romania alone and drivers will swap between 2-3 of them every day. So yeah, it's pretty trivial. While there's no reason to start one if you can't undercut Uber or whoever's already cutrate prices, that doesn't mean Uber has a lot of room to increase prices/profits.
  - jeltz 3y ago
    It is pretty peak HN to assume the world is only the US. Outside the US there are plenty of taxi apps. So, yes, we know from evidence that they are easy to build. The trick is getting customers and drivers for your app.
    - relativ575 3y ago
      Do this exercise. Pick any country. See how many taxi apps available. They may not be called Uber and Lyft, but I bet there are only a handful at best, anywhere you pick (see Careem). That's the nature of the business.
  - tzs 3y ago
    It's not easy if you want one app that deals with a market containing many different legal jurisdictions with widely varying tax and safety and labor and consumer protection requirements. Plus different countries might need different payment system and need localization to different languages. But if the market you want to deal with is just one city or metro area or similar then it is not a difficult app.
    - disgruntledphd2 3y ago
      There's not a huge network effect between cities though and there's high fixed costs for each one so it's not a great technology business.
  - JeremyNT 3y ago
    > Just another HN Tuesday I see. It’s so easy that it’s still duopoly in US since the inception of the market. I'd suggest that this is not necessarily related to how hard the tech side is. Both major incumbents have (until now!) been throwing away VC money without any clear path to profitability, so there hasn't exactly been much of an incentive to build yet another money pit.
- nordsieck 3y ago
  > The final question is: what's the moat? I mean, it's a 2-sided market. That's inherently a moat. There's a reason why it took Amazon to displace Ebay, and Facebook to displace Craigslist. It's a very expensive and difficult market to get into. > It seems an industry designed to reach, at its height, tiny profit margins. There are plenty of industries like that. Grocery, for example. That doesn't mean that the business is a bad one by itself. > I suspect regulation is heading in the direction of making it easier for people to move their data between apps too -- if that happens, the "social-data" moats of these bizes will disappear. IMO, that wouldn't change anything. If I could export all of my Facebook data (maybe I can, I haven't checked), it wouldn't cause me to abandon the platform - I'm there because of the other people on the platform. Riders use Uber because it has the drivers. And the drivers use Uber because it has the riders. The ability to export ride history or reputation isn't going to change that fact.
  - hiq 3y ago
    You're not on Uber because of all the other users. Heck, you're not really there because of most the drivers, you're only there because there are enough drivers such that requesting a ride won't be a hassle. It's quite different from Facebook (I think WhatsApp in Europe is a better example these days) where you just expect everyone, including somebody you just met, to be. > And the drivers use Uber because it has the riders. You make it sound exclusive, but I've seen many drivers use a few different apps at the same time, often with different phones. You just need some temporary incentives and you've bootstrapped your network, because as explained above, the problem is only the initial bootstrapping. Concrete example: two months ago I hadn't heard of "Free Now". I've now used it twice in two different European countries, last time because Uber was exactly four times as expensive (maybe that explains their new profits? They just raised their prices, hoping users won't notice?). I'm not often in a taxi so this is just anecdotal, but there's very little friction when switching to another service.
- pclmulqdq 3y ago
  There's no foundational IP at uber that prevents a competitor from copying them (and many do), but the network effect is a non-trivial moat in itself, particularly for a two-sided market like that. Ebay has no foundational IP either, but it has been the marketplace for online auctions for a long time because of that network effect.
moralestapia 3y ago
Uber has burned 32B to date, so I don't think investors are super stoked now.
- fullshark 3y ago
  Sure they are, after IPO they got a nifty return. Uber is a VC success story by any reasonable metric other than "was it the next google/fb/amzn?"
  - moralestapia 3y ago
    ??? IIRC they got about 8B from the IPO? Still a long way to 32B.
    - fullshark 3y ago
      I think I see it's last pre IPO valuation was 62 billion? It IPOed at 82 billion valuation, currently sitting at 95 billion. Late round investors maybe could have done better investing elsewhere but this is a success story. I'm sure many investors have divested some shares post IPO at a profit.
      - moralestapia 3y ago
        Lol, no, that's funny money. The 32B I'm talking about it's actual cash that is gone and has to be recouped.
        fullshark 3y ago
        If the investors have turned bearish on Uber they have give or take 10 years to sell that "funny money" at a profit. I'm sure many have and again, my primary point is that for our industry, for the large range of possible outcomes, Uber is a success. Once you understand that, a lot of decisions VCs make and certainly did make in the low interest rate environment from 2010-2022 make a lot more sense.
sschueller 3y ago
So you have a profitable company but at what cost? These drivers are working at slave wages unable to pay into any retirement funds or have health insurance. In countries where there was a reasonable taxi system uber gutted them and went around regulations taking away the few guarantees the people had like a retirement and sick leave. In the end we the tax payer have to help these people down the road when they get sick or old and all of this for the profit of a few share holders. In Switzerland Uber still owes drivers half a billion Swiss Francs in unpaid wages/retirement and sick leave. Where do people think this missing money will come from when these people need it later on in life?
- mentos 3y ago
  Devils advocate, what will these people do if/when Uber/Lyft/etc replaces the driver with automation?
  - flangola7 3y ago
    They will probably suffer even more, why?
    - Zetice 3y ago
      I think his argument is that slavery benefits the enslaved, or something like that.
      - pessimizer 3y ago
        How would my child slaves eat if I released them?
        efields 3y ago
        omg this place sucks
    - sabas123 3y ago
      They might move to easy to entry positions where shortages exist though.
altacc 3y ago
Maybe wait and see if it really is a sustainable business first. Making a profit for 1 quarter after 50 quarters of loses whilst having over $9 billion of debt isn't strong proof that it will be profitable from now on. The numbers are positive though, it doesn't seem to be just a bookkeeping profit as they have a good rise in revenue & use. Personally I think if they keep running a tighter ship than they did pre-pandemic they might make a sustainable profit. Using profits for buybacks and dividends will be more attractive to shareholders than paying off debts as that's what most have been waiting for.
ImPostingOnHN 3y ago
> I remember reading plenty of thought pieces a few years ago saying this was impossible I'm not sure many actually said that > that Uber was a house of cards gaining market share by subsidizing rides with investor money they were > That there were no economies of scale to bring costs down the criticism I heard was, at then-current prices, _profits_ wouldn't come turns out they had to severely jack up prices to profit, proving such criticism correct > I would love to see a "what we got wrong, and what we still have right" post see above
- relativ575 3y ago
  >> that Uber was a house of cards gaining market share by subsidizing rides with investor money > they were They no longer are, and they don't lose customers. So no house of cards, because they didn't collapse when subsidy disappeared. > the criticism I heard was, at then-current prices, _profits_ wouldn't come Turn out users don't seem to mind. Bookings is back to the pre-pandemic level. Food delivery is at the record. > turns out they had to severely jack up prices to profit, proving such criticism correct They are not more expensive compared to the competition. So no, the criticism isn't correct, unless you're saying consumers are stupid. If anything they were able to control cost and increase booking. People come to them despite the increased price. Keep in mind also that they didn't have major layoff like other tech companies.
  - deleted 3y ago
    [deleted]
  - ImPostingOnHN 3y ago
    > > turns out they had to severely jack up prices to profit, proving such criticism correct > They are not more expensive compared to the competition. So no, the criticism isn't correct They are more expensive than they were. So yes, the criticism is correct. Price vs. competition is a red herring, we're discussing if the prices they initially had could be sustained in the long term while still generating a profit. Turns out, they couldn't, hence why they were jacked way up
piva00 3y ago
It was subsidising rides, just look at the steady increase in prices, reduction in quality, while the drivers are still paid peanuts. Is this a sustainable model? We don't know, it's the first time ever a profit has been posted, what was the cost of acquiring this profit? Will it drive ridership down (due to aforementioned quality and price issues)? You are expecting that because a profitable quarter happened, that it will continue to happen. It might as well not if the changes to bring this profit create a lot of churn, anecdotally I've been seeing this churn happen in real time around my social circle in different countries. I think we all need to wait and see what's the trend instead of jumping into "you naysayers were all wrong, haha"-rhetorics.
Analemma_ 3y ago
I still think this is true and this result is basically random noise. If they do this for another 20 years and erase the $30 billion of operating losses they've incurred up to this point, maybe I'll change my mind and do a lengthy postmortem on why I was wrong.
spaceman_2020 3y ago
Uber will have to post profits like this every quarter for 20 years to just break even on the investment they've received. At least in my country, the business is dead already.
jseliger 3y ago
I've not been bearish on rideshare, but Waymo is operating in the greater Phoenix area: https://waymo.com/blog/2023/05/waymo-one-doubles-service-area-in.html https://waymo.com/blog/2023/05/waymo-one-doubles-service-are... and that seems like the biggest medium-term threat. It's so good!
- MichaelNolan 3y ago
  It wouldn’t surprise me if Waymo/google decide they just want to remain on the tech side, and avoid all of the headaches that the operations side brings. Waymo and Uber have a partnership. Soon in Phoenix, when you call an Uber, you might get a waymo car. We might see a three group market: Waymo, Cruise, etc provide the driver. Uber, Lyft provide the platform. Hertz, Avis, Enterprise manage the physical cars/cleaning/etc. https://waymo.com/blog/2023/05/waymo-and-uber-partner-to-bring-waymos.html https://waymo.com/blog/2023/05/waymo-and-uber-partner-to-bri...

smcl 3y ago

Is a profit of $394m one quarter sufficient indication that this kind of criticism was wrong? As far as I recall, Uber lost quite a bit more money than this each year since 2016 so they'd have to repeat this a few times if we're to believe this is them hitting long-term profitability. Also my memory of Uber critiques weren't that they'd never be profitable, but that as a business they aren't quite as unique and untouchable as their valuation suggested (which, given the number of competing companies that operate in my city, is correct).

mjburgess 3y ago

I don't think the claim would be about quarterly profits. It has had profitable quaters before. Consider, eg, >Uber on Tuesday posted a profit of $394 million during the second quarter, compared with a loss of $2.60 billion a year earlier This really doesn't answer or refute any questions around their business model. The final question is: what's the moat? It's trivial to create these "automate contract labour" apps, and many now exist. It seems an industry designed to reach, at its height, tiny profit margins. I suspect regulation is heading in the direction of making it easier for people to move their data between apps too -- if that happens, the "social-data" moats of these bizes will disappear. They'll be left with IP that teens could compete with

mi_lk 3y ago
> It's trivial to create these "automate contract labour" apps Just another HN Tuesday I see. It’s so easy that it’s still duopoly in US since the inception of the market.
- larksimian 3y ago
  It's so easy that there's like 5 or 6 of them that I know of in Romania alone and drivers will swap between 2-3 of them every day. So yeah, it's pretty trivial. While there's no reason to start one if you can't undercut Uber or whoever's already cutrate prices, that doesn't mean Uber has a lot of room to increase prices/profits.
- jeltz 3y ago
  It is pretty peak HN to assume the world is only the US. Outside the US there are plenty of taxi apps. So, yes, we know from evidence that they are easy to build. The trick is getting customers and drivers for your app.
  - relativ575 3y ago
    Do this exercise. Pick any country. See how many taxi apps available. They may not be called Uber and Lyft, but I bet there are only a handful at best, anywhere you pick (see Careem). That's the nature of the business.
- tzs 3y ago
  It's not easy if you want one app that deals with a market containing many different legal jurisdictions with widely varying tax and safety and labor and consumer protection requirements. Plus different countries might need different payment system and need localization to different languages. But if the market you want to deal with is just one city or metro area or similar then it is not a difficult app.
  - disgruntledphd2 3y ago
    There's not a huge network effect between cities though and there's high fixed costs for each one so it's not a great technology business.
- JeremyNT 3y ago
  > Just another HN Tuesday I see. It’s so easy that it’s still duopoly in US since the inception of the market. I'd suggest that this is not necessarily related to how hard the tech side is. Both major incumbents have (until now!) been throwing away VC money without any clear path to profitability, so there hasn't exactly been much of an incentive to build yet another money pit.
nordsieck 3y ago
> The final question is: what's the moat? I mean, it's a 2-sided market. That's inherently a moat. There's a reason why it took Amazon to displace Ebay, and Facebook to displace Craigslist. It's a very expensive and difficult market to get into. > It seems an industry designed to reach, at its height, tiny profit margins. There are plenty of industries like that. Grocery, for example. That doesn't mean that the business is a bad one by itself. > I suspect regulation is heading in the direction of making it easier for people to move their data between apps too -- if that happens, the "social-data" moats of these bizes will disappear. IMO, that wouldn't change anything. If I could export all of my Facebook data (maybe I can, I haven't checked), it wouldn't cause me to abandon the platform - I'm there because of the other people on the platform. Riders use Uber because it has the drivers. And the drivers use Uber because it has the riders. The ability to export ride history or reputation isn't going to change that fact.
- hiq 3y ago
  You're not on Uber because of all the other users. Heck, you're not really there because of most the drivers, you're only there because there are enough drivers such that requesting a ride won't be a hassle. It's quite different from Facebook (I think WhatsApp in Europe is a better example these days) where you just expect everyone, including somebody you just met, to be. > And the drivers use Uber because it has the riders. You make it sound exclusive, but I've seen many drivers use a few different apps at the same time, often with different phones. You just need some temporary incentives and you've bootstrapped your network, because as explained above, the problem is only the initial bootstrapping. Concrete example: two months ago I hadn't heard of "Free Now". I've now used it twice in two different European countries, last time because Uber was exactly four times as expensive (maybe that explains their new profits? They just raised their prices, hoping users won't notice?). I'm not often in a taxi so this is just anecdotal, but there's very little friction when switching to another service.
pclmulqdq 3y ago
There's no foundational IP at uber that prevents a competitor from copying them (and many do), but the network effect is a non-trivial moat in itself, particularly for a two-sided market like that. Ebay has no foundational IP either, but it has been the marketplace for online auctions for a long time because of that network effect.

moralestapia 3y ago

Uber has burned 32B to date, so I don't think investors are super stoked now.

fullshark 3y ago
Sure they are, after IPO they got a nifty return. Uber is a VC success story by any reasonable metric other than "was it the next google/fb/amzn?"
- moralestapia 3y ago
  ??? IIRC they got about 8B from the IPO? Still a long way to 32B.
  - fullshark 3y ago
    I think I see it's last pre IPO valuation was 62 billion? It IPOed at 82 billion valuation, currently sitting at 95 billion. Late round investors maybe could have done better investing elsewhere but this is a success story. I'm sure many investors have divested some shares post IPO at a profit.
    - moralestapia 3y ago
      Lol, no, that's funny money. The 32B I'm talking about it's actual cash that is gone and has to be recouped.
      - fullshark 3y ago
        If the investors have turned bearish on Uber they have give or take 10 years to sell that "funny money" at a profit. I'm sure many have and again, my primary point is that for our industry, for the large range of possible outcomes, Uber is a success. Once you understand that, a lot of decisions VCs make and certainly did make in the low interest rate environment from 2010-2022 make a lot more sense.

sschueller 3y ago

So you have a profitable company but at what cost? These drivers are working at slave wages unable to pay into any retirement funds or have health insurance. In countries where there was a reasonable taxi system uber gutted them and went around regulations taking away the few guarantees the people had like a retirement and sick leave. In the end we the tax payer have to help these people down the road when they get sick or old and all of this for the profit of a few share holders. In Switzerland Uber still owes drivers half a billion Swiss Francs in unpaid wages/retirement and sick leave. Where do people think this missing money will come from when these people need it later on in life?

mentos 3y ago
Devils advocate, what will these people do if/when Uber/Lyft/etc replaces the driver with automation?
- flangola7 3y ago
  They will probably suffer even more, why?
  - Zetice 3y ago
    I think his argument is that slavery benefits the enslaved, or something like that.
    - pessimizer 3y ago
      How would my child slaves eat if I released them?
      - efields 3y ago
        omg this place sucks
  - sabas123 3y ago
    They might move to easy to entry positions where shortages exist though.

altacc 3y ago

Maybe wait and see if it really is a sustainable business first. Making a profit for 1 quarter after 50 quarters of loses whilst having over $9 billion of debt isn't strong proof that it will be profitable from now on. The numbers are positive though, it doesn't seem to be just a bookkeeping profit as they have a good rise in revenue & use. Personally I think if they keep running a tighter ship than they did pre-pandemic they might make a sustainable profit. Using profits for buybacks and dividends will be more attractive to shareholders than paying off debts as that's what most have been waiting for.

ImPostingOnHN 3y ago

> I remember reading plenty of thought pieces a few years ago saying this was impossible I'm not sure many actually said that > that Uber was a house of cards gaining market share by subsidizing rides with investor money they were > That there were no economies of scale to bring costs down the criticism I heard was, at then-current prices, _profits_ wouldn't come turns out they had to severely jack up prices to profit, proving such criticism correct > I would love to see a "what we got wrong, and what we still have right" post see above

relativ575 3y ago
>> that Uber was a house of cards gaining market share by subsidizing rides with investor money > they were They no longer are, and they don't lose customers. So no house of cards, because they didn't collapse when subsidy disappeared. > the criticism I heard was, at then-current prices, _profits_ wouldn't come Turn out users don't seem to mind. Bookings is back to the pre-pandemic level. Food delivery is at the record. > turns out they had to severely jack up prices to profit, proving such criticism correct They are not more expensive compared to the competition. So no, the criticism isn't correct, unless you're saying consumers are stupid. If anything they were able to control cost and increase booking. People come to them despite the increased price. Keep in mind also that they didn't have major layoff like other tech companies.
- deleted 3y ago
  [deleted]
- ImPostingOnHN 3y ago
  > > turns out they had to severely jack up prices to profit, proving such criticism correct > They are not more expensive compared to the competition. So no, the criticism isn't correct They are more expensive than they were. So yes, the criticism is correct. Price vs. competition is a red herring, we're discussing if the prices they initially had could be sustained in the long term while still generating a profit. Turns out, they couldn't, hence why they were jacked way up

piva00 3y ago

It was subsidising rides, just look at the steady increase in prices, reduction in quality, while the drivers are still paid peanuts. Is this a sustainable model? We don't know, it's the first time ever a profit has been posted, what was the cost of acquiring this profit? Will it drive ridership down (due to aforementioned quality and price issues)? You are expecting that because a profitable quarter happened, that it will continue to happen. It might as well not if the changes to bring this profit create a lot of churn, anecdotally I've been seeing this churn happen in real time around my social circle in different countries. I think we all need to wait and see what's the trend instead of jumping into "you naysayers were all wrong, haha"-rhetorics.

Analemma_ 3y ago

I still think this is true and this result is basically random noise. If they do this for another 20 years and erase the $30 billion of operating losses they've incurred up to this point, maybe I'll change my mind and do a lengthy postmortem on why I was wrong.

spaceman_2020 3y ago

Uber will have to post profits like this every quarter for 20 years to just break even on the investment they've received. At least in my country, the business is dead already.

jseliger 3y ago

I've not been bearish on rideshare, but Waymo is operating in the greater Phoenix area: https://waymo.com/blog/2023/05/waymo-one-doubles-service-area-in.html https://waymo.com/blog/2023/05/waymo-one-doubles-service-are... and that seems like the biggest medium-term threat. It's so good!

MichaelNolan 3y ago
It wouldn’t surprise me if Waymo/google decide they just want to remain on the tech side, and avoid all of the headaches that the operations side brings. Waymo and Uber have a partnership. Soon in Phoenix, when you call an Uber, you might get a waymo car. We might see a three group market: Waymo, Cruise, etc provide the driver. Uber, Lyft provide the platform. Hertz, Avis, Enterprise manage the physical cars/cleaning/etc. https://waymo.com/blog/2023/05/waymo-and-uber-partner-to-bring-waymos.html https://waymo.com/blog/2023/05/waymo-and-uber-partner-to-bri...