Uber Says Sales Growth Outpaces Losses
bloomberg.com
bloomberg.com
And if you have new or growing product lines that incorporate into both revenue and expenses like Uber Pool does, you'd see exactly this shift _without a change in the underlying unit economics_. Which means that, not only are they losing money faster than ever, but they have no mechanism to stop the bleeding.
Does this mean Uber technically recognizes more revenue from from a $6 UberPool ride than a $20 UberX ride?
This company is like a Russian nesting doll shell game. There's more in each layer and every layer is a distraction.
In the marketplace case this is deceitful because the marketplace owner doesn't really have a way to bring the costs of the product down, so it's much more realistic to only consider their margin as revenue.
In the UberPool case I think there's a reasonable argument to be made that since they are paying drivers a flat fee, but charging users based on dynamic pricing and packing a variable number of people in each vehicle Uber has more flexibility in terms of how it provides the service to customers, the top line number of how much they are charging users is more reasonable. Uber cuts their costs on an UberPool ride in half every time they put two groups in the same car.
You would really want to see the data broken out by category if you were an investor, since mixing the two types in the revenue number is sort of meaningless since we don't know the split, but we're not exactly in a position to demand financials.
Still, I think this data shows a much rosier picture than HN wants to paint about how "Uber is losing money on every ride"/"Selling 2 dollar bills for $1" etc. the 2.8B loss is huge, but when you look at it compared to the $20B bookings number, you can see that they're not significantly subsidizing rides, but rather using their war chest to compete on price. They only need a 15% price increase to become profitable, which shows their prices are in the right ballpark, even if they're not profitable right now.
I do wonder if this is essentially a move to try and compete more effectively for talent that, besides being outraged, may be starting to believe HN about how likely Uber is to fail.
I think this is a matter of accounting judgment.
I'm not an accountant, but I remember reading somewhere that pure agency transactions have different accounting treatment vs. "principal" transactions where the party in question assumes more risk and is not acting strictly as a representative of another party (the UberX driver).
[1] http://www.journalofaccountancy.com/news/2015/aug/fasb-propo...
It's to Uber's credit that on an ordinary ride, they don't try to claim that they have revenue equal to the entire fare. That would be an easy way for them to make their top-line financials look way more palatable than they actually are (ie, that they lost about $3B on $20B, rather than $3B on $7B).
But it may be genuinely hard to report on just the share of UberPool revenue that does not go to the driver, as my understanding is that the calculation is much more complicated in that case.
Uber's gotten away with a lot of stuff but I doubt even they could pull a 'whoops, forgot our expenses' sleight of hand. Especially since they try and frame drivers as 'contractors' and not employees
I do not think this a shell game to make the revenue number larger. The way drivers are paid while driving UberX vs. Uber Pool is different, and that probably has accounting rule impact.
If you're using GAAP, you have to include stock-based compensation as a cost. There are, however, a lot of tech companies that try and spin non-GAAP earnings by removing stock-based compensation, which can paint a very different picture (e.g., Salesforce)
In the car of Pool, Uber hires the driver.
Part 1: http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver...
Part 2: http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver...
Part 3: http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver...
Part 4: http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver...
Part 5: http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver...
Part 6: http://www.nakedcapitalism.com/2017/01/can-uber-ever-deliver...
Part 7: http://www.nakedcapitalism.com/2017/01/can-uber-ever-deliver...
Part 8: http://www.nakedcapitalism.com/2017/02/can-uber-ever-deliver...
Part 9: http://www.nakedcapitalism.com/2017/03/can-uber-ever-deliver...
This is basically saying, look we were on a good trajectory from Q3-Q4.
But the question is, what happened after that?
None of that seems to have impacted Uber anyway, not meaningfully.
“We’re fortunate to have a healthy and growing business"
It's not sustainable, as sooner or later you'll go to jail, but they didn't say sustainable :)
Imagine your parents give you a $10 loan to start a lemonade stand. You think you need six years to make them an above market return on their investment of 2x.
You're gonna buy cups, lemons, sugar, and water.
In the first year you think you're going to spend $3 and make $0.
So you have $7 in the bank.
In the second year you think you're gonna spend $2, and make $1.
So you have $6 in the bank.
In the third year you think you're gonna spend $6, and make $4.
So you have $4 in the bank.
In the fourth year you think you're gonna spend $6, and make $6.
So you still have $4 in the bank.
In the fifth year you think you're gonna spend $6 and make $10.
And now you're profitable. In the sixth year you spend $6 and make $50. You pay back 2x your parents' money.
As long as you were hitting your targets, that loan looks like smart business from you and your parents are pleased that their investment outperformed the market and generated a huge return.
If you had trouble hitting your targets, or needed to raise more money unexpectedly, your parents might have said that they'd want a higher return or more security (equity) in the business. But if you're executing on your plan, then that's not gonna happen.
Businesses operate with debt all the time. Some businesses are lossmaking for a long time. Some businesses are lossmaking on billions of dollars of revenue. They have high central costs. They have high R&D costs. They have marketing strategies which require them to subsidise entry-level products and upsell.
The business is healthy provided the following things are true:
1. They've agreed a strategy and milestones with their investors and board,
2. They are hitting those milestones by executing on that strategy.
3. They aren't running out of money ahead of schedule, or running out of money on specific instruments ahead of schedule (for example they have debt financing with Goldman which I'm assuming is being used to acquire smaller companies or subsidise driver fares since that would be expensive to do out of equity).
4. The investors are prepared to honour their agreement to fund the company and truly believe in the milestones and objectives the board has voted on.
Uber has raised $15 billion to date.
In 2012 it lost $20m, in 2013 $15m, in 2014 it lost around $650m, in 2015 it lost $1.5bn, in 2016 it lost $2.8bn.
The business has burned $5bn give or take, or 33% of its total capital raise to date.
Let's say that the losses are understated and they've actually lost closer to $7bn.
They have ~$8bn in the bank or on credit. They have a team of 6,700 which let's say is 45% engineering, R&D, product and the remainder have a linear relationship to the busyness and scale of the business.
They don't have to think about raising money until the middle or end of next year. They could cut their workforce if they needed to get to profitability quickly for some reason.
You or I might not be comfortable running a business with a $2.8bn loss, but nobody on here bats an eye when a YC company loses a a million dollars on a couple of million of revenue with a few million more in the bank. But as soon as it's a b and not an m, people lose their minds.
It's not always a happy ending in the lemonade business.
That's correct. And that's why most of your parents' money is in more stable investments. But if yours comes off, then they get a great return!
> That lemonade stand of yours might spend more than it makes for longer than your loan will sustain you.
That's also true. And if that happens, your parents don't have to put bad money after good. That's why it's important that you say what you're going to deliver, and if you deliver it, then they can believe you're on course. If you think you need $40, and you ask for $10 today, then they'll be happy to give you the $30 in 3 years when you need to open more lemonade stands on other streets.
> Which would require you to obtain another loan and so on. How many loans would it take before you would say: Maybe I really should start to make a profit on every glass of lemonade?
That's the point I'm making: your parents and you have an agreement and a plan. If you're sticking to that plan and on course, then we'll give you however many loans we discussed or anticipated you'd need.
> Or maybe you'd say: What a bummer, Joe from next door has also started a lemonade business, I wished he wouldn't subsidize his lemonade so much because I can't compete with him and his parents are wealthier than mine so they can keep that up longer.
This is an inevitable outcome that anyone in the lemonade business would have expected.
> It's not always a happy ending in the lemonade business.
:-)
In theory yes, but tracking the the progress of UberChina http://www.cnbc.com/2016/02/18/uber-losing-1-billion-a-year-..., situation in Denmark or Spain, inability to win market share from established players in Russia, India or Malaysia introduce some real-world corrections to an otherwise ideal business plan.
Any concrete data on this other than for news articles?
Here's NYT on India https://www.nytimes.com/2017/04/14/technology/uber-india.htm...
"On top of all this is competition. Uber faces an aggressive and well-funded Indian rival, Ola Cabs, which operates in 100 cities and offers a wider range of services than Uber does."
RT (okay, not the best source of non-fake news, but this is covering business and referring to a third-party report, so even with a grain of salt) https://www.rt.com/business/312513-yandex-taxi-uber-revenue/
"Russia's most popular search engine has not only beaten Google on its home turf, but has now left Uber in the dust in the Russian taxi market. The company has announced that its online-taxi services’ revenue has tripled in the second quarter of 2015. The Yandex.Taxi fleet has more than 15,000 vehicles in Moscow compared to 10,000 for its Israeli competitor Gett and America’s Uber with 3,000."
Analysis of Singapore market suggests that the playbook consisting of lowering the prices to undercut the taxi establishment works well in countries with expensive taxi services that limit medallions, not so well in countries with dirt-cheap and readily available taxi services http://sbr.com.sg/transport-logistics/news/sorry-uber-and-gr...
"the extremely high taxi penetration rate in Singapore means that it is less difficult for commuters to get a taxi in Singapore than in other cities, making it harder than elsewhere for Uber/Grab to get jobs for its drivers during off-peak hours."
From http://www.latimes.com/business/technology/la-fi-tn-uber-did...
> Uber will receive a 5.89% share of the combined entity with preferred equity interest, which is equal to a 17.7% economic interest in Didi Chuxing, the statement said.
Imagine your parents give you a 10 dollar loan to start a lemonade stand.
It costs you $3 to buy the lemons, sugar, water, and cups to make 10 cups of lemonade, that you sell for ten cents each.
In the first day you spend $3 and make $1. In the second day you spend 3 more dollars and make one dollar. In the third day you spend $3 and make another $1. In the fourth day you again spend $3 and make $1. At this point you now have $2 remaining.
On the fifth day a miracle happens and your mom gives you another 10 dollars, so you make and sell more lemonade. But you're concerned now so you ask all of your customers why they're buying your lemonade. They tell you that the only reason is the price, it's such cheap lemonade! If it were 2x more expensive they might still buy it, but certainly not at 3x.
And then what happens 4 days later?
Uber doesn't have a business model, they have a house of cards. They can't make money continuing to operate the way they do now, fares don't cover their operating costs, even if you factor out costs of "building" or "expansion". Their paths to success are either forcing everyone out of business by undercutting them and causing everyone else to go bankrupt, after which they can raise their prices back to the old market rates; or, somehow managing to get self-driving taxis on the market in the next 5 years so they can take driver compensation out of the equation.
I was demonstrating to OP that even if he is concerned by the losses Uber is making, and doesn't consider $3bn of losses on $6bn of revenue to be "healthy", it doesn't matter if the plan and the numbers are headed in the right way as far as investors are concerned.
> On the fifth day a miracle happens and your mom gives you another 10 dollars
This is precisely my point. This does not happen (except at huge economic cost to the company and its founders) unless you are demonstrating a plan which you are executing on.
> Uber doesn't have a business model.
Yes, it does. You may not like it, and you may think it's stupid and you know better than the people who put $15bn into it, but it does have a business model.
> They can't make money continuing to operate the way they do now, fares don't cover their operating costs, even if you factor out costs of "building" or "expansion".
Really? A 15% price increase = Uber is profitable[1], and you don't think they could generate a commensurate margin shift from losing central cost? Get rid of the team working on driverless and it's a profitable business.
> Their paths to success are either forcing everyone out of business by undercutting them
Yep.
> somehow managing to get self-driving taxis on the market
Yep
> or simply continuing to build huge volume, as they have been, and then cutting their central costs back to achieve profitability
Oh, you didn't suggest that much easier path to profitability which they could execute on tomorrow. Weird.
Only if nobody beats them to it and offers self-driving taxis before they do.
This is pretty arrogant given that you're trying to prognosticate something that historically isn't predictable, the financial outcome of a company.
What you neglect to acknowledge in your post is that the there is a lot of signaling from Travis about his ethics being questionable, existing investors want to get their money out so there's no assurances they're being ethical, it's not impossible that Uber will come out as playing Enron accounting games.
In my view it's less arrogant than OP is being naive. My point is not that Uber is going to have a certain financial outcome, it's that people are losing their minds because it's large numbers. Losing $3bn on $6bn of revenue is "unhealthy" but if they were losing $3m on $6m people wouldn't give a shit.
> there is a lot of signaling from Travis about his ethics being questionable
Yes.
> existing investors want to get their money out
The Kapors are seed investors. I don't think any of the institutions who have put in the bulk of the $15bn raised have suggested that they want their money back.
(a) your beliefs that Uber's fleet shifts to driverless at various points over the next 20 years.
(b) Their change in costs and revenues following this scenario (and in cases when this doesn't happen).
I can only justify Uber's recent valuations if I entirely discount regulatory risk, assume huge GDP growth in the developing economies + Uber establishing dominance there and that Uber goes completely driverless in the next 10 years, without any legal/licencing costs.
The alternative would be a 30% fare hike, which would cause customers to go banannas.
My point as ever remains this: people are looking at Uber's current model (where it loses 15% on each fare), its revenue, and its losses, and shitting themselves. They are correctly observing that to raise fares they would have to suffer a loss of customers. Those people are missing several points:
1. The bet on autonomous cars reducing Uber's fares further whilst simultaneously driving them to profitability
2. Uber's intent to spread beyond just passenger carrying
3. The fact that Uber could cut its expensive R&D and autonomous car team today and likely be profitable.
4. The fact that these numbers are simply the same numbers as most/many/all startups raising venture capital, simply orders of magnitude higher. They raised $15bn at a $100bn valuation? Great. There are companies who have raised $15m at $100m.
> I can only justify Uber's recent valuations if I entirely discount regulatory risk, assume huge GDP growth in the developing economies + Uber establishing dominance there and that Uber goes completely driverless in the next 10 years, without any legal/licencing costs.
A more interesting discussion (although irrelevant to my argument), and one we'd struggle to make without, y'know, actually having the data we need to value the business. Which is to say that we're sitting on the sidelines trying to guess the strategy and numbers. Parts of it are clear but I'd expect that a VC investor in Uber probably knows a bit more about what they want to do than us.
How likely do you think 1 is in the next 15 years (surely less than 100%)? To me, 50% seems generous.
How much can Uber's revenue grow with/without 1 (bare in mind they already represent approx 1/4 to 1/5 of global taxi bookings, although I admit this could be undercounted and grow)?
Based on this, what happens to Uber's net margin with/without (1). Bare in mind it's currently > -100% and the sector average has been low-mid single digits for years. I can't see it rising much above $3 -$4 billion with and can't get it anywhere near this without.
Its true that smaller companies raise money at high multiples of revenue, but that is when they represent a much smaller proportion of the potential market.
It's also true that they COULD successfully expand into other markets and this COULD one day become profitable. However, in my mind this roughly cancels out with the significant competitive and regulatory risk that they face in doubling their share of the taxi market,and they could end up repeating their trick of selling dollar bills for 85 cents in the markets too.
Happy to hear where you disagree!
Tesla has the hardware deployed already and announced that the software to enable Tesla Network (which is essentially Uber, without drivers) will be enabled by the end of this calendar year. You think there are 50% odds that one of the other companies ploughing billions of dollars into autonomous driving R&D is going to take another 15 years to execute on this? I can't think of many examples where that level of first mover advantage has existed outside of the development of viably deployable nuclear weapons.
> Based on this
I don't accept the premise, I'm afraid. But Uber could be profitable if it increased its fare price by 15%. So why is it difficult to believe that they could achieve profitability by cutting central costs?
In return Tesla will have much more data in a few years.
Very happy to concede that it's possible they won't be! But look at the context as I think you're missing the point a little: OP is stating there's a 50% chance that they won't be L5 in the next _fifteen_ years. They're currently forecasting L5 in Q4 17. He's saying that they're going to be 14 years late.
If investor money stopped flowing tomorrow and all companies were forced to be cash flow positive to remain solvent, we'll quickly see which emperors have no clothes. These unit economics will continue for every player in this market as long as investors feel it is worth fighting for. Those with better margins will survive and will suffer the least amount of dilution in the process.
When the dust settles Uber is going to be the only company that ever ends up making any money in this market.
I sold my car over a year ago and use a mix of ridesharing and rentals for transportation. Uber and Lyft's greatest competition in my life is a small Google product where people pick up people on their daily commute to and from work and the drivers are compensated only for gas money.
Locally, there is a company that will allow you to rent an electric car for free for two hours (it has an electronic billboard on the ceiling).
In the future, cheap electricity and efficient manufacturing might make a world where rides of a certain distance would be free or extremely low cost in exchange for advertising.
Transportation is a commodity. For a short ride, I don't care that much about the differences, whether I'm sitting in a Toyota Corolla or Mercedes S-Class. It gets me from point A to point B.
In this environment, I think the VCs pouring billions of dollars into Uber are throwing their money away subsidizing Uber's leadership in commodity market. Cheaper wins. I get to choose on each ride. There's no lock-in, there's really no reason for brand loyalty. Whatever is cheaper wins. If it's free, whomever gets here first wins. If they are both available right now, it's who has the nicer seat.
This is a race to the bottom and as a customer I'm only going to remember negative experiences with the brand. Lyft is better by encouraging themed cars but, they've stopped doing that from what I've seen.
There's a good chance that Lyft and Uber might face huge backlash for bait and switching drivers when they roll out driverless cars.
I'm bearish on Uber in the long term.
Yeah, it's actually kind of amazing how many 'traditional' checkboxes Uber seems to miss with its 'rapid growth'. Little network effect lockin, low (ish) barrier to entry (with the hardest thing being brand recognition, with news of new/cheaper/'better' ridesharing plats potentially spreading like wildfire), opportunistic customers (and even drivers) without brand loyalty.
If Kalanick implements some sort of amazing plan to pull them through despite all of that (not counting the moonshot of expediting SDCs into the market) he'll be a walking testament to the whole 'market doesn't care who you are as a person, but if you can get the job done' maxim.
I'm not necessarily bearish - I'm not expecting an upset like that, but I'm not particularly invested in Uber so am more keeping an eye on it for the entertainment than anything.
When I first heard about Uber I never thought about it as a replacement for the traditional taxi system but more of this. People on the way to their destination who can take some people there. Not some guy waiting around for the next person who needs a ride.
Totally different long term business model and why they are pushing so hard for driverless cars, because that's more of a platform.
I expect that they want to really be an infrastructure player more like Verizon than anything in the very long term where they have lock in through municipal or state mandate for contract vehicles and driving infrastructure.
Given their less than positive relationship with governments I could see a city/state starting with autonomous buses and then moving to cars in a hub and spoke type system for public transport level fares. Uber probably would want those contracts more than anything.
It's almost a standard by now: lose on every sale, make it up in volume.
Joseph Heller had that one first I think.
Tesla is a good example of a company that did this.
A company that loses money on every unit sale has no breakeven point (Uber). A company that makes money on every unit sale has a breakeven point (Tesla). Because Tesla's fixed costs are very high, their breakeven point is out there, and thus they must operate at a loss for a period of time.
Now this is a simplistic one product view. When you add multiple products and release timing to the model, the complexity increases. Not only does the complexity increase, we don't have enough external financial numbers to break apart the data per product.
Don't get me wrong, Tesla has execution risk. But financially, I'm not at all concerned. They won't fail for lack of profitability or demand, they'll fail because they couldn't execute if anything. And... well... they've been slowly but surely derisking their execution risk as well.
So we shall see.
What? Uber spends an additional ~$0 on every additional ride. They only lose money because of growth and price wars with the competition.
In mature markets with no competition (eg. Toronto) there are no driver incentives or bonuses and they are still cheap and popular with riders and drivers alike.
This sort of thing is super common, where I get a deep discount on a 'pool' ride but I end up riding alone. The drivers tell me that they get a regular rate (on top of whatever the bonuses are) which is per-mile. The guy tonight said he thought he was making like $7 for the ride in question, just on the mileage.
I... am pretty sure they are losing money on many pool rides.
They can be losing money on many pool rides and still be making money on pool overall. I don't know whether they are.
It makes sense, but I'm not sure it works out that way. Many web services have zero lock-in (not including those with a network effect such as Twitter and Facebook) and competitors are a URL away, yet the first ones to gain (mindshare? marketshare?) seem to keep it: Google search, Amazon, etc.
Uber takes me from point A to point B in a virtually indistinguishable way than Lyft or any of the other smaller ride sharing services. The most important thing is the transport, not the comfort, not the branding, not the "Lifestyle Experience". Maybe they will succeed because all of these people want something more out of a ride other than the ride but, for me it's cheap, reliable, fast; in that order. Everything else if fluff.
Google search was the first one to find a business model for pure search (adsense i.e. advertising based on your search terms).
That allowed them to build the best pure search experience they could and was so profitable that they could spend more money building it than anyone else. That's a virtuous cycle.
Their competition at the time was moving away from pure search (because it was unprofitable for them) into yahoo-like portals, because that's where the money was (also ads but non-contextual display ads).
Which is why that's not a good analogy for uber.
In U.S. there's really Uber and Lyft. Every time Uber is discussed, "no lock-in" comes up but why no one even tries to compete with Uber and Lyft in US?
It does seem like people who actually have the money to potentially mount an attack on Uber or Lyft came to the conclusion that it would be a foolish waste of money.
Uber and Lyft have a clear business model: they are better and cheaper than taxis and have global presence (while taxi companies are historically local and don't have the capital to go global).
Customers in this market do care about price and better service, so it's rather obvious that Uber and Lyft will win over taxis (arguably they already won given that they're 100x bigger than any taxi company).
Both Uber and Lyft are still in the phase of aggressive expansion and growth, they still enter new markets, subsidize the service to increase usage density (which makes the user experience better), they experiment with things like Uber Pool, being alternative to busses etc.
None of the above is cheap so it's understandable that they loose money today.
But at some point the growth will stop, their costs will go down and one of them (or even both) will be very profitable companies.
The only thread for Uber and Lyft are self-driving cars (i.e. Google, Tesla, GM) because they'll drive costs down by 5x. Whoever wins that race wins the taxi business, which is why Uber spent $680 million on Otto and GM $1billion on Cruise and Google was apparently paying $120 million to a single individual in charge of self-driving cars.
Amazon figured out how to marry a familiar and easy to use web-based store to a state of the art fulfillment pipeline, which is how they took over the market. Fulfillment is a non-trivial problem. Keeping track of what is where and how much is left, figuring out what to charge for shipping and handling, and figuring out where to keep stock and how to produce orders. A typical web-based shop will get to your order in one or two business days and be able to put it in the mail maybe that day or a day later. Amazon figured out how to optimize everything about their systems to be able to get your order in the mail within hours of you placing it. They've consistently been improving that process for years, and almost nobody can keep up with them. They can achieve same day delivery on a lot of common items in many metro areas, for example.
If Uber was as superior to the alternatives as Amazon or google was they wouldn't have any problems keeping marketshare. But they really aren't that much different than Lyft or other ride hailing apps. The core valueadd comes from being able to use a smartphone to set up your ride instead of having to place a call or having a cab be immediately visible to you. There's not enough that Uber brings to the table otherwise which would allow them to keep their business if they couldn't subsidize fares using VC money.
The Who's Driving app is great for this kind of thing.
They're fixing this. You buy 100 flat fares that you can use over the next 6 months, then you're more or less locked in.
I'm sure they lost even more money on me that month than normal.
And chariot i think started in 2014, so Uber is very slow to respond, not sure why.
And I'm sure Ford did the math, they're not some VC with free money.
Is there any public information that says Uber is losing money on every sale? I'm honestly curious. In my brief searching, I haven't found much. I'd love it if someone would point me to information on Uber's finances/economics that shows their negative gross margin in developed city markets.
My mental model of their finances is heavy fixed costs (~5,000 programmers) and near-zero marginal costs. The only way they are losing money on marginal rides is if they are paying drivers more than the fare. Do they? I honestly don't know.
We can double the size of a loss making business! We can lose money twice as fast!
Actually it looks like losses relative to revenues are smaller than they were, but that's still not impressive. Especially when it's non-GAAP anyway.
How much money do they have? How did they raise so much without giving any control away and not going to the public markets? I mean... a billion here, a billion there, sooner or later it adds up... right?
In competitive markets a lot of "me too" competitors pop up all the time. When you see consumers just picking the one that's the cheapest (i.e. with the most VC cash subsidizing the ride) and drivers rocking up with multiple phones on the dashboard as they too game these companies it's clearly all a fools game. This industry is a race to the bottom, but at least people get to enjoy cheap VC-subsidized rides while the party's still on!
I think the consensus is that rides are subsidised by around twenty cents on the dollar.
Ubers bet is autonomous cars. They pay a 75% fee to the driver. When autonomous fleets launch in the next few years they'll normalise prices at around 50%, meaning your $10 ride costs you $5, and each ride has wafer thin profitability (the additional 5% margin will be chewed up a little by maintenance costs).
And let's be real: Lyft did $600m of sales in 2016. Uber did $5.5bn. This isn't just a race to the bottom on price, it's about building a brand.
Personally, I believe their bet is on not needing a large advertising budget once enough people know about their service.
Tesla believes its cars are already equipped with the necessary hardware and that the software, including Tesla Network (their announced autonomous Uber competitor), will be going live at the end of 2017.
At this point five years seems like a long time horizon for autonomous cars being on the road.
OP said that self driving cars are 10-15 years away.
I observe that the hardware has already been developed and that Tesla anticipates its software being ready within the next 12 months, suggesting that a ten year horizon feels conservative.
HN pedant wades in to make an irrelevant point.
Autonomous cars being generally available lowers the barrier to entry for competitors to Uber, and makes their position worse, not better. Uber's bet is Uber controlling the autonomous car market, which is a different and much harder thing.
Why do you think that's true? Uber is investing heavily in autonomous cars because they want to be very early to the market (hence "Uber's bet is autonomous cars"), and because when you have autonomous cars high utilisation is important, they are in food delivery, and interested in shipping and courier services.
I think you're also overestimating the complexity of recruiting a load of former private hire drivers and underestimating the complexity of developing scaled fleet management solutions for entirely autonomous vehicles.
> Uber's bet is Uber controlling the autonomous car market
I think most reasonable people would be able to impute some sort of first mover or early mover advantage into what I was saying.
> I think most reasonable people would be able to impute some sort of first mover or early mover advantage into what I was saying.
I think most reasonable people are deeply sceptical that Uber is going to win first-mover advantage against the likes of Google (who's been working on the autonomy tech for what, a decade, now?), traditional automakers (who have deep experience actually building vehicles), and Tesla (who've been working on the autonomy for at least as long, while also developing manufacturing experience, and have many more vehicles on the road gathering data). Let's not even bother quibbling about that nasty lawsuit.
Sure. Not anything to do with my point, though.
Do you really think with this many players, that anyone is going to get a huge market? They're not. Uber, even if they manage to survive their lawsuit and build a working system, has plenty of fast followers in the self-driving systems market. So the competition will be at most 24 months behind. Not nearly enough time to acquire and retrofit a fleet of vehicles, and then deploy the fleet in numbers big enough to make a difference to their current cost structure. (Keep in mind the fleet acquisition is a capital expenditure.)
Second, they won't have a large market to distribute this technology, because they don't make cars, and the people that do make cars are already players in this space. I find it hard to believe that Volkswagon, Toyota, or General Motors would simply ditch their internal projects and license with a newcomer that has no manufacturing experience to be a supplier, especially when they themselves would be close to making their own solution which would be able able to be manufactured at scale.
Look, everyone knows that auto manufacturer navigation and entertainment systems suck, yet they still roll their own instead of wide partnering with Apple, Microsoft, Google. My Acura's infotainment system is awkward, slow, and outright user antagonistic, yet there it is.
At most, Uber's self driving kits could be what Alpine is to car stereos. Sure people buy them, but most don't, and if you already have one that works, you probably won't swap it out.
Out of the following contenders:
1) GM (+Cruise Automation), Mercedes or VW with their enormous supply networks, vendor lock-ins, economies of scale and ability to massively ramp up a car production when needed.
2) Tesla with their (allegedly unique) battery storage tech, working manufacturing facility and massive amounts of data harvested from thousands of Tesla vehicles on the roads today.
3) Google/Waymo with their unlimited budget, ability to partner up or buy whoever they choose, and nearly limitless amount of software engineering talent they can suddenly relocate to this project when desired.
4) Avis/Budget, Hertz or other fleet management company that already has a relationship with car manufacturer and can own/maintain/wash/clean/park/dispatch a large number of vehicles on the cheap.
5) Uber.
Why is #5 the strongest candidate? Does the dispatch app that displays available cars on the map create such a strong moat that #1, #2, #3 or #4 will never be able to replicate? Does Uber have a bunch of aces up their sleeve that will allow them to build/buy automobile manufacturing facilities on the cheap? Do they have a know-how of maintaining a large fleet and take care of simple things like changing a tire or cleaning the car after the previous passenger puked in it? And do that at scale?
Live by the sword, die by the sword.
Uber most definitely wasn't playing the fool.
Congratulations on your foresight, however I think the chorus you should expect from this audience is "they did it better than you, so get over it."
Seriously though, this is a super common thing that happens on HN all the time. This community is actively hostile to people who aren't winners and talk about why they should have won if only they were "given a chance" or did something differently. Pretty typical recipe for the bottom of the page.
I'll note that I didn't vote either way on your comment so as to not bias it. Though simply posting my comment might actually sway people to vote it up - there is also a very strong contrarian trend on HN as well.
Why? Screw the downvotes, thanks for writing that.
It beats the crap out of all those so called 'success stories' that if you look at them closely merely amount to a half-assed hobby project that accidentally made some money.
FWIW: My partner Michael in 1999 suggested that besides live content we should find a way to easily host videos. I nixed the idea.
For an encore, a couple of years later when confronted with gamers using our service to live-stream their games I wrote a bot to block them.
Youtube and Twitch happened anyway :)
Don't wait for success or money if you want to start a family, there really never is a 'right' time.
That's pretty awesome that you guys thought of hosting videos. The idea escaped me, even after watching photo.net & then Flickr. I was working on an idea back then & the issue was the cost of bandwidth, right? Sure.. put videos on the Internet... but how would you ever pay for that much bandwidth? I guess that's why a Silicon valley crew did it. They could somehow see the decline in bandwidth pricing, understood how much extra fiber capacity there was.
We should have gotten together then. I owned the domain fullscreen.com (and I made nice websites!)
Software is hard! The winners show what it takes. Just put something out there! AirBNB ruby on rails! Facebook... PHP! Google... python!
Was the first iteration of Google really written in Python?
That's quite interesting.
OH.
I felt like I was going insane reading some of the comments that seemed like they had no context. Ha. (Now to figure out what the proper ordering is? Unless it's deleted)
Thanks for the context
You forget that Uber was the last one to market with ridesharing. Lyft and Sidecar were out there faster. The reason why Uber is huge is because it was the first company to take all its money and go all-in into growth, by any means necessary. They spent and grew and got more funding until they were global within a few years, unlike most other companies. Their growth strategy is unprecedented and what is the most special about Uber, not the app itself, or even the idea.
You would most likely not have duplicated their growth strategy, and would have gotten steamrolled. At this point, there's no way you could get your foot in the door next to Lyft or Uber, without significant funding.
FWIW, back then my friends sounded a lot what you are saying. Oh it's too hard. Oh you'll be up against big boys.
And I didn't do it b/c I'm a bit of a perfectionist. Uber did it. And, from what I understand, they did it by hiring someone off an offshore programming website. MVP.
And they built the human pyramid. That's what you need to do to retire. Build a human pyramid.
Money is not everything. You don't have to be a millionaire to have children. You don't need to be filthy rich to retire.
But you also have to accept that you would never, ever have built Uber. The growth strategy was executed perfectly, so far. So don't feel bad that you didn't finish the app, it wouldn't have made a difference.
So please move on, have a family, stop thinking about money.