Uber’s Losses Widen as SoftBank Launches Bid to Buy Shares
bloomberg.com
bloomberg.com
Absent cost-cutting, that implies a 9 to 12 month runway. Even if SoftBank injects $1bn, that could only mean a few months’ runway. A large fine in the Waymo case [2] could literally bankrupt them.
[1] https://venturebeat.com/2017/08/23/uber-is-still-burning-cas...
[2] https://mobile.nytimes.com/2017/11/29/business/waymo-uber-tr...
If so, they then probably think they can go public with all of that baggage.
What a loss to Waymo might do is make an Uber IPO much less attractive. It might even be the difference between an IPO happening and not happening. And that might be the difference between Uber getting another year or two of runway and them dying in 2018.
So? They'd almost certainly be forced to put up a very large bond to do that, assuming they can get it.
In some jurisdictions, this can be 100% of judgement + interest. IIRC, in the 9th circuit, it's at the discretion of district courts, but given the financial situation, if they did have a multi-billion judgement against them, and not a lot of runway, what makes you think a judge won't make them put up a full bond to appeal?
These cases actually often do bankrupt businesses, and the predatory lawsuit creditors take over (though usually that happens more in patent cases) :)
Are they planning to raise prices? Cut employees? What are they planning on doing here?
This is the nature of "predatory" pricing.
There is something to be said for volume and if a couple competitors die in the process then Uber's volume can only go up. Unfortunately their competitors have found a variety of ways to keep from being dragged down (eg: regulatory support of municipal taxi orgs) or ways to keep oxygen expenditure stable (eg: controlled expenditures through higher pricing and "friendlier" demeanor).
I am almost positive the point of subsidizing the price of the rides is to get you addicted/ build up a habit or get you comfortable using the service.
I think they are aware of the competition and are comfortable owning 60+% versus trying to get 80%+.
Their revenue is growing which is still wild despite bad press.
>Unfortunately their competitors have found a variety of ways to keep from being dragged down
Not a bad point but it is highly dependent on the market. In the US, Uber is 4x Lyft in market share.
A common problem drivers cite is that Lyft pays better, but the volume of Uber riders is much much larger.
I am not a fan of Uber, just extremely bitter at poor journalism, hence , I stopped reading at the first paragraph.
Not really. The revenue for a company selling dollar bills for 80c each will keep increasing until all the cash is gone as well.
The rides that I have taken are not subsidized. Maybe it's not statistically significant but I have yet to see the subsidy in the major cities that I have traveled in.
SoftBank obviously sees something in them.
Who knows. I don't disagree with what you said.
How do you know that?
How do you know they are subsidized?
While in reality, their overall share of the ride-hailing + taxi market in the US is ~25% as of August 2017, and far less in Europe and Asia.
You don't know what you are talking about.
https://www.google.com/amp/s/www.recode.net/platform/amp/201...
>That week, Uber’s market share dropped 5 percentage points compared with the previous week, from 81 percent to 76 percent, according to Second Measure data. Lyft’s market share gained about the same amount that week. Other ride-sharing companies, including Gett and Juno, saw a nominal increase that week.
- Assuming this refers to Lyft, Lyft's expenses compared dollar to dollar are on-par if not worse than Ubers - https://techcrunch.com/2017/11/14/unpacking-lyfts-projected-...
As long as Uber can keep the cost per ride lower than other competitors, it just needs to wait for the burn to end faster on the competitors side before turning break-even.
Uber have joined loss leading with scale, a combination that works if one has access to an endless spigot of money. The scandals have impacted Uber's fundraising. Time for eyes to match stomach.
I predict, in addition to lay-offs, we'll soon see more Didi-style hand-offs of offshore ride-sharing markets. Southeast Asia to Grab et al seems reasonable.
Disclaimer: this is not investment advice. Do not buy or sell anything based on this Internet comment.
Also Disclaimer: this is not investment advice. Do not buy or sell anything based on this Internet comment.
some interested parties (waymo/alphabet) might be happy to foot that bill.
And once autonomous cars become part of the picture, I think they're in an even worse position. Suddenly they're not competing just against would-be moguls. Now they're up against the car companies, who have strong brands, deep pockets, and the ability to make cars at cost. Imagine, for example, BMW extending their leasing business to on-demand car use. We also have existing car rental companies that will be eager to get in on the action. And that's not counting the zillion other outfits with strong brands and a taste for expansion. Apple, for example. Virgin. Amazon.
I just don't see how this ends well for them. At best, I think 10 years from now they'll be the next Groupon: the hot startup everybody everybody loved but now nobody talks much about and is trading at a fraction of their peak valuation.
There is a lot of work that goes into the infrastructure behind companies like Uber and Lyft. You need good engineers that build products that are reliable and well tested, to work 24/7.
It is a hard problem. A lot of the smaller city taxi companies that have apps contract to larger vendors as well.
So did newspapers - the very definition of mission-critical computing is the the paper HAS to hit the stands the next morning. Didn't save them from half-arsed competitors running glorified blogs...
BMW has no choice but to do this, as do all the strong brands. They can't compete in a world that you don't care about the brand because you're riding journey-by-journey with no personal investment.
Edit:
There are two possible stories here about Uber and Lyft's losses, and we can't tell which is right from the outside.
1. Uber and Lyft are in a price war death spiral, heavily subsidizing all rides to compete. Their only hope is for all competitors to die, so they can take over the whole market and raise prices. Then vague hopes of lowering costs with self-driving tech and take the surplus as profit. The plan doesn't seem viable, since they have no moat and they can't outspend GM and other self-driving players.
2. Uber and Lyft can actually make a profit in mature markets, but choose to subsidize rides in growing markets, on the theory that growing the market size increases the long term profit opportunity. The data we need to evaluate this idea isn't public, however Uber did a "prove it" quarter in 2016 where they turned the spigots to be profitable in the US. They are now pursuing growth in the US again, expanding to a larger territory and expanding Pool and other offerings like flat-rate passes in mature cities. Under this model, Uber could at any time decide to become profitable, but the revenue growth would stop, placing a cap on the valuation. Notably, there is no "predatory pricing" here.
With internal finances, we could easily tell whether option 2 is valid. You can bet Uber is constantly doing experiments on price elasticity of demand and knows exactly where the truth is. You can bet Softbank has seen numbers we have not. If Uber wants to IPO, I would expect them to provide additional public info, possibly pivoting to profitability again in the US. But doing a pivot like that permanently reduces the size of the opportunity, allowing Lyft to capture that new market instead, so they may be reluctant to do it large scale.
You have the give your drivers a reason to use your app instead of uber.
You have to give riders a reason to use your app instead of uber.
The two reasons have to be good enough to build a large enough network for the rideshare system to work.
I'd say there is a network effect for ride-sharing in aggregate, neither Lyft nor Ueber has been good at locking drivers and riders in with loyalty programs to try to keep people solely on their platform.
The truth is that all the viable competitors are likely already out there and it's going to be very very difficult to replicate what these incumbents have without burning ridiculous amounts of capital.
If the Softbank deal closes, we'll likely see a wave of consolidation with Softbank orchestrating acquisitions by Uber. It's very common for relatively young markets to consolidate over time.
No one in their right mind would start a new company to compete with the existing TNCs in 2017.
Ride sharing is essentially a local business with very low barriers to entry. You don't need to replicate what the incumbents have right away. You just need a modest number of drivers (who can also be driving for the incumbents) and a modest number of customers.
That seems sufficient to me. It's hard to name any company started in the last few years that is a major market player when then have a bunch of competitors. New businesses take time to grow.
The discussion here is about whether Uber has a moat. The point being made is that it's pretty easy to start a rideshare company. Which it is. That one hasn't become major yet isn't proof that one can't become so. As long as there's room for new companies to start and be sustainable at modest scale, then Uber can't extract monopoly rents.
Did the journalist who wrote that story cite any figures to support that assertion?
To start a rideshare company, you only need to do reasonably well in one segment in one geographic market. Then you have a basis for expansion into other areas, other segments. Contrast this with a search engine, where people really expect you to be good for everything and covering the entire internet.
However, you are right to bring up autonomous cars. I always thought it amusing that Kalanick et al were so anxious to bet the house on autonomous cars, when in fact, they are the company's greatest existential threat long-term. Once those cars are readily available and street-legal, there's nothing stopping Enterprise or Avis or the automakers themselves from becoming overnight competitors.
And once drivers are taken out of the picture, ride prices will plummet. Margins will also thin because of the likely extreme competitiveness of this market. I would not want to be an Uber investor that's for sure. In theory, the "winner" will be whoever scales the most (i.e. has the most capital to put into their fleet) and has the most effective marketing. In practice, prices may be close enough that people will rent car X because they like brand/model Y better.
If I were on Uber's board, I would advise against trying to win that war which they will lose once/if the automakers get in on it, and instead get creative about how to conquer the market in a more niche way.
Someone is going to have to program self-driving ambulances :)
1. This is probably further out than a lot of people assume. Reliable door to door fully autonomous in dense cities is one of the hardest use cases to solve but it's more or less what you need for self-driving taxis.
2. The pricing probably also won't "plummet." The IRS mileage rate (about 53 cents/mile) is probably a reasonable floor to use. That's still about half current Uber rates.
https://www.irs.gov/newsroom/2017-standard-mileage-rates-for...
"The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs."
1. Maintenance. Electric vehicles require far less maintenance than ICE vehicles. (First thing I found on Google: https://insideevs.com/ev-vs-ice-maintenance-the-first-100000...)
2. Vehicle size. Once these systems are up and running, do you think Waymo & Uber, once their systems reach any level of maturity, are going to send you a 4 person vehicle to pick up 1 person? This reduces:
a- the capital cost of the vehicle
b- its cost of maintenance (less parts, etc)
c- the amount of energy required to get from point A to point B
Which brings me to...
3. Price of electricity. Waymo, Uber, et al will get their electricity at wholesale rates.
4. Low cost of capital. The cost to access the capital to buy these vehicles will be lower than anything a peon like you or me could ever access.
5. Bulk-buying 1,000,000 vehicles. No dealers, no dealer commissions, zero customizations, less parts, smaller vehicles, no car manufacturer marketing budget...
6. Maintenance scaling. The need to scale maintenance operations country-wide is going to lead to its own interesting effects. With a hard limit on the types of vehicles in a network, most cleaning and general maintenance will, in time, be doable by human-monitored robots.
7. Ride subsidization will effectively crush any margins any of these companies could ever hope to have.
8. Shared depreciation. Depreciation will be significant per vehicle but overall, cheaper, as each vehicle will have more utilization.
I'd hesitate to guess at the effects of all of the above, but it's not much of a stretch to anticipate an additional 50% reduction here, barring any unforeseen taxes, of course.
You might pay more for the network with great coverage and lux vehicles.
You might pay less for the crappy network with dirty cars and plastic seat buckets.
Etc.
And regarding (8), many taxis are rented by drivers for their shift, with multiple shifts per car per day. Uber could be doing the same right now, but they'd rather rely on drivers not realizing the full value of their car and giving the difference to Uber.
I totally envision the points mentioned. I put the $$ figures for on-demand hail service subscription a month ago, on a HN thread as follow .
https://news.ycombinator.com/item?id=15644680
2021 : Electric Self-driving on-demand FLEET Car 1000 miles/month SUBSCRIPTION from Google, DiDi, Uber, Renault/Nissan,Tesla, VW,Toyota,GM for $400/month
2024 :same 1000 miles/month SUBSCRIPTION $200/month
------
> Literally none of the old assumptions will apply. Let's go through some of them.
> 1. Maintenance. Electric vehicles require far less maintenance than ICE vehicles. (First thing I found on Google: https://insideevs.com/ev-vs-ice-maintenance-the-first-100000...)
> 2. Vehicle size. Once these systems are up and running, do you think Waymo & Uber, once their systems reach any level of maturity, are going to send you a 4 person vehicle to pick up 1 person? This reduces:
a- the capital cost of the vehicle b- its cost of maintenance (less parts, etc) c- the amount of energy required to get from point A to point B
Which brings me to...
> 3. Price of electricity. Waymo, Uber, et al will get their electricity at wholesale rates.
> 5. Bulk-buying 1,000,000 vehicles. No dealers, no dealer commissions, zero customizations, less parts, smaller vehicles, no car manufacturer marketing budget...
> 6. Maintenance scaling. The need to scale maintenance operations country-wide is going to lead to its own interesting effects. With a hard limit on the types of vehicles in a network, most cleaning and general maintenance will, in time, be doable by human-monitored robots.
> I'd hesitate to guess at the effects of all of the above, but it's not much of a stretch to anticipate an additional 50% reduction here, barring any unforeseen taxes, of course.
> You might pay more for the network with great coverage and lux vehicles.
> You might pay less for the crappy network with dirty cars and plastic seat buckets. Etc.
I also suspect that ride pricing and scale will not be the determining factors. Look at the variety that still exists among car manufaturers after a century of competition:
http://www.thetruthaboutcars.com/2017/08/usa-auto-sales-bran...
There's such a wide variety in terms of both cost and experience that I'd be very surprised to see that drop off to one or two players.
The car brands know it, which is why they're panicking.
(Why ALL car brands? Because you're going to have companies like Bosch and Foxconn competing. I'd like to see Ford beat Foxconn at a challenge like this.)
This would be especially true if people continue to own or lease private cars, which I'm sure will continue at some level for decades at least. Look at how much stuff families keep in their minivans, for example. Or all the tradespeople who keep working materials in their trunk.
Or look at commuters. Taxi-ish providers like Uber and Lyft will have a hard time dealing with commutes because they'll have to buy a lot of vehicles to cover the peak that just won't get used much during the off hours. If people treat it like a minibus, where they share, then the providers might do well. But I suspect a lot of people will be willing to pay up for a private commute, at which point they might as well just have a dedicated car. In which case, the market will look a lot more like it does now.
Commodore 64 was a profitable bestseller.
Tramiel left Commodore while it was still very successful, founded new company, bought Atari and tried to replicate Commodore 64 success with Atari ST.
Commodore failed because they failed to transition from Commodore 64 to a better specced machines, despite having a technological marvel at their hands (Commodore Amiga).
When they flip the switch they become more expensive that a regular mini-cab. Customers will leave in droves, drivers will leave in droves. There s no loyalty to a middleman.
Uber may or may not be subsidizing fares, but they’re also spending tons of money on engineering and product development, both on their existing product and in an attempt to develop self-driving cars. That’s growth.
I have no idea why (maybe less drivers?) but I already stopped using Uber because of that. If their prices when even higher then I'd simply never use them again instead of the occasional time that I do now.
With Uber, I think there is some degree of loyalty just because of the ubiquity and convenience. Plus, I imagine their prices will be more or less the same as a taxi since they don't have the expense of dealing with the regulatory overhead (since they just blatantly ignore the law instead)
This is not true for all markets in which Uber operates - in NYC for example, uber cars are all registered with the TLC.
Both! Just don't tell anyone.
It's like having Stripe getting a 25% cut from all card transactions.
I have a feeling this isn't as easy as you think. There are some great talks on Uber's microservice architecture and it's pretty insane. They could create new services, but I have a feeling their existing infrastructure is very custom. They've got over 1,000 microservices and it's actually difficult to get an exact number.
Symptomatic of too many engineers and too little leadership
The talk is invariably about some really impressive bit of software that appears to have required equally heaping measures of smarts and money to build, and also appears to be a $10 solution to a 10¢ problem.
But yeah, extraordinarily few internal projects can be turned into an external project without enormous rework. It's only the myth of middle managers who perceive software as a growing asset who think otherwise.
Not sure if the unit economics can ever work out.
It's quite tricky to package an internally used system into something that can be sold and used by others. It most likely takes years to get to any significant amount of sales.
* Thinks they have a logistics problem in the first place.
* Thinks that software can solve that problem.
* Are in the market for software to solve that problem.
* Think that Uber's software is the software that would solve that problem the best.
That's a hell of a lot of assumptions, each of which is fairly easy to pick apart.
And this is just the taxi industry, there are plenty of industries that would love to use a logistics software to help their business. The only real magic Uber has is this software, the rest is easily replaceable or overhead.
[1] https://daymondjohnssuccessformula.com/launch-pad/cab-compan...
[2]https://www.watchdog.org/california/the-uber-effect-why-cab-...
[3] https://www.quora.com/Why-do-taxi-drivers-hate-Uber-if-its-c...
[4] https://therideshareguy.com/what-taxis-need-to-do-to-survive...
The subsidizing is what made them a household name, along with the ease of use.
I worked for a very big "Old Media" company in Australia when we rebuilt one of their key properties. Their "definition of success" was to _not accelerate the rate of decline_ of page views. Since then I've realised that these types of businesses are ran by people who are motivated differently than 'us'.
Plus any other startup or company can build such app to compete.
Any start up could build this, but most companies don't want to deal with an MVP and the bugs that come with it, or a startup that may or may not exist in 6 months, etc... Companies will over pay for enterprise grade software if it has a history of just working. This is why Uber has an advantage, software that has a track record of doing what it says it does.
I think that companies like taxis are cheap and while they are willing to pay, they are not willing to pay much.
And the taxi firms usually won't and often legally can't use Uber's pricing algorithms which is pretty much the only secret sauce to the app, they don't want to ignore bylaws that Uber has cheerfully skirted around and they don't want their expensively-licensed drivers competing for leads on an equal footing with new Uber drivers.
But that aside, yes a pivot would require them to do things differently, just as in your example learn selling to businesses However every taxi company in the world would jump at this opportunity immediately. The same industry that refused change for decades and had their parade rained on when Uber came around would greet this change with open arms. Especially if Uber were to 'go away' as a result.
There are going to be down rounds for Uber in the future no matter what, valuation means nothing if your business won't survive.
Every taxi company on Earth (well, at least in the UK) has an app of their own now, even if it's just a white-label with their branding applied. They all let you book a journey and tell you the name of the driver and the reg plate of the car, and have a nice animated map of how far away the car is. No-one will buy it.
But as I mentioned above the taxi industry is only the first immediate one I'd tackle, there are plenty others.
TO my understanding (probably not a full understanding), Uber's business model to date has always been predicated on subsidizing cheap fares and wages that at least keep lots of drivers around. The idea was at some point this would be sustainable and the subsidies would go away. It is unclear now whether such a point exists
Uber could cut costs, ie massive layoffs, but imagine what that would do to its talent base. Who would stay at uber amid massive layoffs when the hiring market is so strong?
THey could try to improve unit economics by charging higher fares or squeezing drivers further, but it is unclear how much more they could squeeze drivers, and if fares rise materially, a lot of their business goes to lyft or goes away entirely.
i rarely used uber when i was in NYC or non-SF places in CA. in SF uber might still be viable because public transportation is so terrible, but in many other cities uber could disappear and people wouldnt miss it all that much
After reading the Times article (currently #7 on HN list) it would look like a fine is probably the least of their worries in the Waymo case.
Just curious, but does it actually mean this? I thought some of their $1.5B losses could be in the form of debt that has to be repaid in the future?
The (buzzword warning) hyper-growth startup model is in essence 2X revenue, 1.5X costs. Repeat until inevitably profitable - and I say inevitably because with enough time, 2X revenue, 1.5X costs gets to profitable. The only variable there is having a long enough runway.
Uber seem, from the financial data I have seen, to be sticking to that playbook down to the 3rd decimal place (exaggeration for effect). When Uber does turn the profitability corner, it will be at a level well over a billion a quarter.
Sure it's a risk, but if any company was setup to be huge, had followed almost all the meta-rules on growth and looked to be hitting those growth targets, it is certainly Uber.
Can you elaborate on this? What is the relationship between those figures? I am guessing there is a third component that those are multiples of?
it is like gambling with doubling (or even tripling) down each time - with enough time you will inevitably win and as result will reap a huge profit in total. Now if just somebody write me a blank check backed by an unlimited bank account... On practice though, even if got that check - what if the casino can't match my next 3x bet?
The same thing with Uber - the important thing isn't just the Uber's money runway. The other side's "runway" (i.e. total size of the market) is also extremely important - are there enough people on Earth needing enough rides so that that amount of rides would allow for that "2x revenue 1.5x costs" model to reach profitability?
Now if just somebody write me a blank check backed by an unlimited bank account... On practice though, even if got that check - what if the casino can't match my next 3x bet?
It's called a table limit. At one point you just can't raise your bet anymore.
Will revenue double forever? No. Will revenue double for 100 years? No. Will revenue double for 10 years? Hmmm. Will it double for a year? Lets just say yes. Solve for between 1 and 10, and place your bets accordingly.
Except, if you check the linked article, you'll find that bookings grew 11%, revenue grew 21%, and losses grew 38%.
That is exact time 2019 January google Waymo will be having driver less full autonomous Ride hailing service at least in 10 US Cities in limited routes of each city to begin with ( as Phonix driver less service is LIVE at this time).
Unless Uber driver less technology is ready for deployment for real world Ride hailing service by 2019 January (even in small limited routes in those 10 cities), Uber is in big trouble !!!!!
I think this Uber 30% lowered valuation is result of this two factors of perceived RISK that is
a) running out of money in one year
b) driver less technology readiness by 2019 for real world use
https://www.bloomberg.com/news/articles/2017-11-29/uber-s-th...
At this point, two things are clear to me:
1) Uber will IPO, there's just oo much money and influence behind it to stop that.
2) I'd be really worried if I was an employee about my options and also about my job.
Employee's now ahve two large worries hanging over their heads.....
What about my job and what about my options...
With Uber preparing for an IPO, they'll od what most companies do, clean up their balance sheet. And with the losses piling up they'll start cutting costs, which as for most tech companies starts with employee's.
And now I don't htink anyone believes that they'll IPO at anywhere close to the 60+ Billion valuation they had a year ago.
Infact SNAP looks like a great model to study for what an Uber IPO might look like, lots of good first day to week action with price rises but then a steady stream of down days leading up to their first quarter report which will almost certainly show them loosing money and then much larger short interest leading up to a huge lock up expiry of their employee's options.
Given how much money institutional investors put into the company, and the late stage at when they did and given how much they valued the company at, I'd be very afraid if I was an option holding employee at just how many shares are going to flood the market before I get to try and redeem my own options.
And to top it all off, the biggest thing driving their valuation recently, self driving cars, appears to be in serious jeopardy, can anyone make a credible case of Uber having self driving fleet in the next 5 years?
EDIT to those of you who i confused with layoffs. No one is saying that Uber needs to be profitable when they go public, but their burn rate had better be decreasing. T
hey don't need to fire 3 billion dollars worth of salary, no one would think that's a wise move, but they had better show they are moving towards profitability, and the easiest way to show this is a string of quarter where their quarterly loss is decreasing and the easiest way to do that is to cut costs and the largest cost is people.
2) They're worried the value of their options will drop out before they have the option to exercise them.
Check out Table 2 here, down on page 45:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2955455
It uses Square as an example. The headline valuation price from their E round suggests that a share of stock was worth $15.46. But later investors can have all sorts of preferences. Common stock, though, is valued at $5.62.
As people who were here for the last bubble know, this is exacerbated when valuations dip. I know a number of people who worked their asses off for companies that got sold for hundreds of millions of dollars. But the employees saw nothing, because investors get paid first.
They went public earlier this year. With burgeoning balance sheet they have to fire people:
https://www.businessinsider.in/Snap-hit-with-more-layoffs-pl...
Given the widespread unethical (and probably criminal) activity that was conducted at the highest levels of the company I would say there are even odds that there are some big skeletons in the closet that opening the books would reveal and that is why they have stayed private so long.
Why else would Benchmark and others be running for the exits now? If all the smart money that knows the company best is dumping at a discount it does not paint a pretty picture.
I don't think this can be understated. In the social and political climate of today, it would be hard (I think) for Uber to have a banner IPO. When you look at where we are, with sexual misconduct headlining the nightly news, I feel like Uber would generally like to avoid public scrutiny until the issue is not as hot.
If their average employee costs them $500,000 a year (surely a generous estimate), then that's $125k per quarter. A $2B spend on salaries would suggest then that they had 16,000 employees (not counting drivers, who aren't part of this equation -- they're the difference between the $9.7B "gross bookings" and the $2B net revenue).
Uber employs apparently "more than 12,000 people," which is shocking, but salary still can't plausibly be the entire story here.
That's roughly as many employees as Apple had in 2005, a company that was making laptops, desktops, servers, wireless routers, portable audio players, and entire operating systems.
I doubt a scrappy "startup" like Uber can beat companies like Toyota, Volkswagen, GM, Google or even Apple to market with a viable, certified self-driving car. They have, at best, a few billion left to dump into that venture. Those big companies could throw in ten times that if they wanted to.
Maybe someone needs to disrupt Uber. Go Lyft!
Other than engineering they also have a lot of people going around mapping cities, QAing those maps etc.
Ps... you'd crap your pants if you knew how many contractors they have doing operations work. Their mostly in low cost counties like the Philippines, and Brazil. Nothing about support scales with growth.
Uber currently sends teams to major cities all over the world to build maps for self driving cars. They outfit cars in those cities with 6 figure camera rigs and enable 'passive collection', where maps are built over the course of normal rides. After that they actively collect any missing pieces and move on to the next city. They've got teams in C / D level cities (which I won't name because I don't want to ID anyone but are the international equivalents of a Baltimore MD or Miami FL).
They are not positioned as well as say Tesla IMO but they also aren't just sitting around waiting for something to happen on this front.
http://www.zdnet.com/article/navya-bringing-driverless-vehic...
(I realize the trials aren't Uber, but if our government is getting ready to allow self-driving taxis, I imagine Uber would want to be prepared & ready to launch ASAP.)
Given their burn rate and their IPO scheduled for 2019, they will still struggle to get there even with the incoming round. At this point it's hard to find any winners besides Lyft.
Part of Uber's increased losses are stemming directly from massive burn on Lyfts end to try and capitalize on Uber's problems.
1. GAAP v.s. non GAAP. Different media sites are reporting between 1.5B and 750B for Uber because of this discrepancy.
2. Timelines - Uber numbers are from Q3. Lyft from H1
3. Size discrepancies - it's better to look at loss per trip given that Uber is far bigger.
Overall I agree somewhat, but when what matters is explicitly runway (who can survive the longest), scaling for size may not make sense. Lyft's smaller current size might actually advantage them in this marathon.
With regards to why not move sooner, isn't the company going through an entirely top-down overhaul starting with the CEO? If someone wants to be part of that change, and if they still believe in the ride-sharing space and if they were never in the crossfires of any of this anyways, then all of these are valid reasons to stick around.
If Uber had ethical leadership, there would be no worry about any of the technical talent, and they would be the very same people.
That worked adequately for industrial work. But for creative work, following isn't enough. Our whole field is about making computers do the dumb stuff so that humans can focus on the smart stuff. The SV startup model gets much of its economic power from the way that a small group of people can out-think, out-innovate large companies that operate along industrial lines.
But that only keeps working as long as individuals have a fair bit of autonomy. Which in turn only works as long as workers are able to think for themselves. As David Marquet wrote, modern effective organizations don't move information to authority; they move authority to information.
I want to build teams that can spot a ball, pick it up, and run with it. That doesn't work well if they have to run every detail up to the CEO for signoff.
Frontline devs or middle management? Honestly they're some of the best talent in the valley esp if they joined in 2014 when Uber was the top destination ($19B valuation timeframe)
I would imagine that considering the long road, a lot of people are really ready to sell. There are lots of owners that will have achieved 50X or more return, even at a low market cap. Former employees with option strike prices @ £20m, early investors that got in @ £150m....
That means far too much of their net worth is in Uber. They need out regardless of fundamentals. They've probably felt this way for a while. Meanwhile all the shifty news about workplace bullying, an ousted ceo, legal battles.
I guess this applies to all IPOs. Why don't prices plummet as soon as all the people who want out can get out?
https://www.investopedia.com/ask/answer/12/ipo-lockup-period...
>For example, Facebook's IPO lock up prevented the sale of 271 million shares during the company's first three months of public ownership. FB hit an all-time low of $19.69 the day its first lock-up period ended, a price about 50% lower than the share price on the day the company went public. Further restrictions prevented the sale of another 1.66 billion shares through mid-2013. Facebook's unusual lock-up policy released insider shares at five different dates.
Share price does often drop when the lock-up expires, but usually not as much as you'd expect--the number of restricted shares to be release and resulting liquidity effects of that expiration are well know and disclosed in public filings. So this mostly gets baked into pricing well in advance.
But I honestly doubt that Uber will ever make it to IPO; at least not an IPO that pays off employees in any meaningful way. Their business model is basically "buy for $10 and sell for $8" -- it's fundamentally flawed, and they're about to get a whole bunch of competition in the form of self-driving fleet management. New challengers wouldn't have the overhead of Uber's legacy infrastructure / driver incentives / etc. and much of the tech that made Uber unique has been commoditized. I doubt their IPO will even cover the late-stage investment they've received; much of their valuation was based on brand value which has been thoroughly destroyed by recent scandals.
I would love for one of these people to speak on the record about this, but I imagine that’ll never happen.
No matter what I think Uber will remain a big part of the unicorn bubble story going forward.
Option exercise price is 409A price, not the preferred price per share.
These two things make it highly unlikely that any option holder is truly under water.
Apparently, it WOULD BE possible to completely kill off the legacy taxi industry given 10 years or so of artificially subsidized pricing. So I understand the concept of disrupting a previous oligarchy, replacing it with a new monopoly, and then profiting through rent seeking.
But where are the barriers to entry that would allow Uber to solidify as that new monopoly? There's already Lyft today... and once Uber starts to charge their true costs, then we'll likely see numerous other competitors emerge to compete on price. Ultimately, they're just a phone app! Most Uber drivers today are running the Uber app and Lyft app side by side anyway.
The usual playbook calls for the early leader to pay off politicians, and have them write new laws or regulations that raise the barrier to entry for future competitors. But Uber's playbook has been to take an antagonistic stance toward politicians, rather than buying them off. So what's to stop some newer competitor from beating them on price... or some huge company to swoop in after Uber establishes the market, and beat them by cross-promoting and leveraging their other lines of business?
No, they're basically a taxi service funded by investors. They served almost $10 billion in rides, and lost $1.5 billion in this single quarter. Other projects, like UberEats and self-driving car R&D are, in comparison, little more than distractions at present. You can buy self-driving companies or restaurants and employ an army of self-driving engineers for a billion dollars a year, and have that be a tiny fraction of those financials.
The problem is that 2017 seems like a major hiccup in this vision. The original visionary is gone. There's been some issues with self-driving technology. Lyft wasn't a huge problem when they were small and had no self-driving tech, now they are much bigger and have a viable self-driving tech partner in Ford... and so on.
It'll be interesting to see if this is actually the case, and, if they are off track enough, how they might change the way they operate.
The original vision was that they would somehow be a profitable concern as a taxi company despite the total lack of barrier to entry because, um, reasons. That they could create an app that was hard to compete with. In all fairness, it wasn't super clear seven or so years ago that there would be so relatively little innovation in the app after the core business of hailing happened.
Then, they would expand into being a logistics company. They used to talk about this all the time. Taxi -> logistics, Uber for things. Uber Eats was supposed to be part of this, and they did a bike courier service in NYC that was supposed to be part of it and several other experiments.
Then, when self-driving tech came along, and they were probably thinking like mid-2020's (hardly anyone in 2010-2011 believed that self-driving would go as fast as it did), their vast profitable concern would be well-positioned to get even bigger.
That was the original narrative. It wasn't hidden, they talked about it a lot. As little as about two years ago, their redesign was heavily concerned with positioning themselves as a logistics company.
But what happened is:
1. They've never been more than razor-thin profitable in certain very favorable markets as a taxi company, and obviously overall are grossly unprofitable as a taxi company.
2. Nobody in the entire world wants their logistics business. The only company who would be even remotely interested in it is Amazon, and Amazon laughed and said, "Nothing about your taxi business makes you well-suited to do logistics, we'll just build our own version kthx."
3. So now they spun up a self-driving car program out of nothing a couple of years ago and have desperately pumped cash into it. Hoping that they can somehow catch up with companies that are both substantially better-resourced than they are and who have multi-year head-starts on them, or, more cynically, that they can play some kind of pixie dust story into an IPO and dump their losses on dumb money.
In economic terms the switching cost for the consumer is low. Really low. I'm not locked in and Uber is not Amazon that is spending their runway on capital investment. They're spending their capital on paying drivers who will leave once they start getting paid more somewhere else.
The best bet for Uber right now would be to close up shop, return the money to their investors, and cease business.
That's kinda funny. I'm sure you know it will never happen. We're talking about billions in countries all over the world. Get out of an Airport in London, Melbourne, Auckland, Atlanta, Vegas .. you can get an Uber.
That combined with their questionable ethical track record (which I don't think has really turned around since they symbolically hired Eric Holder's company to do damage control).
If Uber does fail, it will do it gloriously and colossally.
The government and taxpayer could then take any profit (or operate at a loss / break even if they want to subsidise costs for their citizens). The customer acquisition / marketing costs would be almost zero if the government mandates it as the only or preferred ride-hailing app.
I don't really think Uber is going to innovate much from here (e.g .how much has the uber experience changed since UberX was rolled out?) outside of self-driving cars etc. there's no reason why we need a private company to innovate further, and there's almost no risk in doing this.
It would be seen as a natural extension to mass transit, and every government around the world should be providing it for their citizens.
"Aside from the most impressive engineered systems known to man kind, the government can't do anything right"
> things that enable those currently in power to remain in power they do well
1. It's unclear to me how most of our military hardware is in any way even closely related to "enabling those currently in power to remain in power", perhaps aside from functioning as PC jobs programs. Super impressive engineering, but it's not really clear to me why most of it is particularly necessary.
2. Then I guess maybe we should vote for people who run effective services.
> Things that help the average citizen, most definitely not.
My local government has a system that allows you to reserve park space. I can also look up hours for rec centers on the city website. Those things are helpful to me, the average citizen, and definitely work well.
I've been beating this drum for years. One interesting point is that competitors aren't only competing on price, and there are a lot of ways to cut into Uber's market. Juno [1] offers an example that focused on a tight geography (Manhattan), and became popular by paying drivers more, scooping the highest rated drivers from Uber, and offering consumers a perceived better experience. Expect this to increase as people become more used to hailing cars from inside of their maps applications which act as aggregators.
In places like Germany where the laws make it hard for Uber to operate, smaller companies like MyTaxi offer ride-hailing services to the traditional taxi network. Their valuation likely offers a very different idea of how much of the surplus offered by ride-hailing apps can ultimately be captured by apps.
[1] Acquired earlier this year by the VW-funded Gett - https://techcrunch.com/2017/04/26/on-demand-ride-service-get...
I feel like the prices I get from within Google Maps are both vague and higher than the prices I get from opening the actual apps, so I never actually use the Google Maps integration and just end up checking both apps, which is pretty annoying.
I think the Maps integration is basically a customer acquisition tactic, not something they expect most people to actually use.
I recently went on a holiday to place where Uber is not there. It made me realise how much actual value they provide me.
As someone who was born near mid eghties, Amazon and Uber are the only two apps who have my credit card.
The end game is owning logistics (IE all forms of delivery, etc). It's a dumb end game, but that's what it is!
If Uber does go under within the next ten years, will we see a reemergence of people taking cabs and drivers getting paid better?
It happens in various forms, but I suspect minimum-payout subsidies are one of the main causes.
In many cities Uber is trying to shorten wait times (so there's a car very close to you always), and the only way to do this is to flood the streets with drivers. Flooding the streets with drivers lowers each driver's earning ability, since there are now more drivers competing for the same number of passengers.
To make sure drivers don't quit, Uber has been in the habit of guaranteeing payouts - if you work this area during a particular time period, they guarantee you a minimum level of earnings, paying you the difference if there aren't enough passengers.
This is a big part of how they lose money - in order to maintain a system where a car is always nearby, they need to pay drivers a lot more than they make from the passengers.
A good read on this topic calling these business Regulatory Entrepreneurship :
There are surely other forms of revenue they can spin up too, but this seems to be pretty straightforward, especially in markets where they have already decimated local taxi firms.
Source: Lyft pushes back profitability after increased burn - https://techcrunch.com/2017/11/14/unpacking-lyfts-projected-...
Maybe I'm weird, but:
1) I don't even look at what the price of lyft is. So they could up the price by a significant percentage I wouldn't even notice.
2) Even if Uber was more expensive than lyft, I would almost definitely still take uber.
Every time I take an "expensive" ride (let's say more than 10$), I open both apps in parallel and take the cheapest. Even sometimes cancelling one to get the other if the price changed meanwhile.
I'll bet that gets trimmed even more if the deal closes. Losses are increasing, not decreasing.
They still don’t have a real business (a company kept on life support by constant external cash injections is not a real business).
edit: runway to IPO I meant
I think that assumes their burn rate will not increase. Which, historically, is not the case. At their current increase of burn, assuming it is linear, they're probably looking at less than a year. Maybe even as little as 9 months.
"according to people with knowledge of the matter.."
How is reporting like this legal? Is this not speculation?
It baffles me that no fact checking/ benchmarking exists for such a major news platform.
As far as legality, there is a system in place; if it's false, it's handled in civil court.
It's hard to take things seriously when people/organizations do not take/put skin in the game.
From a risk perspective it is genuis, but from a readers perspective it is problematic in my opinion.( I am not a fan of gossip)
What's stranger to me is how you assume that they fact check....
For all I know they do, but it defeats the purpose of confidentiality agreements if sources speak up when they are explicitly told not too. (I am referring to confidential finance contracts)
Why wouldn’t it be?
> Is this not speculation?
No, in the same way that court decisions based on witness testimony are not.
It is, of course, difficult for outside parties to verify the reporting, but journalism has never been legally bound to the standards appropriate to scientific research where reproducibility is key.
> It baffles me that no fact checking/ benchmarking exists for such a major news platform.
The absence of named sources does not imply the absence of fact checking.
What about when false information could cause financial harm?
It is ironic considering that BBG( Bloomberg is private )
Is it wrong to question sources?
Deep Throat was 'a person familiar with the matter'.
Ethical injuctions? Lol, yeah if maybe the industry was not based off of advertising as a primary source of revenue. The way that it currently stands getting those clicks/eyeballe is way more important than ethics.
Journalism is dead in the United States.