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Comment by saas_co_de | Hacker News Reader

One of the things I find interesting is how they treat bookings like revenue.

In reality Uber is just like Visa. They are a transaction processor.

Visa does not report revenue of trillions of dollars per year.

For Uber actual revenue is somewhere between "Gross Profit" (865M) and "Net Revenue" (2B) and then their actual operating expenses are between 2B and 3.2B depending on what you call revenue and cost of revenue.

The bottom line is that they are taking huge losses for relatively small amounts of revenue.

Reporting your transaction volume as revenue is really infantile and should get you laughed out of the room, but here we are.

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Groupon did something similar. It’s silly and anyone with two brain cells firing sees right though the BS.

Also they want to claim their drivers are not employees but then want to count the full fare as “revenue.” Sigh.

It does seem to fully contradict the notion that driver's are independent contractors if they count the fare as revenue.

This is one of the reasons I bailed on accounting as a possible study in college. I really liked the idea of accounting for the whole of a massive business and understanding every unit, but most of the advanced stuff ended up being "here's how to get creative and not go to prison over it". Obfuscation over clarification. Really strange profession.

IMO is quite the opposite. Accounting, as "science", is mostly about making sure numbers represent a good view of reality, with a very conservative bias.

Those example are gimmicks set by C management that, while legal, certainly raised a few eyebrows in the accounting dept. Also, having accounting training helps detection BS practices.

Agree with the strange profession. However, to accountants defense: the rules are pretty open and in any industry, most professional insiders easily know most of the loopholes. It's the layman / politician / civil servant that might get fooled because their common sense does not hold up. In the case of Uber, not a single investor will not recognize this.

Where does this go wrong? SME where the accountant has to expect less questions, since there are no professionals watching the stock. That's why banks do their own due diligence (and p2p lending is more risky). Investing in individual stocks based on your reading of an annual report. No way you are more savvy than the leeways an accountant has.

I don't understand your objection at all. They clearly break out "Gross Bookings", which is the total of all fares, from "Net Revenue", which is the amount that goes to Uber after paying drivers. The income statement is very clear in that respect.

> The income statement is very clear in that respect

A matter of opinion I guess. I would characterize it as being as misleading as possible without actually being false.

The point is that Bookings are not income at all so they don't belong anywhere on an income statement.

"Contra Revenue" and "Net Revenue" are pure fiction because the Bookings are not revenue in the first place.

Once again, if you want to see how a real company run by adults does this, just look at Visa's annual report:

http://s1.q4cdn.com/050606653/files/doc_financials/annual/20...

Spoiler Alert: transaction volume is on Page 38.

Bookings would certainly be a key financial metric... and would certainly belong on a financial statement since the funds transit Uber's books before being distributed to 3rd parties.

Transaction volume is an important metric for tracking the growth of the business, but it is not revenue.

The fact that the funds go through Uber's account has nothing to do with it.

See Uber's terms of service:

"with respect to Third Party Providers, Charges you incur will be owed directly to Third Party Providers, and Uber will collect payment of those charges from you, on the Third Party Provider’s behalf as their limited payment collection agent"

https://www.uber.com/legal/terms/us/

Bookings are not revenue, which is why Uber can't call them revenue, but then wtf is "Contra Revenue" and how does Bookings - Contra Revenue = Net Revenue?

Basic math: 5 Apples - 2 Oranges != 3 Oranges

You may think this, but coming from an analogous business I can say virtually all "middlemen" market-making companies (think online travel agents like Booking.com or Expedia) track like this: start at the top with Gross Bookings, then make a bunch of deductions to Net Revenue. And in truth it gives a more accurate picture of the business, because the "Take Rate", that is Net Revenue/Gross Bookings, is an important metric in and of itself.

Nitpick: Companies like Uber and and Expedia are brokers, not market makers.

> virtually all

Provide a link to the annual report for a single public company that does this and I will accept your claim.

Edit:

See the annual report for Priceline which owns Booking.com, Kayak, etc.

http://files.shareholder.com/downloads/PCLN/5793618865x0xS10...

P.33 They report real revenue of 10.7B with no mention bookings

P.41 They report gross bookings of 68B for the same period

I think you are confusing the data presented by WSJ with an audited SEC financial report. Uber didn't make anything public - this is just data they presented, privately, to their investors who obviously know the difference. I mean, this data was leaked to WSJ.

As a better comparison, here is the data Expedia puts out on an earnings release: https://files.shareholder.com/downloads/EXPE/5068357871x0x92...

They show Gross Bookings were $9.7B in Q3 of 2017.

Net Revenue was $2.0B which is after paying drivers.

> Reporting your transaction volume as revenue is really infantile and should get you laughed out of the room, but here we are.

It’s not GAAP so as long as you’re private it’s merely stupid — if they tried that when public the SEC would be involved. Of course they couldn’t go public that way in the first place.

>In reality Uber is just like Visa. They are a transaction processor.

No. Sorry. They are also processing the transaction and keeping the whole amount of transaction which is not what Visa does.

Don't they pay drivers 70%? That's somewhere in between paying your service contractor and passing along the 97% that VISA does.

Agreed for their current model. However Uber is very different to Visa.

What's the endgame for Uber? Surely that's operating an autonomous fleet. No drivers. Visa will always have merchants, but Uber will not always have drivers.

Yes, this reporting would make sense for the imaginary company that operates with technology that does not currently exist, but that is not the way that companies typically make financial statements. (also why Uber is not public)

None of the current business supports this endgame. Recruiting drivers, trying to match demand and offer, offering insurances, loans to drivers to get vehicles, negotiating with authorities to not have to pass taxi certification for drivers...

All those cost points don't benefit the endgame.

The theory is that the customer install base, brand, and mindshare are the valuable assets that will give them a head start in the autonomous sector.

I think all the autonomous fleet stuff done by Uber is pure hype to get more investors thinking that is the endgame, and that it's not just viable in the next 5-10 years, but inevitability.

There is no reason why municipalities should not consider their own autonomous fleets as part of public transit. The roads are already public, having a fully autonomous fleet is hardly any different than public buses or trains purchased from private manufacturers. It'll be a commodity (or at least it should be, short of monopolization and cronyism).

Exactly. We had a similar discussion a couple days ago: https://news.ycombinator.com/item?id=16006674.

> There is no reason why municipalities should not consider their own autonomous fleets as part of public transit.

Except that they're terrible inefficient, and still 10~15 years away. Even if the tech was available tomorrow, and even if you could cut off Interstates so they only allowed autonomous vehicles and all those vehicles could run at 120kph, bumper-to-bumper at less than .5 meter intervals, a six lane highway would even begin to approach the capacity of a single track of London train line running at <2min intervals (which they often do during the morning rush .. often times < 30sec intervals).

http://penguindreams.org/blog/self-driving-cars-will-not-sol...

Self-driving cars are new and shiny and all the rage, but they're nowhere near ready for production deployment en-mass, people still don't realize that no person can actually own a autonomous car (the inspection/maintenance cycle would need to be more strict than a small engine aircraft) and therefore they wouldn't be able to be modified in any way.

For a fraction of the cost, American cities could revitalize and expand our crumbling rail infrastructure, which would be way more helpful than autonomous public car fleets.

I did say "part of" public transit. Clearly trains have a role in moving people from point A to F to M, and the in-between can be done with autonomous. And I don't have a 5-10 year pie in the sky idea of autonomous either, I'm thinking 25 years down the road.

The point is car ownership itself is obsolete and it's not a big stretch for there to be a public car option. The road infra is already public, just like rail tracks and rail cars.

Maintenance is likely to be cheaper per mile for an autonomous car than a human driven one, though a combination of actually being on a regular cycle, dedicated fleet facilities, and better driving practices.

As far as autonomous vs traditional public transit, it's a false dichotomy. Municipalities will use both when it comes to moving people around, because they're good for different use cases. You choose one particular metric where trains do win out, but that's an irrelevancy, because it's not even close to feasible to build a system of trains that do everything that cars currently are able to do.

I have a hard time seeing that as an endgame that Uber is well-positioned to win at.

Right now, Uber's core competencies are having a nice app, and managing a bunch of people-centric things like recruiting drivers and getting them to be available to drive at times when people want rides. Of those two, the latter is probably the more difficult one to clone. It's also useless to a company that doesn't employ any drivers.

What they have close to zero competency in is fleet management. That's something for which traditional cab companies have something approaching a 100 year head start, and they which are very good at.

I think that's the reason why Uber has decided that it's so critical that they develop their own self-driving car technology: They need to control a supply of self-driving cars during the critical transition period if they want to avoid being at a disadvantage while it's happening. If everyone's buying commodity self-driving cars from a big automaker, then it's just a game of who can operate most efficiently in order to offer the lowest prices. Traditional cab companies were already good at that, and, if anything, the influence of Uber on their market over the past however many years has forced them to get even better at it.

How would Uber be any better at fleet management (than cab companies) when the fleet is self driving? Do cab companies’ fleet management practices fall apart when they don't need drivers?

Whether or not the company has drivers, the data on who rides where and how much it costs to meet that demand via local driving pool is valuable. And Uber has by far the biggest data set on the planet. (They are active in more cities than Lyft.)

I would like to see some financial comparisons of operating an autonomous owned fleet vs current third party drivers.

If Uber’s big moat is on the driver supply side, an autonomous fleet could wipe that away and hand the profits to Google & Apple in an auction based market for rides.

If you buy into the idea that they are just a middle man connecting independent drivers with customers, then yeah.

If you see them as a cab company, then their reporting makes sense.

> If you buy into the idea that they are just a middle man connecting independent drivers with customers

That is what they legally are. If they aren't that then they don't have any business at all.

How do companies like Ticketmaster handle this? They sell tons of tickets but their revenue comes from the service charges right?

I wouldn't know, they wanted to charge me to print their financials at home.

Sort of hard to tell since Ticketmaster is part of Live Nation and so they don't go into a lot of detail on their financials.

http://s1.q4cdn.com/788591527/files/doc_financials/2016/annu...

If you look at the Live Nation annual report you will see Ticketmaster reporting revenue of 1.8B (P.34) on 186M fee-bearing tickets sold (P.29).

They don't specifically say what the face value of those tickets was but they are almost certainly only reporting their fees as revenue because the average is less than $10 per ticket and their revenue includes other things besides ticket fees.

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