Uber reportedly lost $891M in the second quarter of 2018 as growth slows
theverge.com
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It's actually quite brilliant: An innovative looking Silicon Valley startup that provides a concrete lifestyle improvement for the upper middle-class under a thin veil of inevitable technological progress.
1. Seems innovative, progressive, and aligned with currents of the time.
2. Got influential supporters through concrete life-style improvements for them.
3. Got a cover story that carries an unspoken threat of being a technophobe.
Not to mention the blatant euphemism "the sharing economy".
An example of where 2. becomes extra visible is when ex-employees of Uber rightfully criticizes the toxic leadership that's spread throughout the company, but is at the same time seemingly oblivious to the fact that Uber's business model is fundamentally reactionary for the working class and that this has been called out, albeit without an audience, for a long time.
So, did they succeed? Are cabbies dismantled now?
If the vcs stop pumping bil/year, will Uber exist?
I don't care about Uber or the Taxi industry, I am trying to point out that better replaces existing, and so far, that hasn't happened in the case of Uber.
Except for the entire planet getting some free rides, that part is awesome.
If uber drivers are not available locally, you won't use them. However, when a local market has lots of users who expect to use the service and are able to find local drivers, it becomes self sustaining and uber no longer needs to subsidize drivers and market customers as much and so they can rake in their fees.
TLDR: they were able to raise a lot of money because they showed that while it costs a lot to grow to new LOCAL markets, they eventually make money on each user and it becomes self sustaining.
Moviepass on the otherhand loses money on almost every customer because they priced their service below what it costs to go to 2 movies a month and hoped that in the end, users would keep paying even if they did not use it more than twice a month (somewhat similar to some gyms business model), or they could strongarm movie theaters into giving them lower fees so that the 2/more movies watched per month per user became profitable.
Is there actually some GAAP-compatible (hopefully audited) document outlining this, or is it purely self-declared?
[0]: https://www.ft.com/content/afa1d4de-33bc-11e6-bda0-04585c31b...
[1]: http://fortune.com/2016/06/16/uber-profitable-markets/
[2]: https://www.crunchbase.com/organization/uber#section-funding...
Looks like 8.3 of that is "Secondary market", which, IIUC, is old investors selling to new ones. This would explain why there are two Dec 28, 2017 rounds listed with different dollar amounts and the same lead investor. In fact, SoftBank is listed as the only investor for the non-secondary round on that date.
Still, that's 13.4 billion dollars of actual new cash (and 3 very recent line items have no dollar values attached, meaning it could be significantly more), so your point stands.
There's the legend about the Texas oilman who, wanting to distract his competitors, started a rumor that oil'd been found in hell. This worked for a bit, but eventually he heard the rumor enough times himself that he had to go check out hell for himself.
I personally wouldn't be shocked to find out Uber never ends up really working as a business. Investors are herd animals, and hate missing out on a hot deal. By your logic, nobody would have given Theranos $1.4 billion fucking dollars without making sure their shit worked. But we now know it was a fraud, and not even a very good one.
It's very hard to know if the unit economics for Uber work because there are a lot of things muddying the picture. Uber doesn't own the cars or employ the drivers, so capital costs and expenses are mostly on other people's books. Uber is getting a massive subsidy from investors, but it could also be argued that it's getting a massive subsidy from desperate and/or optimistic drivers who aren't properly valuing their cars, their time, their sanity, or their health. Uber is definitely getting a subsidy from society: they're creating large externalities in terms of pollution, congestion, and carbon emissions. And probably also in terms of short- and long-term draws on the social safety net. Over time, things tend to be properly priced, so Uber's unit economics will likely get worse. We just don't know how much worse.
And even if the unit economics end up being positive, Uber has a lot of investors who expect a return. Given that they have a very shallow moat, will they be able to throw off enough profit to satisfy shareholders without competitors coming in and undercutting them? If they're going to give the same kind of return on capital as Apple, I'd guess that will take $1-2/ride on its own. That could be quite an advantage for a scrappy competitor.
My other comment in this thread [0] is about how I think waymo has a good chance of eating all of ubers/lyfts market so I totally agree. However, I still think their current unit economics in established markets are profitable and I can see why investors are interested in the market assuming self driving cars do not work out (which i personally don't).
> By your logic, nobody would have given Theranos $1.4 billion fucking dollars without making sure their shit worked.
I thought up about this a while and I have to agree with you, they could certainly be pulling a theranos or enron especially since they are not public companies which require regular audits (that I know of but I'm not finance guy).
That being said, with more private money being invested in a company, I would assume they would do more personal auditing. Are there any VC guys that can comment?
Honestly, I don't even thing they have to be pulling an intentional fraud, although clearly given Uber's corporate ethics it wouldn't be beyond plausibility. I think they just have to be selling the dream of future profits. "Sure, unit economics aren't in the black now, because like every startup we're working to capture market share. But once things settle down and we are the dominant player we'll be able to raise prices well above costs. Then we'll be minting money like Google or Apple."
If that's their line, then extraordinary losses are just more proof of how big they'll be in the end. Transportation is a big market, so they'll have to spend big to become the dominant player. Then throw in a lot of waffle about how cars as assets are underutilized, the shift to a service model is inevitable, and robot cars are the future that Uber will also own, but with no pesky drivers to pay.
Also, did you really just auto-hide my comment for using allcaps on 3 words?
Actually, it's worse than that - in almost all areas of the US it was cheaper than even a SINGLE movie. I live in a smallish town with cheap cost of living, and a movie ticket here is $11.20 or so (Like $10.50+tax), vs $9.99 MoviePass
I wonder if a downturn will be what it takes for Uber to finally die.
Uber and other ride sharing services are so much better than taxis, why would you want them to die? Uber's international support is amazing and has made international travel far more safe and convenient.
What Uber and others do is an unlicensed/subcontracted taxi service.
Private car hire where you book someone to drive from x to y location at z time has been a thing for a lot longer than these apps. That's what Uber and others do.
Taxi's can pick up people who hail them at the curb. That's their differentiator from private cars and uber. That's what they have paid licencing fees and bought medallions (depending on area) to be able to do.
I think Uber and similar have a valuable role in matching a latent supply of labor, an unmet demand for transportation, and wasted resources in the form of cars sitting parked 95% of the time.
It’s not like we were going around paying people $20/hr to drive us home from the bar ten years ago and those jobs went away - that activity simply wasn’t happening (excluding some very rare areas where taxis exist). It would be nice if we could cause Uber drivers to get paid $20/hr with benefits now, but if we passed laws requiring that, the economic activity would probably just go away because most people wouldn’t be willing to pay high enough fares. The driver would be sitting at home on Friday night instead of getting paid to drive the drunk kids around.
Link to the PDF of the revision comment: http://ceepr.mit.edu/files/papers/2018-005%20Authors%20State...
> Using Method 1, and following Hall’s advice not to adjust income, Median profit rises to $8.55/hour from the $3.37 initially reported. For 54% of drivers, profit per hour is less than 2016 minimum wage in their state. 8% of drivers lose money.
> Using Method 2, median profit rises to $10/hour. For 41% of drivers, profit per hour is less than 2016 minimum wage in their state. 4% of drivers lose money.
I find it odd that the median is reported so prominently. I'd be far more interested in the mean (though I realize that could be misleading if not weighted by total hours and/or income).
It's also unclear if the minimum wage threshold was naive and equated dollars per hour in profit with the hourly wage number or accounted for things like employer-paid payroll taxes and mandatory insurance (e.g. unemployment, workers comp).
Also, in my opinion, they pretty much have to go all-in investing in self driving cars because any market waymo launches in can easily outprice uber/lyft especially considering that while uber has a lot of cash, google literally has an order of magnitude more on hand + they still rake in gobs full of profits from search.
And for the eventual "waymo cannot handle rain or snow and probably won't be able to handle it for years" argument: almost all of the taxi driving market is under normal conditions. It will almost certainly be profitable to just service customers when weather conditions are fine and then park their cars in bad weather.
Rain and snow are normal conditions in most of the U.S. Here in NYC (one of Uber's largest markets) it's been raining a lot lately. I don't think a taxi service that doesn't operate in the rain would get much business here. The demand for taxis actually goes up here when it rains.
Also, it can start raining quite suddenly. What do you do if someone is on their way to somewhere in a self-driving car and it starts to rain?
> It will almost certainly be profitable to just service customers when weather conditions are fine and then park their cars in bad weather.
You'd need somewhere with enough space to park your entire fleet when it's raining or snowing. That would be rather expensive.
Researching it some more led me to an article from October 2017: "Waymo says its cars can handle nighttime driving and light rain, but its cars will be geofenced" [0]. That should handle a decent amount of it but I definitely agree that the whole "what to do mid taxi service if conditions become terrible or where to park the fleet" will still be a thorny problems for some time.
That being said, unless you think self driving cars will never be able to handle 99% of situations, those problems will just cause the self driving car revolution to happen more gradually as they slowly adopt more and more unique situations (which seems to be their current strategy starting with phoenix). During that gradual progression, I just see them slowly eating away at ubers/lyfts market as more markets become locally profitable when they can adapt to the local conditions/economics (and it is not like some other companies self driving tech will be instantly be able to handle more complex situations in a local market that the leader of the market cannot handle)
[0]: https://arstechnica.com/cars/2017/10/5-things-we-learned-fro...
Your wish for Uber to die is elitist and comes from a place of misunderstanding why Uber is a good thing to many, many people, startups and workers alike. Just because you dread the idea of being driven by a taxi driver without a permit doesn't mean I have to as well.
Why on earth do you need a $60k vehicle? That’s exorbitant if you’re just trying to “get to work”. 60k is a luxury joy ride, not a commuter beater.
Uber should not have a self-driving unit. Self driving cars are only going to be safe to use on infrastructure specifically made and certified for self driving cars. That's going to take massive government investment that probably isn't going to come any time soon. You're only going to see self driving cars in say intentionally created smart cities any time soon.
https://www.theinformation.com/articles/waymos-big-ambitions...
At this point in time there are no driverless cars.
Still see the google robocars on a regular basis -- which, BTW, are horrible freeway drivers.