Uber doesn't buy and own the car, which means it requires much less capital. This small change has many implications, and the tech helps solves many of the problems that come up.
I am not saying it is properly valued (over or under or whatever). Just that given the choice between an Uber (or Lyft or yourlocalapp.com) or a cab company with the same fleet, customers, and revenue, I would consider the Uber version more valuable.
They burned through billions of dollars of capital. That's quite a lot for a business that requires very little capital. What would they burn if they needed lots of capital? Trillions of dollars?
Thus far, Uber has raised $24.2 bil in financing so they could have bought cars for every driver easily. No idea what they did with all that money.
They’re already profitable in New York and San Francisco.
Scale. One can reliably get an Uber almost anywhere. That makes it attractive to travelling businesspeople and jet setters, two price insensitive customer segments that Uber almost singularly dominates.
Network effects. Ubers are almost always among the fastest transportation options in most cities.
Breadth. I never use Uber Eats, but apparently it’s doing quite well.
(I don’t know if the above gets me to $70bn. It does, however, point to a gargantuan business.)
(Also, Uber is a terrible company that doesn't deserve my money.)
Indeed. I was shocked to not be able to get one in China a couple of months ago
When I land in Sydney, or Seoul, or Paris, or New York, I don't want to have to work out what app to get, download it, set it up, set up payments, and then hope it works.
On the other hand Uber really let me down in Nairobi last year. with an airport pickup, so I don't rely on it there now, and will pre-book a legacy transfer to/from the airport now. They need to keep the quality up across all those cities otherwise they risk someone else winning.
I don't think they will get there with self-driving, but by the same token they're not going to end up owning a zillion cars either.
that can go both ways:
If I have to buy a fleet of cars big enough to cover my area and write an app and advertise to compete with uber, that sounds like an expensive proposition.
If all I have to do is come up with an app and the advertising, that sounds rather less daunting.
That sounds the same as all cab companies I know of that have operated in the UK for years.
I don't think this is true with one of the major things they have been selling investors for years: self-driving cars. That certainly requires a lot of capital to pull off, and I think they plan is they would own those cars.
1. It is not the same business model it currently has
2. It has an even stronger claim to not being a traditional cab company, and for being a "true" technology company
In that case they would have capital costs (perhaps even higher), but would eliminate labor costs.
Your bank might lend you money to buy a house based on your excellent credit and your large downpayment. That does not mean they want to rent out your home, speculate on home prices etc.
They may end up doing some of this tangentially (they have to dispose of the house if you end up not paying) but that is not the same business.
Uber's risks are additive here. They're extremely leveraged.
[Edit] Doesn't Uber subsidize vehicle leases for drivers?
I don't remember if Uber does, but Lyft does.