Uber Is a Scam
jacobinmag.com
jacobinmag.com
The question is will revenue overtake costs as it grows more quickly - no serious analyst would insinuate Uber will be gross margin unprofitable over the long-term. It would be awfully difficult to do so given they collect a percentage of every sale.
Uber has opened offices all over and has high fixed costs. It’s waiting on the small variable revenue from each trip to catch up with those costs, and the question is “will it?” That’s all.
How much room do they have to grow? Uber is already a, what, multi-billion-dollar company? If they're not gross margin profitable now, where's the tipping point?
> Uber has opened offices all over and has high fixed costs. It’s waiting on the small variable revenue from each trip to catch up with those costs, and the question is “will it?” That’s all.
What's the high fixed cost? App development surely can't cost that much. Drivers, server hosting, support, lawsuits etc. are all going to be variable cost.
Lets consider Block Buster Video. Their business model was to use cheap access to debt to push out all their small competitors. This is Ubers business model as well. I'm not sure they actually made a profit that wasn't financed by debt for their whole 28 years in business.
https://www.economist.com/business/2019/04/27/can-uber-ever-... https://www.forbes.com/sites/lensherman/2017/12/14/why-cant-... https://www.wsj.com/articles/uber-wants-to-be-the-uber-of-ev...
Post-IPO I don't understand how it can gain ongoing sources of cash it needs while operating at a loss (unless of course the IPO raises enough cash immediately to fund it until after it has autonomous cars).
Yes the drivers provides their own vehicle, but it's factored in the driver's revenue.
Does it? As I understood it the way it works is through a discount that takes the form of "$10 towards your first ride", so it's pretty obvious where the VC money is going. They don't do that marketing in every market any more, and allegedly they're already profitable in some places (presumably the places where they don't give money away).
I used to think this, but I'm increasingly skeptical this is actually the plan.
1. It's unlikely all other similar transportation options fold in the next five to ten years. (Beyond that you're putting a lot of faith in your ability to predict market activity very far in the future).
2. There are available substitutes for some types of trips, and substitutes make it difficult for monopolies to extract rents. E.g., sometimes they are competing with cross town buses, sometimes they are competing with walking, ebikes, or scooters, sometimes they are competing with asking a friend for a ride.
3. There are low barriers to entry.
If Uber monopolized car hiring transportation somehow, then increased prices to collect enough rents to recoup losses from the dumping phase, a new Lyft could immediately spin up to threaten that position.
Uber and Lyft cost a lot to maintain, but not necessarily to start.
I mean, maybe they're optimistic that these won't be issues, but building a monopoly isn't as easy as it seems. People have been very successful as monopolists, but that doesn't mean become a monopolist is always the best strategy.
Yes and no. I observe different markets and while it's true that new players appear, in general their offering is worse than Uber because of smaller fleet. Also, with Uber prices it's already hard to achieve profitability, so any new player finds it even harder to compete price-wise.
I see this said a lot, but what opex do they have that makes them costlier than any other business?
Investors know it's not profitable and operating at loss, yet they keep investing.
Uber is not lying and report their numbers accurately. They don't report unflattering numbers, which is telling, but still - it's not scam.
Otherwise known as "There's one born every minute."
Uber (and Lyft, et al.) are in competition with traditional taxis. There's a good reason taxis are more expensive, which is that taxis have to break even, at the bare minimum. If Uber charged what the service costs, there would be no difference in costs to the consumer between using a taxi or calling a Uber. It's the dumb investors which are making up that difference. They won't be dumb forever.