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Uber operating at big losses, suggests document leak

38 points by boomzilla 11y ago

ianstallings 11y ago
The profits on a business in a rapid growth period, where everyone expects losses, is not a problem. It's all about expectations and communication with the investors. If this is the plan, then they are on track.
boomzilla 11y ago
More details in Gawker's article: http://gawker.com/here-are-the-internal-documents-that-prove-uber-is-a-mo-1704234157 http://gawker.com/here-are-the-internal-documents-that-prove...
ebbv 11y ago
Can't say this is at all a surprise. With how aggressive their expansion has been, there's no way they were doing that in the black.
jshelly 11y ago
Kalanick is not necessary lying about revenue growth, he just doesn't differentiate between gross or net which is misleading unless you do your own legwork into the revenue numbers. Not much of a story here...
tibbon 11y ago
Given their current funding, even at a 400mm/year loss, they could keep going for several years. Maybe that's the plan?
- justaman 11y ago
  Their plan is to become a household name. A trusted name. Something synonymous is transportation. Then in 5 or 6 years buy thousands of Google-Cars. If they keep burning cash like this I dont think they will make it 5 years and still be in a position to purchase automated cars without additional funding.
  - ianstallings 11y ago
    I think you're on the right track and I think the funding for that push will come from the inevitable IPO, and probably more public offerings after that. But it will be important to be in the black by then. So right now it's all about growth and capturing the market.
    - tibbon 11y ago
      Yep. Remember how long Amazon lost money for? Seemed to work out for them.
      - discodave 11y ago
        Negative income != negative cash flow
kuschku 11y ago
So, they are ignoring regulations, avoided paying insurance fees and drivers licenses for months, are equally expensive as normal taxis, are paying their drivers badly, and are STILL not profitable? Well, this is a failed experiment.
- dylanjermiah 11y ago
  Regulations imposed to protect incumbents. Evidence on the insurance fees? Evidence on licenses? Evidence on price? Anecdotally in my city they're 300% cheaper than taxi's. Evidence on paying drivers 'badly'? Investing in growth > short term profitability (which they could do of they wanted to miss future markets)
  - mgkimsal 11y ago
    how can something be 300% cheaper? do they pay me to take rides?
  - kuschku 11y ago
    The court case in Germany has all the evidence you asked for. UberPop was banned (not UberBlack, though) because Uber refused to only hire drivers who had a chauffeurs license; because Uber refused to pay insurance. And anecdotal evidence of the uber pricing is that it’s not a bit more expensive than any other taxi or chauffeur services. Paying drivers 'badly': There were multiple submissions about this topic on HN, use the search.
  - Nursie 11y ago
    Regulations are not always imposed to protect incumbents. This meme is really winding me up lately. Sure, it seems like in the US market there are protections in place for existing firms - tax medallions etc. This does not apply everywhere and some of the regulations around this industry are genuinely for consumer protection. Uber may well have a case for some of the regs to be reviewed, but you can't just blithely dismiss every rule as protectionist.
- dec0dedab0de 11y ago
  ...are equally expensive as normal taxis... I've only used uber twice, but it was about half as much as a taxi would have been.
dpflan 11y ago
There is an older (by ~13 hours) submission on the same topic with numerous comments if you want to checkout the discussion captured then: https://news.ycombinator.com/item?id=10013798 https://news.ycombinator.com/item?id=10013798
dmihal 11y ago
They're still in an aggressive growth stage, they're supposed to be burning through their cash. Did anyone really think that $5 Uber pools were money makers?
- mrweasel 11y ago
  >they're supposed to be burning through their cash I don't think that they're supposed to, that's potentially dangerous thinking, depending on their business strategy. It's not an uncommon practise though.
  - tertius 11y ago
    No, their investors are forcing them to burn through their capital. That's what capital investment is for.
- sp332 11y ago
  Pretty sure they told the Wall Street Journal that they weren't profitable at these prices. No leaked documents required. https://twitter.com/NeilAnAlien/status/627873374505562112 https://twitter.com/NeilAnAlien/status/627873374505562112
- omouse 11y ago
  They're trying to turn into infrastructure. Of course they're supposed to be burning through cash and I'm happy to help them heh.
userbinator 11y ago
I think "Leaked documents suggest Uber operating at big losses" would be a clearer headline. I parsed it at first to mean Uber's losses were due to document leaks, or that they suggest leaking documents because of losses(?) Especially when they also have headlines like this: http://www.bbc.com/news/uk-northern-ireland-31771046 http://www.bbc.com/news/uk-northern-ireland-31771046
B4CKlash 11y ago
Is anyone surprised by this? Amazon had a net income of (241,000,000) in 2014 and a market cap well over $100 billion... I know the comparison is a little strange, but these big startups/tech companies (i.e. Uber/Amazon) feel remnant of the old Standard Oil days. Standard Oil would routinely operated at a loss to hamstring competition. A tech company (similarly) can operate at a loss, undercut it's competition, and skirt regulation until it reaches an economy of scale. At which point competition has been decimated and a monopoly (or oligopoly) is established. The ideal scenario for a profit maximizing business.
- bluedino 11y ago
  Uber isn't Amazon. They aren't selling phones and tablets at cost (or at a loss) in an attempt to get customers. They aren't investing in things like AWS or acquiring companies.
  - cylinder 11y ago
    They are investing in expanding and protecting market share. Clearly they are already far and away the dominant player internationally. They're spending wildly on things like driver guarantees, paying fines on behalf of drivers, lobbying etc. If they can spread Uber around the world and defeat regulatory challenges they can become profitable.
  - paulpauper 11y ago
    what matters is the cash flow. Amazon is cash flow positive meaning that their operations are very profitable, but they are reinvesting this profits into the business
    - tertius 11y ago
      Or rather, they have enough income above cost to pay for reinvestment. This lowers profits, for a reason.
  - cryptoz 11y ago
    > They aren't investing in things like AWS Sure they are. Their investments in self-driving cars I think is an excellent comparison: self-driving cars will become a fundamental backbone of transportation in the future, kind of like AWS is for the internet right now. Uber's not the only one of course, but if they can grow to lead the pack with research, production and use of a large fleet of self-driving cars, then they are in a very good position for the future.
mrweasel 11y ago
I wanted to ask if anyone seriously believed that Uber was making a profit, while requiring funding at their current scale, but then again what are they spending all that money on? Sure they need developers, infrastructure, marketing and all the stuff required to run any business, but the drivers and vehicles aren't costing them money. So why do they need $1bn in cash? It would be very interesting to see the Uber yearly budget.
- kuschku 11y ago
  Lobbying, lobbying, and lobbying. It’s cheaper to lobby against mandatory insurance than to actually pay for it.
  - icebraining 11y ago
    What mandatory insurance does Uber fail to provide?
    - kuschku 11y ago
      In Germany, if you transport passengers commercially, your normal insurance does not apply. As, if you operate a car, you have to have an insurance, you have to have a seperate insurance for the cases where you operate a car while transporting someone commercially. UberPop did not provide those insurances, and instead said the drivers would have to pay them themselves. As that is not acceptable for the drivers, and Uber directly suggests the drivers to just drive without insurance, the courts ruled that Uber will be fined 240k€ for every business interaction its UberPop service does without providing this insurance. Remember, not all taxi regulations in Europe are crazy, most actually make sense.
      - drzaiusapelord 11y ago
        >Remember, not all taxi regulations in Europe are crazy, most actually make sense. That's a bold claim. No government is immune from protectionism legislation and corruption, in fact this is the defacto mode of almost all governments. I'm getting a little sick of Europeans thinking their shit doesn't stink. Paris cab drivers were throwing cinder blocks onto cars with impunity last month. You people aren't special, you're just unbelievable statist to the point of not questioning your government. The German laws sound corrupt as well. Everything about the taxi industry is a shitshow. Lets all accept that. This is why Uber is so exciting and popular. The cab industry deserves to be disrupted. Considering political corruption over the decades, this path won't be easy, but its worth doing.
beering 11y ago
What falls under "Cost of Revenue" and "Cost of Sales" in their documents?
wehadfun 11y ago
Is the majority of the loss from R&D? From what I understand Uber is only an automated call center.
ForHackernews 11y ago
Other than marketing, what are Uber's expenses? From the outside, it looks to me like they've successfully outsourced all their costs onto their "independent-contractor" drivers? How are they not profitable?

38 points by boomzilla 11y ago

The profits on a business in a rapid growth period, where everyone expects losses, is not a problem. It's all about expectations and communication with the investors. If this is the plan, then they are on track.

boomzilla 11y ago

More details in Gawker's article: http://gawker.com/here-are-the-internal-documents-that-prove-uber-is-a-mo-1704234157 http://gawker.com/here-are-the-internal-documents-that-prove...

ebbv 11y ago

Can't say this is at all a surprise. With how aggressive their expansion has been, there's no way they were doing that in the black.

jshelly 11y ago

Kalanick is not necessary lying about revenue growth, he just doesn't differentiate between gross or net which is misleading unless you do your own legwork into the revenue numbers. Not much of a story here...

tibbon 11y ago

Given their current funding, even at a 400mm/year loss, they could keep going for several years. Maybe that's the plan?

justaman 11y ago
Their plan is to become a household name. A trusted name. Something synonymous is transportation. Then in 5 or 6 years buy thousands of Google-Cars. If they keep burning cash like this I dont think they will make it 5 years and still be in a position to purchase automated cars without additional funding.
- ianstallings 11y ago
  I think you're on the right track and I think the funding for that push will come from the inevitable IPO, and probably more public offerings after that. But it will be important to be in the black by then. So right now it's all about growth and capturing the market.
  - tibbon 11y ago
    Yep. Remember how long Amazon lost money for? Seemed to work out for them.
    - discodave 11y ago
      Negative income != negative cash flow

kuschku 11y ago

So, they are ignoring regulations, avoided paying insurance fees and drivers licenses for months, are equally expensive as normal taxis, are paying their drivers badly, and are STILL not profitable? Well, this is a failed experiment.

dylanjermiah 11y ago
Regulations imposed to protect incumbents. Evidence on the insurance fees? Evidence on licenses? Evidence on price? Anecdotally in my city they're 300% cheaper than taxi's. Evidence on paying drivers 'badly'? Investing in growth > short term profitability (which they could do of they wanted to miss future markets)
- mgkimsal 11y ago
  how can something be 300% cheaper? do they pay me to take rides?
- kuschku 11y ago
  The court case in Germany has all the evidence you asked for. UberPop was banned (not UberBlack, though) because Uber refused to only hire drivers who had a chauffeurs license; because Uber refused to pay insurance. And anecdotal evidence of the uber pricing is that it’s not a bit more expensive than any other taxi or chauffeur services. Paying drivers 'badly': There were multiple submissions about this topic on HN, use the search.
- Nursie 11y ago
  Regulations are not always imposed to protect incumbents. This meme is really winding me up lately. Sure, it seems like in the US market there are protections in place for existing firms - tax medallions etc. This does not apply everywhere and some of the regulations around this industry are genuinely for consumer protection. Uber may well have a case for some of the regs to be reviewed, but you can't just blithely dismiss every rule as protectionist.
dec0dedab0de 11y ago
...are equally expensive as normal taxis... I've only used uber twice, but it was about half as much as a taxi would have been.

dpflan 11y ago

There is an older (by ~13 hours) submission on the same topic with numerous comments if you want to checkout the discussion captured then: https://news.ycombinator.com/item?id=10013798 https://news.ycombinator.com/item?id=10013798

dmihal 11y ago

They're still in an aggressive growth stage, they're supposed to be burning through their cash. Did anyone really think that $5 Uber pools were money makers?

mrweasel 11y ago
>they're supposed to be burning through their cash I don't think that they're supposed to, that's potentially dangerous thinking, depending on their business strategy. It's not an uncommon practise though.
- tertius 11y ago
  No, their investors are forcing them to burn through their capital. That's what capital investment is for.
sp332 11y ago
Pretty sure they told the Wall Street Journal that they weren't profitable at these prices. No leaked documents required. https://twitter.com/NeilAnAlien/status/627873374505562112 https://twitter.com/NeilAnAlien/status/627873374505562112
omouse 11y ago
They're trying to turn into infrastructure. Of course they're supposed to be burning through cash and I'm happy to help them heh.

userbinator 11y ago

I think "Leaked documents suggest Uber operating at big losses" would be a clearer headline. I parsed it at first to mean Uber's losses were due to document leaks, or that they suggest leaking documents because of losses(?) Especially when they also have headlines like this: http://www.bbc.com/news/uk-northern-ireland-31771046 http://www.bbc.com/news/uk-northern-ireland-31771046

B4CKlash 11y ago

Is anyone surprised by this? Amazon had a net income of (241,000,000) in 2014 and a market cap well over $100 billion... I know the comparison is a little strange, but these big startups/tech companies (i.e. Uber/Amazon) feel remnant of the old Standard Oil days. Standard Oil would routinely operated at a loss to hamstring competition. A tech company (similarly) can operate at a loss, undercut it's competition, and skirt regulation until it reaches an economy of scale. At which point competition has been decimated and a monopoly (or oligopoly) is established. The ideal scenario for a profit maximizing business.

bluedino 11y ago
Uber isn't Amazon. They aren't selling phones and tablets at cost (or at a loss) in an attempt to get customers. They aren't investing in things like AWS or acquiring companies.
- cylinder 11y ago
  They are investing in expanding and protecting market share. Clearly they are already far and away the dominant player internationally. They're spending wildly on things like driver guarantees, paying fines on behalf of drivers, lobbying etc. If they can spread Uber around the world and defeat regulatory challenges they can become profitable.
- paulpauper 11y ago
  what matters is the cash flow. Amazon is cash flow positive meaning that their operations are very profitable, but they are reinvesting this profits into the business
  - tertius 11y ago
    Or rather, they have enough income above cost to pay for reinvestment. This lowers profits, for a reason.
- cryptoz 11y ago
  > They aren't investing in things like AWS Sure they are. Their investments in self-driving cars I think is an excellent comparison: self-driving cars will become a fundamental backbone of transportation in the future, kind of like AWS is for the internet right now. Uber's not the only one of course, but if they can grow to lead the pack with research, production and use of a large fleet of self-driving cars, then they are in a very good position for the future.

mrweasel 11y ago

I wanted to ask if anyone seriously believed that Uber was making a profit, while requiring funding at their current scale, but then again what are they spending all that money on? Sure they need developers, infrastructure, marketing and all the stuff required to run any business, but the drivers and vehicles aren't costing them money. So why do they need $1bn in cash? It would be very interesting to see the Uber yearly budget.

kuschku 11y ago
Lobbying, lobbying, and lobbying. It’s cheaper to lobby against mandatory insurance than to actually pay for it.
- icebraining 11y ago
  What mandatory insurance does Uber fail to provide?
  - kuschku 11y ago
    In Germany, if you transport passengers commercially, your normal insurance does not apply. As, if you operate a car, you have to have an insurance, you have to have a seperate insurance for the cases where you operate a car while transporting someone commercially. UberPop did not provide those insurances, and instead said the drivers would have to pay them themselves. As that is not acceptable for the drivers, and Uber directly suggests the drivers to just drive without insurance, the courts ruled that Uber will be fined 240k€ for every business interaction its UberPop service does without providing this insurance. Remember, not all taxi regulations in Europe are crazy, most actually make sense.
    - drzaiusapelord 11y ago
      >Remember, not all taxi regulations in Europe are crazy, most actually make sense. That's a bold claim. No government is immune from protectionism legislation and corruption, in fact this is the defacto mode of almost all governments. I'm getting a little sick of Europeans thinking their shit doesn't stink. Paris cab drivers were throwing cinder blocks onto cars with impunity last month. You people aren't special, you're just unbelievable statist to the point of not questioning your government. The German laws sound corrupt as well. Everything about the taxi industry is a shitshow. Lets all accept that. This is why Uber is so exciting and popular. The cab industry deserves to be disrupted. Considering political corruption over the decades, this path won't be easy, but its worth doing.

beering 11y ago

What falls under "Cost of Revenue" and "Cost of Sales" in their documents?

wehadfun 11y ago

Is the majority of the loss from R&D? From what I understand Uber is only an automated call center.

ForHackernews 11y ago

Other than marketing, what are Uber's expenses? From the outside, it looks to me like they've successfully outsourced all their costs onto their "independent-contractor" drivers? How are they not profitable?