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Really good article. Some thoughts on Uber Eats... I used to be an analyst at a VC firm that invested in a food delivery startup (which went broke). Food deli

Really good article. Some thoughts on Uber Eats... I used to be an analyst at a VC firm that invested in a food delivery startup (which went broke). Food delivery is not a very attractive business in terms of its profitability, but it is an extremely attractive business if you want to show fast top line revenue growth. Why so? Food delivery is great because the full order value can be taken as the top line revenue. If someone orders a £80 meal for four, that's another £80 to add to your top line even though your net revenues were ~£8, if that. The institutional investors Uber will need to attract at IPO will be expecting Uber to have a typical tech company profile - extremely fast growing revenue and healthy losses. Strangely, from the IPO documents I've seen, accounting is very opaque for public companies vs private companies - meaning Uber Eats revenue is unlikely to be separated. I think there is a possibility Uber is being forced to gear up to an IPO, top line revenue growth from the taxi business is not enough to justify the valuation, so the board has decided to move Uber into food to drive big numbers - but not profitability.

neom 10y ago
Awesome analysis, thanks for that. :)
deleted 10y ago
[deleted]
spraak 10y ago
From a very low level validation of Uber and Uber Eats finances being interwoven: my Uber Eats orders always show up in the Uber ride app and say that I took a Volkswagen GTI somewhere
- adamson 10y ago
  Are you serious? That's a really odd way of implementing that accounting trick
simulate 10y ago
Great insight into Uber Eats. Do you have suggestions for reports or other public analyses of this category or adjacent categories like on-demand delivery (e.g., Google Shopping Express, Instacart, Amazon Fresh)?
onemore 10y ago
> Food delivery is great because the full order value can be taken as the top line revenue. If someone orders a £80 meal for four, that's another £80 to add to your top line even though your net revenues were ~£8, if that. I don't really understand this. Shouldn't the £80 be something akin of gross merchandise volume? What you described seems borderline fraud to me.
troydavis 10y ago
Savvy investors do split this revenue into two buckets: 1. Gross merchandise volume (GMV), or what passes through the marketplace: https://en.wikipedia.org/wiki/Gross_merchandise_volume https://en.wikipedia.org/wiki/Gross_merchandise_volume 2. Fee revenue, which is what the marketplace actually retains This knowledge is common among investors, like item #6 on http://a16z.com/2015/08/21/16-metrics/ http://a16z.com/2015/08/21/16-metrics/. It may not be common among, say, individual private wealth management clients of Morgan Stanley who funded their SPV (http://www.nytimes.com/2016/02/05/business/dealbook/deal-shows-investors-are-willing-to-make-a-blind-bet-on-uber.html http://www.nytimes.com/2016/02/05/business/dealbook/deal-sho...), but they chose to invest without any revenue reporting at all, so it's probably not what made the difference.
- tim333 10y ago
  I imagine the wealth management clients understand #6 but are hoping to flip their stock at a higher price in the IPO or similar.
- FailMore 10y ago
  Right, but I think the reporting would be the same in this case as both Uber Eats and Uber (taxi) are marketplaces. I don't think Uber will be breaking down it's revenue into these two marketplaces when it IPOs, but yes - it will be the GTV showing big growth.
qwrusz 10y ago
What you're describing may be illegal. A company cannot juice top line revenue with the full meal values like this as they report revenue to sell to investors and get ready to IPO. The revenue reported would need to be clearly a transaction revenue they get from facilitating the service between restaurants and hungry people. troydavis' comment is correct. The full order values or GMV and Uber's separate cut of it (net revenue or transaction revenue) are both important numbers and both should be reported. But the total order value should not reported as a revenue. A few years ago Groupon got in trouble for fishy accounting and had to restate earnings. http://dealbook.nytimes.com/2011/09/23/groupon-changes-its-revenue-accounting/?hpw http://dealbook.nytimes.com/2011/09/23/groupon-changes-its-r... Also, for anyone looking for a more professional writeup about Uber's valuation, while he famously got it wrong at first I still think Professor Damodaran is the best one writing about it. http://aswathdamodaran.blogspot.in/2016/08/the-ride-sharing-business-is-bar.html http://aswathdamodaran.blogspot.in/2016/08/the-ride-sharing-...
- qwrusz 10y ago
  https://www.sec.gov/divisions/corpfin/guidance/nongaapinterp.htm https://www.sec.gov/divisions/corpfin/guidance/nongaapinterp...

neom 10y ago

Awesome analysis, thanks for that. :)

deleted 10y ago

[deleted]

spraak 10y ago

From a very low level validation of Uber and Uber Eats finances being interwoven: my Uber Eats orders always show up in the Uber ride app and say that I took a Volkswagen GTI somewhere

adamson 10y ago
Are you serious? That's a really odd way of implementing that accounting trick

simulate 10y ago

Great insight into Uber Eats. Do you have suggestions for reports or other public analyses of this category or adjacent categories like on-demand delivery (e.g., Google Shopping Express, Instacart, Amazon Fresh)?

onemore 10y ago

> Food delivery is great because the full order value can be taken as the top line revenue. If someone orders a £80 meal for four, that's another £80 to add to your top line even though your net revenues were ~£8, if that. I don't really understand this. Shouldn't the £80 be something akin of gross merchandise volume? What you described seems borderline fraud to me.

troydavis 10y ago

Savvy investors do split this revenue into two buckets: 1. Gross merchandise volume (GMV), or what passes through the marketplace: https://en.wikipedia.org/wiki/Gross_merchandise_volume https://en.wikipedia.org/wiki/Gross_merchandise_volume 2. Fee revenue, which is what the marketplace actually retains This knowledge is common among investors, like item #6 on http://a16z.com/2015/08/21/16-metrics/ http://a16z.com/2015/08/21/16-metrics/. It may not be common among, say, individual private wealth management clients of Morgan Stanley who funded their SPV (http://www.nytimes.com/2016/02/05/business/dealbook/deal-shows-investors-are-willing-to-make-a-blind-bet-on-uber.html http://www.nytimes.com/2016/02/05/business/dealbook/deal-sho...), but they chose to invest without any revenue reporting at all, so it's probably not what made the difference.

tim333 10y ago
I imagine the wealth management clients understand #6 but are hoping to flip their stock at a higher price in the IPO or similar.
FailMore 10y ago
Right, but I think the reporting would be the same in this case as both Uber Eats and Uber (taxi) are marketplaces. I don't think Uber will be breaking down it's revenue into these two marketplaces when it IPOs, but yes - it will be the GTV showing big growth.

qwrusz 10y ago

What you're describing may be illegal. A company cannot juice top line revenue with the full meal values like this as they report revenue to sell to investors and get ready to IPO. The revenue reported would need to be clearly a transaction revenue they get from facilitating the service between restaurants and hungry people. troydavis' comment is correct. The full order values or GMV and Uber's separate cut of it (net revenue or transaction revenue) are both important numbers and both should be reported. But the total order value should not reported as a revenue. A few years ago Groupon got in trouble for fishy accounting and had to restate earnings. http://dealbook.nytimes.com/2011/09/23/groupon-changes-its-revenue-accounting/?hpw http://dealbook.nytimes.com/2011/09/23/groupon-changes-its-r... Also, for anyone looking for a more professional writeup about Uber's valuation, while he famously got it wrong at first I still think Professor Damodaran is the best one writing about it. http://aswathdamodaran.blogspot.in/2016/08/the-ride-sharing-business-is-bar.html http://aswathdamodaran.blogspot.in/2016/08/the-ride-sharing-...

qwrusz 10y ago
https://www.sec.gov/divisions/corpfin/guidance/nongaapinterp.htm https://www.sec.gov/divisions/corpfin/guidance/nongaapinterp...