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Uber is showing huge growth by expanding in a lot of new markets (in Europe and Asia). Market formation is expensive; they initially support a critical mass of
by vladd 10y ago
Uber is showing huge growth by expanding in a lot of new markets (in Europe and Asia). Market formation is expensive; they initially support a critical mass of drivers with minimum guaranteed earnings before mass adoption in that region happens. As long as they can prove profitability in established regions such as New York City, I don't see a problem with them temporarily losing money on expansion.
At the end of the day, Uber is still a private company. There's very few data flying around, and key metrics are shared just with the original investor group. It's hard to judge if they made a correct capital allocation decision or not. And, ultimately, it's their money and their decision to make. Who are we to judge?
- zzalpha 10y agoUber has a clear business model with clear revenue and cost centers. In this way they're similar to Amazon, spending to establish themselves. Their biggest challenge (beyond regulatory hurdles) is the race to the bottom, as their primary cost centers are their drivers, and there's only so far that they can drive down wages. But there's a whole range of Valley businesses out there with the same basic model: attract lots of users (preferably by being "social"), and then monetize them... Somehow. Where that somehow is almost inevitably advertising. How many of those really justify billion dollar valuations?
- Grue3 10y agoUber is in the industry where there is no stickiness and the profit margins are incredibly low. The only way they can win is having the opposition (taxis) hampered by regulations that don't apply to them. If either taxis become unregulated (see Bangkok), or Uber becomes regulated (see Austin), Uber loses all competitive advantage it has.