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All the speculation around the turmoil over seems to be missing one key component. I think a bigger driving force then this sexual harassment and CEO antics is

All the speculation around the turmoil over seems to be missing one key component. I think a bigger driving force then this sexual harassment and CEO antics is the waymo lawsuit. Uber itself has acknowledged that without self-driving capabilities the company will most likely not find profitability. From reporting I've read, it appears the waymo lawsuit has a high probability of success. If the waymo lawsuit essentially forces Uber to start its self driving program back from scratch then the path to self-driving viability has essentially been scrapped. To me, this is a better explanation of the recent spat of high-level exits from the company.

teekert 10y ago
Maybe I'm being naive but how can a company that replaces a whole layer of management and overhead of traditional Taxi companies by an App not reach profitability? Is maintaining an app that expensive? I can't imagine.
- pyvpx 10y ago
  because they subsidize every ride. significantly. traditional taxis are actually profitable with what they charge. uber is not.
  - hueving 10y ago
    >because they subsidize every ride. significantly I don't believe this is true in all markets. IIRC the heavy subsidizing behavior causing severe losses is in new markets like China.
    - mandevil 10y ago
      Nope, worse than that. Uber did have its butt kicked in China and surrendered last summer, having it's China operations purchased by Didi (the company that applied the foot to Uber's posterior). But the problem was everywhere: Uber lost 800 million in 3Q 2016 ex-China, 2.2 billion for the year. "Even in the U.S., Uber's home market, the company continues to lose money." They did manage to turn a profit in the US in 1Q2016 but lost 100 million in 2Q and the losses "increased" in 3Q, looking only at the US. Source: https://www.bloomberg.com/news/articles/2016-12-20/uber-s-loss-exceeds-800-million-in-third-quarter-on-1-7-billion-in-net-revenue https://www.bloomberg.com/news/articles/2016-12-20/uber-s-lo...
      - danielweber 10y ago
        That doesn't show they are losing money by subsidizing rides. From your source: > Net revenue—the amount of money Uber generates after it pays its drivers—was $1.7 billion in the third quarter, That's what it takes to be a real business. If you are a grocery store that buys bread for $1 and sells it for $2, you potentially have a real business even if you only move 20K loaves a month and need 30K to cover all expenses. People keep on alleging that Uber is somehow buying bread for $1 and selling it for less than $1. There was stupidness like this in the first dot-com bubble. You aren't a business if you are doing this. This distinction really matters. Since Uber is making money on each ride, there is a real business here.
    - macNchz 10y ago
      I don't claim to know what's going on behind the scenes, but even years after launching in NYC, both Uber and Lyft have continued to send me notifications with steep discounts, free rides, etc. I've used both apps since they launched here and a major percentage of my rides have been discounted below 'sticker price'.
- JustSomeNobody 10y ago
  Poor management. If a company is not successful it is because they have a product nobody wants or they have bad management.
  - bmelton 10y ago
    Uber may indeed have poor management, but I believe you paint with far too broad a brush in this scenario. MOST companies fail. 75% of venture backed companies fail quickly. Only about 50% of all businesses are capable of lasting 5 years, and only about 35% are able to last 10 years. We have all seen companies that were offering products you wanted, but that closed for one reason or another, and it is not in every case that you can attribute it to bad management.
    - Arizhel 10y ago
      Companies can fold while offering products that are in-demand. The problem is that you have to have enough demand, and sell at a price that allows you to be profitable at that demand level. So it's quite possible for a company to have a product that's in-demand, such as glittery pink mechanical computer keyboards (there's got to be a few people out there who want them after all), but not be able to sell them at a price high enough to keep the company afloat. So glittery pink mechanical keyboards surely have some demand, but it's not going to be high, and the manufacturing cost of such things is going to be high, so between the low volume and high cost, that means you need to charge boutique prices. If you can't get enough people to buy them, then the company goes under. But this is still attributable to "bad management". Good management would not even try to sell a low-volume product where they cannot price it high enough to make up for the limited demand and volume, and would instead come up with a better business plan in the first place.
      - iamatworknow 10y ago
        You don't even need to make up your keyboard example -- just look at Pebble.
        10y ago
- danesparza 10y ago
  Taxi's don't have an app to maintain. Uber does everything that Taxi's do, but also has an app (and associated server resources and operations) to maintain. Your assessment of "replaces a whole layer of management and overhead" isn't entirely true as far as I know. If anything, they have more overhead.
  - kristiandupont 10y ago
    Would you also argue that AirBnB does everything hotels do, as well as a website?
    - ncphillips 10y ago
      I'm not sure of their business model, but my understanding is that AirBnB doesn't set the price of the rentals or pay the home-owners, they take a cut of whatever price the homeowner decides to charge. As I see it, Uber employs drivers, whereas AirBnB facilitates BnB owners.
  - officelineback 10y ago
    I believe you're wrong and here's why (maybe the previous poster's way of explaining it wasn't good). 1) Economies of scale. Airbnb has management and overhead but it's spread across thousands of cities. Cab co.s need a full structure for each city in which they operate. 2) Automation. Many of the manual jobs in local cab companies like dispatch and scheduling are automated. You don't call a human when you need a ride, you push a button on an app. So that's also less overhead. They are also very clever in how they treat their drivers, so labor cost is also low, and of course there is no maintenance on cars (drivers change their own oil, buy their own tires, etc). So I believe Uber could probably make money just by replacing cabs, but like others have said, they have to compete with other VC money receiving ventures that are wiling to burn money to come out on top. For now, we the customers are benefiting greatly from the situation.
    - vmateixeira 10y ago
      You forgot: not paying local taxes and being able to operate illegally in some countries (without public transport insurances and legal permits). Which actually also happens to be the case of Airbnb.
- dasimon 10y ago
  The problem is not competition from traditional taxi companies (they do indeed replace taxi companies' management structure) but other ride sharing companies, ie Lyft. Uber has only managed to stay ahead of Lyft by undercutting Lyft's prices, incurring severe losses in the hope that as soon as they have self-driving cars they will be able to become profitable by eliminating one of their main expenses, the drivers themselves, while maintaining lower prices than Lyft. Without self-driving cars, that strategy isn't sustainable, and so eventually Uber will find itself unable to maintain its advantage over Lyft.
  - CPLX 10y ago
    > Uber has only managed to stay ahead of Lyft by undercutting Lyft's prices, incurring severe losses in the hope that as soon as they have self-driving cars they will be able to become profitable by eliminating one of their main expenses I think someone should pause to note that, if true, this is one of the dumbest long term business strategies in the history of high finance. This idea, apparently, is a bet on a technology that not only doesn't exist, but is extremely highly regulated, that the company has literally no demonstrated core competencies in, hasn't been even successfully prototyped, that represents the hardest most complex use case of the technology, and is obviously years away at best, but yet it justifies a policy of losing billions of dollars in the present just to get market share when the costs of switching brands are literally so non-existant that a typical customer often does it several times in a single evening out. Maybe it's my old age and having lived through the first dotcom crash, but it seems to me that even when you feel like the only person who sees that the underlying business logic is nonsensical magical thinking, it's still quite possible you're correct.
    - tyingq 10y ago
      You aren't alone in that thought. Being privately held the financials are opaque enough that no outsider knows for sure how much of the spend is subsidizing the low prices, versus being used for expansion and R&D. The leaked data from Naked Capitalism is really the only data outsiders have at their disposal: http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver-part-one-understanding-ubers-bleak-operating-economics.html http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver... The use of EBITAR (vs EBITDA) makes it difficult to draw real conclusions, though the fact that they use EBITAR at all is suggestive on its own.
- crispyambulance 10y ago
  Traditional taxi companies are now increasingly employing 3rd-party apps which function much like Uber's. In many US cities, the "Curb" app will hail you a regular taxi cab and allow you to pay for the whole thing through the app (including tip, even if you just happen to hail the cab without opening the app). Uber's long-game, and the reason they've been funded so handsomely, is the autonomous taxi plan. Its a pity that taxi companies were so slow to adapt to Uber by providing convenient ways to summon and pay for a cab. All that people really want is to get from point A to point B without a hassle.
  - pjmlp 10y ago
    > Its a pity that taxi companies were so slow to adapt to Uber by providing convenient ways to summon and pay for a cab. Have you ever picked a taxi in Nordic countries? Those guys already had Uber like apps and all possible ways of paying for a ride, before Uber was a thing.
    - crispyambulance 10y ago
      Never, but not surprised. How is Uber doing in Nordic countries?
      - pjmlp 10y ago
        Not sure, my last trip there has been around 2012.
      - Nekorosu 10y ago
        Talking about Sweden Uber is just another taxi company here. It's not possible to provide taxi service without having a license. Uber has to comply. Still it's more convenient to use their app because it has better UX than everything else on Swedish market.
        gtirloni 10y ago
        Which isn't hard to replicate or improve upon. Is Uber fighting the local government in Sweden to have less regulation too? It seems that's what they are doing here (Brazil).
- emodendroket 10y ago
  The overhead is not as large as you're imagining. http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver-part-one-understanding-ubers-bleak-operating-economics.html http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver... > By contrast, in the hundred years since the first motorized taxi, there has been no evidence of significant scale economies in the urban car service industry. That explains why successful operators never expanded to other cities and why there was no natural tendency towards concentration in individual markets. Drivers, vehicles and fuel account for 85% of urban car service costs. None of these costs decline significantly as companies grow. As the P&L data above demonstrates, Uber has not discovered a magical new way to drive down unit costs.
  - 013a 10y ago
    That seems like a strange conclusion considering Uber doesn't even pay for the vehicles and fuel. UberPool is one pointed example of scale economics working. Another would be Uber's brand encouraging more riders and the ability to scale into smaller markets that taxis normally couldn't service.
    - emodendroket 10y ago
      > That seems like a strange conclusion considering Uber doesn't even pay for the vehicles and fuel. Well, they do, indirectly, in that that is part of the money the driver is paid. Yes, one way they've improved the numbers is squeezing their drivers more, but they can't do that forever. They're already encountering a lot of pushback. I question the claim that Uber is serving a bunch of small markets that traditional livery services do not. Do you have an example?
      - cat199 10y ago
        Not OP, but I can say from personal observation/experience that while not 'small', Uber has increased taxi use in the general sense in Texas cities that are so car-centric and-or sprawl-like that traditional taxi services were never really popular (Houston, Austin, Dallas, etc) - having more drivers available in an ad-hoc manner has made the dispatch time much more reasonable (minutes vs a hit-or-miss scheduling ordeal of ~1h) and so using taxis (e.g. Uber) as a viable means of transportation, especially for things like social events, is much more common than it was before. I suspect the same is likely in similar places where 'everyone has a car' and the geography is very spread out.
- samfisher83 10y ago
  They are subsidizing the rides. They are charging you less than what they pay the driver. That is why they are losing money.
  - danielweber 10y ago
    That's not what private leaks show. For example, in the first half of 2015, they got $3.6 Billion from customers and paid $3 Billion to drivers.
- deleted 10y ago
  [deleted]
- kylehotchkiss 10y ago
  Imagine Uber built by a team of 10 people making $75,000k each in the midwest. That would not be the worst profit share / stock payout.
  - paulcole 10y ago
    This classic HN-trope simply isn't possible in this case. The app, while perhaps technically impressive, is the least of Uber's problems: 1. Recruiting drivers and passengers 2. Legal issues 3. Marketing and branding 4. Support
- logicallee 10y ago
  Not even a dating app would be profitable if you just spent VC money on paying for (subsidizing) users' dates ;) It would be very popular though. Hey - brb!
- cauterized 10y ago
  By keeping their prices below costs in order to undercut the competition.
- fs111 10y ago
  > Maybe I'm being naive but how can a company that replaces a whole layer of management and overhead of traditional Taxi companies by an App not reach profitability? They employ more than 2000 Engineers, many of them in the Bay Area. Those cost easily more than any manager in a Taxi corporation..
  - Arizhel 10y ago
    Yep. Amazing how you need 2 thousand engineers just to make an app (which is already made) and run some servers (which are probably hosted on AWS anyway).
    - iamatworknow 10y ago
      I wonder if they were just overzealous in hiring and don't actually need all those employees, but now can't let them go because of the impression that would give to the industry/equity holders. Large staff cuts usually do not instill confidence in investors, even if that staff literally isn't required.
    - sosborn 10y ago
      > just to make an app (which is already made) and run some servers I assume they want to do more than let the product stagnate, not to mention the resources they are putting into driverless vehicles.
      - Arizhel 10y ago
        You don't need thousands of engineers to keep a mobile app up-to-date, and the driverless vehicle thing is a boondoggle as there's already other companies doing that work, which are much better at it (Google, GM, etc.), and don't need tons of VC for such a risky endeavor.
        sosborn 10y ago
        > there's already other companies doing that work In your opinion, is work not worth doing if those mammoth companies are pursuing it? Also, you say it is a risky endeavor. Would you argue that the driverless vehicle is not an inevitability? I would certainly argue that betting on Uber to come out on top is risky, but that doesn't mean there isn't money to be made.
- anilshanbhag 10y ago
  I disagree with the other comments. I think it's because the rides are currently cheaper than they need to be. From the airport to my place, it costs 50$ via normal taxi. Via uber pool I pay $10-12. Most of the times it's only me in the car. There you have it.
- ExactoKnight 10y ago
  Uber has massive costs as it scales, but unlike Amazon that has fixed costs, Uber's problem is that it has massive VARIABLE COSTS in three areas: driver recruitment, local advertising and local regulation. The work Uber needs to do to onboard a driver in Alberta, Canada is completely different from Ontario, Canada (e.g. drivers needing a commercial class 4 vs consumer class 5 license). As a result, they are facing unique regulations that is making it difficult to automate the work that is being done in each local market.
CSMastermind 10y ago
Absolutely. I wouldn't be suprised if most of the recent bad PR Uber has been getting is actually being driven by Google ahead of the lawsuit to hurt Uber's reputation and distract them from preperation.
- zaphar 10y ago
  I would be surprised. That would be way out of character for Google.
nradov 10y ago
Such lawsuits rarely destroy the defendants. Uber has been working on autonomous vehicles for several years now so they probably have some patents of their own. Most likely outcome is they will pay Alphabet (Waymo) a few hundred million $ and agree to cross-license all of their patents.
- throwaway2048 10y ago
  I dont see a reason that waymo has to license anything to a potential competitor that they could very easily put out of business instead, especially at such a low amount.
  - nradov 10y ago
    The risk in such cases is always that the defendant will use their own patent library to countersue. So the plaintiff has an incentive to settle.
    - danielweber 10y ago
      It's a lot different if Uber is found, as is alleged, to have induced the employee to take the secrets and bring them to Uber.
bernardlunn 10y ago
If Uber really needs self driving cars to become a viable business, that seems like a hail mary pass. Agree, this not just about culture probs.
- beager 10y ago
  At their proposed scale, yes. There's another version of reality where Uber can massively scale back and become profitable, but that screws over a ton of investors, and causes an almost complete turnover. At that point, Uber is a much smaller, and really unsexy company.
zelos 10y ago
Self-driving cars as in with no driver at all, even as a backup? Surely being allowed to run a fleet of self-driving taxis is 10+ years away from being legal?
- ethbro 10y ago
  Running an unregulated taxi service was also 10+ years away from being legal...
  - danielweber 10y ago
    They're not a taxi service. This might seem like splitting hairs, but it's important. The car-for-hire industry just got good enough that it ate the taxi companies' lunch.
    - vkou 10y ago
      Assassinat.io is not an assassination service. It's just a social network, whose premium users get to sponsor surprise meet-ups between its other users. If it walks like a duck...
      - danielweber 10y ago
        No, seriously, it isn't a taxi service. A taxi service can pick you up from the side of the road when you hold up your hand and whistle. A car-for-hire service is where you call a company and ask for them to give you a ride from place A to place B. It should be obvious from those two sentences why taxis are more regulated. Now, with increasing technology (primarily universal smartphones), the need for taxis cruising the streets at random looking for hails has dwindled significantly. This still doesn't mean car-for-hire services are taxi companies. It might be how you understand "taxi" but that's not relevant, any more than if a robotic factory was doing work with a lot fewer people and a critic can't understand why minimum wage laws don't apply to the assembly machines. In his mind "factory" is something that uses labor to produce goods so there must be some scam going on. But he just doesn't understand.
metaphorm 10y ago
from our perspective (very focused on technology) it seems that way but I have my doubts. Jones was hired on as a marketing and PR oriented executive. I don't think his role had much of anything to do with technology or dealing with the lawsuit. My opinion is that he got out of there because he didn't sign on to be doing constant spin and damage control over a rancid company culture.
vannevar 10y ago
Uber doesn't just need self-driving cars, they need driverless cars. That's ten years away, and there's no way Uber can sustain its losses for that long. It's an investment Ponzi scheme, and it's losing steam. When it collapses, it's going to take a big chunk of the tech private equity market with it.
- at-fates-hands 10y ago
  They said the same thing about Groupon and somehow they're managing to keep their heads above water. I haven't seen them in the news at all in the last year or so.
  - vannevar 10y ago
    Groupon went public, and their stock went from $26/share to $4. If the same thing happens to Uber in a down round, that's pretty much the definition of collapse.
    - danielweber 10y ago
      Without saying whether I think such a thing is likely, Uber compensates significantly with stock, and they cannot retain talent if the trust in the cashout goes away.
      - user5994461 10y ago
        They give ISO which are worthless and might fire back for a lot of employees. They won't be able to retain talent when the talent will figure out they can't get the stock that was wrongly promised.
  - deleted 10y ago
    [deleted]
- alistproducer2 10y ago
  This is my assessment as well. People at the c-suite level had to be aware that viability of the company is highly reliant on the magical thinking that they could get to market with driver-less tech before the VC money runs out. The (very real) prospect of complete restart of that research program has likely freed them of the fantasy. I'm not totally discounting the PR issues as a partial cause of the exits. As a c-level employee, you (more than most hires) have to answer for rotten company culture. I also, however, think both issue (lawsuit and PR issues) make it untenable for the current batch of executives to stay on.
elmar 10y ago
Flying cars of "Uber elevate" that is the path Travis is counting own to propel Uber to the next level.
Fricken 10y ago
Waymo's case isn't as strong as it looks. 1. Levandowski was critical to the development of the Lidar technology he allegedly stole 2. Google has never before enforced IP theft by former employees, and makes it clear to engineers that it doesn't do that. This is the first time. 3. Levandowski was selling technology he developed at Google to other companies, while working at Google, and Google looked the other way. Waymo obviously has good reasons to be pissed off, but they've already set a precedent of permissiveness towards Levandowski's antics, which are not news to people familiar with the matter. All these years Goolge has been going around with a 'kick me' sign taped to it's back, and big surprise, Levandowski kicked them. They've already let him get away with this kind of shit. I can't actually speak to the 14,000 documents he allegedly downloaded, so it's possible there's a silver bullet hidden in there somewhere. We'll see what sort of defense Uber trots out likely sometime over the next few weeks.
- swang 10y ago
  Maybe I'm missing it here, but your points (mostly 1&2) seem to make Google's case _stronger_. I haven't heard about the point that Google let Levandowski sell tech to other companies. Also Google did their own internal investigation which led to them strongly believing that the theft of important tech and secrets happened. > The company decided to perform a forensic investigation of Levandowski’s former company computer after a Waymo employee was inadvertently copied on an email from a lidar supplier with the subject line “Otto Files.” The email was being sent to a list of people that Waymo believes were working with Uber. Attached to the email were drawings of Otto’s lidar circuit board.[0] Seems pretty straight forward [0]: http://www.recode.net/2017/2/23/14717432/waymo-otto-uber-anthony-levandowski-lawsuit http://www.recode.net/2017/2/23/14717432/waymo-otto-uber-ant...
- brotoss 10y ago
  Yea I was pretty much blown away by the difference between the Bloomberg feature in last week's Businessweek and the blog post that was submitted here earlier. Paints Levandowski in a MUCH better light with sources and high level interviews.
  - 10y ago
samfisher83 10y ago
Google ventures is an investor in uber. They invested 250 mil when it was worth 3.6 billion. That works out to about 7%. Lets assume their stock has been diluted somewhat to 5% however the company is now worth 60 billion. That is is 2.75 billion paper gain. I think it makes sense they just work together and settle the issue because even if google wins the only people who really win are the the lawyers, because you will be hurting your investment. Also google track record with getting R&D projects to market is not too great.
- Tepix 10y ago
  I think they have more to gain here by winning the lawsuit even if they have to write off their $250mil investment.
- alistproducer2 10y ago
  Interesting point. Cheeky counter point: Google having done the research knows better than most that Uber's future profitability dependence on autonomous vehicles is doomed and is trying to recoup it's $250 million while Uber's still flush with other VC's money.
yeukhon 10y ago
I think it's the (1) internal politics, people do get freakin' tired of yelling and backstabbing in the end, (2) public blackslash and the down image working there. Associate oneself with this company at an executive position / senior management position is going to hurt people's profile down the road.
smallgovt 10y ago
I think we should be asking whether this exodus is actually happening before why. Uber is a large company with hundreds of "execs" at this level. If we assume there are 100 "senior execs", even with a healthy 5-year retention, we'd expect 20 execs to leave every year. Sure, we'd expect churn to ramp over time, but 1 senior exec leaving every month would not be out of the ordinary. I guess it's not really surprising that some people (and therefore reporters) want to believe this story. Uber is the villain and the villain must die. But, it doesn't make it true.
- nomnombunty 10y ago
  There are probably hundreds of senior execs, but Jeff Jones was the second in command... not just any senior execs
Dwolb 10y ago
There's a way out of this that doesn't involve self-driving vehicles if Uber's willing to give up some control: 3rd party integrations. If they allowed other ride-share/delivery services to integrate seamlessly into the Uber app/driver onboarding process, they don't need to build self-driving vehicles. They just level up from a driver dispatch service to a general dispatch service. It'd be pretty tough for any one car manufacturer to go their own on a ride-sharing/delivery platform as long as Uber does everything they can to keep competition on both their inputs and outputs thriving.
ExactoKnight 10y ago
According to Uber, the engineer who was the target of the lawsuit developed a self-driving motorcycle way before he ever worked at Google. So while Google/Waymo probably have a case, it's not black and white. A lot of techniques developed over years of research was probably stolen from Google, but the truth is Google does not have a monopoly on using LIDAR sensors to train self-driving cars.
- dreamcompiler 10y ago
  > Google does not have a monopoly on using LIDAR sensors to train self-driving cars. True. But they do have a LIDAR that's an order of magnitude cheaper than the competition -- which makes LIDAR practical as a use-phase sensor (not just a training sensor), as well as a patent on "zoomable" LIDAR with Levandowski listed as one of the inventors.
  - ExactoKnight 10y ago
    Interesting, but I thought the best LIDAR sensors were being built primarily by 3rd party vendors? These vendors are working very hard to make a powerful under thousand dollar LIDAR sensor possible, so I wouldn't say that LIDAR sensor pricing is Uber's achilles heel.

teekert 10y ago

Maybe I'm being naive but how can a company that replaces a whole layer of management and overhead of traditional Taxi companies by an App not reach profitability? Is maintaining an app that expensive? I can't imagine.

pyvpx 10y ago
because they subsidize every ride. significantly. traditional taxis are actually profitable with what they charge. uber is not.
- hueving 10y ago
  >because they subsidize every ride. significantly I don't believe this is true in all markets. IIRC the heavy subsidizing behavior causing severe losses is in new markets like China.
  - mandevil 10y ago
    Nope, worse than that. Uber did have its butt kicked in China and surrendered last summer, having it's China operations purchased by Didi (the company that applied the foot to Uber's posterior). But the problem was everywhere: Uber lost 800 million in 3Q 2016 ex-China, 2.2 billion for the year. "Even in the U.S., Uber's home market, the company continues to lose money." They did manage to turn a profit in the US in 1Q2016 but lost 100 million in 2Q and the losses "increased" in 3Q, looking only at the US. Source: https://www.bloomberg.com/news/articles/2016-12-20/uber-s-loss-exceeds-800-million-in-third-quarter-on-1-7-billion-in-net-revenue https://www.bloomberg.com/news/articles/2016-12-20/uber-s-lo...
    - danielweber 10y ago
      That doesn't show they are losing money by subsidizing rides. From your source: > Net revenue—the amount of money Uber generates after it pays its drivers—was $1.7 billion in the third quarter, That's what it takes to be a real business. If you are a grocery store that buys bread for $1 and sells it for $2, you potentially have a real business even if you only move 20K loaves a month and need 30K to cover all expenses. People keep on alleging that Uber is somehow buying bread for $1 and selling it for less than $1. There was stupidness like this in the first dot-com bubble. You aren't a business if you are doing this. This distinction really matters. Since Uber is making money on each ride, there is a real business here.
  - macNchz 10y ago
    I don't claim to know what's going on behind the scenes, but even years after launching in NYC, both Uber and Lyft have continued to send me notifications with steep discounts, free rides, etc. I've used both apps since they launched here and a major percentage of my rides have been discounted below 'sticker price'.
JustSomeNobody 10y ago
Poor management. If a company is not successful it is because they have a product nobody wants or they have bad management.
- bmelton 10y ago
  Uber may indeed have poor management, but I believe you paint with far too broad a brush in this scenario. MOST companies fail. 75% of venture backed companies fail quickly. Only about 50% of all businesses are capable of lasting 5 years, and only about 35% are able to last 10 years. We have all seen companies that were offering products you wanted, but that closed for one reason or another, and it is not in every case that you can attribute it to bad management.
  - Arizhel 10y ago
    Companies can fold while offering products that are in-demand. The problem is that you have to have enough demand, and sell at a price that allows you to be profitable at that demand level. So it's quite possible for a company to have a product that's in-demand, such as glittery pink mechanical computer keyboards (there's got to be a few people out there who want them after all), but not be able to sell them at a price high enough to keep the company afloat. So glittery pink mechanical keyboards surely have some demand, but it's not going to be high, and the manufacturing cost of such things is going to be high, so between the low volume and high cost, that means you need to charge boutique prices. If you can't get enough people to buy them, then the company goes under. But this is still attributable to "bad management". Good management would not even try to sell a low-volume product where they cannot price it high enough to make up for the limited demand and volume, and would instead come up with a better business plan in the first place.
    - iamatworknow 10y ago
      You don't even need to make up your keyboard example -- just look at Pebble.
      - 10y ago
danesparza 10y ago
Taxi's don't have an app to maintain. Uber does everything that Taxi's do, but also has an app (and associated server resources and operations) to maintain. Your assessment of "replaces a whole layer of management and overhead" isn't entirely true as far as I know. If anything, they have more overhead.
- kristiandupont 10y ago
  Would you also argue that AirBnB does everything hotels do, as well as a website?
  - ncphillips 10y ago
    I'm not sure of their business model, but my understanding is that AirBnB doesn't set the price of the rentals or pay the home-owners, they take a cut of whatever price the homeowner decides to charge. As I see it, Uber employs drivers, whereas AirBnB facilitates BnB owners.
- officelineback 10y ago
  I believe you're wrong and here's why (maybe the previous poster's way of explaining it wasn't good). 1) Economies of scale. Airbnb has management and overhead but it's spread across thousands of cities. Cab co.s need a full structure for each city in which they operate. 2) Automation. Many of the manual jobs in local cab companies like dispatch and scheduling are automated. You don't call a human when you need a ride, you push a button on an app. So that's also less overhead. They are also very clever in how they treat their drivers, so labor cost is also low, and of course there is no maintenance on cars (drivers change their own oil, buy their own tires, etc). So I believe Uber could probably make money just by replacing cabs, but like others have said, they have to compete with other VC money receiving ventures that are wiling to burn money to come out on top. For now, we the customers are benefiting greatly from the situation.
  - vmateixeira 10y ago
    You forgot: not paying local taxes and being able to operate illegally in some countries (without public transport insurances and legal permits). Which actually also happens to be the case of Airbnb.
dasimon 10y ago
The problem is not competition from traditional taxi companies (they do indeed replace taxi companies' management structure) but other ride sharing companies, ie Lyft. Uber has only managed to stay ahead of Lyft by undercutting Lyft's prices, incurring severe losses in the hope that as soon as they have self-driving cars they will be able to become profitable by eliminating one of their main expenses, the drivers themselves, while maintaining lower prices than Lyft. Without self-driving cars, that strategy isn't sustainable, and so eventually Uber will find itself unable to maintain its advantage over Lyft.
- CPLX 10y ago
  > Uber has only managed to stay ahead of Lyft by undercutting Lyft's prices, incurring severe losses in the hope that as soon as they have self-driving cars they will be able to become profitable by eliminating one of their main expenses I think someone should pause to note that, if true, this is one of the dumbest long term business strategies in the history of high finance. This idea, apparently, is a bet on a technology that not only doesn't exist, but is extremely highly regulated, that the company has literally no demonstrated core competencies in, hasn't been even successfully prototyped, that represents the hardest most complex use case of the technology, and is obviously years away at best, but yet it justifies a policy of losing billions of dollars in the present just to get market share when the costs of switching brands are literally so non-existant that a typical customer often does it several times in a single evening out. Maybe it's my old age and having lived through the first dotcom crash, but it seems to me that even when you feel like the only person who sees that the underlying business logic is nonsensical magical thinking, it's still quite possible you're correct.
  - tyingq 10y ago
    You aren't alone in that thought. Being privately held the financials are opaque enough that no outsider knows for sure how much of the spend is subsidizing the low prices, versus being used for expansion and R&D. The leaked data from Naked Capitalism is really the only data outsiders have at their disposal: http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver-part-one-understanding-ubers-bleak-operating-economics.html http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver... The use of EBITAR (vs EBITDA) makes it difficult to draw real conclusions, though the fact that they use EBITAR at all is suggestive on its own.
crispyambulance 10y ago
Traditional taxi companies are now increasingly employing 3rd-party apps which function much like Uber's. In many US cities, the "Curb" app will hail you a regular taxi cab and allow you to pay for the whole thing through the app (including tip, even if you just happen to hail the cab without opening the app). Uber's long-game, and the reason they've been funded so handsomely, is the autonomous taxi plan. Its a pity that taxi companies were so slow to adapt to Uber by providing convenient ways to summon and pay for a cab. All that people really want is to get from point A to point B without a hassle.
- pjmlp 10y ago
  > Its a pity that taxi companies were so slow to adapt to Uber by providing convenient ways to summon and pay for a cab. Have you ever picked a taxi in Nordic countries? Those guys already had Uber like apps and all possible ways of paying for a ride, before Uber was a thing.
  - crispyambulance 10y ago
    Never, but not surprised. How is Uber doing in Nordic countries?
    - pjmlp 10y ago
      Not sure, my last trip there has been around 2012.
    - Nekorosu 10y ago
      Talking about Sweden Uber is just another taxi company here. It's not possible to provide taxi service without having a license. Uber has to comply. Still it's more convenient to use their app because it has better UX than everything else on Swedish market.
      - gtirloni 10y ago
        Which isn't hard to replicate or improve upon. Is Uber fighting the local government in Sweden to have less regulation too? It seems that's what they are doing here (Brazil).
emodendroket 10y ago
The overhead is not as large as you're imagining. http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver-part-one-understanding-ubers-bleak-operating-economics.html http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver... > By contrast, in the hundred years since the first motorized taxi, there has been no evidence of significant scale economies in the urban car service industry. That explains why successful operators never expanded to other cities and why there was no natural tendency towards concentration in individual markets. Drivers, vehicles and fuel account for 85% of urban car service costs. None of these costs decline significantly as companies grow. As the P&L data above demonstrates, Uber has not discovered a magical new way to drive down unit costs.
- 013a 10y ago
  That seems like a strange conclusion considering Uber doesn't even pay for the vehicles and fuel. UberPool is one pointed example of scale economics working. Another would be Uber's brand encouraging more riders and the ability to scale into smaller markets that taxis normally couldn't service.
  - emodendroket 10y ago
    > That seems like a strange conclusion considering Uber doesn't even pay for the vehicles and fuel. Well, they do, indirectly, in that that is part of the money the driver is paid. Yes, one way they've improved the numbers is squeezing their drivers more, but they can't do that forever. They're already encountering a lot of pushback. I question the claim that Uber is serving a bunch of small markets that traditional livery services do not. Do you have an example?
    - cat199 10y ago
      Not OP, but I can say from personal observation/experience that while not 'small', Uber has increased taxi use in the general sense in Texas cities that are so car-centric and-or sprawl-like that traditional taxi services were never really popular (Houston, Austin, Dallas, etc) - having more drivers available in an ad-hoc manner has made the dispatch time much more reasonable (minutes vs a hit-or-miss scheduling ordeal of ~1h) and so using taxis (e.g. Uber) as a viable means of transportation, especially for things like social events, is much more common than it was before. I suspect the same is likely in similar places where 'everyone has a car' and the geography is very spread out.
samfisher83 10y ago
They are subsidizing the rides. They are charging you less than what they pay the driver. That is why they are losing money.
- danielweber 10y ago
  That's not what private leaks show. For example, in the first half of 2015, they got $3.6 Billion from customers and paid $3 Billion to drivers.
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kylehotchkiss 10y ago
Imagine Uber built by a team of 10 people making $75,000k each in the midwest. That would not be the worst profit share / stock payout.
- paulcole 10y ago
  This classic HN-trope simply isn't possible in this case. The app, while perhaps technically impressive, is the least of Uber's problems: 1. Recruiting drivers and passengers 2. Legal issues 3. Marketing and branding 4. Support
logicallee 10y ago
Not even a dating app would be profitable if you just spent VC money on paying for (subsidizing) users' dates ;) It would be very popular though. Hey - brb!
cauterized 10y ago
By keeping their prices below costs in order to undercut the competition.
fs111 10y ago
> Maybe I'm being naive but how can a company that replaces a whole layer of management and overhead of traditional Taxi companies by an App not reach profitability? They employ more than 2000 Engineers, many of them in the Bay Area. Those cost easily more than any manager in a Taxi corporation..
- Arizhel 10y ago
  Yep. Amazing how you need 2 thousand engineers just to make an app (which is already made) and run some servers (which are probably hosted on AWS anyway).
  - iamatworknow 10y ago
    I wonder if they were just overzealous in hiring and don't actually need all those employees, but now can't let them go because of the impression that would give to the industry/equity holders. Large staff cuts usually do not instill confidence in investors, even if that staff literally isn't required.
  - sosborn 10y ago
    > just to make an app (which is already made) and run some servers I assume they want to do more than let the product stagnate, not to mention the resources they are putting into driverless vehicles.
    - Arizhel 10y ago
      You don't need thousands of engineers to keep a mobile app up-to-date, and the driverless vehicle thing is a boondoggle as there's already other companies doing that work, which are much better at it (Google, GM, etc.), and don't need tons of VC for such a risky endeavor.
      - sosborn 10y ago
        > there's already other companies doing that work In your opinion, is work not worth doing if those mammoth companies are pursuing it? Also, you say it is a risky endeavor. Would you argue that the driverless vehicle is not an inevitability? I would certainly argue that betting on Uber to come out on top is risky, but that doesn't mean there isn't money to be made.
anilshanbhag 10y ago
I disagree with the other comments. I think it's because the rides are currently cheaper than they need to be. From the airport to my place, it costs 50$ via normal taxi. Via uber pool I pay $10-12. Most of the times it's only me in the car. There you have it.
ExactoKnight 10y ago
Uber has massive costs as it scales, but unlike Amazon that has fixed costs, Uber's problem is that it has massive VARIABLE COSTS in three areas: driver recruitment, local advertising and local regulation. The work Uber needs to do to onboard a driver in Alberta, Canada is completely different from Ontario, Canada (e.g. drivers needing a commercial class 4 vs consumer class 5 license). As a result, they are facing unique regulations that is making it difficult to automate the work that is being done in each local market.

CSMastermind 10y ago

Absolutely. I wouldn't be suprised if most of the recent bad PR Uber has been getting is actually being driven by Google ahead of the lawsuit to hurt Uber's reputation and distract them from preperation.

zaphar 10y ago
I would be surprised. That would be way out of character for Google.

nradov 10y ago

Such lawsuits rarely destroy the defendants. Uber has been working on autonomous vehicles for several years now so they probably have some patents of their own. Most likely outcome is they will pay Alphabet (Waymo) a few hundred million $ and agree to cross-license all of their patents.

throwaway2048 10y ago
I dont see a reason that waymo has to license anything to a potential competitor that they could very easily put out of business instead, especially at such a low amount.
- nradov 10y ago
  The risk in such cases is always that the defendant will use their own patent library to countersue. So the plaintiff has an incentive to settle.
  - danielweber 10y ago
    It's a lot different if Uber is found, as is alleged, to have induced the employee to take the secrets and bring them to Uber.

bernardlunn 10y ago

If Uber really needs self driving cars to become a viable business, that seems like a hail mary pass. Agree, this not just about culture probs.

beager 10y ago
At their proposed scale, yes. There's another version of reality where Uber can massively scale back and become profitable, but that screws over a ton of investors, and causes an almost complete turnover. At that point, Uber is a much smaller, and really unsexy company.

zelos 10y ago

Self-driving cars as in with no driver at all, even as a backup? Surely being allowed to run a fleet of self-driving taxis is 10+ years away from being legal?

ethbro 10y ago
Running an unregulated taxi service was also 10+ years away from being legal...
- danielweber 10y ago
  They're not a taxi service. This might seem like splitting hairs, but it's important. The car-for-hire industry just got good enough that it ate the taxi companies' lunch.
  - vkou 10y ago
    Assassinat.io is not an assassination service. It's just a social network, whose premium users get to sponsor surprise meet-ups between its other users. If it walks like a duck...
    - danielweber 10y ago
      No, seriously, it isn't a taxi service. A taxi service can pick you up from the side of the road when you hold up your hand and whistle. A car-for-hire service is where you call a company and ask for them to give you a ride from place A to place B. It should be obvious from those two sentences why taxis are more regulated. Now, with increasing technology (primarily universal smartphones), the need for taxis cruising the streets at random looking for hails has dwindled significantly. This still doesn't mean car-for-hire services are taxi companies. It might be how you understand "taxi" but that's not relevant, any more than if a robotic factory was doing work with a lot fewer people and a critic can't understand why minimum wage laws don't apply to the assembly machines. In his mind "factory" is something that uses labor to produce goods so there must be some scam going on. But he just doesn't understand.

metaphorm 10y ago

from our perspective (very focused on technology) it seems that way but I have my doubts. Jones was hired on as a marketing and PR oriented executive. I don't think his role had much of anything to do with technology or dealing with the lawsuit. My opinion is that he got out of there because he didn't sign on to be doing constant spin and damage control over a rancid company culture.

vannevar 10y ago

Uber doesn't just need self-driving cars, they need driverless cars. That's ten years away, and there's no way Uber can sustain its losses for that long. It's an investment Ponzi scheme, and it's losing steam. When it collapses, it's going to take a big chunk of the tech private equity market with it.

at-fates-hands 10y ago
They said the same thing about Groupon and somehow they're managing to keep their heads above water. I haven't seen them in the news at all in the last year or so.
- vannevar 10y ago
  Groupon went public, and their stock went from $26/share to $4. If the same thing happens to Uber in a down round, that's pretty much the definition of collapse.
  - danielweber 10y ago
    Without saying whether I think such a thing is likely, Uber compensates significantly with stock, and they cannot retain talent if the trust in the cashout goes away.
    - user5994461 10y ago
      They give ISO which are worthless and might fire back for a lot of employees. They won't be able to retain talent when the talent will figure out they can't get the stock that was wrongly promised.
- deleted 10y ago
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alistproducer2 10y ago
This is my assessment as well. People at the c-suite level had to be aware that viability of the company is highly reliant on the magical thinking that they could get to market with driver-less tech before the VC money runs out. The (very real) prospect of complete restart of that research program has likely freed them of the fantasy. I'm not totally discounting the PR issues as a partial cause of the exits. As a c-level employee, you (more than most hires) have to answer for rotten company culture. I also, however, think both issue (lawsuit and PR issues) make it untenable for the current batch of executives to stay on.

elmar 10y ago

Flying cars of "Uber elevate" that is the path Travis is counting own to propel Uber to the next level.

Fricken 10y ago

Waymo's case isn't as strong as it looks. 1. Levandowski was critical to the development of the Lidar technology he allegedly stole 2. Google has never before enforced IP theft by former employees, and makes it clear to engineers that it doesn't do that. This is the first time. 3. Levandowski was selling technology he developed at Google to other companies, while working at Google, and Google looked the other way. Waymo obviously has good reasons to be pissed off, but they've already set a precedent of permissiveness towards Levandowski's antics, which are not news to people familiar with the matter. All these years Goolge has been going around with a 'kick me' sign taped to it's back, and big surprise, Levandowski kicked them. They've already let him get away with this kind of shit. I can't actually speak to the 14,000 documents he allegedly downloaded, so it's possible there's a silver bullet hidden in there somewhere. We'll see what sort of defense Uber trots out likely sometime over the next few weeks.

swang 10y ago
Maybe I'm missing it here, but your points (mostly 1&2) seem to make Google's case _stronger_. I haven't heard about the point that Google let Levandowski sell tech to other companies. Also Google did their own internal investigation which led to them strongly believing that the theft of important tech and secrets happened. > The company decided to perform a forensic investigation of Levandowski’s former company computer after a Waymo employee was inadvertently copied on an email from a lidar supplier with the subject line “Otto Files.” The email was being sent to a list of people that Waymo believes were working with Uber. Attached to the email were drawings of Otto’s lidar circuit board.[0] Seems pretty straight forward [0]: http://www.recode.net/2017/2/23/14717432/waymo-otto-uber-anthony-levandowski-lawsuit http://www.recode.net/2017/2/23/14717432/waymo-otto-uber-ant...
brotoss 10y ago
Yea I was pretty much blown away by the difference between the Bloomberg feature in last week's Businessweek and the blog post that was submitted here earlier. Paints Levandowski in a MUCH better light with sources and high level interviews.
- 10y ago

samfisher83 10y ago

Google ventures is an investor in uber. They invested 250 mil when it was worth 3.6 billion. That works out to about 7%. Lets assume their stock has been diluted somewhat to 5% however the company is now worth 60 billion. That is is 2.75 billion paper gain. I think it makes sense they just work together and settle the issue because even if google wins the only people who really win are the the lawyers, because you will be hurting your investment. Also google track record with getting R&D projects to market is not too great.

Tepix 10y ago
I think they have more to gain here by winning the lawsuit even if they have to write off their $250mil investment.
alistproducer2 10y ago
Interesting point. Cheeky counter point: Google having done the research knows better than most that Uber's future profitability dependence on autonomous vehicles is doomed and is trying to recoup it's $250 million while Uber's still flush with other VC's money.

yeukhon 10y ago

I think it's the (1) internal politics, people do get freakin' tired of yelling and backstabbing in the end, (2) public blackslash and the down image working there. Associate oneself with this company at an executive position / senior management position is going to hurt people's profile down the road.

smallgovt 10y ago

I think we should be asking whether this exodus is actually happening before why. Uber is a large company with hundreds of "execs" at this level. If we assume there are 100 "senior execs", even with a healthy 5-year retention, we'd expect 20 execs to leave every year. Sure, we'd expect churn to ramp over time, but 1 senior exec leaving every month would not be out of the ordinary. I guess it's not really surprising that some people (and therefore reporters) want to believe this story. Uber is the villain and the villain must die. But, it doesn't make it true.

nomnombunty 10y ago
There are probably hundreds of senior execs, but Jeff Jones was the second in command... not just any senior execs

Dwolb 10y ago

There's a way out of this that doesn't involve self-driving vehicles if Uber's willing to give up some control: 3rd party integrations. If they allowed other ride-share/delivery services to integrate seamlessly into the Uber app/driver onboarding process, they don't need to build self-driving vehicles. They just level up from a driver dispatch service to a general dispatch service. It'd be pretty tough for any one car manufacturer to go their own on a ride-sharing/delivery platform as long as Uber does everything they can to keep competition on both their inputs and outputs thriving.

ExactoKnight 10y ago

According to Uber, the engineer who was the target of the lawsuit developed a self-driving motorcycle way before he ever worked at Google. So while Google/Waymo probably have a case, it's not black and white. A lot of techniques developed over years of research was probably stolen from Google, but the truth is Google does not have a monopoly on using LIDAR sensors to train self-driving cars.

dreamcompiler 10y ago
> Google does not have a monopoly on using LIDAR sensors to train self-driving cars. True. But they do have a LIDAR that's an order of magnitude cheaper than the competition -- which makes LIDAR practical as a use-phase sensor (not just a training sensor), as well as a patent on "zoomable" LIDAR with Levandowski listed as one of the inventors.
- ExactoKnight 10y ago
  Interesting, but I thought the best LIDAR sensors were being built primarily by 3rd party vendors? These vendors are working very hard to make a powerful under thousand dollar LIDAR sensor possible, so I wouldn't say that LIDAR sensor pricing is Uber's achilles heel.