8 ms·

Will Uber Ever Stop the Bleeding?

62 points by coloneltcb 9y ago

deleted 9y ago
[deleted]
pboutros 9y ago
Once they bleed out!
- mandabuddhi 9y ago
  I wouldn't be sad to see them bleed out.
QAPereo 9y ago
That would only happen if the truth itself were not fatal to them, and their destruction of evidence suggests that the truth is monstrous. As others here have said, maybe their financials are as crooked as everything else about them, and then there’s no IPO, and no future for Uber.
bob_theslob646 9y ago
Title is slightly misleading. Everyone knows that they are bleeding money, but it is by design to get as much marketshare as possible/get as many people using/ addicted to their services. EDIT* They are a software based business ,of course they can and are highly likely to turn a profit if they raise prices * The better question that many journalists seem to shy away from asking is: What are the effects of subsidizing goods/services on the end user? Will end users be more likely to pay for the goods/services if they increase/charge market rate for them? Is it okay to make end users addicted to your services? It will be a very interesting next 10 years for business models of businesses like Uber.
- workthrowaway27 9y ago
  I don't understand why this is legal? I thought there were laws about operating at a loss to drive competitors out of business.
  - ggg9990 9y ago
    Read "Chickenshit" and "The Divide." Starting with the Obama administration and definitely continuing there is effectively no law for the sufficiently rich. It makes no sense for Uber to worry about laws.
    - workthrowaway27 9y ago
      I haven't read those, but just skimming their amazon pages they look to be about why wealthy individuals are less likely to be prosecuted, which doesn't really apply to large corporations. Plus Uber is in the middle of a court case right now, so I'm sure both Uber and its lawyers have very good reasons to worry about laws.
    - IncRnd 9y ago
      > there is effectively no law for the sufficiently rich. It makes no sense for Uber to worry about laws. That's clearly false. Uber is currently in a court case and was just reprimanded by the judge for appearing to intentionally destroy business records.
  - kjksf 9y ago
    It would be hard to come up with definition of "operating at a loss to drive competition out" that applies to Uber but doesn't kill YCombinator and all other VC businesses. Dropbox has competitors and for years operated at a loss thanks to investment from YC and other VC firms. So did Twitter, Airbnb and countless other. If that was illegal, there would be no-one for VCs to invest and you wouldn't be here reading Hacker News, because this website would not exist.
    - workthrowaway27 9y ago
      It appears to be covered under antitrust laws and so is only applicable when the creation of a monopoly is likely, but there are situations in which it is illegal. See [1]. I disagree with your claim that there would be no one for VCs to invest in if the law were enforced more broadly/frequently. The important part is that the law isn't applicable to all unprofitable businesses. Only those that are unprofitable because they are pricing below cost. [1]: https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/single-firm-conduct/predatory-or-below-cost https://www.ftc.gov/tips-advice/competition-guidance/guide-a...
- ztratar 9y ago
  "They are a software based business of course they can and will turn a profit." The aren't as software-based as many people make them out to be. They need driverless cars to become what their current valuation and growth expectations require. Don't get me wrong, I'm long Uber and think they'll survive either way, but if others dominate them in driverless and drive prices down before Uber is ready with their own fleet, they will be forced to conduct a massive down-sizing.
  - bob_theslob646 9y ago
    >The aren't as software-based as many people make them out to be. What does that even mean? Has Uber made a single physical product? To the best of my knowledge they do not. Yes they may have to balance wages of drivers which is arguably not easy, nor is it easy to balance human labor(capital) costs in any industry. They are a marketplace for retail transportation. I agree that driverless cars could sink their ship if they're beaten to the market first. Self-driving cars are about many years away contingent on the legal system being the way it is today. That could change.The biggest problem to self-driving cars is insurance/liability ,the areas that they are going to be used, people's ability to change/adapt to them. What people don't understand is that the most population dense places, where uber and other ride handling services are predomimatly used, happens to have many pedestrians and the shittiest infrastructure. I think even talking about self driving cars is a gigantic waste of time , borderline buzzwordiness of 'machine learning' and 'artificial intelligence'. At least those buzz words are being used today. We are nowhere near a level 5 standards.
    - rco8786 9y ago
      I think the “not that much of a software company” has to do with the fact that their product is delivered in person by humans. They’re no more of a software company than UPS or Delta.
      - bob_theslob646 9y ago
        Correct.
- femto113 9y ago
  It's certainly not all by design, e.g. Uber began winding down [their direct to driver leasing business] this summer after learning that losses were $9,000 per car on average, steeply above the previous estimates of around $500 per car That's an 18x miscalculation.
- emiliobumachar 9y ago
  "Is it okay to make end users addicted to your services?" I don't think the definition of "addictive" you seem to be using is the standard one, or it would apply to making any product or service better in any way.
- nitwit005 9y ago
  > They are a software based business of course they can and will turn a profit. They're vetting people, and having them do labor on their behalf. Regardless of how the law defines an employee, they're effectively hiring a huge amount of labor. They're completely unlike most software firms who can sell licenses or ads with no human involvement.
  - bob_theslob646 9y ago
    >They're vetting people, and having them do labor on their behalf. Regardless of how the law defines an employee, they're effectively hiring a huge amount of labor. They are doing this, primarily, with software. I agree they are not like traditional software companies, but technically they are giving you the right but not the obligation to obtain business, and in that sense it is like a software as a service company. Again, I agree that it is not traditional, but as another commenter stated they are more like a Logistic Company like Delta or UPS with a focus on the end consumer versus a business.
    - nitwit005 9y ago
      > They are doing this, primarily, with software. Not really, no, or at least no more than ordinary companies like Target, where they also have you apply on a website. They're paying people to do background checks, vehicle confirmation, and so on.
- Splines 9y ago
  > Is it okay to make end users addicted to your services? How much of a moat does uber really have? It seems to be only made of money - there is nothing inherent in their product that makes it sticky, only "is this the cheapest ride right now?".
  - bob_theslob646 9y ago
    You raise a really fair question, but as of August of this year they had a 76% market share in the U.S. I agree with you that price is king(cheapest) and on stickiness. Unfortunately, at the moment, they are the dominate service.
cleansy 9y ago
The numbers in this article are not giving a good picture of the company, at all. The revenue and operating loss and such do not really give a good idea whether or not the company will survive in the long term. What are they spending the money on? Billions in net revenue for an app with offices all around the globe, fine. But how can you amount such losses with that plus marketing expense? - Number of unique customers - Rides/Cust - CLV - average customer lifetime - CAC? These would be the interesting numbers if you want to assess the company. Disclaimer: I work in the BI space, but have no formal finance education, so I might miss a thing or two in this assessment.
- bduerst 9y ago
  In those terms: With the ride subsidies, it's likely that current CAC is higher than CLV. Since there isn't much customer or driver loyalty, the customer lifetime doesn't matter since raising prices will likely lose customers. You're not going to get a company sharing many of these specific metrics because they're competitive secrets.
- jcdavis 9y ago
  Just a guess, but from what I understand they spend significant $$ on driver-side acquisition and retention, perhaps even moreso than customer side. In addition to the signing/referral bonuses, they have regular weekly bonuses for hitting a certain number of rides.
- pfarnsworth 9y ago
  lol it doesn't take a finance degree to posit that losing 1.5B in a quarter is pretty bad, if not historically bad for a non-public company.
sethev 9y ago
It's really hard to tell from the overall numbers whether they're in bad shape. If a significant amount of the expense is in acquiring new customers then it makes perfect sense for investors to keep pouring money in.
- braythwayt 9y ago
  > If a significant amount of the expense is in acquiring new customers If _and only if_ there is significant lifetime value for customers. If there is little or no lock-in, losing money to acquire a first-time customers may look good to outsiders, but isn't sustainable.
- XR0CSWV3h3kZWg 9y ago
  Or they could be pulling a groupon.
JumpCrisscross 9y ago
Uber had $6.6bn on hand at the end of June [1]. Burning $1.5bn in Q3 [2] means they are down to $5.1bn. Absent cost-cutting, that implies a 9 to 12 month runway. Even if SoftBank injects $1bn, that could only add a few months. A larger-than-expected fine in the Waymo case [3] could literally bankrupt them. It's time for Uber to reduce the number of markets they run losses in and cut costs at headquarters. Their old growth model was predicated on an assumption of unlimited fundraising capability. The scandals seem to have hurt that. [1] https://venturebeat.com/2017/08/23/uber-is-still-burning-cash-at-a-rate-of-2-billion-a-year/ https://venturebeat.com/2017/08/23/uber-is-still-burning-cas... [2] https://www.bloomberg.com/news/articles/2017-11-29/uber-s-third-quarter-loss-is-said-to-widen-to-1-46-billion https://www.bloomberg.com/news/articles/2017-11-29/uber-s-th... [3] https://mobile.nytimes.com/2017/11/29/business/waymo-uber-trial.html?referer=https://news.ycombinator.com/ https://mobile.nytimes.com/2017/11/29/business/waymo-uber-tr...
- mkempe 9y ago
  The key word here is "burning." If Uber's quarterly losses were caused by productive spending they could have a chance. Since their mounting losses are mostly caused by consumption the company is not going to survive. They recently announced a plan to purchase 24,000 Volvo XC90s for self-driving, to be delivered from 2019 to 2021, at a cost of about $1b. That would qualify as productive spending, capital invested for the purpose of greater production. But that's going to be too late, and if I were running Volvo I would not count on those sales...
  - JumpCrisscross 9y ago
    > If Uber's quarterly losses were caused by productive spending they could have a chance I am reminded of John Maynard Keynes' words. "The market can remain irrational longer than you can remain solvent." It speaks of the financing coming home to roost before its labors have borne fruit. Uber may be financing productive spending. But if it runs out of money before the spending makes a return, it was for naught. Uber played two games. One, buying expected long-term profits with short-term loss-making spending. Two, overwhelming the competition with scale. There is an adage admonishing attempts to make up unit losses with volume. Uber sustained losing money at volume by promising investors its long-term gains. As long as Uber could raise financing, the long-term gains were safe. This dynamic mirrors the asset-liability mismatch that creates banks' run risk. Uber is reliant on short-term fundraising to finance its long-term competitive position. Those short-term backers are now becoming nervous. Just like a bank facing a run, the only choice is to cut, cut, cut.
0xB31B1B 9y ago
Maybe they’re spending a ton to maintain market position w lyft, who just raised a bunch of money and is now doubt also lighting it on fire for growth reasons.
rokhayakebe 9y ago
Genuine questions: Did we not ask the same questions about Amazon and now they proved they knew what they were doing? Can't Uber continue to operate at a loss for a few years until they can switch drivers for self-driving vehicles and significantly reduce cost instantly?
- AnimalMuppet 9y ago
  > Did we not ask the same questions about Amazon and now they proved they knew what they were doing? Yes. They never came close to bleeding money at the rate that Uber is, though. > Can't Uber continue to operate at a loss for a few years until they can switch drivers for self-driving vehicles and significantly reduce cost instantly? No. They don't have years, at least not without raising more money. And when you start looking like you won't survive, raising more money becomes much harder.
- XR0CSWV3h3kZWg 9y ago
  There are two major steps that Uber needs to make before achieving their driverless dream. 1) Achieve driverless tech at a safe enough level that they don't carry a huge insurance/legal cost 2) Build out a fleet of cars, maintenance regiment, security team etc. 1 seems to be a huge sticking point for them. And for 2, uber has never had to have large carrying capital costs. They spend on ads, subsidizing rides and legal battles, not purchasing and maintaining vehicles. Right now they have successfully externalized a lot of costs to their drivers. That will go away. They also still won't have customer lock-in even if they achieve the dream. Others will be hot on their tail and then they'll be back to a race to the bottom where the core competencies are: fleet maintenance, ride optimization and capital costs that far outstrip their current operation. They have an advantage in ride optimization, not the rest of it.
  - nephersir7 9y ago
    Meanwhile, car-sharing companies like Car2Go (Daimler AG) already are profitable operations that already own and manage large fleets. When driverless tech becomes available, they'll be much better positioned than Uber.
digitaltrees 9y ago
No. They are struggling to do a down round. They didn’t win a monopoly position, Lyft and others survived. Now they might not have enough runway to fundamentally change their unit economics. They are walking dead.
- aetherson 9y ago
  I'm pretty bearish on Uber, but let's note that it's a down-round of $50B or so. Softbank clearly still thinks that there's a bright future ahead for Uber, if not quite as bright as the earlier $70B valuation suggested. I'm more bearish than Softbank is. But there's a serious difference between a down-round that's still makes Uber a uniquely valuable unicorn and the kind of down rounds that a more typical start-up might get.
  - Analemma_ 9y ago
    > But there's a serious difference between a down-round that's still makes Uber a uniquely valuable unicorn and the kind of down rounds that a more typical start-up might get. The best thing you can say about this is that "it could be worse", but down rounds are ugly no matter the amount. Because: - it indicates a downward trajectory. Start-ups in growth typically IPO at a higher valuation than their most recent round, because they're moving up. But the reverse is also true, so if present trends continue the IPO valuation may be even less. Sure, Softbank may have factored that in, but more ugly news has surfaced since then, like the destruction of evidence. - Down rounds scare away talent, both new hires (who will be much more reluctant to accept equity) and existing employees (who are going to get fucked over when existing investors demand more equity as compensation for the lower value)
    - aetherson 9y ago
      I mean, a down round doesn't indicate a downward trajectory in the minds of the investors. They're still investing. SoftBank expects Uber to be worth more than $50B. In their minds, it's a correction, not a slippery slope. Down round are really bad for existing employees, unless more equity is given to make them whole. But that's not the perspective that matters here.
spiderfarmer 9y ago
If Uber, Tesla, Lyft or any other player lives long enough to have a fleet of self driving cars with cheap rates and high availability, I am really interested in ditching one of my own cars. But of the 3 I think only Tesla is in a reasonably good position to pull this of.
danschumann 9y ago
I think they built their business on shifty ground anyway. The car companies are going to eat their lunch, like GM. Uber planned to do fleets, but perhaps it will be easier to do fleets if you already make the cars.
ohiovr 9y ago
Uber is an absolutely feral corporation that should be eliminated, period. It flagrantly violates the law constantly, its been banned by several law abiding nations, it has been caught stealing intellectual property, it violates people's trust and privacy, it takes unfair advantage of labor. It is a monster. Dismantle it and throw all the company officers in jail.
CodeWriter23 9y ago
Yes. One way or the other, Uber will stop the bleeding.

62 points by coloneltcb 9y ago

deleted 9y ago

[deleted]

pboutros 9y ago

Once they bleed out!

mandabuddhi 9y ago
I wouldn't be sad to see them bleed out.

QAPereo 9y ago

That would only happen if the truth itself were not fatal to them, and their destruction of evidence suggests that the truth is monstrous. As others here have said, maybe their financials are as crooked as everything else about them, and then there’s no IPO, and no future for Uber.

bob_theslob646 9y ago

Title is slightly misleading. Everyone knows that they are bleeding money, but it is by design to get as much marketshare as possible/get as many people using/ addicted to their services. EDIT* They are a software based business ,of course they can and are highly likely to turn a profit if they raise prices * The better question that many journalists seem to shy away from asking is: What are the effects of subsidizing goods/services on the end user? Will end users be more likely to pay for the goods/services if they increase/charge market rate for them? Is it okay to make end users addicted to your services? It will be a very interesting next 10 years for business models of businesses like Uber.

workthrowaway27 9y ago
I don't understand why this is legal? I thought there were laws about operating at a loss to drive competitors out of business.
- ggg9990 9y ago
  Read "Chickenshit" and "The Divide." Starting with the Obama administration and definitely continuing there is effectively no law for the sufficiently rich. It makes no sense for Uber to worry about laws.
  - workthrowaway27 9y ago
    I haven't read those, but just skimming their amazon pages they look to be about why wealthy individuals are less likely to be prosecuted, which doesn't really apply to large corporations. Plus Uber is in the middle of a court case right now, so I'm sure both Uber and its lawyers have very good reasons to worry about laws.
  - IncRnd 9y ago
    > there is effectively no law for the sufficiently rich. It makes no sense for Uber to worry about laws. That's clearly false. Uber is currently in a court case and was just reprimanded by the judge for appearing to intentionally destroy business records.
- kjksf 9y ago
  It would be hard to come up with definition of "operating at a loss to drive competition out" that applies to Uber but doesn't kill YCombinator and all other VC businesses. Dropbox has competitors and for years operated at a loss thanks to investment from YC and other VC firms. So did Twitter, Airbnb and countless other. If that was illegal, there would be no-one for VCs to invest and you wouldn't be here reading Hacker News, because this website would not exist.
  - workthrowaway27 9y ago
    It appears to be covered under antitrust laws and so is only applicable when the creation of a monopoly is likely, but there are situations in which it is illegal. See [1]. I disagree with your claim that there would be no one for VCs to invest in if the law were enforced more broadly/frequently. The important part is that the law isn't applicable to all unprofitable businesses. Only those that are unprofitable because they are pricing below cost. [1]: https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/single-firm-conduct/predatory-or-below-cost https://www.ftc.gov/tips-advice/competition-guidance/guide-a...
ztratar 9y ago
"They are a software based business of course they can and will turn a profit." The aren't as software-based as many people make them out to be. They need driverless cars to become what their current valuation and growth expectations require. Don't get me wrong, I'm long Uber and think they'll survive either way, but if others dominate them in driverless and drive prices down before Uber is ready with their own fleet, they will be forced to conduct a massive down-sizing.
- bob_theslob646 9y ago
  >The aren't as software-based as many people make them out to be. What does that even mean? Has Uber made a single physical product? To the best of my knowledge they do not. Yes they may have to balance wages of drivers which is arguably not easy, nor is it easy to balance human labor(capital) costs in any industry. They are a marketplace for retail transportation. I agree that driverless cars could sink their ship if they're beaten to the market first. Self-driving cars are about many years away contingent on the legal system being the way it is today. That could change.The biggest problem to self-driving cars is insurance/liability ,the areas that they are going to be used, people's ability to change/adapt to them. What people don't understand is that the most population dense places, where uber and other ride handling services are predomimatly used, happens to have many pedestrians and the shittiest infrastructure. I think even talking about self driving cars is a gigantic waste of time , borderline buzzwordiness of 'machine learning' and 'artificial intelligence'. At least those buzz words are being used today. We are nowhere near a level 5 standards.
  - rco8786 9y ago
    I think the “not that much of a software company” has to do with the fact that their product is delivered in person by humans. They’re no more of a software company than UPS or Delta.
    - bob_theslob646 9y ago
      Correct.
femto113 9y ago
It's certainly not all by design, e.g. Uber began winding down [their direct to driver leasing business] this summer after learning that losses were $9,000 per car on average, steeply above the previous estimates of around $500 per car That's an 18x miscalculation.
emiliobumachar 9y ago
"Is it okay to make end users addicted to your services?" I don't think the definition of "addictive" you seem to be using is the standard one, or it would apply to making any product or service better in any way.
nitwit005 9y ago
> They are a software based business of course they can and will turn a profit. They're vetting people, and having them do labor on their behalf. Regardless of how the law defines an employee, they're effectively hiring a huge amount of labor. They're completely unlike most software firms who can sell licenses or ads with no human involvement.
- bob_theslob646 9y ago
  >They're vetting people, and having them do labor on their behalf. Regardless of how the law defines an employee, they're effectively hiring a huge amount of labor. They are doing this, primarily, with software. I agree they are not like traditional software companies, but technically they are giving you the right but not the obligation to obtain business, and in that sense it is like a software as a service company. Again, I agree that it is not traditional, but as another commenter stated they are more like a Logistic Company like Delta or UPS with a focus on the end consumer versus a business.
  - nitwit005 9y ago
    > They are doing this, primarily, with software. Not really, no, or at least no more than ordinary companies like Target, where they also have you apply on a website. They're paying people to do background checks, vehicle confirmation, and so on.
Splines 9y ago
> Is it okay to make end users addicted to your services? How much of a moat does uber really have? It seems to be only made of money - there is nothing inherent in their product that makes it sticky, only "is this the cheapest ride right now?".
- bob_theslob646 9y ago
  You raise a really fair question, but as of August of this year they had a 76% market share in the U.S. I agree with you that price is king(cheapest) and on stickiness. Unfortunately, at the moment, they are the dominate service.

cleansy 9y ago

The numbers in this article are not giving a good picture of the company, at all. The revenue and operating loss and such do not really give a good idea whether or not the company will survive in the long term. What are they spending the money on? Billions in net revenue for an app with offices all around the globe, fine. But how can you amount such losses with that plus marketing expense? - Number of unique customers - Rides/Cust - CLV - average customer lifetime - CAC? These would be the interesting numbers if you want to assess the company. Disclaimer: I work in the BI space, but have no formal finance education, so I might miss a thing or two in this assessment.

bduerst 9y ago
In those terms: With the ride subsidies, it's likely that current CAC is higher than CLV. Since there isn't much customer or driver loyalty, the customer lifetime doesn't matter since raising prices will likely lose customers. You're not going to get a company sharing many of these specific metrics because they're competitive secrets.
jcdavis 9y ago
Just a guess, but from what I understand they spend significant $$ on driver-side acquisition and retention, perhaps even moreso than customer side. In addition to the signing/referral bonuses, they have regular weekly bonuses for hitting a certain number of rides.
pfarnsworth 9y ago
lol it doesn't take a finance degree to posit that losing 1.5B in a quarter is pretty bad, if not historically bad for a non-public company.

sethev 9y ago

It's really hard to tell from the overall numbers whether they're in bad shape. If a significant amount of the expense is in acquiring new customers then it makes perfect sense for investors to keep pouring money in.

braythwayt 9y ago
> If a significant amount of the expense is in acquiring new customers If _and only if_ there is significant lifetime value for customers. If there is little or no lock-in, losing money to acquire a first-time customers may look good to outsiders, but isn't sustainable.
XR0CSWV3h3kZWg 9y ago
Or they could be pulling a groupon.

JumpCrisscross 9y ago

Uber had $6.6bn on hand at the end of June [1]. Burning $1.5bn in Q3 [2] means they are down to $5.1bn. Absent cost-cutting, that implies a 9 to 12 month runway. Even if SoftBank injects $1bn, that could only add a few months. A larger-than-expected fine in the Waymo case [3] could literally bankrupt them. It's time for Uber to reduce the number of markets they run losses in and cut costs at headquarters. Their old growth model was predicated on an assumption of unlimited fundraising capability. The scandals seem to have hurt that. [1] https://venturebeat.com/2017/08/23/uber-is-still-burning-cash-at-a-rate-of-2-billion-a-year/ https://venturebeat.com/2017/08/23/uber-is-still-burning-cas... [2] https://www.bloomberg.com/news/articles/2017-11-29/uber-s-third-quarter-loss-is-said-to-widen-to-1-46-billion https://www.bloomberg.com/news/articles/2017-11-29/uber-s-th... [3] https://mobile.nytimes.com/2017/11/29/business/waymo-uber-trial.html?referer=https://news.ycombinator.com/ https://mobile.nytimes.com/2017/11/29/business/waymo-uber-tr...

mkempe 9y ago
The key word here is "burning." If Uber's quarterly losses were caused by productive spending they could have a chance. Since their mounting losses are mostly caused by consumption the company is not going to survive. They recently announced a plan to purchase 24,000 Volvo XC90s for self-driving, to be delivered from 2019 to 2021, at a cost of about $1b. That would qualify as productive spending, capital invested for the purpose of greater production. But that's going to be too late, and if I were running Volvo I would not count on those sales...
- JumpCrisscross 9y ago
  > If Uber's quarterly losses were caused by productive spending they could have a chance I am reminded of John Maynard Keynes' words. "The market can remain irrational longer than you can remain solvent." It speaks of the financing coming home to roost before its labors have borne fruit. Uber may be financing productive spending. But if it runs out of money before the spending makes a return, it was for naught. Uber played two games. One, buying expected long-term profits with short-term loss-making spending. Two, overwhelming the competition with scale. There is an adage admonishing attempts to make up unit losses with volume. Uber sustained losing money at volume by promising investors its long-term gains. As long as Uber could raise financing, the long-term gains were safe. This dynamic mirrors the asset-liability mismatch that creates banks' run risk. Uber is reliant on short-term fundraising to finance its long-term competitive position. Those short-term backers are now becoming nervous. Just like a bank facing a run, the only choice is to cut, cut, cut.

0xB31B1B 9y ago

Maybe they’re spending a ton to maintain market position w lyft, who just raised a bunch of money and is now doubt also lighting it on fire for growth reasons.

rokhayakebe 9y ago

Genuine questions: Did we not ask the same questions about Amazon and now they proved they knew what they were doing? Can't Uber continue to operate at a loss for a few years until they can switch drivers for self-driving vehicles and significantly reduce cost instantly?

AnimalMuppet 9y ago
> Did we not ask the same questions about Amazon and now they proved they knew what they were doing? Yes. They never came close to bleeding money at the rate that Uber is, though. > Can't Uber continue to operate at a loss for a few years until they can switch drivers for self-driving vehicles and significantly reduce cost instantly? No. They don't have years, at least not without raising more money. And when you start looking like you won't survive, raising more money becomes much harder.
XR0CSWV3h3kZWg 9y ago
There are two major steps that Uber needs to make before achieving their driverless dream. 1) Achieve driverless tech at a safe enough level that they don't carry a huge insurance/legal cost 2) Build out a fleet of cars, maintenance regiment, security team etc. 1 seems to be a huge sticking point for them. And for 2, uber has never had to have large carrying capital costs. They spend on ads, subsidizing rides and legal battles, not purchasing and maintaining vehicles. Right now they have successfully externalized a lot of costs to their drivers. That will go away. They also still won't have customer lock-in even if they achieve the dream. Others will be hot on their tail and then they'll be back to a race to the bottom where the core competencies are: fleet maintenance, ride optimization and capital costs that far outstrip their current operation. They have an advantage in ride optimization, not the rest of it.
- nephersir7 9y ago
  Meanwhile, car-sharing companies like Car2Go (Daimler AG) already are profitable operations that already own and manage large fleets. When driverless tech becomes available, they'll be much better positioned than Uber.

digitaltrees 9y ago

No. They are struggling to do a down round. They didn’t win a monopoly position, Lyft and others survived. Now they might not have enough runway to fundamentally change their unit economics. They are walking dead.

aetherson 9y ago
I'm pretty bearish on Uber, but let's note that it's a down-round of $50B or so. Softbank clearly still thinks that there's a bright future ahead for Uber, if not quite as bright as the earlier $70B valuation suggested. I'm more bearish than Softbank is. But there's a serious difference between a down-round that's still makes Uber a uniquely valuable unicorn and the kind of down rounds that a more typical start-up might get.
- Analemma_ 9y ago
  > But there's a serious difference between a down-round that's still makes Uber a uniquely valuable unicorn and the kind of down rounds that a more typical start-up might get. The best thing you can say about this is that "it could be worse", but down rounds are ugly no matter the amount. Because: - it indicates a downward trajectory. Start-ups in growth typically IPO at a higher valuation than their most recent round, because they're moving up. But the reverse is also true, so if present trends continue the IPO valuation may be even less. Sure, Softbank may have factored that in, but more ugly news has surfaced since then, like the destruction of evidence. - Down rounds scare away talent, both new hires (who will be much more reluctant to accept equity) and existing employees (who are going to get fucked over when existing investors demand more equity as compensation for the lower value)
  - aetherson 9y ago
    I mean, a down round doesn't indicate a downward trajectory in the minds of the investors. They're still investing. SoftBank expects Uber to be worth more than $50B. In their minds, it's a correction, not a slippery slope. Down round are really bad for existing employees, unless more equity is given to make them whole. But that's not the perspective that matters here.

spiderfarmer 9y ago

If Uber, Tesla, Lyft or any other player lives long enough to have a fleet of self driving cars with cheap rates and high availability, I am really interested in ditching one of my own cars. But of the 3 I think only Tesla is in a reasonably good position to pull this of.

danschumann 9y ago

I think they built their business on shifty ground anyway. The car companies are going to eat their lunch, like GM. Uber planned to do fleets, but perhaps it will be easier to do fleets if you already make the cars.

ohiovr 9y ago

Uber is an absolutely feral corporation that should be eliminated, period. It flagrantly violates the law constantly, its been banned by several law abiding nations, it has been caught stealing intellectual property, it violates people's trust and privacy, it takes unfair advantage of labor. It is a monster. Dismantle it and throw all the company officers in jail.

CodeWriter23 9y ago

Yes. One way or the other, Uber will stop the bleeding.