8 ms·

Uber reportedly lost $891M in the second quarter of 2018 as growth slows

66 points by dralley 8y ago

rohitb91 8y ago
How does Uber even lose that much money while paying their drivers on average $3.5 per hour and offering no benefits or safety nets? I wonder if a downturn will be what it takes for Uber to finally die.
- dantheman 8y ago
  Uber pays more than $3.5 an hour. Where are you getting that number? Uber and other ride sharing services are so much better than taxis, why would you want them to die? Uber's international support is amazing and has made international travel far more safe and convenient.
  - deleted 8y ago
    [deleted]
  - nickserv 8y ago
    Please don't call it "ride sharing", which is when 2 or more people going to the same place share the cost of transportation. There is no profit motive involved. What Uber and others do is an unlicensed/subcontracted taxi service.
    - point78 8y ago
      Half of these "sharing" economy services have nothing to do with sharing...
    - cam3ham 8y ago
      what? it's sharing a car as opposed to everyone buying and owning their own. #facepalm
    - austhrow743 8y ago
      That they're not ride sharing services does not make them unlicensed taxi's. Private car hire where you book someone to drive from x to y location at z time has been a thing for a lot longer than these apps. That's what Uber and others do. Taxi's can pick up people who hail them at the curb. That's their differentiator from private cars and uber. That's what they have paid licencing fees and bought medallions (depending on area) to be able to do.
- ben174 8y ago
  Honestly, where did you come up with that number? I know many drivers and they’re certainly making far more than three fiddy an hour.
  - RodericDay 8y ago
    after expenses?
  - icebraining 8y ago
    It comes from the MIT paper "The Economics of Ride-Hailing", but the authors have since revised the numbers (still, only to $8.5-$10): https://twitter.com/StephenZoepf/status/970754550968676352 https://twitter.com/StephenZoepf/status/970754550968676352
    - djajshgsjja 8y ago
      Uh, it’s a pretty huge difference. Millions of people live in that kind of wage in the US. It’s the difference between drivers being completely irrational or maybe the gig being worth their while.
      - toomuchtodo 8y ago
        It’s still not a living wage.
      - GW150914 8y ago
        Millions of people live in abject poverty too, so what? It’s on par with an entry level fast food job, but a lot more risky given the inherent dangers of spending a lot of time on the road, and with no possibility of advancement. Given that entry level burger flipping is considered the bottom of the barrel, I wouldn’t be too impressed. I think it’s worth fighting for jobs that have a future, the possibility of a living wage, benefits like healthcare, and at least the possibility of advancement don’t you?
        djajshgsjja 8y ago
- zitterbewegung 8y ago
  Maybe their insurance policy that covers all the drivers when they are on the clock with passengers.
- jchw 8y ago
  The subtitle of this article is "The company’s self-driving unit continues to be a drain on cash." Guessing that might contribute to it.
  - eanzenberg 8y ago
    Hope they can last the couple of decades it will need for self-driving cars to be viable.
  - mrep 8y ago
    True, but the self-driving unit was only 200 million out of the total 891 million. Also, in my opinion, they pretty much have to go all-in investing in self driving cars because any market waymo launches in can easily outprice uber/lyft especially considering that while uber has a lot of cash, google literally has an order of magnitude more on hand + they still rake in gobs full of profits from search. And for the eventual "waymo cannot handle rain or snow and probably won't be able to handle it for years" argument: almost all of the taxi driving market is under normal conditions. It will almost certainly be profitable to just service customers when weather conditions are fine and then park their cars in bad weather.
    - greenyoda 8y ago
      > And for the eventual "waymo cannot handle rain or snow and probably won't be able to handle it for years" argument: almost all of the taxi driving market is under normal conditions. Rain and snow are normal conditions in most of the U.S. Here in NYC (one of Uber's largest markets) it's been raining a lot lately. I don't think a taxi service that doesn't operate in the rain would get much business here. The demand for taxis actually goes up here when it rains. Also, it can start raining quite suddenly. What do you do if someone is on their way to somewhere in a self-driving car and it starts to rain? > It will almost certainly be profitable to just service customers when weather conditions are fine and then park their cars in bad weather. You'd need somewhere with enough space to park your entire fleet when it's raining or snowing. That would be rather expensive.
      - 8y ago
- WilliamEdward 8y ago
  My unpopular opinion is that Uber is one of the better things to happen to the economy. So many regulations and corporate/government giants stomping out growing businesses basically means that you can align everything perfectly in your startup and still fail. Uber found a loophole and now I get to travel to work without buying a $60k vehicle. Your wish for Uber to die is elitist and comes from a place of misunderstanding why Uber is a good thing to many, many people, startups and workers alike. Just because you dread the idea of being driven by a taxi driver without a permit doesn't mean I have to as well.
  - tango24 8y ago
    > now I get to travel to work without buying a $60k vehicle. Why on earth do you need a $60k vehicle? That’s exorbitant if you’re just trying to “get to work”. 60k is a luxury joy ride, not a commuter beater.
    - WilliamEdward 8y ago
      Sorry, i don't live in the US. Just did a rough conversion to make it easier to read. Either way I do not have 5-30 thousand to spend. I also live in a place with really bad public transport.
- overcast 8y ago
  By subsidizing cheap cab fares? There is a reason Uber gained popularity, because the fees are cheap comparatively.
curiousDog 8y ago
$891 million*. Incorrect title
- slaveofallah93 8y ago
  Yep. HN used to spread more fake news.
  - toomuchtodo 8y ago
    $100 million here or there isn’t much of a concern when you’re that unprofitable. What’s Uber going to do, shed their self-driving unit? Their only hope for profitability?
    - edoceo 8y ago
      That idea has been floated[0] [0] https://www.bloomberg.com/news/articles/2018-08-15/uber-ceo-embraces-losing-money-with-revenue-growth-slowing https://www.bloomberg.com/news/articles/2018-08-15/uber-ceo-...
      - toomuchtodo 8y ago
        Ending their self-driving initiative would expose that their business as-is is fundementally unsustainable (it’s clear expensive incentives are required to continually pull new drivers into the driver pool). They have to continue to try to maintain their valuation and funding, at least until IPO (where they can dump it on public investors).
- dang 8y ago
  Fixed now. Thanks!
hugh4life 8y ago
"The company’s self-driving unit continues to be a drain on cash" Uber should not have a self-driving unit. Self driving cars are only going to be safe to use on infrastructure specifically made and certified for self driving cars. That's going to take massive government investment that probably isn't going to come any time soon. You're only going to see self driving cars in say intentionally created smart cities any time soon.
- tim333 8y ago
  You can see them in Phoenix just now https://www.bloomberg.com/news/features/2018-07-31/inside-the-life-of-waymo-s-driverless-test-family https://www.bloomberg.com/news/features/2018-07-31/inside-th...
  - oldgradstudent 8y ago
    I wouldn't call a car with a driver "a self driving car".
    - mr_toad 8y ago
      Waymo have already started testing cars with no backup drivers. They’re years ahead of the competition, even GM are 2-3 years behind Waymo, and Uber is probably more years behind them.
      - tim333 8y ago
        Yeah the article has "...is now starting to test cars in Phoenix with no backup safety driver behind the wheel, something the Jacksons have experienced just once."
      - oldgradstudent 8y ago
        As expected, turns out that cars without a driver are remotely monitored. https://www.theinformation.com/articles/waymos-big-ambitions-slowed-by-tech-trouble?shared=4596b7125469ea51 https://www.theinformation.com/articles/waymos-big-ambitions... At this point in time there are no driverless cars.
pdeva1 8y ago
Can someone genuinely explain this: How is that Uber continues losing cash but is about to IPO, but when MoviePass tries to do the same, its about to go out of business.
- x220 8y ago
  Moviepass doesn't get enough investment money to continue operating.
- bdcravens 8y ago
  Many reasons, but MoviePass was just a reseller at the end of the day, whereas Uber is a service business.
- lozenge 8y ago
  Uber has many services in many markets, many of which make money. They are just spending it as fast as they earn it. MoviePass is just one service and it loses money on every customer.
- deleted 8y ago
  [deleted]
- mrep 8y ago
  The main reason is unit economics. Uber is profitable in established markets however it is costly to incentivize the initial driver pool in a new area to drive around hoping for customers where customers do not expect there to be uber drivers. They also need to spend money to market their service to customers once they have paid enough drivers to be available even when customers aren't requesting uber fares. If uber drivers are not available locally, you won't use them. However, when a local market has lots of users who expect to use the service and are able to find local drivers, it becomes self sustaining and uber no longer needs to subsidize drivers and market customers as much and so they can rake in their fees. TLDR: they were able to raise a lot of money because they showed that while it costs a lot to grow to new LOCAL markets, they eventually make money on each user and it becomes self sustaining. Moviepass on the otherhand loses money on almost every customer because they priced their service below what it costs to go to 2 movies a month and hoped that in the end, users would keep paying even if they did not use it more than twice a month (somewhat similar to some gyms business model), or they could strongarm movie theaters into giving them lower fees so that the 2/more movies watched per month per user became profitable.
chx 8y ago
This is very small money to be invested to dismantle all the protections organized labor achieved in the last hundred plus years. I must congratulate the investors. Maybe it didn't start that way but certainly now this is now what it is.
- jahaja 8y ago
  Unfortunately this is true. I think this is a textbook example of where conflating interests are able to effectively push through regressive ideas without some dark room conspiracy. It's actually quite brilliant: An innovative looking Silicon Valley startup that provides a concrete lifestyle improvement for the upper middle-class under a thin veil of inevitable technological progress. 1. Seems innovative, progressive, and aligned with currents of the time. 2. Got influential supporters through concrete life-style improvements for them. 3. Got a cover story that carries an unspoken threat of being a technophobe. Not to mention the blatant euphemism "the sharing economy". An example of where 2. becomes extra visible is when ex-employees of Uber rightfully criticizes the toxic leadership that's spread throughout the company, but is at the same time seemingly oblivious to the fact that Uber's business model is fundamentally reactionary for the working class and that this has been called out, albeit without an audience, for a long time.
- quickben 8y ago
  Interesting. So, did they succeed? Are cabbies dismantled now? If the vcs stop pumping bil/year, will Uber exist? I don't care about Uber or the Taxi industry, I am trying to point out that better replaces existing, and so far, that hasn't happened in the case of Uber. Except for the entire planet getting some free rides, that part is awesome.
  - joejerryronnie 8y ago
    Yes, we really should be thanking the VC firms (or really the pension and endowment funds which act as LPs) for all the nearly-free rides.
  - londons_explore 8y ago
    If VC's stop pumping money, Uber might not exist, but I highly doubt the 'ridesharing market' is going away.
ebikelaw 8y ago
They can't just jettison the self-driving unit because that torpedos their long-time valuation strategy. Of course, their car doesn't work so they will eventually have to shut it down. That leaves them in the same place I've always said that Uber would end up: a radically smaller company retrenched in existing, profitable markets. Softbank will take a bath and the smart money already exited.
- xkcd-sucks 8y ago
  Its fundamentally a logistics company, why does the valuation depend on uber not buying self driving cars from a third party?

66 points by dralley 8y ago

How does Uber even lose that much money while paying their drivers on average $3.5 per hour and offering no benefits or safety nets? I wonder if a downturn will be what it takes for Uber to finally die.

dantheman 8y ago
Uber pays more than $3.5 an hour. Where are you getting that number? Uber and other ride sharing services are so much better than taxis, why would you want them to die? Uber's international support is amazing and has made international travel far more safe and convenient.
- deleted 8y ago
  [deleted]
- nickserv 8y ago
  Please don't call it "ride sharing", which is when 2 or more people going to the same place share the cost of transportation. There is no profit motive involved. What Uber and others do is an unlicensed/subcontracted taxi service.
  - point78 8y ago
    Half of these "sharing" economy services have nothing to do with sharing...
  - cam3ham 8y ago
    what? it's sharing a car as opposed to everyone buying and owning their own. #facepalm
  - austhrow743 8y ago
    That they're not ride sharing services does not make them unlicensed taxi's. Private car hire where you book someone to drive from x to y location at z time has been a thing for a lot longer than these apps. That's what Uber and others do. Taxi's can pick up people who hail them at the curb. That's their differentiator from private cars and uber. That's what they have paid licencing fees and bought medallions (depending on area) to be able to do.
ben174 8y ago
Honestly, where did you come up with that number? I know many drivers and they’re certainly making far more than three fiddy an hour.
- RodericDay 8y ago
  after expenses?
- icebraining 8y ago
  It comes from the MIT paper "The Economics of Ride-Hailing", but the authors have since revised the numbers (still, only to $8.5-$10): https://twitter.com/StephenZoepf/status/970754550968676352 https://twitter.com/StephenZoepf/status/970754550968676352
  - djajshgsjja 8y ago
    Uh, it’s a pretty huge difference. Millions of people live in that kind of wage in the US. It’s the difference between drivers being completely irrational or maybe the gig being worth their while.
    - toomuchtodo 8y ago
      It’s still not a living wage.
    - GW150914 8y ago
      Millions of people live in abject poverty too, so what? It’s on par with an entry level fast food job, but a lot more risky given the inherent dangers of spending a lot of time on the road, and with no possibility of advancement. Given that entry level burger flipping is considered the bottom of the barrel, I wouldn’t be too impressed. I think it’s worth fighting for jobs that have a future, the possibility of a living wage, benefits like healthcare, and at least the possibility of advancement don’t you?
      - djajshgsjja 8y ago
zitterbewegung 8y ago
Maybe their insurance policy that covers all the drivers when they are on the clock with passengers.
jchw 8y ago
The subtitle of this article is "The company’s self-driving unit continues to be a drain on cash." Guessing that might contribute to it.
- eanzenberg 8y ago
  Hope they can last the couple of decades it will need for self-driving cars to be viable.
- mrep 8y ago
  True, but the self-driving unit was only 200 million out of the total 891 million. Also, in my opinion, they pretty much have to go all-in investing in self driving cars because any market waymo launches in can easily outprice uber/lyft especially considering that while uber has a lot of cash, google literally has an order of magnitude more on hand + they still rake in gobs full of profits from search. And for the eventual "waymo cannot handle rain or snow and probably won't be able to handle it for years" argument: almost all of the taxi driving market is under normal conditions. It will almost certainly be profitable to just service customers when weather conditions are fine and then park their cars in bad weather.
  - greenyoda 8y ago
    > And for the eventual "waymo cannot handle rain or snow and probably won't be able to handle it for years" argument: almost all of the taxi driving market is under normal conditions. Rain and snow are normal conditions in most of the U.S. Here in NYC (one of Uber's largest markets) it's been raining a lot lately. I don't think a taxi service that doesn't operate in the rain would get much business here. The demand for taxis actually goes up here when it rains. Also, it can start raining quite suddenly. What do you do if someone is on their way to somewhere in a self-driving car and it starts to rain? > It will almost certainly be profitable to just service customers when weather conditions are fine and then park their cars in bad weather. You'd need somewhere with enough space to park your entire fleet when it's raining or snowing. That would be rather expensive.
    - 8y ago
WilliamEdward 8y ago
My unpopular opinion is that Uber is one of the better things to happen to the economy. So many regulations and corporate/government giants stomping out growing businesses basically means that you can align everything perfectly in your startup and still fail. Uber found a loophole and now I get to travel to work without buying a $60k vehicle. Your wish for Uber to die is elitist and comes from a place of misunderstanding why Uber is a good thing to many, many people, startups and workers alike. Just because you dread the idea of being driven by a taxi driver without a permit doesn't mean I have to as well.
- tango24 8y ago
  > now I get to travel to work without buying a $60k vehicle. Why on earth do you need a $60k vehicle? That’s exorbitant if you’re just trying to “get to work”. 60k is a luxury joy ride, not a commuter beater.
  - WilliamEdward 8y ago
    Sorry, i don't live in the US. Just did a rough conversion to make it easier to read. Either way I do not have 5-30 thousand to spend. I also live in a place with really bad public transport.
overcast 8y ago
By subsidizing cheap cab fares? There is a reason Uber gained popularity, because the fees are cheap comparatively.

curiousDog 8y ago

$891 million*. Incorrect title

slaveofallah93 8y ago
Yep. HN used to spread more fake news.
- toomuchtodo 8y ago
  $100 million here or there isn’t much of a concern when you’re that unprofitable. What’s Uber going to do, shed their self-driving unit? Their only hope for profitability?
  - edoceo 8y ago
    That idea has been floated[0] [0] https://www.bloomberg.com/news/articles/2018-08-15/uber-ceo-embraces-losing-money-with-revenue-growth-slowing https://www.bloomberg.com/news/articles/2018-08-15/uber-ceo-...
    - toomuchtodo 8y ago
      Ending their self-driving initiative would expose that their business as-is is fundementally unsustainable (it’s clear expensive incentives are required to continually pull new drivers into the driver pool). They have to continue to try to maintain their valuation and funding, at least until IPO (where they can dump it on public investors).
dang 8y ago
Fixed now. Thanks!

hugh4life 8y ago

"The company’s self-driving unit continues to be a drain on cash" Uber should not have a self-driving unit. Self driving cars are only going to be safe to use on infrastructure specifically made and certified for self driving cars. That's going to take massive government investment that probably isn't going to come any time soon. You're only going to see self driving cars in say intentionally created smart cities any time soon.

tim333 8y ago
You can see them in Phoenix just now https://www.bloomberg.com/news/features/2018-07-31/inside-the-life-of-waymo-s-driverless-test-family https://www.bloomberg.com/news/features/2018-07-31/inside-th...
- oldgradstudent 8y ago
  I wouldn't call a car with a driver "a self driving car".
  - mr_toad 8y ago
    Waymo have already started testing cars with no backup drivers. They’re years ahead of the competition, even GM are 2-3 years behind Waymo, and Uber is probably more years behind them.
    - tim333 8y ago
      Yeah the article has "...is now starting to test cars in Phoenix with no backup safety driver behind the wheel, something the Jacksons have experienced just once."
    - oldgradstudent 8y ago
      As expected, turns out that cars without a driver are remotely monitored. https://www.theinformation.com/articles/waymos-big-ambitions-slowed-by-tech-trouble?shared=4596b7125469ea51 https://www.theinformation.com/articles/waymos-big-ambitions... At this point in time there are no driverless cars.

pdeva1 8y ago

Can someone genuinely explain this: How is that Uber continues losing cash but is about to IPO, but when MoviePass tries to do the same, its about to go out of business.

x220 8y ago
Moviepass doesn't get enough investment money to continue operating.
bdcravens 8y ago
Many reasons, but MoviePass was just a reseller at the end of the day, whereas Uber is a service business.
lozenge 8y ago
Uber has many services in many markets, many of which make money. They are just spending it as fast as they earn it. MoviePass is just one service and it loses money on every customer.
deleted 8y ago
[deleted]
mrep 8y ago
The main reason is unit economics. Uber is profitable in established markets however it is costly to incentivize the initial driver pool in a new area to drive around hoping for customers where customers do not expect there to be uber drivers. They also need to spend money to market their service to customers once they have paid enough drivers to be available even when customers aren't requesting uber fares. If uber drivers are not available locally, you won't use them. However, when a local market has lots of users who expect to use the service and are able to find local drivers, it becomes self sustaining and uber no longer needs to subsidize drivers and market customers as much and so they can rake in their fees. TLDR: they were able to raise a lot of money because they showed that while it costs a lot to grow to new LOCAL markets, they eventually make money on each user and it becomes self sustaining. Moviepass on the otherhand loses money on almost every customer because they priced their service below what it costs to go to 2 movies a month and hoped that in the end, users would keep paying even if they did not use it more than twice a month (somewhat similar to some gyms business model), or they could strongarm movie theaters into giving them lower fees so that the 2/more movies watched per month per user became profitable.

chx 8y ago

This is very small money to be invested to dismantle all the protections organized labor achieved in the last hundred plus years. I must congratulate the investors. Maybe it didn't start that way but certainly now this is now what it is.

jahaja 8y ago
Unfortunately this is true. I think this is a textbook example of where conflating interests are able to effectively push through regressive ideas without some dark room conspiracy. It's actually quite brilliant: An innovative looking Silicon Valley startup that provides a concrete lifestyle improvement for the upper middle-class under a thin veil of inevitable technological progress. 1. Seems innovative, progressive, and aligned with currents of the time. 2. Got influential supporters through concrete life-style improvements for them. 3. Got a cover story that carries an unspoken threat of being a technophobe. Not to mention the blatant euphemism "the sharing economy". An example of where 2. becomes extra visible is when ex-employees of Uber rightfully criticizes the toxic leadership that's spread throughout the company, but is at the same time seemingly oblivious to the fact that Uber's business model is fundamentally reactionary for the working class and that this has been called out, albeit without an audience, for a long time.
quickben 8y ago
Interesting. So, did they succeed? Are cabbies dismantled now? If the vcs stop pumping bil/year, will Uber exist? I don't care about Uber or the Taxi industry, I am trying to point out that better replaces existing, and so far, that hasn't happened in the case of Uber. Except for the entire planet getting some free rides, that part is awesome.
- joejerryronnie 8y ago
  Yes, we really should be thanking the VC firms (or really the pension and endowment funds which act as LPs) for all the nearly-free rides.
- londons_explore 8y ago
  If VC's stop pumping money, Uber might not exist, but I highly doubt the 'ridesharing market' is going away.

ebikelaw 8y ago

They can't just jettison the self-driving unit because that torpedos their long-time valuation strategy. Of course, their car doesn't work so they will eventually have to shut it down. That leaves them in the same place I've always said that Uber would end up: a radically smaller company retrenched in existing, profitable markets. Softbank will take a bath and the smart money already exited.

xkcd-sucks 8y ago
Its fundamentally a logistics company, why does the valuation depend on uber not buying self driving cars from a third party?