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Honest question from someone who doesn't understand high finance: Article says $2.95b revenue. Where did all that money go? Wiki says they have 12k employees,

Honest question from someone who doesn't understand high finance: Article says $2.95b revenue. Where did all that money go? Wiki says they have 12k employees, is every single employee getting paid $300k+? And if Uber has never been profitable, or at least not for a while, where does the money come from? Is there really $100b+ of investor cash floating around out there, getting spent on stuff like Uber?

sdinsn 8y ago
> Wiki says they have 12k employees, is every single employee getting paid $300k+? In the majority of areas, Uber drivers aren't counted as employees, they are contractors. There are 2+ million Uber drivers.
paxy 8y ago
A majority (~75%) of the revenue is going to drivers. Rest for employee salaries and other operating expenses (facilities, marketing etc.) For the second part, yes, and a LOT more than $100B. Heck, a single fund (SoftBank Vision Fund) is worth that much.
eldavido 8y ago
You're just missing some terminology. This stuff is surprisingly complex -- which gives technical people used to worrying about mind-numbing levels of complexity an edge ;) "Revenue" is confusing for business like this. More precise reporting usually reports either "GMV" (gross marketplace value, all the payments Uber took in) or "net revenue", which would deduct the amounts paid to drivers. If an article said "revenue" without further qualification and it was a marketplace business, I'd probably assume they were talking about GMV. "Profit" is to some extent a fiction of the accounting department -- the relevant question is actually cashflow. Money in, money out. When you need to make a payment for loan service/payroll/etc and don't have the cash, you're headed for bankruptcy; that's pretty easy to understand. By way of comparison, whether or not a firm is "profitable" requires making a bunch of complicated judgments about whether you've actually "earned" the cash you've collected (e.g. gift cards, multi-year software contracts) and on the expense side, how to spread the cost of large, long-term, fixed assets (like code development, PCs, etc) against what they productively delivered (revenue-wise) over long timescales, potentially decades. That's called depreciation and amortization and it's a big topic in accounting school. One thing many developers forget is that customer acquisition, especially in marketplace businesses like Uber, DEVOURS cash. Uber spends like crazy on everything from conventional advertising (digital, TV, radio), referral/sign-up credits, rider incentives, cross-promotions with other brands (stay at X hotel and get uber for 10% off), etc. Uber is uniquely complex because it's sort of an aggregated conglomerate of a bunch of markets with differing stages of maturity and profitability. Think of each of these as different businesses, where the older, more developed (e.g. Chicago, New York) ones are putting cash into the business, subsidizing the spend (investment) on developing a good competitive position in later markets. And yes, there is absolutely truckloads of money available if you can show you can reliably acquire customers on a business with good economics.
- sonnyblarney 8y ago
  Profit is not a fiction, it's just a different thing that cash flow. Cash flows ultimately reconcile with profit. Or they should.
  - joevandyk 8y ago
    It’s difficult to show how much profit you had in Q2 2018, let’s say. Hence the fiction qualifier.
    - sonnyblarney 8y ago
      "It’s difficult to show how much profit you had in Q2 2018," ? It's right on their public statements. The components of it are not known, but then again, same thing applies to their cash flow.
  - unreal37 8y ago
    It's fiction in that it can be whatever they want it to be. Like Amazon was known for years to intentionally not make a profit. They arranged their business so that all the money they made got plowed back into the business in such a way that they could claim a slight loss. That was in their control to some degree.
    - sonnyblarney 8y ago
      "It's fiction in that it can be whatever they want it to be." No, absolutely not. There are well accepted accounting principles. If a company wants to re-invest, then they can do that - but 'profit' is a material, objective thing, of course it changes profit, but it also would change 'cash flow'. Financial accounting is a real thing, not any kind of fiction. It gets to be fiction when there are things that are difficult to account for, or intangible things like goodwill. But if they book a sale on Dec 1 - then that's revenue, even if the money doesn't come in until 3 months later.
      - jcampbell1 8y ago
dahart 8y ago
> Is there really $100b+ of investor cash floating around out there, getting spent on stuff like Uber? Here are a couple links that might shed some light: https://en.m.wikipedia.org/wiki/List_of_venture_capital_firms https://en.m.wikipedia.org/wiki/List_of_venture_capital_firm... https://nvca.org/pressreleases/investment-venture-capital-backed-companies-pace-exceed-100-billion-end-2018/ https://nvca.org/pressreleases/investment-venture-capital-ba... *BTW, I’m actually surprised it’s not much higher than that, since private wealth in the US alone is > $100t. (https://www.wsj.com/articles/u-s-net-worth-surpasses-100-trillion-1528387386 https://www.wsj.com/articles/u-s-net-worth-surpasses-100-tri...)
- eldavido 8y ago
  This isn't even the whole story. Uber has progressed to where they're raising directly from the people venture capital funds raise from, cutting out the VC, a middleman.
zhte415 8y ago
I pretend to understand finance but constantly get surprised. In financial statements, revenue is stated with (can be subtracted by) cost of revenue. Say you're selling baked beans, the cost of revenue is your beans and the tin and associated packaging. So, the cost of revenue is the drivers pay (contractors, not employees, I guess) and probably a little more marketing stuff baked in. Uber's not public so we're not privy to that. Net revenue is probably a lot smaller, and I'm frankly stunned they have 12k employees and don't believe it. That's especially because a large part of their business (call centre, customer support) is further contracted out and won't count as employee headcount. Wiki cites a BBC article that doesn't make it clear if these 'Uber employees' are actually Uber staff. I do know that Uber 'staff' working in China doing customer support work (probably far more is outsourced in places other than China, I'm just familiar with China) for a variety of outsourcing partners, for example Concentrix, and get a wage of average about USD 600 per month.
giarc 8y ago
Another large cost not included in other replies is growth in new markets. Not only new staff etc, but when they enter a city they subsidize rides a ton. Just think when one person signs up and gets $5 off first ride, they still have to pay the driver the regular rate. Plus, people use sign up codes, which gives both people $5 off their next ride. Again, they still need to pay both drivers their regular rate.
aetherson 8y ago
You're getting a lot of incorrect information in your responses. Uber's "revenue" is already net of driver payments (except in the case of Uber Pool). Their big costs are payroll, marketing, promotions (for both the driver and the passenger), and probably compute. In a lot of cases, including "mature markets" in the US, they end up being unprofitable per ride due to the number of promotions they run.
jiveturkey 8y ago
> Article says $2.95b revenue. Where did all that money go? Wiki says they have 12k employees, is every single employee getting paid $300k+? Sounds about right. Total loaded cost of a tech employee of a company with HQ in SF would easily average $300k.

sdinsn 8y ago

> Wiki says they have 12k employees, is every single employee getting paid $300k+? In the majority of areas, Uber drivers aren't counted as employees, they are contractors. There are 2+ million Uber drivers.

paxy 8y ago

A majority (~75%) of the revenue is going to drivers. Rest for employee salaries and other operating expenses (facilities, marketing etc.) For the second part, yes, and a LOT more than $100B. Heck, a single fund (SoftBank Vision Fund) is worth that much.

eldavido 8y ago

You're just missing some terminology. This stuff is surprisingly complex -- which gives technical people used to worrying about mind-numbing levels of complexity an edge ;) "Revenue" is confusing for business like this. More precise reporting usually reports either "GMV" (gross marketplace value, all the payments Uber took in) or "net revenue", which would deduct the amounts paid to drivers. If an article said "revenue" without further qualification and it was a marketplace business, I'd probably assume they were talking about GMV. "Profit" is to some extent a fiction of the accounting department -- the relevant question is actually cashflow. Money in, money out. When you need to make a payment for loan service/payroll/etc and don't have the cash, you're headed for bankruptcy; that's pretty easy to understand. By way of comparison, whether or not a firm is "profitable" requires making a bunch of complicated judgments about whether you've actually "earned" the cash you've collected (e.g. gift cards, multi-year software contracts) and on the expense side, how to spread the cost of large, long-term, fixed assets (like code development, PCs, etc) against what they productively delivered (revenue-wise) over long timescales, potentially decades. That's called depreciation and amortization and it's a big topic in accounting school. One thing many developers forget is that customer acquisition, especially in marketplace businesses like Uber, DEVOURS cash. Uber spends like crazy on everything from conventional advertising (digital, TV, radio), referral/sign-up credits, rider incentives, cross-promotions with other brands (stay at X hotel and get uber for 10% off), etc. Uber is uniquely complex because it's sort of an aggregated conglomerate of a bunch of markets with differing stages of maturity and profitability. Think of each of these as different businesses, where the older, more developed (e.g. Chicago, New York) ones are putting cash into the business, subsidizing the spend (investment) on developing a good competitive position in later markets. And yes, there is absolutely truckloads of money available if you can show you can reliably acquire customers on a business with good economics.

sonnyblarney 8y ago
Profit is not a fiction, it's just a different thing that cash flow. Cash flows ultimately reconcile with profit. Or they should.
- joevandyk 8y ago
  It’s difficult to show how much profit you had in Q2 2018, let’s say. Hence the fiction qualifier.
  - sonnyblarney 8y ago
    "It’s difficult to show how much profit you had in Q2 2018," ? It's right on their public statements. The components of it are not known, but then again, same thing applies to their cash flow.
- unreal37 8y ago
  It's fiction in that it can be whatever they want it to be. Like Amazon was known for years to intentionally not make a profit. They arranged their business so that all the money they made got plowed back into the business in such a way that they could claim a slight loss. That was in their control to some degree.
  - sonnyblarney 8y ago
    "It's fiction in that it can be whatever they want it to be." No, absolutely not. There are well accepted accounting principles. If a company wants to re-invest, then they can do that - but 'profit' is a material, objective thing, of course it changes profit, but it also would change 'cash flow'. Financial accounting is a real thing, not any kind of fiction. It gets to be fiction when there are things that are difficult to account for, or intangible things like goodwill. But if they book a sale on Dec 1 - then that's revenue, even if the money doesn't come in until 3 months later.
    - jcampbell1 8y ago

dahart 8y ago

> Is there really $100b+ of investor cash floating around out there, getting spent on stuff like Uber? Here are a couple links that might shed some light: https://en.m.wikipedia.org/wiki/List_of_venture_capital_firms https://en.m.wikipedia.org/wiki/List_of_venture_capital_firm... https://nvca.org/pressreleases/investment-venture-capital-backed-companies-pace-exceed-100-billion-end-2018/ https://nvca.org/pressreleases/investment-venture-capital-ba... *BTW, I’m actually surprised it’s not much higher than that, since private wealth in the US alone is > $100t. (https://www.wsj.com/articles/u-s-net-worth-surpasses-100-trillion-1528387386 https://www.wsj.com/articles/u-s-net-worth-surpasses-100-tri...)

eldavido 8y ago
This isn't even the whole story. Uber has progressed to where they're raising directly from the people venture capital funds raise from, cutting out the VC, a middleman.

zhte415 8y ago

I pretend to understand finance but constantly get surprised. In financial statements, revenue is stated with (can be subtracted by) cost of revenue. Say you're selling baked beans, the cost of revenue is your beans and the tin and associated packaging. So, the cost of revenue is the drivers pay (contractors, not employees, I guess) and probably a little more marketing stuff baked in. Uber's not public so we're not privy to that. Net revenue is probably a lot smaller, and I'm frankly stunned they have 12k employees and don't believe it. That's especially because a large part of their business (call centre, customer support) is further contracted out and won't count as employee headcount. Wiki cites a BBC article that doesn't make it clear if these 'Uber employees' are actually Uber staff. I do know that Uber 'staff' working in China doing customer support work (probably far more is outsourced in places other than China, I'm just familiar with China) for a variety of outsourcing partners, for example Concentrix, and get a wage of average about USD 600 per month.

giarc 8y ago

Another large cost not included in other replies is growth in new markets. Not only new staff etc, but when they enter a city they subsidize rides a ton. Just think when one person signs up and gets $5 off first ride, they still have to pay the driver the regular rate. Plus, people use sign up codes, which gives both people $5 off their next ride. Again, they still need to pay both drivers their regular rate.

aetherson 8y ago

You're getting a lot of incorrect information in your responses. Uber's "revenue" is already net of driver payments (except in the case of Uber Pool). Their big costs are payroll, marketing, promotions (for both the driver and the passenger), and probably compute. In a lot of cases, including "mature markets" in the US, they end up being unprofitable per ride due to the number of promotions they run.

jiveturkey 8y ago

> Article says $2.95b revenue. Where did all that money go? Wiki says they have 12k employees, is every single employee getting paid $300k+? Sounds about right. Total loaded cost of a tech employee of a company with HQ in SF would easily average $300k.