5 ms·

Uber Is a Scam

75 points by kome 8y ago

olliej 8y ago
I can't work out how uber can continue to operate post-IPO. Currently it operates by converting VC funding into discounted transport. Post-IPO I don't understand how it can gain ongoing sources of cash it needs while operating at a loss (unless of course the IPO raises enough cash immediately to fund it until after it has autonomous cars).
- rorykoehler 8y ago
  I don't see how autonomous cars will save them. They don't build cars
  - rusticpenn 8y ago
    The want to replace drivers, not cars..
    - rorykoehler 8y ago
      All car manufacturers will do both once SDC tech is commoditised which will happen almost immediately
  - sleepychu 8y ago
    Eliminating the driver cost.
    - celticninja 8y ago
      driver cost currently includes the cost of the car, i dont see how a self-driving car is cheaper than a driver who is proividing their own vehicle.
      - eloisant 8y ago
        The cost of a car will always be cheaper than the cost of car + driver. Yes the drivers provides their own vehicle, but it's factored in the driver's revenue.
        celticninja 8y ago
        Yes but the initial outlay is the drivers and not Ubers. Also they don't pay for the car they just pay a bit toward it, if you buy the car you have maintenance and insurance to pay for directly. If they had to buy a fleet of vehicles for their entire operation in pretty sure their losses would be an order of magnitude above 3bn.
- EliRivers 8y ago
  Maybe this is the end game. They don't have to have a profitable business. They just need to get over that IPO line, convincing enough people to pay enough for the stock, for the VC to exit richer than they came in and for the Uberites with stock who are allowed to cash out to walk away handsomely.
  - Gibbon1 8y ago
    They don't need to convince people to buy their stock. Wall Streets going to stuff this into Muni retirement funds and ma and pa's 401k.
- yumraj 8y ago
  Follow-on offerings.
- onion2k 8y ago
  Currently it operates by converting VC funding into discounted transport. Does it? As I understood it the way it works is through a discount that takes the form of "$10 towards your first ride", so it's pretty obvious where the VC money is going. They don't do that marketing in every market any more, and allegedly they're already profitable in some places (presumably the places where they don't give money away).
  - celticninja 8y ago
    thats just some of the subsidising, if it was just $10 to each new user they would have been fine, but there is subsidisation going on to ensure they remain cheaper than standard taxis, this is part of their draw. At a guess their aim is to remain solvent long enough to become a monopoloy, so that they can set prices and start to earn back their losses.
    - brownbat 8y ago
      > remain solvent long enough to become a monopoloy I used to think this, but I'm increasingly skeptical this is actually the plan. 1. It's unlikely all other similar transportation options fold in the next five to ten years. (Beyond that you're putting a lot of faith in your ability to predict market activity very far in the future). 2. There are available substitutes for some types of trips, and substitutes make it difficult for monopolies to extract rents. E.g., sometimes they are competing with cross town buses, sometimes they are competing with walking, ebikes, or scooters, sometimes they are competing with asking a friend for a ride. 3. There are low barriers to entry. If Uber monopolized car hiring transportation somehow, then increased prices to collect enough rents to recoup losses from the dumping phase, a new Lyft could immediately spin up to threaten that position. Uber and Lyft cost a lot to maintain, but not necessarily to start. I mean, maybe they're optimistic that these won't be issues, but building a monopoly isn't as easy as it seems. People have been very successful as monopolists, but that doesn't mean become a monopolist is always the best strategy.
      - dvfjsdhgfv 8y ago
        > 3. There are low barriers to entry. Yes and no. I observe different markets and while it's true that new players appear, in general their offering is worse than Uber because of smaller fleet. Also, with Uber prices it's already hard to achieve profitability, so any new player finds it even harder to compete price-wise.
- dvfjsdhgfv 8y ago
  Well, post-IPO it will burn the cash from the IPO.
- cjhopman 8y ago
  Tesla seems to be able to do it just fine post-IPO.
austenallred 8y ago
This is kindergarten-level financial analysis from a socialist magazine. All this to say that Uber is losing money right now - we already knew that. Then a bunch of other random stories of other companies that have lost money in the past, including, well, some of the biggest and most successful companies on earth. The question is will revenue overtake costs as it grows more quickly - no serious analyst would insinuate Uber will be gross margin unprofitable over the long-term. It would be awfully difficult to do so given they collect a percentage of every sale. Uber has opened offices all over and has high fixed costs. It’s waiting on the small variable revenue from each trip to catch up with those costs, and the question is “will it?” That’s all.
- garlandkey 8y ago
  There are two factors that make me think Uber isn't sustainable. One is that they're relying on drivers being contractors, which won't last. The second issue is that Tesla is coming and nobody will be able to compete with not having to pay any driver.
- tsss 8y ago
  You'd think that a socialist of all people would understand that it pays off to bleed money in the beginning in order to get a market controlling position.
  - kobiguru 8y ago
    I don't think they like monopolies they don't control.
- lmm 8y ago
  > The question is will revenue overtake costs as it grows more quickly - no serious analyst would insinuate Uber will be gross margin unprofitable over the long-term. How much room do they have to grow? Uber is already a, what, multi-billion-dollar company? If they're not gross margin profitable now, where's the tipping point? > Uber has opened offices all over and has high fixed costs. It’s waiting on the small variable revenue from each trip to catch up with those costs, and the question is “will it?” That’s all. What's the high fixed cost? App development surely can't cost that much. Drivers, server hosting, support, lawsuits etc. are all going to be variable cost.
pkalinowski 8y ago
How is it a scam? I'm using it and I'm not being scammed. Drivers are getting paid, they are not being scammed. Investors know it's not profitable and operating at loss, yet they keep investing. Uber is not lying and report their numbers accurately. They don't report unflattering numbers, which is telling, but still - it's not scam.
- garlandkey 8y ago
  Scam was a poor word choice. That said, their entire business model is a house of cards and certainly isn't future proof. Uber doesn't seem to be planning for the future very well and will have no way to compete with Tesla (if their vision pans out).
- simonblack 8y ago
  Investors know it's not profitable and operating at loss, yet they keep investing. Otherwise known as "There's one born every minute." Uber (and Lyft, et al.) are in competition with traditional taxis. There's a good reason taxis are more expensive, which is that taxis have to break even, at the bare minimum. If Uber charged what the service costs, there would be no difference in costs to the consumer between using a taxi or calling a Uber. It's the dumb investors which are making up that difference. They won't be dumb forever.

75 points by kome 8y ago

I can't work out how uber can continue to operate post-IPO. Currently it operates by converting VC funding into discounted transport. Post-IPO I don't understand how it can gain ongoing sources of cash it needs while operating at a loss (unless of course the IPO raises enough cash immediately to fund it until after it has autonomous cars).

rorykoehler 8y ago
I don't see how autonomous cars will save them. They don't build cars
- rusticpenn 8y ago
  The want to replace drivers, not cars..
  - rorykoehler 8y ago
    All car manufacturers will do both once SDC tech is commoditised which will happen almost immediately
- sleepychu 8y ago
  Eliminating the driver cost.
  - celticninja 8y ago
    driver cost currently includes the cost of the car, i dont see how a self-driving car is cheaper than a driver who is proividing their own vehicle.
    - eloisant 8y ago
      The cost of a car will always be cheaper than the cost of car + driver. Yes the drivers provides their own vehicle, but it's factored in the driver's revenue.
      - celticninja 8y ago
        Yes but the initial outlay is the drivers and not Ubers. Also they don't pay for the car they just pay a bit toward it, if you buy the car you have maintenance and insurance to pay for directly. If they had to buy a fleet of vehicles for their entire operation in pretty sure their losses would be an order of magnitude above 3bn.
EliRivers 8y ago
Maybe this is the end game. They don't have to have a profitable business. They just need to get over that IPO line, convincing enough people to pay enough for the stock, for the VC to exit richer than they came in and for the Uberites with stock who are allowed to cash out to walk away handsomely.
- Gibbon1 8y ago
  They don't need to convince people to buy their stock. Wall Streets going to stuff this into Muni retirement funds and ma and pa's 401k.
yumraj 8y ago
Follow-on offerings.
onion2k 8y ago
Currently it operates by converting VC funding into discounted transport. Does it? As I understood it the way it works is through a discount that takes the form of "$10 towards your first ride", so it's pretty obvious where the VC money is going. They don't do that marketing in every market any more, and allegedly they're already profitable in some places (presumably the places where they don't give money away).
- celticninja 8y ago
  thats just some of the subsidising, if it was just $10 to each new user they would have been fine, but there is subsidisation going on to ensure they remain cheaper than standard taxis, this is part of their draw. At a guess their aim is to remain solvent long enough to become a monopoloy, so that they can set prices and start to earn back their losses.
  - brownbat 8y ago
    > remain solvent long enough to become a monopoloy I used to think this, but I'm increasingly skeptical this is actually the plan. 1. It's unlikely all other similar transportation options fold in the next five to ten years. (Beyond that you're putting a lot of faith in your ability to predict market activity very far in the future). 2. There are available substitutes for some types of trips, and substitutes make it difficult for monopolies to extract rents. E.g., sometimes they are competing with cross town buses, sometimes they are competing with walking, ebikes, or scooters, sometimes they are competing with asking a friend for a ride. 3. There are low barriers to entry. If Uber monopolized car hiring transportation somehow, then increased prices to collect enough rents to recoup losses from the dumping phase, a new Lyft could immediately spin up to threaten that position. Uber and Lyft cost a lot to maintain, but not necessarily to start. I mean, maybe they're optimistic that these won't be issues, but building a monopoly isn't as easy as it seems. People have been very successful as monopolists, but that doesn't mean become a monopolist is always the best strategy.
    - dvfjsdhgfv 8y ago
      > 3. There are low barriers to entry. Yes and no. I observe different markets and while it's true that new players appear, in general their offering is worse than Uber because of smaller fleet. Also, with Uber prices it's already hard to achieve profitability, so any new player finds it even harder to compete price-wise.
dvfjsdhgfv 8y ago
Well, post-IPO it will burn the cash from the IPO.
cjhopman 8y ago
Tesla seems to be able to do it just fine post-IPO.

austenallred 8y ago

This is kindergarten-level financial analysis from a socialist magazine. All this to say that Uber is losing money right now - we already knew that. Then a bunch of other random stories of other companies that have lost money in the past, including, well, some of the biggest and most successful companies on earth. The question is will revenue overtake costs as it grows more quickly - no serious analyst would insinuate Uber will be gross margin unprofitable over the long-term. It would be awfully difficult to do so given they collect a percentage of every sale. Uber has opened offices all over and has high fixed costs. It’s waiting on the small variable revenue from each trip to catch up with those costs, and the question is “will it?” That’s all.

garlandkey 8y ago
There are two factors that make me think Uber isn't sustainable. One is that they're relying on drivers being contractors, which won't last. The second issue is that Tesla is coming and nobody will be able to compete with not having to pay any driver.
tsss 8y ago
You'd think that a socialist of all people would understand that it pays off to bleed money in the beginning in order to get a market controlling position.
- kobiguru 8y ago
  I don't think they like monopolies they don't control.
lmm 8y ago
> The question is will revenue overtake costs as it grows more quickly - no serious analyst would insinuate Uber will be gross margin unprofitable over the long-term. How much room do they have to grow? Uber is already a, what, multi-billion-dollar company? If they're not gross margin profitable now, where's the tipping point? > Uber has opened offices all over and has high fixed costs. It’s waiting on the small variable revenue from each trip to catch up with those costs, and the question is “will it?” That’s all. What's the high fixed cost? App development surely can't cost that much. Drivers, server hosting, support, lawsuits etc. are all going to be variable cost.

pkalinowski 8y ago

How is it a scam? I'm using it and I'm not being scammed. Drivers are getting paid, they are not being scammed. Investors know it's not profitable and operating at loss, yet they keep investing. Uber is not lying and report their numbers accurately. They don't report unflattering numbers, which is telling, but still - it's not scam.

garlandkey 8y ago
Scam was a poor word choice. That said, their entire business model is a house of cards and certainly isn't future proof. Uber doesn't seem to be planning for the future very well and will have no way to compete with Tesla (if their vision pans out).
simonblack 8y ago
Investors know it's not profitable and operating at loss, yet they keep investing. Otherwise known as "There's one born every minute." Uber (and Lyft, et al.) are in competition with traditional taxis. There's a good reason taxis are more expensive, which is that taxis have to break even, at the bare minimum. If Uber charged what the service costs, there would be no difference in costs to the consumer between using a taxi or calling a Uber. It's the dumb investors which are making up that difference. They won't be dumb forever.