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Did I miss something? I thought Uber was still a long way from being profitable and had no plausible plan for how to become profitable.
by ufmace 7y ago
Did I miss something? I thought Uber was still a long way from being profitable and had no plausible plan for how to become profitable.
- malvosenior 7y agoJust like Amazon at its IPO.
- duxup 7y agoMaybe I don't remember it well enough but Amazon's business model seemed a lot more ... tangible than Uber's don't you think?
- dymk 7y agoIn the 1997, Amazon's proposition of "Online retailer" was also pretty far fetched. It wasn't obvious that their model was going to make them one of the largest retailers in the world.
- duxup 7y agoI duno, buying stuff online seemed like the way of the future at the time IMO. When, how much and etc was just a matter of timing.
- atemerev 7y agoSo is gig economy. Jobs will continue to decline.
- trynewideas 7y agoTechCrunch did a good job looking back at Amazon's IPO and it's a good read to clarify what Amazon was when it went public (a bookseller, not general retail), how insane its growth was (revenue up about 3,000% YoY from 1996 to 1997, more revenue in the quarter before its IPO than the entire previous year), and how fast the IPO came together (12 days to S-1). Even for all that growth, revenue was still around $15M. It was a minnow but it played all of its cards about as right as it could for an IPO. https://techcrunch.com/2017/06/28/a-look-back-at-amazons-1997-ipo/ https://techcrunch.com/2017/06/28/a-look-back-at-amazons-199...
- NewsAware 7y agoThe idea of "people won't buy things they can't judge by holding it in their hands" was still strong back then. That's why Amazon was successful selling books where quality was trusted implicitly without that physical judgment being necessary.
- paulddraper 7y agoDoesn't ride sharing seem like the way of the future in your opinion?
- duxup 7y agoNot necessarily.
- visarga 7y agoWho's doing ride sharing? Certainly not Uber
- paulddraper 7y ago> Uber Technologies Inc. is a transportation network company (TNC) offering services that include peer-to-peer ridesharing, ride service hailing, food delivery, and a bicycle-sharing system. https://en.wikipedia.org/wiki/Uber https://en.wikipedia.org/wiki/Uber
- fullshark 7y agoOnline retailers wasn't far-fetched at all. It wasn't obvious they were going to become the everything store and dominate the market, but it wasn't like people were perplexed by a business plan of selling books online and sending them to consumers. If people are perplexed by uber today it's because the unit economics look horrible, and it doesn't seem like they will improve without a major technological advance. Edit: TBF, I was curious so I checked out AMZN's first year of trading: https://finance.yahoo.com/quote/AMZN/history?period1=852883200&period2=894783600&interval=1d&filter=history&frequency=1d https://finance.yahoo.com/quote/AMZN/history?period1=8528832... They dropped 20% on day one. I don't think that reflects investor skepticism re: shopping online, but skepticism re: the myriad risks they faced as one of many money losing online retailers.
- SeanAppleby 7y agoEven with a major technical advance it's not obvious that they'll have a moat to defend their margins. All of the ride sharing platforms might just end up competing to the death on price without anything else to differentiate on, and in that future I'd imagine the person with the cheapest supply chain will win, and I don't see why that would be Uber.
- guelo 7y agoIt wasn't farfetched, everyone had the same idea, there were dozens of online retailers that IPO'd in those years. Amazon was just better managed so it was one of the few that survived the dotcom crash.
- fullshark 7y agoThey also started with selling media, which is the perfect industry to get people comfortable with shopping online as quality is nearly assured.
- Animats 7y agoRight. At the time, I thought Sears would dominate that business. They had the big-catalog fulfillment thing down, and had for a century. All they needed to do was take it online. But Sears gave up on general mail order in 1993, when they discontinued their huge print catalog. They thought WalMart and the malls had won.
- malvosenior 7y agoAs a heavy early Amazon and Uber user, I'd say not really. Both are pretty revolutionary and I certainly have been paying Uber a lot more than I was paying Amazon when they just sold books.
- nonaime 7y agoI get how Amazon can be seen as revolutionary, but not how Uber (or even Lyft) is. I mean, when I think of catching a taxi back in the day, the only difference is that I made a phonecall instead of using an app to get the service. If it's the "gig economy-ness" of it, we had hacks in my hometown. Maybe there was a license requirement to be a hack, but it always felt like hacks were just regular schmoes who would charge a flat fee to take you somewhere.
- malvosenior 7y agoI've had very extensive and very negative taxi experiences around the world. Uber is night and day from a UX perspective. Being able to see where the car is when it's on the way, pre-inputting your destination, paying through the app... The gig economy aspect was definitely revolutionary as well. It's essentially changing the nature of work (love it or hate it). As much as I love Amazon and always have, in the early days it was "just" ordering books online. Yes, that was great and again the UX was great but it didn't seem as revolutionary as Uber.
- semi-extrinsic 7y agoI don't see how the UX thing is so revolutionary. I live in a city with 120k people, and the app of the local taxi company here does all of those things as well.
- malvosenior 7y agoThat's not been my experience and definitely not before Uber existed and forced people to start copying them.
- tinco 7y agoYou don't think selling taxi rides is a tangible business model?
- duxup 7y agoThe traditional system did, I don't see Uber doing it.
- EpicEng 7y agoAt a loss without any notion of how to make it profitable in the near future? No, I don't.
- lkbm 7y agoI see no evidence that they lack a notion of how to make it profitable. Are they doing it in the near future? No, but why do they need to? There are clearly plenty of people happy to fund for the long-term payout. From what I saw in the S-1, their core platform -- which I assume is ride hailing -- was profitable until Q4 2018. They offer heavy incentives in order to compete, but once they're sufficiently established in a market, looks like they can become profitable on that front by no longer offering promotions in order to fight Lyft/whoever. They just need to stay solvent longer than the competitors, and being in more markets than the competition should help with that. Their R&D is also massive, but they could stop most of that if they needed to.
- mrnobody_67 7y agoAmazon was cashflow positive from the early days and raised less than $100m in its entire existence.
- Naac 7y agoCan you elaborate?
- pastor_elm 7y agoAmazon stock success has always been built on AWS.
- rtempaccount1 7y agoMy feeling though is that Amazon had a much larger moat to build, with distribution networks, warehouses, logistics etc. With Uber, what's their moat, so that when they raise prices to become profitable users don't just move away? Lyft/local taxi companies/public transport, all have the infrastructure to provide the service that uber provides.
- chrshawkes 7y agoI would personally pay twice the rate I pay for an Uber to be honest.
- throwaway082729 7y agoLyft has to be in business till then. Local taxi companies are more expensive than Uber and inconvenient. Public transport is barely used. Uber is providing a subsidized public service while employing a lot of people. The moat is there but the question is one of diversification and sustenance as a public company. In the coming days, there'll be a massive internal push to reduce costs, diversify and become profitable. If the foundation of the company is strong, they'll be able to get through this period. Instead, if most of the early employees jump ship (which I strongly suspect is likely to happen), it's going to meander. For Uber's own sake, having a mature and repentant Travis back might not be a bad thing. They'll need a second wind at some point.
- rtempaccount1 7y agoLocal taxis are perhaps only more expensive due to Uber burning VC cash to compete? Public transport is barely used in the USA perhaps but that's not the only market Uber needs to compete in to succeed. And this isn't taking into account Uber's many run-ins with local authorities, which are dragging on , costing money and have the possibility to shut them out of some markets. From what I understand Uber's main answer to this is "autonomous taxis" but to me that's a long way from being a viable business model.
- matthewaveryusa 7y agoOh lyft will be in business until then. How do you think Google is planning on selling their Waymo rides?
- kgwgk 7y agoTo be fair, AMZN was valued at $400mn at the IPO and not $80bn (only in 2011 did Amazon reach that valuation).
- deleted 7y ago[deleted]
- aetherson 7y agoAmazon went public in 1997 with revenue of $16M in Q1 of that year. Its revenue was up a startling 1,800% or so YoY. Its losses were about $3M, so about 19% of revenue. Its market value at launch was about $438M, about 27x quarterly revenue. Uber's Q4 2018 revenue was about $3B, up about 25% YoY. Its losses are a little hard to parse due to some tax shenanigans, but maybe $865M is about right (or maybe it should be worse), so 28% of revenue. Its market cap right now is around $85B, about 28x quarterly revenue.
- ronaru 7y agoAmazon was cash flow positive within few years (6?). Uber still isn't
- atemerev 7y agoThese days, being profitable is considered harmful. More profits = more taxes. Getting virtual “profits” into stock appreciation and structuring revenues to pay nearly zero tax is the name of the game today, and only big corporations can afford it. It is small and medium businesses that pick the bill.
- asdff 7y agoUber isn't rolling profit back into the company like Amazon or others do, they are literally loosing money on every ride. There's no profit to hide from the taxman.
- gniv 7y ago> Uber isn't rolling profit back into the company like Amazon They kind of are. It’s just a matter of timing. They are rolling future profits, bankrolled by VC.
- adjkant 7y agoAnd betting those profits come in the process. Huge difference.
- TazeTSchnitzel 7y agoRight. Amazon is and has been accumulating a massive vertically-integrated empire of physical infrastructure they actually own or lease. Uber is accumulating… uh. Microservices? Negative goodwill?
- mattmanser 7y agoMarkets, it's acquiring markets. I'm no Uber fan, but come on, they're moving into more and more cities world-wide, often without competition save the local taxi firms.
- matt4077 7y ago
- sytelus 7y agoAmazon didn't turned profit for first 5 years or so after IPO. If you go back 15 years down the history, you will find many articles/analysis doubting if they would ever become profitable. However no one doubted that online retail was the future and brick-and-mortar stores will increasingly become part of the history. I see a lot of parallels here. No one doubts anymore that app-based cabs are the future and traditional taxis business is pretty much done now. So if you take that as foundation then there has to be one or two companies that would eventually dominate this business. With first mover advantage, Uber has good chance of being one of them.
- exogeny 7y agoThis is a foolish viewpoint. Amazon got immense economies of scale as they grew, Uber’s costs scale alongside it. It drives me crazy that so many people equivocate them.
- rwmj 7y agoAmazon also built out a huge logistics infrastructure which they own and is hard to replicate (not just know-how, but warehouses and robots). Uber don't own the cars or employ the drivers, they have a phone app and a brand name.
- klaudius 7y agoGood point. Have you read Hubert Horan's articles on Uber (especially those on nakedcapitalism.com)? Retailers can use economies of scale to lower prices and increase variety of products. There are no economies of scale in Uber the way it's structured now and the service is largely homogeneous. There could be economies of scale with self-driving cars, but why should they be the winner there? The only way they managed to offer lower prices (which is the main concern to riders) is through VC subsidy. There is simply no way to significantly lower prices for taxis, unless you have self-driving cars. The only thing Uber has is a limited power of a local network effect which is a relatively weak moat.
- mevile 7y agoI don't understand why uber's costs don't scale well. They make an app that drivers use. They're not having to buy cars or hire drivers to grow. They just need their app to function. What is all their money going towards? Is all that money lost just subsidizing the cost of the ride? If they stop subsidizing the drive price, which they will have to at some point I imagine, will people just abandon the service?
- gdilla 7y agoUber is valued more for its potential and growth. Uber is optimizing growth and revenue before it optimizes profit (which could take another decade). See Amazon.
- robbyking 7y agoUber's business plan under Kalanick was to create a monopoly and then raise rates. Now that Dara is CEO they're trying to legitimize themself, but it's going to be an uphill battle to say the least.
- rswail 7y agoUber's business plan under Kalanick was to flout the law and use VC money to subsidize until some future time when it would be a monopoly. It assumed that the market would not react or it assumed that the VCs would keep funneling cash to keep it going. Uber's business "model" always was unsustainable and the IPO and subsequent drop is entirely realistic as people realize that. Uber Eats and some airy-fairy driverless vehicle models will not sustain it. Currently Uber does not fund its vehicles, how does it think that the capital cost of running a driverless taxi fleet in a city will somehow be cheaper than the current cost of driver+car? Uber doesn't have the capital to actually replace its current business model with one that is capital intensive and it will be eaten alive by existing fleet logistics and car manufacturers. It has no distinct advantage when operating a driverless fleet than Fedex or UPS or the equivalent operators.
- rswail 7y ago"optimizing growth and revenue" by subsidizing the operations. That isn't "optimization", it's sunk cost that will never be recovered. Uber is already withdrawing from Asian cities (eg Bangkok) where the price of taxis was close to cost, and in other cities (eg Melbourne), where Uber's flouting of the existing law has lead to deregulation, Uber is just another brand in the market. The price of a normal taxi hailed on the street and an Uber (I took Uber to/taxi from the city the other day, non peak, non surge) was literally within 5%.