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There's way too many comments in this thread comparing Uber's non-profitability to Amazon's which I think is quite silly. Amazon lost $2.8 billion over its firs

There's way too many comments in this thread comparing Uber's non-profitability to Amazon's which I think is quite silly. Amazon lost $2.8 billion over its first 17 quarters while Uber lost $4.5 billion in 2017 alone. Also comparing Uber to Facebook is quite silly too. Facebook had a lot more users than Uber but they are also different types of users. One is a free user with hope for targeted advertisement (in which the advertiser gains/loses money) whereas the other is paid users/riders (but in this case Uber has been losing money each ride and I don't see it changing). Also advertisement has huge margins with not much cost from Facebook's pov but ride sharing logistics is completely different with very little margin where the driver needs to get paid. Drivers are already complaining that they are not getting paid enough for rides and asking Uber to take lesser cut of the ride. So Uber can't raise their cut over their current 20-25%. Facebook's advertisement business doesn't have this problem. Nor does Amazon as they can make their logistics more efficient. Amazon is able to lower it's cost with economies of scale but I don't see Uber being able to achieve that as their costs only increase as they scale as they lose money on every ride. The only way I can see them become profitable is if and when they achieve driverless cars, which they are betting huge on, but that's a long way to go. Uber is betting on driverless cars to lower the cost per mile. But I think Tesla will beat them to market much much before them considering Tesla already has the tech. Elon even hinted on the Tesla taxi fleet in the next couple years. Now I realize Elon's got poor judgement on timing but I still think they will be able to achieve that much earlier than Uber. And if they do, I honestly don't see Uber & Lyft surviving.

sova 8y ago
Well said! Given that UBER actually follows a model that looks like: Don't own the equipment, rent people who own their own equipment, be the middleman. It's quite reminiscent of Truck Driving or some sort of specialty guildswork, like carpentry or other professions there are Guilds for. UBER is a replicable model for any guildswork, taxi [guild] service conveniently benefitting from GPS and mapping. However, since UBER owns not the equipment, and only rents the laborers (without a strong "come in to the office" type of contract) it's hard to see where the value of this company actually lies. Of course, due to their brand monopoly, or duopoly, they are able to keep strength for a while. But, eventually, guildsworks in general will probably be delegated to some other motherlode app. If they need help growing or figuring out how to actually make a profitable company, they need to stop thinking about how to be a taxi service, and how to be a transportation provider.
Udik 8y ago
> Also comparing Uber to Facebook is quite silly too. Facebook had a lot more users than Uber but they are also different types of users. The main difference seems to me that Facebook enjoys a network effect: you can move to a different social network, but who will you find there? While you can download as many taxi service apps as you want and use one or the other, the one that has the cheapest offer. If an Uber competitor comes up with autonomous driving first and offers ride for half of Uber's price, people will switch instantly.
- busymom0 8y ago
  That's a very good point too which I missed. People don't care about whether their friends are using Uber or some other app. They care about whether the ride is cheaper. It's a bottom of the barrel pricing game in ride sharing apps.
  - usaar333 8y ago
    They also care about wait times. And drivers care about utilization. "Taxi apps" definitely have network effects from the two sided market, though not as strong as a social network.
    - busymom0 8y ago
      From what I have found personally, the wait times on Uber and Lyft are the exact same in my area in Canada. Every driver which is on Uber is also on Lyft. So I don't think the network effect is helping them much as riders aren't really getting anything different in terms of wait times. Also this is even after Lyft barely being about 1 year old in my city while Uber has been around for many years.
- dangjc 8y ago
  Uber pool gives it a very strong network effect. You need enough riders going in the same direction as you at the same time. When I do my morning commute, I can't take Lyft because there isn't a critical mass and there isn't room for two ride sharing networks. Uber is consistently cheaper and has shorter wait times.
JMTQp8lwXL 8y ago
Does Uber even want to encourage people to take more rides if each single one is at a loss? It's hard to envision the strategy going forward.
- acchow 8y ago
  Yes, they want to eat up the whole market until all the competitors die. Then they can raise prices.
  - JMTQp8lwXL 8y ago
    With that strategy, Uber might run out of cash before the competition is crushed.
    - rhizome 8y ago
      They are way into debt financing and have a $25B bottom line, this is a "when you owe the bank a million dollars..." situation now, nobody involved is going to let it run out of money and throw the whole house of cards away.
      - JMTQp8lwXL 8y ago
        Correct me if I'm wrong, but that sounds like sunk cost fallacy.
        rhizome 8y ago
        I'm not surprised.
    - speedplane 8y ago
      > Uber might run out of cash before the competition is crushed. True, but time scales matter. Given their current position, it might take 20 years for that to happen. By then, who knows where they or the market will be.
  - 8y ago
acdha 8y ago
Amazon is definitely misleading: they became profitable within specific business areas (e.g. books & music first) but invested that money in new businesses. The analogy would be if, say, Uber was profitable in San Francisco and Los Angeles but still bootstrapping Phoenix and Denver. I haven’t read anything which suggests they aren’t subsidizing rides in their most established markets just like everywhere else, and both their drivers and customers can switch to competitors so easily that it’s not obvious how they can change that.
- levthedev 8y ago
  I believe they are, by some fairly loose accounting definition (i.e., not counting back office expenses, capital expenses, etc), profitable on non-pool rides in core US cities.
  - askafriend 8y ago
    I believe that is considered being "contribution margin positive"
mirajshah 8y ago
Don't you have to adjust Amazon's 2.8 billion for inflation?
- busymom0 8y ago
  Should we though? Technology was far inferior back then and it would be much cheaper for amazon to achieve the same thing as they back in the day if they had today's technology. Amazon also has a lot more gears moving around in their logistics as compared to Uber.
foobarian 8y ago
> Also advertisement has huge margins with not much cost from Facebook's pov but ride sharing logistics is completely different with very little margin where the driver needs to get paid Why is this? In both cases it seems the cost is paying a bunch of servers and engineers to run a website. So why is Facebook seemingly more efficient?
- el_benhameen 8y ago
  Uber also has drivers to pay. Facebook doesn't. Thus, the margin.
- busymom0 8y ago
  Mostly because Uber needs to pay the drivers and they can't really take more than 20-25% cut. Drivers are already complaining that Uber should take less as they are barely making much money especially as there are now a lot of drivers.
- sfifs 8y ago
  Nope. Market share and pricing power in digital advertising comes from user base and targeting capability. As an advertiser, I can reach most of the population in many country through FB/IG and YouTube. Their targeting data is also pretty good. So they claim a lion's share of the market. Also inventory expands as userbase expands and the userbase doesn't really have other options with similar network effects. Uber on the other hand has plenty of competition. Their total cost to user has to be competitive vs. not just taxis but possibly owning a car. There's only so much they can charge for a ride and they pay a ton of incentives to get drivers to drive for them in many markets. So the available space for profitability is constrained.
  - foobarian 8y ago
    So basically advertising is less constrained on the upside than transportation. The whole bit about 'they have to pay their drivers' is a red herring - the real constraint is that the price the riders are willing to pay is more constrained / lower than what advertisers are per user.

sova 8y ago

Well said! Given that UBER actually follows a model that looks like: Don't own the equipment, rent people who own their own equipment, be the middleman. It's quite reminiscent of Truck Driving or some sort of specialty guildswork, like carpentry or other professions there are Guilds for. UBER is a replicable model for any guildswork, taxi [guild] service conveniently benefitting from GPS and mapping. However, since UBER owns not the equipment, and only rents the laborers (without a strong "come in to the office" type of contract) it's hard to see where the value of this company actually lies. Of course, due to their brand monopoly, or duopoly, they are able to keep strength for a while. But, eventually, guildsworks in general will probably be delegated to some other motherlode app. If they need help growing or figuring out how to actually make a profitable company, they need to stop thinking about how to be a taxi service, and how to be a transportation provider.

Udik 8y ago

> Also comparing Uber to Facebook is quite silly too. Facebook had a lot more users than Uber but they are also different types of users. The main difference seems to me that Facebook enjoys a network effect: you can move to a different social network, but who will you find there? While you can download as many taxi service apps as you want and use one or the other, the one that has the cheapest offer. If an Uber competitor comes up with autonomous driving first and offers ride for half of Uber's price, people will switch instantly.

busymom0 8y ago
That's a very good point too which I missed. People don't care about whether their friends are using Uber or some other app. They care about whether the ride is cheaper. It's a bottom of the barrel pricing game in ride sharing apps.
- usaar333 8y ago
  They also care about wait times. And drivers care about utilization. "Taxi apps" definitely have network effects from the two sided market, though not as strong as a social network.
  - busymom0 8y ago
    From what I have found personally, the wait times on Uber and Lyft are the exact same in my area in Canada. Every driver which is on Uber is also on Lyft. So I don't think the network effect is helping them much as riders aren't really getting anything different in terms of wait times. Also this is even after Lyft barely being about 1 year old in my city while Uber has been around for many years.
dangjc 8y ago
Uber pool gives it a very strong network effect. You need enough riders going in the same direction as you at the same time. When I do my morning commute, I can't take Lyft because there isn't a critical mass and there isn't room for two ride sharing networks. Uber is consistently cheaper and has shorter wait times.

JMTQp8lwXL 8y ago

Does Uber even want to encourage people to take more rides if each single one is at a loss? It's hard to envision the strategy going forward.

acchow 8y ago
Yes, they want to eat up the whole market until all the competitors die. Then they can raise prices.
- JMTQp8lwXL 8y ago
  With that strategy, Uber might run out of cash before the competition is crushed.
  - rhizome 8y ago
    They are way into debt financing and have a $25B bottom line, this is a "when you owe the bank a million dollars..." situation now, nobody involved is going to let it run out of money and throw the whole house of cards away.
    - JMTQp8lwXL 8y ago
      Correct me if I'm wrong, but that sounds like sunk cost fallacy.
      - rhizome 8y ago
        I'm not surprised.
  - speedplane 8y ago
    > Uber might run out of cash before the competition is crushed. True, but time scales matter. Given their current position, it might take 20 years for that to happen. By then, who knows where they or the market will be.
- 8y ago

acdha 8y ago

Amazon is definitely misleading: they became profitable within specific business areas (e.g. books & music first) but invested that money in new businesses. The analogy would be if, say, Uber was profitable in San Francisco and Los Angeles but still bootstrapping Phoenix and Denver. I haven’t read anything which suggests they aren’t subsidizing rides in their most established markets just like everywhere else, and both their drivers and customers can switch to competitors so easily that it’s not obvious how they can change that.

levthedev 8y ago
I believe they are, by some fairly loose accounting definition (i.e., not counting back office expenses, capital expenses, etc), profitable on non-pool rides in core US cities.
- askafriend 8y ago
  I believe that is considered being "contribution margin positive"

mirajshah 8y ago

Don't you have to adjust Amazon's 2.8 billion for inflation?

busymom0 8y ago
Should we though? Technology was far inferior back then and it would be much cheaper for amazon to achieve the same thing as they back in the day if they had today's technology. Amazon also has a lot more gears moving around in their logistics as compared to Uber.

foobarian 8y ago

> Also advertisement has huge margins with not much cost from Facebook's pov but ride sharing logistics is completely different with very little margin where the driver needs to get paid Why is this? In both cases it seems the cost is paying a bunch of servers and engineers to run a website. So why is Facebook seemingly more efficient?

el_benhameen 8y ago
Uber also has drivers to pay. Facebook doesn't. Thus, the margin.
busymom0 8y ago
Mostly because Uber needs to pay the drivers and they can't really take more than 20-25% cut. Drivers are already complaining that Uber should take less as they are barely making much money especially as there are now a lot of drivers.
sfifs 8y ago
Nope. Market share and pricing power in digital advertising comes from user base and targeting capability. As an advertiser, I can reach most of the population in many country through FB/IG and YouTube. Their targeting data is also pretty good. So they claim a lion's share of the market. Also inventory expands as userbase expands and the userbase doesn't really have other options with similar network effects. Uber on the other hand has plenty of competition. Their total cost to user has to be competitive vs. not just taxis but possibly owning a car. There's only so much they can charge for a ride and they pay a ton of incentives to get drivers to drive for them in many markets. So the available space for profitability is constrained.
- foobarian 8y ago
  So basically advertising is less constrained on the upside than transportation. The whole bit about 'they have to pay their drivers' is a red herring - the real constraint is that the price the riders are willing to pay is more constrained / lower than what advertisers are per user.