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How is it that Uber is losing money? They have such a huge amount of income, There is an Uber on almost every block in America. They don't pay their contractors

How is it that Uber is losing money? They have such a huge amount of income, There is an Uber on almost every block in America. They don't pay their contractors a living wage and seems to me they have extremely little overhead. They don't have to maintain cars or even have an HR department for their employees. All they do is develop an app that does nothing special. Is it all R&D?

creaghpatr 7y ago
A transfer of wealth from the rich and the poor to the middle class
polskibus 7y ago
Buying market share via heavy discounts. They used to subsidy fares a lot, now it's ubereats that is subsidized most.
- frankbreetz 7y ago
  Could you ELI5 for this?
  - rudolfwinestock 7y ago
    Think on how much cheaper rides are with Uber, Lyft, or any similar service, compared with an ordinary taxi cab. The reason for that is that you're splitting the fare with a venture capitalist. The reason why VCs were willing to do that was that they anticipated that Uber (in particular) would monopolize ride-sharing. After that, they intended to replace the drivers (who are still the most expensive part of the ride) with self-driving cars. I spoke with a Google employee, about two years ago, who told me that everyone in the self-driving business hoped to have some big advances ready by 2021. Turns out that autonomous vehicles are a lot harder than anticipated, so the ride-share companies have had to pivot. That explains Uber Eats. As sketchy as Uber has been, I have no sympathy for the traditional taxi cab companies. They refused to adapt in the face of a new situation staring them in the face. The New York City medallion-owners just expected to continue farming from the cab drivers with zero effort. Parasites. I spoke with a guy who had recently come to America and needed a ride. His friends couldn't drive him, for some reason, so they tried to arrange a cab. While they bickered, trying to find a cab company phone number, this guy downloaded the Uber app, punched in his credit card info, and his ride showed up before his friends had finished finding a cab company. Nevertheless, Uber is a sketchy company and desperately needs regulation.
    - frankbreetz 7y ago
      The article says they take 30% of each fare, but we are splitting it with a VC? This does not add up to me.
      - bena 7y ago
        You get an Uber. The overall cost of your trip should be $15 once you figure in all the various costs and overhead. But you get charged only $10. Uber has already eaten $5 of the fare for you. That money has to come from somewhere. The 30% they take on the $10 isn't covering what they've already knocked off the price. That money has to come from somewhere. That somewhere is the VC. The 30% they take is really only stemming the bleeding.
        frankbreetz 7y ago
        That's what I don't understand. What are the various cost and overhead? If a trip cost $10, the driver gets $7. You are telling me $3 to uber doesn't cover overhead? Overhead to me seems extremely small, what is the marginal cost on an uber ride to uber?
        tryitnow 7y ago
        Other costs include vehicle depreciation, insurance, maintenance, gas, etc. Hubert Horan is an analyst who goes into these costs into detail. http://horanaviation.com/Uber.html http://horanaviation.com/Uber.html
        misnome 7y ago
        Isn't all this offloaded to the driver though? e.g. not Uber's $3 cut
        johnbrodie 7y ago
        There is a huge amount of Uber right now that needs paid for but is out of sight, though. Developers for the app and infrastructure, but also entire offices of engineers dedicated to R&D for driverless cars. Eats into that $3 quick.
  - bena 7y ago
    Uber is charging less than fair market rates for the services it provides. It's using money from other sources to prop up parts of the business that can't support themselves.
    - Fogest 7y ago
      But their cost to run servers/app should not be costing them 30% of each ride. They should be making good profit. They are blowing a lot of money in other areas if you look at charts that outline this.
      - bena 7y ago
        The cost of the servers, no. But there are processing fees, employee salaries, etc. If you have a link to those charts outlining where they're spending their cash, I'd actually like to look at them.
- navigatesol 7y ago
  >Buying market share via heavy discounts. Then leveraging their new-found monopoly by raising rates and becoming profitable....right? Except that articles like this (and the multitude of others) demonstrate that this simply will not happen. Riders and drivers do the work, pay the costs and will revolt.
ebg13 7y ago
> They don't have to ... have an HR department for their employees Uber has something like 22,000 actual employees. They definitely have to maintain HR departments.
- frankbreetz 7y ago
  not in the context of giving millions of rides a day. They don't have an HR department to handle the vast majority of their employees(the drivers) is the point.
overcast 7y ago
They are burning through VC money by subsidizing the cost of each ride, thus artificially deflating its actual cost. Once the gravy train runs out, these ride sharing companies will have no choice but to jack up the prices to their actual value. You'll then have normal cab prices, but without the headache of hailing one.
- Fogest 7y ago
  > They are burning through VC money by subsidizing the cost of each ride I've never understood that. How are they subsidizing it? They take over 25% of what the customer pays and all they have to do is run the app. Whether they charge $10 or $15 for the same ride the cost to them is the same. It doesn't make sense, they don't have any extra cost by making a ride cheaper.
  - overcast 7y ago
    Because the cost of a cab ride is not $6 to drive entirely cross town. It just isn't. Uber is popular because it's cheap as shit. If SuperRide came out, and it was half the price of Uber, no one would ever use Uber again.
    - Fogest 7y ago
      But that doesn't mean Uber is losing money by offering it less. It costs the driver more to drive farther for less, Uber doesn't have a higher expense for a longer ride.
      - overcast 7y ago
        "Investor reports reveal riders only pay 41 percent of the full cost of each ride, with investors footing the remaining 59 percent." I hope this explains it more clearly. https://www.vice.com/en_us/article/9a3vye/uber-true-cost-uh-oh https://www.vice.com/en_us/article/9a3vye/uber-true-cost-uh-...
        7y ago
navigatesol 7y ago
>How is it that Uber is losing money? Because driving individual people around in expensive cars burning expensive fuel is not a profitable business (in the economic sense). Where are all the billion dollar taxi empires? It's a tough racket. It's equally laughable that Uber's "killer app" is going to be food delivery.
- nabnob 7y ago
  But uber isn't paying for the car, the insurance, or the fuel.
Jommi 7y ago
Because America is not the only market they are operating in. Because ridehailing is not the only industry they are operting in.

creaghpatr 7y ago

A transfer of wealth from the rich and the poor to the middle class

polskibus 7y ago

Buying market share via heavy discounts. They used to subsidy fares a lot, now it's ubereats that is subsidized most.

frankbreetz 7y ago
Could you ELI5 for this?
- rudolfwinestock 7y ago
  Think on how much cheaper rides are with Uber, Lyft, or any similar service, compared with an ordinary taxi cab. The reason for that is that you're splitting the fare with a venture capitalist. The reason why VCs were willing to do that was that they anticipated that Uber (in particular) would monopolize ride-sharing. After that, they intended to replace the drivers (who are still the most expensive part of the ride) with self-driving cars. I spoke with a Google employee, about two years ago, who told me that everyone in the self-driving business hoped to have some big advances ready by 2021. Turns out that autonomous vehicles are a lot harder than anticipated, so the ride-share companies have had to pivot. That explains Uber Eats. As sketchy as Uber has been, I have no sympathy for the traditional taxi cab companies. They refused to adapt in the face of a new situation staring them in the face. The New York City medallion-owners just expected to continue farming from the cab drivers with zero effort. Parasites. I spoke with a guy who had recently come to America and needed a ride. His friends couldn't drive him, for some reason, so they tried to arrange a cab. While they bickered, trying to find a cab company phone number, this guy downloaded the Uber app, punched in his credit card info, and his ride showed up before his friends had finished finding a cab company. Nevertheless, Uber is a sketchy company and desperately needs regulation.
  - frankbreetz 7y ago
    The article says they take 30% of each fare, but we are splitting it with a VC? This does not add up to me.
    - bena 7y ago
      You get an Uber. The overall cost of your trip should be $15 once you figure in all the various costs and overhead. But you get charged only $10. Uber has already eaten $5 of the fare for you. That money has to come from somewhere. The 30% they take on the $10 isn't covering what they've already knocked off the price. That money has to come from somewhere. That somewhere is the VC. The 30% they take is really only stemming the bleeding.
      - frankbreetz 7y ago
        That's what I don't understand. What are the various cost and overhead? If a trip cost $10, the driver gets $7. You are telling me $3 to uber doesn't cover overhead? Overhead to me seems extremely small, what is the marginal cost on an uber ride to uber?
        tryitnow 7y ago
        Other costs include vehicle depreciation, insurance, maintenance, gas, etc. Hubert Horan is an analyst who goes into these costs into detail. http://horanaviation.com/Uber.html http://horanaviation.com/Uber.html
        misnome 7y ago
        Isn't all this offloaded to the driver though? e.g. not Uber's $3 cut
        johnbrodie 7y ago
        There is a huge amount of Uber right now that needs paid for but is out of sight, though. Developers for the app and infrastructure, but also entire offices of engineers dedicated to R&D for driverless cars. Eats into that $3 quick.
- bena 7y ago
  Uber is charging less than fair market rates for the services it provides. It's using money from other sources to prop up parts of the business that can't support themselves.
  - Fogest 7y ago
    But their cost to run servers/app should not be costing them 30% of each ride. They should be making good profit. They are blowing a lot of money in other areas if you look at charts that outline this.
    - bena 7y ago
      The cost of the servers, no. But there are processing fees, employee salaries, etc. If you have a link to those charts outlining where they're spending their cash, I'd actually like to look at them.
navigatesol 7y ago
>Buying market share via heavy discounts. Then leveraging their new-found monopoly by raising rates and becoming profitable....right? Except that articles like this (and the multitude of others) demonstrate that this simply will not happen. Riders and drivers do the work, pay the costs and will revolt.

ebg13 7y ago

> They don't have to ... have an HR department for their employees Uber has something like 22,000 actual employees. They definitely have to maintain HR departments.

frankbreetz 7y ago
not in the context of giving millions of rides a day. They don't have an HR department to handle the vast majority of their employees(the drivers) is the point.

overcast 7y ago

They are burning through VC money by subsidizing the cost of each ride, thus artificially deflating its actual cost. Once the gravy train runs out, these ride sharing companies will have no choice but to jack up the prices to their actual value. You'll then have normal cab prices, but without the headache of hailing one.

Fogest 7y ago
> They are burning through VC money by subsidizing the cost of each ride I've never understood that. How are they subsidizing it? They take over 25% of what the customer pays and all they have to do is run the app. Whether they charge $10 or $15 for the same ride the cost to them is the same. It doesn't make sense, they don't have any extra cost by making a ride cheaper.
- overcast 7y ago
  Because the cost of a cab ride is not $6 to drive entirely cross town. It just isn't. Uber is popular because it's cheap as shit. If SuperRide came out, and it was half the price of Uber, no one would ever use Uber again.
  - Fogest 7y ago
    But that doesn't mean Uber is losing money by offering it less. It costs the driver more to drive farther for less, Uber doesn't have a higher expense for a longer ride.
    - overcast 7y ago
      "Investor reports reveal riders only pay 41 percent of the full cost of each ride, with investors footing the remaining 59 percent." I hope this explains it more clearly. https://www.vice.com/en_us/article/9a3vye/uber-true-cost-uh-oh https://www.vice.com/en_us/article/9a3vye/uber-true-cost-uh-...
      - 7y ago

navigatesol 7y ago

>How is it that Uber is losing money? Because driving individual people around in expensive cars burning expensive fuel is not a profitable business (in the economic sense). Where are all the billion dollar taxi empires? It's a tough racket. It's equally laughable that Uber's "killer app" is going to be food delivery.

nabnob 7y ago
But uber isn't paying for the car, the insurance, or the fuel.

Jommi 7y ago

Because America is not the only market they are operating in. Because ridehailing is not the only industry they are operting in.