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Based on my observation of Uber and similar businesses, they are likely losing money slower during this downturn, and this layoff will help preserve more needed

Based on my observation of Uber and similar businesses, they are likely losing money slower during this downturn, and this layoff will help preserve more needed cash. Less rides means less revenue but also less cloud compute cost to serve them, payout to drivers, and certainly no driver subsidies at this point, which during normal times is quite costly. Many of these are variable costs tied to ride volume. The only major fix costs to operating Uber's ridesharing business is people, office commercial leases, and maintaining IT infrastructure (I believe Uber operates its own cloud, but not 100% sure). And now it's cutting the "people" part to preserve more cash for the long-haul.

1MoreThing 6y ago
According to their last earnings call, Uber's rides business was making enough profit paying for all of R&D costs. It's been a long time since the "losing money on every ride" narrative was true.
- arcticbull 6y ago
  Weren't the massive quantity of discounts required to entice people to use them factored into marketing? Further I believe they counted the entire price of a shared ride as "revenue" while they only counted 30% of regular rides, even though shared rides likely made them even less money? That would restore the narrative.
  - georgespencer 6y ago
    Their annual report[1] shows 2019 revenue of $14.1bn, with cost of revenue of $7.2bn and sales and marketing costs of $4.6bn. Both cost of revenue and sales and marketing (for simplicity's sake I'll call these "direct costs") grew proportionately to revenue growth year on year from 2018 to 2019, running at 77% of revenue in 2018 and 83% of revenue in 2019. The 5% swing there is almost purely marketing: cost of revenue was 49.8% of revenue in 2018 and 50.9% in 2019, whereas marketing grew from 27.9% to 32.6%. So they could be hiding subsidies (prefer this term to discounts) in marketing costs, although it's not such a significant figure that it loses them money. It's conceivable that they're still doing some hocus pocus with the treatment of pool revenue, but it would have to be a significant portion of their revenue for it to have an impact. I can't find the disclosures on this if they're in there (although they do disclose that they treat three people pooling as three rides, which seems fair enough). The business suffered a 2.8x increase in losses from operations -- $8.5bn up from $3bn -- but this appears to mainly be attributable to R&D costs growing from $1.5bn to $4.8bn YOY. [1] https://investor.uber.com/news-events/news/press-release-details/2020/Uber-Announces-Results-for-Fourth-Quarter-and-Full-Year-2019/ https://investor.uber.com/news-events/news/press-release-det...
BurningFrog 6y ago
The cloud compute cost for an individual ride can't even be one US cent! Surely?
- matthewbauer 6y ago
  Supposedly lyft’s cost per ride was $0.14: https://mobile.twitter.com/mohapatrahemant/status/1102401615263223809 https://mobile.twitter.com/mohapatrahemant/status/1102401615...
  - mcny 6y ago
    How much of the expense is directly for a ride versus other support activities? I imagine everything from 1099 and taxes to dev qa staging runs on aws?
  - BurningFrog 6y ago
    Interesting! All their AWS costs are probably not ride related, but most probably are, one way or another. The marginal cost for one more ride, is probably much smaller, but I don't know that that is the right way to think about this.

1MoreThing 6y ago

According to their last earnings call, Uber's rides business was making enough profit paying for all of R&D costs. It's been a long time since the "losing money on every ride" narrative was true.

arcticbull 6y ago
Weren't the massive quantity of discounts required to entice people to use them factored into marketing? Further I believe they counted the entire price of a shared ride as "revenue" while they only counted 30% of regular rides, even though shared rides likely made them even less money? That would restore the narrative.
- georgespencer 6y ago
  Their annual report[1] shows 2019 revenue of $14.1bn, with cost of revenue of $7.2bn and sales and marketing costs of $4.6bn. Both cost of revenue and sales and marketing (for simplicity's sake I'll call these "direct costs") grew proportionately to revenue growth year on year from 2018 to 2019, running at 77% of revenue in 2018 and 83% of revenue in 2019. The 5% swing there is almost purely marketing: cost of revenue was 49.8% of revenue in 2018 and 50.9% in 2019, whereas marketing grew from 27.9% to 32.6%. So they could be hiding subsidies (prefer this term to discounts) in marketing costs, although it's not such a significant figure that it loses them money. It's conceivable that they're still doing some hocus pocus with the treatment of pool revenue, but it would have to be a significant portion of their revenue for it to have an impact. I can't find the disclosures on this if they're in there (although they do disclose that they treat three people pooling as three rides, which seems fair enough). The business suffered a 2.8x increase in losses from operations -- $8.5bn up from $3bn -- but this appears to mainly be attributable to R&D costs growing from $1.5bn to $4.8bn YOY. [1] https://investor.uber.com/news-events/news/press-release-details/2020/Uber-Announces-Results-for-Fourth-Quarter-and-Full-Year-2019/ https://investor.uber.com/news-events/news/press-release-det...

BurningFrog 6y ago

The cloud compute cost for an individual ride can't even be one US cent! Surely?

matthewbauer 6y ago
Supposedly lyft’s cost per ride was $0.14: https://mobile.twitter.com/mohapatrahemant/status/1102401615263223809 https://mobile.twitter.com/mohapatrahemant/status/1102401615...
- mcny 6y ago
  How much of the expense is directly for a ride versus other support activities? I imagine everything from 1099 and taxes to dev qa staging runs on aws?
- BurningFrog 6y ago
  Interesting! All their AWS costs are probably not ride related, but most probably are, one way or another. The marginal cost for one more ride, is probably much smaller, but I don't know that that is the right way to think about this.