4 ms·

Does Uber earn a profit in any market?

by EduardoBautista 4y ago

chrischen 4y ago
There’s no reason their unit economics don’t work or else taxis before Uber would never have existed.
- Ekaros 4y ago
  Big question with Uber is that can the live on the margins there is in taxi-business. Is there enough for them to extract as they currently spend money...
- scarface74 4y ago
  Taxis didn’t employ hundreds if not thousands of people who had nothing to do with physically driving the car. I’m not saying none of the other employees are needed. But they do come with significant overhead.
  - chrischen 4y ago
    If you understand how technology and software companies work then you should realize that one engineer supports thousands if not tens of thousands of customers. They could easily trim their R&D and software team if needed while still keeping their services running. It doesn't require significant engineering effort to support the operation of the Uber app in serving rides.
    - scarface74 4y ago
      It always amazes me that random people on the internet know more about the staffing needs of a company than the people who work in the company.
      - chrischen 4y ago
        The whole point of tech is that the software scales the ability to serve customers. Engineers exist for R&D, not necessarily to support operations. Take Netflix or Google for example. They can support massive engineer salaries because the fixed costs for every additional customer served does not scale linearly with engineers required to support them. Taxi companies cannot compete with Uber not just because of subsidies, but because their apps, experience, UI, all suck. They suck because they are doing by hand manually what Uber et al does with software. Look how universally reviled taxi companies are.
        scarface74 4y ago
        Taxi companies aren’t losing millions a quarter. By definition, there business model must be better.
        chrischen 4y ago
        Not really. Again you have to look at unit economics. Do you think a taxi company can book a higher profit on a single ride using human dispatchers and radios than say a Go application (what Uber is essentially) and automated routing and an iOS/Android app? I doubt it, plus if the taxi company is to handle more rides they have to get and pay more dispatchers, whereas Uber's software more or less scales for fraction of a penny per extra ride. If Uber is losing money it's because they are willfully pouring money into unrelated things not part of the unit economics of fulfilling rides (such as R&D into self-driving cars, upgrades to their tech stack or infrastructure, new feature development, etc). Part of raising money means you have to spend it, and actually booking losses is a great tax minimization strategy as well. Better to give out rider and customer incentives and lose money that way than losing it by giving it to Uncle Sam.
        scarface74 4y ago
        Uber lost 1.3 billion last quarter not including its outside investments https://www.nytimes.com/2022/05/04/business/uber-earnings-revenue-pandemic.html https://www.nytimes.com/2022/05/04/business/uber-earnings-re... It’s only “approaching” cash flow break even and that’s after diluting existing shareholders by offering stock based compensations. Most profitable companies would institute share buybacks to counteract dilution. You don’t spend more money than you make to avoid taxes. These aren’t accounting losses. This doesn’t even take into account that there cost for drivers are going to go up as more legislators start insisting on them giving drivers benefits.
      - xkcd1963 4y ago
        Oh how do I miss https://n-gate.com/ https://n-gate.com/
- Barrin92 4y ago
  Taxi companies don't have thousands of software engineers to pay. In fact the entire reason why there are so many taxi companies is because there's no benefit to scale. (same reason there's countless of very small or self-employed trucking businesses). Transport and driving is a high competition, low margin business, similar to say the restaurant industry. Putting a smartphone app on top of that economy doesn't change that fact. (the only thing that would turn it into an actual high margin technology business is full self-driving, which is why Uber itself once considered this it's 'only path to profitability').
  - Ekaros 4y ago
    I'm rather doubtful about whole self-driving also. At least if there is more than let's say 2 players offering products. That will also be massively capital intensive area with drive to the bottom for lowest possible costs in competing between everyone.
  - carlmr 4y ago
    Thousands of software engineers are cheap, because software scales. So if they still have a better app than the local taxis, they would still have an edge. At least in Germany the taxi apps are so crappy that you still need to call for a taxi most of the time, you then don't have a map where they know where to find you and you know where they are. Uber has that but no/few drivers in my area. I would use Uber if they had drivers, even if it was the same price as the taxis.
  - chrischen 4y ago
    Software engineers are not part of the unit economics. They don’t have to get an engineer to write disposable code for each ride they serve…
llampx 4y ago
If they plow all their revenue into a lossy self-driving program and exec compensation, they never have to turn a profit.

Does Uber earn a profit in any market?

chrischen 4y ago

There’s no reason their unit economics don’t work or else taxis before Uber would never have existed.

Ekaros 4y ago
Big question with Uber is that can the live on the margins there is in taxi-business. Is there enough for them to extract as they currently spend money...
scarface74 4y ago
Taxis didn’t employ hundreds if not thousands of people who had nothing to do with physically driving the car. I’m not saying none of the other employees are needed. But they do come with significant overhead.
- chrischen 4y ago
  If you understand how technology and software companies work then you should realize that one engineer supports thousands if not tens of thousands of customers. They could easily trim their R&D and software team if needed while still keeping their services running. It doesn't require significant engineering effort to support the operation of the Uber app in serving rides.
  - scarface74 4y ago
    It always amazes me that random people on the internet know more about the staffing needs of a company than the people who work in the company.
    - chrischen 4y ago
      The whole point of tech is that the software scales the ability to serve customers. Engineers exist for R&D, not necessarily to support operations. Take Netflix or Google for example. They can support massive engineer salaries because the fixed costs for every additional customer served does not scale linearly with engineers required to support them. Taxi companies cannot compete with Uber not just because of subsidies, but because their apps, experience, UI, all suck. They suck because they are doing by hand manually what Uber et al does with software. Look how universally reviled taxi companies are.
      - scarface74 4y ago
        Taxi companies aren’t losing millions a quarter. By definition, there business model must be better.
        chrischen 4y ago
        Not really. Again you have to look at unit economics. Do you think a taxi company can book a higher profit on a single ride using human dispatchers and radios than say a Go application (what Uber is essentially) and automated routing and an iOS/Android app? I doubt it, plus if the taxi company is to handle more rides they have to get and pay more dispatchers, whereas Uber's software more or less scales for fraction of a penny per extra ride. If Uber is losing money it's because they are willfully pouring money into unrelated things not part of the unit economics of fulfilling rides (such as R&D into self-driving cars, upgrades to their tech stack or infrastructure, new feature development, etc). Part of raising money means you have to spend it, and actually booking losses is a great tax minimization strategy as well. Better to give out rider and customer incentives and lose money that way than losing it by giving it to Uncle Sam.
        scarface74 4y ago
        Uber lost 1.3 billion last quarter not including its outside investments https://www.nytimes.com/2022/05/04/business/uber-earnings-revenue-pandemic.html https://www.nytimes.com/2022/05/04/business/uber-earnings-re... It’s only “approaching” cash flow break even and that’s after diluting existing shareholders by offering stock based compensations. Most profitable companies would institute share buybacks to counteract dilution. You don’t spend more money than you make to avoid taxes. These aren’t accounting losses. This doesn’t even take into account that there cost for drivers are going to go up as more legislators start insisting on them giving drivers benefits.
    - xkcd1963 4y ago
      Oh how do I miss https://n-gate.com/ https://n-gate.com/
Barrin92 4y ago
Taxi companies don't have thousands of software engineers to pay. In fact the entire reason why there are so many taxi companies is because there's no benefit to scale. (same reason there's countless of very small or self-employed trucking businesses). Transport and driving is a high competition, low margin business, similar to say the restaurant industry. Putting a smartphone app on top of that economy doesn't change that fact. (the only thing that would turn it into an actual high margin technology business is full self-driving, which is why Uber itself once considered this it's 'only path to profitability').
- Ekaros 4y ago
  I'm rather doubtful about whole self-driving also. At least if there is more than let's say 2 players offering products. That will also be massively capital intensive area with drive to the bottom for lowest possible costs in competing between everyone.
- carlmr 4y ago
  Thousands of software engineers are cheap, because software scales. So if they still have a better app than the local taxis, they would still have an edge. At least in Germany the taxi apps are so crappy that you still need to call for a taxi most of the time, you then don't have a map where they know where to find you and you know where they are. Uber has that but no/few drivers in my area. I would use Uber if they had drivers, even if it was the same price as the taxis.
- chrischen 4y ago
  Software engineers are not part of the unit economics. They don’t have to get an engineer to write disposable code for each ride they serve…

llampx 4y ago

If they plow all their revenue into a lossy self-driving program and exec compensation, they never have to turn a profit.