6 ms·

I can see Uber (and many many tech companies) become profitable by significantly shrinking their tech and HQ workforce, removing driver/rider incentives and adm

I can see Uber (and many many tech companies) become profitable by significantly shrinking their tech and HQ workforce, removing driver/rider incentives and admit that the total addressable market is much smaller than they thought. I think this is what will happen when interest rates go up and free money stops. Unfortunately, this will mean a lot of tech workers will lose their jobs and/or have their salaries decreased significantly.

pclmulqdq 4y ago
If they do this, their stock will collapse. They are priced on future growth (which is already getting a lot less valuable), so if they admit there is a cap, they will start trading at a reasonable P/E ratio. Edit: P/S ratio, not P/E ratio. Of course their P/E ratio is negative right now.
- api 4y ago
  It'll be interesting to see what happens when they end up with a viable business but one that is probably never going to return the crazy returns that were originally priced into the valuation. There are tons and tons of these across all sectors left over from a prolonged era of incredibly cheap money.
  - pclmulqdq 4y ago
    Ironically, what happened to WeWork is a very soft version of what will likely happen to the Apps and SaaS space in a high-interest environment.
- rrdharan 4y ago
  > they will start trading at a reasonable P/E ratio As in, a positive one?
  - pclmulqdq 4y ago
    I should have said P/S ratio.
  - dchftcs 4y ago
    Slightly positive perhaps, as an investor may ask to get paid to hold Uber for their troubles.
- senttoschool 4y ago
  >If they do this, their stock will collapse. The other option could be bankruptcy which would bring their stock to $0.
  - yywwbbn 4y ago
    If they are cashflow positive this year that seems unlikely
    - senttoschool 4y ago
      Hence, why my original post said Uber will have to shrink tech/HQ employees, reduce incentives, and admit that growth will reverse/decline.
      - ProAm 4y ago
        All they need to do is license their logistics software and they will be extremely profitable.
        senttoschool 4y ago
        License their logistics software to who? Lyft? Bolt? Very few business wants/can to enter ride sharing, food delivery industry.
        ProAm 4y ago
        You can use this style of logistical/pricing software across so many industries.
        senttoschool 4y ago
        Not really. It's just a bunch of basic demand/supply algorithms. Nothing special. I doubt Uber can make a generic version that other businesses will buy.
        4y ago
- _ea1k 4y ago
  Isn't it currently about 2X P/S? That's not terrible in itself.
  - pclmulqdq 4y ago
    If you think about what its sales are, it should be trading a lot lower than 1. Most of what it is doing is matching a buyer to a seller, and taking some amount of that transaction in exchange for facilitating the transaction (I think ~30-40%). Today, it counts the entire price of a ride as revenue, and the entire cost of that sale as an expense. In comparison, if you use Uber's ideas of what is revenue and what is an expense, Ebay (another transaction facilitator) had a P/S ratio of 0.34 in 2019 with a fee of ~10%. Ebay does not count revenue the same way Uber does - they only count their fees as revenue. Another transaction facilitator, Costco (yes, I am comparing Uber to a retail chain - it makes the same fundamental trade), has a P/S ratio of 0.89. Walmart is 0.61. Nobody who retails something from a wholesaler has a P/S ratio greater than 1. Uber is an online retailer of taxi services. Most two-sided platforms treat their fee as their earnings, and thus can claim a very healthy margin. Uber doesn't.
    - _ea1k 4y ago
      Thank you for the explanation. That makes a lot of sense and does provide a much better way to estimate their value relative to sales.
ceejayoz 4y ago
The first company to ditch driver incentives is likely to be the first to have folks going "huh, no drivers on service X available... I'll try service Y" and collapse.
- JohnJamesRambo 4y ago
  After reading your comment I had an image of a New York City cab driver and his medallion and the meter, him looking over his shoulder saying “Welcome back” as he hits the meter.
  - gonzo41 4y ago
    That guy is bankrupt and homeless now. His medallion was worthless because of uber and the large loan he took to get it ruined his life. etc etc.
    - theplumber 4y ago
      >> That guy is bankrupt and homeless now. His medallion was worthless Good riddance! The reason why people rushed to uber was that the taxi services were so bad. You can still see people near the taxi station/taxi cars waiting for uber. Wonder why... That being said it looks like, unfortunately, the taxi industry is not over yet.
      - gonzo41 4y ago
        Good riddance to that person?
        wussboy 4y ago
        Yup. My slavish devotion to “personal responsibility” means I can’t even understand how decisions made at a corporation, insulated from the very personal responsibility I care so much about and powered by unlimited piles of cash can run human lives.
        4y ago
gonzo41 4y ago
When this happens, the amount of uber cars will probably decrease. So there'll actually be a shortage again the taxi market.
sva_ 4y ago
I sometimes wonder what Uber is even doing with their 30k employees. A look at their blog[0] doesn't really give me much of an idea either, it all seems to be scattered, non-concentrated efforts into various directions. [0] https://www.uber.com/en-DE/blog/ https://www.uber.com/en-DE/blog/
- pid-1 4y ago
  I'd guess a business like Uber must need legions of driver / customer support.
  - sva_ 4y ago
    You may be right about customer support, but I don't think they consider their drivers employees. > Uber considers its drivers to be independent contractors https://www.lawyers.com/legal-info/labor-employment-law/wage-and-hour-law/are-uber-drivers-considered-employees.html https://www.lawyers.com/legal-info/labor-employment-law/wage...
    - pid-1 4y ago
      I meant customer support for drivers and "real customers". Sorry for not being clear.
hdjjhhvvhga 4y ago
> Unfortunately, this will mean a lot of tech workers will lose their jobs As far as I can tell, Uber doesn't employ developers - you just have a chance to become their "technology partner". And while there are probably 3500 of them, once this pyramid scheme called Uber falls, many of these people will go elsewhere. The question is: will that be a bad thing? From the point of view of the total benefit to the society, it's probably better that they work on truly sustainable products.
phphphphp 4y ago
That's been the narrative for many years, though. The idea that "...they're unprofitable by choice in pursuit of growth..." is indistinguishable from a bad business model. Most locales already have Uber alternatives that are sustainable and have a better service quality, the only reason Uber has marketshare in these locales is because Uber is cheaper... due to the loss-making behaviours. If Uber removed their incentives, they'd immediately lose marketshare to the local competitors that are already sustainable. Uber is incentives, Uber is investor-subsidised transport.
- dboreham 4y ago
  > Most locales already have Uber alternatives that are sustainable and have a better service quality... Based on my experience recently in Europe, this isn't the case.
rchaud 4y ago
> removing driver/rider incentives and admit that the total addressable market is much smaller than they thought. I think this is what will happen when interest rates go up and free money stops. Ah, for the halcyon days of 2014 when we could blame high taxi fares on the low-tech bureaucrats running medallion rackets. Uber and taxi fares are pretty much neck and neck these days. How much more could they cut driver compensation?
onlyrealcuzzo 4y ago
> I think this is what will happen when interest rates go up and free money stops. And what happens to pension funds if interest rates go up and stay up? What happens to government spending on debt as a percentage of tax revenues? What happens to personal debt service as a percentage of income? The modern world isn't going to work with positive REAL interest rates. So I'm skeptical they're going to stick around for more than a year without causing a bigger depression than The Great Depression.

pclmulqdq 4y ago

If they do this, their stock will collapse. They are priced on future growth (which is already getting a lot less valuable), so if they admit there is a cap, they will start trading at a reasonable P/E ratio. Edit: P/S ratio, not P/E ratio. Of course their P/E ratio is negative right now.

api 4y ago
It'll be interesting to see what happens when they end up with a viable business but one that is probably never going to return the crazy returns that were originally priced into the valuation. There are tons and tons of these across all sectors left over from a prolonged era of incredibly cheap money.
- pclmulqdq 4y ago
  Ironically, what happened to WeWork is a very soft version of what will likely happen to the Apps and SaaS space in a high-interest environment.
rrdharan 4y ago
> they will start trading at a reasonable P/E ratio As in, a positive one?
- pclmulqdq 4y ago
  I should have said P/S ratio.
- dchftcs 4y ago
  Slightly positive perhaps, as an investor may ask to get paid to hold Uber for their troubles.
senttoschool 4y ago
>If they do this, their stock will collapse. The other option could be bankruptcy which would bring their stock to $0.
- yywwbbn 4y ago
  If they are cashflow positive this year that seems unlikely
  - senttoschool 4y ago
    Hence, why my original post said Uber will have to shrink tech/HQ employees, reduce incentives, and admit that growth will reverse/decline.
    - ProAm 4y ago
      All they need to do is license their logistics software and they will be extremely profitable.
      - senttoschool 4y ago
        License their logistics software to who? Lyft? Bolt? Very few business wants/can to enter ride sharing, food delivery industry.
        ProAm 4y ago
        You can use this style of logistical/pricing software across so many industries.
        senttoschool 4y ago
        Not really. It's just a bunch of basic demand/supply algorithms. Nothing special. I doubt Uber can make a generic version that other businesses will buy.
      - 4y ago
_ea1k 4y ago
Isn't it currently about 2X P/S? That's not terrible in itself.
- pclmulqdq 4y ago
  If you think about what its sales are, it should be trading a lot lower than 1. Most of what it is doing is matching a buyer to a seller, and taking some amount of that transaction in exchange for facilitating the transaction (I think ~30-40%). Today, it counts the entire price of a ride as revenue, and the entire cost of that sale as an expense. In comparison, if you use Uber's ideas of what is revenue and what is an expense, Ebay (another transaction facilitator) had a P/S ratio of 0.34 in 2019 with a fee of ~10%. Ebay does not count revenue the same way Uber does - they only count their fees as revenue. Another transaction facilitator, Costco (yes, I am comparing Uber to a retail chain - it makes the same fundamental trade), has a P/S ratio of 0.89. Walmart is 0.61. Nobody who retails something from a wholesaler has a P/S ratio greater than 1. Uber is an online retailer of taxi services. Most two-sided platforms treat their fee as their earnings, and thus can claim a very healthy margin. Uber doesn't.
  - _ea1k 4y ago
    Thank you for the explanation. That makes a lot of sense and does provide a much better way to estimate their value relative to sales.

ceejayoz 4y ago

The first company to ditch driver incentives is likely to be the first to have folks going "huh, no drivers on service X available... I'll try service Y" and collapse.

JohnJamesRambo 4y ago
After reading your comment I had an image of a New York City cab driver and his medallion and the meter, him looking over his shoulder saying “Welcome back” as he hits the meter.
- gonzo41 4y ago
  That guy is bankrupt and homeless now. His medallion was worthless because of uber and the large loan he took to get it ruined his life. etc etc.
  - theplumber 4y ago
    >> That guy is bankrupt and homeless now. His medallion was worthless Good riddance! The reason why people rushed to uber was that the taxi services were so bad. You can still see people near the taxi station/taxi cars waiting for uber. Wonder why... That being said it looks like, unfortunately, the taxi industry is not over yet.
    - gonzo41 4y ago
      Good riddance to that person?
      - wussboy 4y ago
        Yup. My slavish devotion to “personal responsibility” means I can’t even understand how decisions made at a corporation, insulated from the very personal responsibility I care so much about and powered by unlimited piles of cash can run human lives.
      - 4y ago

gonzo41 4y ago

When this happens, the amount of uber cars will probably decrease. So there'll actually be a shortage again the taxi market.

sva_ 4y ago

I sometimes wonder what Uber is even doing with their 30k employees. A look at their blog[0] doesn't really give me much of an idea either, it all seems to be scattered, non-concentrated efforts into various directions. [0] https://www.uber.com/en-DE/blog/ https://www.uber.com/en-DE/blog/

pid-1 4y ago
I'd guess a business like Uber must need legions of driver / customer support.
- sva_ 4y ago
  You may be right about customer support, but I don't think they consider their drivers employees. > Uber considers its drivers to be independent contractors https://www.lawyers.com/legal-info/labor-employment-law/wage-and-hour-law/are-uber-drivers-considered-employees.html https://www.lawyers.com/legal-info/labor-employment-law/wage...
  - pid-1 4y ago
    I meant customer support for drivers and "real customers". Sorry for not being clear.

hdjjhhvvhga 4y ago

> Unfortunately, this will mean a lot of tech workers will lose their jobs As far as I can tell, Uber doesn't employ developers - you just have a chance to become their "technology partner". And while there are probably 3500 of them, once this pyramid scheme called Uber falls, many of these people will go elsewhere. The question is: will that be a bad thing? From the point of view of the total benefit to the society, it's probably better that they work on truly sustainable products.

phphphphp 4y ago

That's been the narrative for many years, though. The idea that "...they're unprofitable by choice in pursuit of growth..." is indistinguishable from a bad business model. Most locales already have Uber alternatives that are sustainable and have a better service quality, the only reason Uber has marketshare in these locales is because Uber is cheaper... due to the loss-making behaviours. If Uber removed their incentives, they'd immediately lose marketshare to the local competitors that are already sustainable. Uber is incentives, Uber is investor-subsidised transport.

dboreham 4y ago
> Most locales already have Uber alternatives that are sustainable and have a better service quality... Based on my experience recently in Europe, this isn't the case.

rchaud 4y ago

> removing driver/rider incentives and admit that the total addressable market is much smaller than they thought. I think this is what will happen when interest rates go up and free money stops. Ah, for the halcyon days of 2014 when we could blame high taxi fares on the low-tech bureaucrats running medallion rackets. Uber and taxi fares are pretty much neck and neck these days. How much more could they cut driver compensation?

onlyrealcuzzo 4y ago

> I think this is what will happen when interest rates go up and free money stops. And what happens to pension funds if interest rates go up and stay up? What happens to government spending on debt as a percentage of tax revenues? What happens to personal debt service as a percentage of income? The modern world isn't going to work with positive REAL interest rates. So I'm skeptical they're going to stick around for more than a year without causing a bigger depression than The Great Depression.