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Uber Loses At Least $1.2 Billion In First Half of 2016 (bloomberg.com)
An anonymous reader writes: The ride-hailing giant Uber Technologies Inc. is not a public company, but every three months, dozens of shareholders get on a conference call to hear the latest details on its business performance from its head of finance, Gautam Gupta. On Friday, Gupta told investors that Uber's losses mounted in the second quarter. Even in the U.S., where Uber had turned a profit during its first quarter, the company was once again losing money. In the first quarter of this year, Uber lost about $520 million before interest, taxes, depreciation and amortization, according to people familiar with the matter. In the second quarter the losses significantly exceeded $750 million, including a roughly $100 million shortfall in the U.S., those people said. That means Uber's losses in the first half of 2016 totalled at least $1.27 billion. "It's hardly rare for companies to lose large sums of money as they try to build significant markets and battle for market share," said Joe Grundfest, professor of law and business at Stanford. "The interesting challenge is for them to turn the corner to become profitable, cash-flow-positive entities."
How is this a related link "10 Confirmed Dead In Shooting at Oregon's Umpqua Community College" to every article I look at, even this one?
"It's hardly rare for companies to lose large sums of money as they try to build significant markets and battle for market share,"
How long did Amazon lose money? Uber's just collecting data until they can get rid of the drivers and their cars and move to their own self driven vehicles using the infrastructure they're building now.
They are in a market where the bar is so low that anyone with a car and access to craigslist can set themselves up as a ride-hailing business. Apparently you don't need commercial license, vehicle inspections, or liability insurance. They are nothing but a 99 cent app and a marketing department - no special sauce.
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As the summary notes, breaking into an existing entrenched market is extremely expensive.
Especially when you're trying to upset the status quo.
We'll see if Uber is still around in 5 years.
I would still love to be one of those private investors. Uber is going to be huge. It already is. Although Slashdotters like to whine about it, Uber has improved taxi service for the common person. Yes, Uber is a taxi service. And yes, it is cleaner, safer, more efficient and cheaper than other taxi services. And stop the bullshit claim that the drivers are getting ripped off: if that were true then they wouldn't be doing it. Uber drivers aren't idiots.
How can a taxi company with literally no expenses except for keeping a few servers running run a loss in the billions?
But will they ever be profitable?
When they switch to driverless cars.
They are a taxi company. Offering prices lower than the market rate. So of course they are losing tons of money.
Their goal is to roll out self-driving taxis before they go bankrupt. If they succeed in being the first company with self-driving taxis, they will become incredibly successful. Because of this possibility, they have attracted a huge amount of investment. This allows them to lose lots of money for a long time without going bankrupt.
In the short term, customers are winners from Uber's lower prices (disregarding legal/ethical issues, which are real, but tangential to my description of the business model).
There is no brand loyalty. Most people only care about getting a cheap ride.
That's even before Tesla, Apple, and Google have autonomous cars... Remind me why I need Uber again. IMHO in 2020 Uber won't even be a thing anymore.
They will become profitable when they drive legacy cab companies and other ride hailing businesses out of the market because Uber has investors willing to take the hit and they don't. Once that happens they can then proceed to jack up prices (it's well established that their current pricing is not sustainable for them or their "independent contractors" in most markets). This is why they bowed out of China, they finally realized that they can't play this game there because the Chinese government has infinitely deeper pockets and controls the legal environment.
Normally companies use "earnings before interest, tax, depreciation, and amortization" to make it look like they are profitable when they really aren't. It's not recognized as a proper measurement of profitability by generally accepted accounting principles. In the words of Warren Buffett, "Does management think the tooth fairy pays for capital expenditures?"
How the hell do you lose $1 billion when you don't actually do anything? Can't uber just be run with a server and a handful of people?
Others have compared Uber to Amazon, but Amazon had real, huge cost drivers: They needed stocks, warehouses and logistics. Even so, and even given their aggressive growth, they never lost this much money - I think the record was around $1 billion in one year. Uber is purely a service, with essentially no capital costs and no logistical infrastructure. They are an app and a money conduit. How can they lose $1.2 billion in six months?!
They attribute the losses to subsidizing drivers, i.e., paying drivers more than the passengers are charged. I can see that on a local scale, over the short-term, as they attempt to gain a foothold in a new market. To do so on this massive of a scale? Insane!
Of course, another aspect is salaries. Why does Uber need 7000 employees? They need a technical team, they need marketing droids and lawyers. But...7000 of them?
Something here does not compute...
Simple: driverless cars. Survive long enough to get driverless cars perfected, dump your largest cost (driver pay), and there you go.
However I call Europe my home. I told everyone I could the app would revolunize cabs.
People would laugh at me. No money for revolutions they said. If I had something on the scale of Twitter or Facebook or Google or Amazon, of course they would invest. Ride sharing? Already invented, works well.
I tried just a couple of years later with a similar idea to AirBnb. Same story.
That's Europe. Missing in action. Doesn't keep them ("investors", politicians) from fretting about how innovative Silicon Valey is in comparison.
but the second mouse gets the cheese. Uber may survive being one of the early distributed ride hailing services, but the danger is that the spend so much money in the process that they go bankrupt and only the name will carry on after someone buys it in a fire sale when the company assets are liquidated.
Is it just my observation, or are there way too many stupid people in the world?
Airbus and uber operate at the periphery of legislation. They have 100s of lobbyists.
That's their innovation. Operate at the edge under the auspices of "tech will solve everything". Lobby like crazy.
Throw billions at it until you are accepted.
Drivers are not employees, have no rights. They have to accept what they are offered for fear of not getting jobs. No different to other dodgy enterprises.
Innovation?
When executed successfully you'll have an unprofitable market all to yourself.
But they make it up on volume, right?
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
This leads me to ask.. why are people pushing the idea that we need to advance technologically when we are clearly not headed for the kind of world that is better for more people here. Do we like shiny new things that much, that we would sacrifice our entire place in the economy?
Laws are rules for the court, but merely a bottom bar to hit for life. Think beyond laws in your actions always.
This leads me to ask.. why are people pushing the idea that we need to advance technologically when we are clearly not headed for the kind of world that is better for more people here.
The money to be made is not in delivering, but in convincing sucker investors that you will deliver BIG TIME at some point.
Driverless cars are never going to be a significant thing. The concept of the personal car will be dead long before the technology is "there". Companies who are using the pile of cash that they made doing real business (e.g. Google) are saying it is decades away. Companies who are struggling to make any real money now are pushing the idea that profitability will arrive via driverless car some time next week. What does this tell you?
So now we have come to google doing "real business". So much for mining, farming, and manufacturing.
What are Uber's expenses? I can't imagine it costs $1 billion+ to run a phone app. Let along lose that much when they make money on every ride.
Exactly how much cocaine are they paying their execs?
Or is all in court cases and bribes to local officials?
Help! I'm a slashdot refugee.
In a related note, Uber just pledged $150M on an autonomous drive project together with Volvo Cars (who threw in the same amount), so there does not seem to be any panic regarding liquid assets: Volvo Cars and Uber join forces to develop autonomous driving cars.
Driverless cars are going to be a significant thing.
When you've got old stodgy car manufacturers like Ford saying they're going to be selling them in 2021, when you've already got technology demo driverless cars on the road today, when many already shipping cars have features that allow them to drive themselves in some conditions, you can be pretty sure that it's going to be a significant thing.
You'd have to be a complete moron to not see this technology coming. It's not decades away. It's already here.
I halfway expect the Slashdot Luddites to be blabbing about driverless cars not being a thing while they're riding in one in a few years.
Movies are set up for accounting purposes so that they will never make money. Revenue, yes, in large amounts, but the way the books are set up practically none of that appears at the bottom line. That's why you want a percentage of the gross, not the net, or an actual salary, if you're going to work on the show. Given the structure of Uber and the way it's pretty much destroyed all potential competitors (cabs, Lyft, whatever), something like movie accounting HAS to be going on to keep losing money in the 9 digits.
And Uber *has* created a high bar for competitors. Their app is actually available for nearly everybody (even Windows, which Lyft ignores). Their system overall is pretty much seamless and painless for users and, presumably, drivers - it *does* work, which is more than you can say for many cab operations. Yes, the drivers get stiffed on their income after cost of operation, but see movie accounting above. They're extras.