Leaked Uber financials from 2012 to 2014 • Hacker News Board

Re: Leaked Uber financials from 2012 to 2014

#91

Post by yummyfajitas » Thu, Aug 06, 2015, 4:37 PM UTC

forgetsusername wrote: post #89

yummyfajitas wrote: post #68

Earlier quoted context omitted.

Expansion costs money, running operations is cheaper. So when growth stops, profit happens almost by default. Simple math. Suppose opening a city costs $10 (once) and returns $1/year in revenue. Year 1: Open 1 city, loss = $10. Year 2: Open 3 cities, loss = $29 (spending $30 on new cities, gaining $1 from year 1's city). Year 3: Open 9 cities, loss = $86. Year 4: expansion stops, profit = $13.

> So when growth stops, profit happens almost by default. That's a pretty bubblicious thing to say. Your model depends on the nature of the costs. Expansion costs aren't 100% and operational costs aren't 0%. I realize it was just a quick example, but profit will depend on how their costs are actually distributed. Certainly not automatic.

Yes, I merely meant to illustrate how a business can become profitable simply by stopping expansion. I didn't mean to imply that this 3 second toy model proves it always will, though I guess my phrasing wasn't clear.

Re: Leaked Uber financials from 2012 to 2014

#92

Post by visakanv » Thu, Aug 06, 2015, 4:39 PM UTC

rorykoehler wrote: post #80

empressplay wrote: post #8

So what's the model? Put the taxis out of business and then jack up the fares to what the taxis were? Who's winning, then, exactly? Not the consumer...

If they do that someone else will out compete them.

I wonder if it'll eventually make sense to have free driverless cars that serve you with ads. That would be interesting.

Re: Leaked Uber financials from 2012 to 2014

#93

Post by rorykoehler » Thu, Aug 06, 2015, 4:44 PM UTC

visakanv wrote: post #92

rorykoehler wrote: post #80

Earlier quoted context omitted.

If they do that someone else will out compete them.

I wonder if it'll eventually make sense to have free driverless cars that serve you with ads. That would be interesting.

This has already been proposed by Google.

Re: Leaked Uber financials from 2012 to 2014

#94

Post by curiousjorge » Thu, Aug 06, 2015, 4:48 PM UTC

I think Uber thinks lighting piles of cash on fire is somehow a competitive edge builder, when the more money they burn faster, the bigger the return they need to make on a razor thin margin, zero barrier to entry market with no network effects. As soon as they've knocked down the walls of regulation and stretched out thin and begin to make any profit at all, it will signal other new entrants. The newer entrants are more likely to succeed thanks to the road that has been paved by Uber. Uber's solution: burn more money acquiring unprofitable new market threats if they miraculously make enough cash if they get another boatload of naive investors.

Afterall, Uber does not own the cars or drivers. As soon as somebody else is willing to give them a better cut or or they are able to get more money per customer, they will always go there.

tl;dr: Uber has absolutely no sustainable long-term economic moat built around it and lighting cash on fire may drive current competitors out, it will not work as soon as they attempt to recoup those costs (profit signals market entrants, uber does not own drivers, cars, or customers due to zero cost of switching - it's just a fucking app).

Re: Leaked Uber financials from 2012 to 2014

#95

Post by curiousjorge » Thu, Aug 06, 2015, 4:48 PM UTC

yummyfajitas wrote: post #68

andygates wrote: post #54

Earlier quoted context omitted.

So what happens when they've aggressively expanded into all their target markets and are still not profitable and have nowhere else to go? Pure expansion is pretty much the sign of a first-mover bubble company who will collapse with their advantage being copied by calmer second-movers...

Expansion costs money, running operations is cheaper. So when growth stops, profit happens almost by default. Simple math. Suppose opening a city costs $10 (once) and returns $1/year in revenue. Year 1: Open 1 city, loss = $10. Year 2: Open 3 cities, loss = $29 (spending $30 on new cities, gaining $1 from year 1's city). Year 3: Open 9 cities, loss = $86. Year 4: expansion stops, profit = $13.

So when growth stops, profit happens almost by

said nobody ever

Re: Leaked Uber financials from 2012 to 2014

#96

Post by hoopd » Thu, Aug 06, 2015, 4:50 PM UTC

andygates wrote: post #54

joshjkim wrote: post #30

Basic rundown of Rev / Loss from reports: Q1.12: 1.4M / 3.4M Q2.12: 2.1M /2.3M Q3.12: 4.3M / 5.4M Q4.12: 8.2M / 7.0M Q1.13: 12.9M / 7.3M Q2.13: 19.3M / 8.1M 2013 (total): 104M / 56M Q1.14: 45.6M / 52.2M Q2.13: 56.9M / 108.8M Rev grew faster than losses consistently all through 2012 and 2013 which is really amazing (2013 is when Uber jumped from a 330M valuation to a 3.5B valuation so investors noticed too)...then los…

So what happens when they've aggressively expanded into all their target markets and are still not profitable and have nowhere else to go? Pure expansion is pretty much the sign of a first-mover bubble company who will collapse with their advantage being copied by calmer second-movers...

It wouldn't be the first time.

What happens to the disrupted sector is the people who work there go find new jobs. Then when the giant monopolizer fails the sector can't return to the way it was before, too much knowledge has been lost.

Example: if WalMart closed tomorrow most of the thousands of small and medium sized businesses they put under wouldn't come back.

If Uber's model turns out to be unrealistic long-term the intellectual capital lost from the global taxi cab sector will only be partially recoverable.

When a company grows based on money they've earned it's the normal process of scaling. When they grow based on money they've borrowed it's no longer the market giving them the thumbs up, it's a couple of dozen investors. By the time WalMart was rapidly expanding it was clear their business model worked, might be evil but it works. It's not clear that Uber's business model is even legal.

Re: Leaked Uber financials from 2012 to 2014

#97

Post by hoopd » Thu, Aug 06, 2015, 5:03 PM UTC

danielweber wrote: post #75

jasonsync wrote: post #72

Earlier quoted context omitted.

Walmart tactics. Open in new town. Sell at a loss to get customers. Go on hiring spree. Local business can't survive the mass exodus of customers and employees. Once the only job in town is Walmart and the only store left is Walmart you slowly raise prices and profit.

Walmart has a profit margin of less than 4%. They are aggressive about controlling costs, which small-time companies can't compete with.

They'll compete by taking losses their competitors can't handle until they go out of business.

I suppose I'm not disagreeing with you, just pointing out WalMart's competitors are one of the costs they aggressively control :)

Re: Leaked Uber financials from 2012 to 2014

#98

Post by md2be » Thu, Aug 06, 2015, 6:04 PM UTC

joshjkim wrote: post #22

rtpg wrote: post #14

Earlier quoted context omitted.

1200 job openings... that's impressive. I agree that you need people to expand, but it never hurts to question how many people you actually need. Nobody denies that megacorps probably have many redundant positions, it's not possible for a company with 3000 employees to have them either.

Good Eggs just laid of 140 people, more than 50% of it's workforce and shut down 3 out of 4 of their markets - only SF, their HQ, will remain, and even the SF office sustained layoffs. They are Sequoia/Index backed, and raised $21M less than 12 months ago. Good example of a company that asked the question "how many people do we actually need?", with an unpleasant answer =( http://blog.goodeggs.com/

good catch - this is one subject that VCs do an awful job with.

Re: Leaked Uber financials from 2012 to 2014

#99

Post by the_economist » Thu, Aug 06, 2015, 6:24 PM UTC

Animats wrote: post #56

As the article points out, the real question is whether Uber is making money in mature markets, such as San Francisco. If the mature markets aren't highly profitable, Uber is way overvalued.

They make 20% of every ride. What costs do they really have in a mature market? A bit of customer service and maintaining the app. I don't see how it could possibly do anything but print cash in mature markets.

Re: Leaked Uber financials from 2012 to 2014

#100

Post by ismail » Thu, Aug 06, 2015, 6:34 PM UTC

andyidsinga wrote: post #33

prostoalex wrote: post #25

Earlier quoted context omitted.

The competition would likely be smaller competitors chipping away at juicy chunks, like Wingz focusing exclusively on airport rides (and competing with UberX on price) and Blacklane promising higher level of service at cheaper rate than Uber Black.

yep ...if it gets as easy to bootstrap a ride sharing company it is for chat apps with the mobile address book competition might be tough on uber. see also http://continuations.com/post/77698925932/facebook-massively...

That post is missing the network effects. Put another way switching costs are high not because it is easy to bootstrap these but the fact that to switch, your entire social circle would need to switch around the same time.

It is no use half switching, if you have an app which has 50% of your friends and another with 100% which will you use? * that for every person and your retention drops and you end up with a feedback loop which is negative(churn) instead of positive (growth).

Now with Uber the switching costs are low (currently), you can just as easily request a lyft and drivers can use both apps.

The long term play of uber though will make it difficult for others to compete since network effects will kick in. If you have more passengers and drivers, it makes it that much easier for you to do real ridesharing I. E 2-3 people per a car driving down costs. Once you add additional revenue streams like last mile delivery + passengers + ondemand x and I can see why they are investing this much in owning the market.