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The Wheels Come Off Uber

nakedcapitalism.com

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Re: The Wheels Come Off Uber

#21

Post by tedsanders »

mikeash wrote: post #10
blisterpeanuts wrote: post #5

By some measures Uber has been fabulously successful, coming from nowhere to the largest privately held company in seven years, and now a $70 billion g/publicly traded/private/ company. Uber has done a stunning job of disrupting a crony-capitalist, monopolistic system. If they are still searching for a way to make a profit, surely they'll figure it out before long. * updated to remove publicly traded

It's easy to disrupt a crony-capitalist, monopolistic system by selling your product at a loss, but you can't make a profit that way.

Uber loses money, but it doesn't sell rides at a loss. Up to 2015 at least (the date of the best finance leak I've seen), Uber's cut of fares was ~18%; and furthermore, that 18% cut more than covered Uber's costs of sales.

Source: http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver...

Uber actually makes money on each ride - it's just that the gross profit from those rides is short of covering its operating expenses. 12,000 employees are not inexpensive.

Based on these financials, if Uber halted most software development and halted subsidies into underdeveloped markets, it seems quite plausible the company would become profitable. Investors might not recoup their whole investments, but the company in zombie could earn back some profits.

Re: The Wheels Come Off Uber

#22

Post by the_mitsuhiko »

Finnucane wrote: post #12
the_mitsuhiko wrote: post #6

Earlier quoted context omitted.

I think there are lots of companies that can capture the market better and for less money. Just look at mytaxi in Europe for a smaller scale conpany that is expanding rapidly.

It's expanding rapidly because it can reach into Daimler-Benz's pockets.

Sure. And the service is inferior. But it's still sigificantly cheaper to operate.

Re: The Wheels Come Off Uber

#23

Post by jballanc »

cs702 wrote: post #7

The most worrisome aspect of this essay is that it questions whether Uber has a viable business model. The OP argues that Uber will never be able to charge prices in excess of the level required by a traditional taxi/limo operator to be profitable for long enough to recoup the billions of dollars the company has burned by subsidizing the price of rides. Put another way, even if Uber drives every competing taxi/limo o…

Gee, it's almost as if a municipality that valued the good provided by a shared-ride or car-for-hire service to their community would have an interest in creating an artificial monopoly for the sake of allowing such a service to operate in a profitable manner...

Re: The Wheels Come Off Uber

#24

Post by clairity »

cs702 wrote: post #7

The most worrisome aspect of this essay is that it questions whether Uber has a viable business model. The OP argues that Uber will never be able to charge prices in excess of the level required by a traditional taxi/limo operator to be profitable for long enough to recoup the billions of dollars the company has burned by subsidizing the price of rides. Put another way, even if Uber drives every competing taxi/limo o…

the article is frustratingly light on actual reasoning about why uber can't become profitable. the tl;dr is basically "it looks bad so they're going to fail". it does look very bad but that in itself (even with the various details mentioned) doesn't shine a light on the path that uber will take to failure. it only shows that any path they could take is treacherous.

it's an opinion piece with a bunch of facts thrown around but no reasoning to thread it together. i wouldn't bother putting any weight on it's conclusions (or wasting your time reading it, if you haven't).

Re: The Wheels Come Off Uber

#25

Post by cs702 »

clairity wrote: post #24
cs702 wrote: post #7

The most worrisome aspect of this essay is that it questions whether Uber has a viable business model. The OP argues that Uber will never be able to charge prices in excess of the level required by a traditional taxi/limo operator to be profitable for long enough to recoup the billions of dollars the company has burned by subsidizing the price of rides. Put another way, even if Uber drives every competing taxi/limo o…

the article is frustratingly light on actual reasoning about why uber can't become profitable. the tl;dr is basically "it looks bad so they're going to fail". it does look very bad but that in itself (even with the various details mentioned) doesn't shine a light on the path that uber will take to failure. it only shows that any path they could take is treacherous. it's an opinion piece with a bunch of facts thrown a…

FYI, the OP links to a 10-part series of posts about Uber's economics by someone with decades of experience in the transportation industry. Here's a link to part one: http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver...

Re: The Wheels Come Off Uber

#26

Post by Analemma_ »

clairity wrote: post #24
cs702 wrote: post #7

The most worrisome aspect of this essay is that it questions whether Uber has a viable business model. The OP argues that Uber will never be able to charge prices in excess of the level required by a traditional taxi/limo operator to be profitable for long enough to recoup the billions of dollars the company has burned by subsidizing the price of rides. Put another way, even if Uber drives every competing taxi/limo o…

the article is frustratingly light on actual reasoning about why uber can't become profitable. the tl;dr is basically "it looks bad so they're going to fail". it does look very bad but that in itself (even with the various details mentioned) doesn't shine a light on the path that uber will take to failure. it only shows that any path they could take is treacherous. it's an opinion piece with a bunch of facts thrown a…

Naked Capitalism did a series of posts on Uber back in November/December of 2016 that did have a lot more facts and reasoning behind them. They probably figured their readers are already familiar with those posts and didn't want to be redundant. You should read those before blithely assuming they don't know what they're talking about.

Re: The Wheels Come Off Uber

#27

Post by mikeash »

tedsanders wrote: post #21
mikeash wrote: post #10

Earlier quoted context omitted.

It's easy to disrupt a crony-capitalist, monopolistic system by selling your product at a loss, but you can't make a profit that way.

Uber loses money, but it doesn't sell rides at a loss. Up to 2015 at least (the date of the best finance leak I've seen), Uber's cut of fares was ~18%; and furthermore, that 18% cut more than covered Uber's costs of sales. Source: http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver... Uber actually makes money on each ride - it's just that the gross profit from those rides is short of covering its operating…

Where is all their money going, then? Seems like a business that should have relatively low overhead.

Re: The Wheels Come Off Uber

#28

Post by yokaze »

Noxchi wrote: post #16

It's a question if uber can race to self driving cars fast enough. That's really the only way their financial model can make sense. They should really be seeing this as essential to their survival, like nuclear bombs in WWII. Nazi Germany had maybe 1000 people working on their version. USA had 180,000(!). I suspect in this analogy, uber is not USA. Someone else will get this rolled out first. But I'm not 100% sure.

But contrary to the atom bomb, it doesn't terribly matter, who rolls it out first.

You will find yourself hard pressed to find a company, which is the first to bring something market and being in the dominant market position.

Self driving cars will be a commodity. Whatever advantage it gives, any company will have it, so there is no way it will increase the margin.

Re: The Wheels Come Off Uber

#29

Post by samstave »

lmm wrote: post #4
dr_ wrote: post #2

If this is true if uber, that it has no path to profitability, isn't it also true of ubers competitors? Their price points are fairly similar and they all, at some point, offer incentives to ensure you keep using their service.

Yes. The argument is that there simply isn't $80 billion to be made in the taxi industry; it's inherently a comodity business where boring companies should be able to make a steady 2% return rather than the kind of industry where a company that manages to sieze the market can make it back in monopoly rents.

What would be interesting would be to see how far all the ridesharing revenues would have gone in actually really good public and municipal transportation and many other lifestyle changes (i.e. what if every company reduced to a 4-day work week, or at least a mandatory 1-day work from home in applicable industries.)

it would be interesting to see where ridesharing investment money and the revenues the companies made could have ad a differing/better/other impact, just as a matter of looking at all possible outcomes as opposed to simply taken the state of things as a given.

Re: The Wheels Come Off Uber

#30

Post by gaius »

onion2k wrote: post #15
dr_ wrote: post #2

If this is true if uber, that it has no path to profitability, isn't it also true of ubers competitors? Their price points are fairly similar and they all, at some point, offer incentives to ensure you keep using their service.

If this is true if uber, that it has no path to profitability, isn't it also true of ubers competitors? A lot of Uber's costs to date have been proving that ride-sharing is a thing that consumers want to do (market education) and that governments don't want to stop (lobbying). Their competition get the benefit of that Uber's investment in those things for free, so it might be the case that Uber will fail and their co…

Forgive me if I am being slow but what is the actual difference between "ride sharing" and "unlicensed minicab"? I mean that seems to be the crux of all Uber's regulatory woes - that they are either unwilling or unable to articulate it.
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