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Uber’s Losses Widen as SoftBank Launches Bid to Buy Shares

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Re: Uber’s Losses Widen as SoftBank Launches Bid to Buy Shares

#201

Post by trhway »

T2_t2 wrote: post #182
JumpCrisscross wrote: post #10

Uber had $6.6bn on hand at the end of June [1]. That means they are down to $5.1bn. Absent cost-cutting, that implies a 9 to 12 month runway. Even if SoftBank injects $1bn, that could only mean a few months’ runway. A large fine in the Waymo case [2] could literally bankrupt them. [1] https://venturebeat.com/2017/08/23/uber-is-still-burning-cas... [2] https://mobile.nytimes.com/2017/11/29/business/waymo-uber-tr...

Except... Growth. The (buzzword warning) hyper-growth startup model is in essence 2X revenue, 1.5X costs. Repeat until inevitably profitable - and I say inevitably because with enough time, 2X revenue, 1.5X costs gets to profitable. The only variable there is having a long enough runway. Uber seem, from the financial data I have seen, to be sticking to that playbook down to the 3rd decimal place (exaggeration for eff…

>The (buzzword warning) hyper-growth startup model is in essence 2X revenue, 1.5X costs. Repeat until inevitably profitable - and I say inevitably because with enough time, 2X revenue, 1.5X costs gets to profitable. The only variable there is having a long enough runway.

it is like gambling with doubling (or even tripling) down each time - with enough time you will inevitably win and as result will reap a huge profit in total. Now if just somebody write me a blank check backed by an unlimited bank account... On practice though, even if got that check - what if the casino can't match my next 3x bet?

The same thing with Uber - the important thing isn't just the Uber's money runway. The other side's "runway" (i.e. total size of the market) is also extremely important - are there enough people on Earth needing enough rides so that that amount of rides would allow for that "2x revenue 1.5x costs" model to reach profitability?

Re: Uber’s Losses Widen as SoftBank Launches Bid to Buy Shares

#202

Post by matt4077 »

T2_t2 wrote: post #182
JumpCrisscross wrote: post #10

Uber had $6.6bn on hand at the end of June [1]. That means they are down to $5.1bn. Absent cost-cutting, that implies a 9 to 12 month runway. Even if SoftBank injects $1bn, that could only mean a few months’ runway. A large fine in the Waymo case [2] could literally bankrupt them. [1] https://venturebeat.com/2017/08/23/uber-is-still-burning-cas... [2] https://mobile.nytimes.com/2017/11/29/business/waymo-uber-tr...

Except... Growth. The (buzzword warning) hyper-growth startup model is in essence 2X revenue, 1.5X costs. Repeat until inevitably profitable - and I say inevitably because with enough time, 2X revenue, 1.5X costs gets to profitable. The only variable there is having a long enough runway. Uber seem, from the financial data I have seen, to be sticking to that playbook down to the 3rd decimal place (exaggeration for eff…

> Uber seem, from the financial data I have seen, to be sticking to that playbook down to the 3rd decimal place

Except, if you check the linked article, you'll find that bookings grew 11%, revenue grew 21%, and losses grew 38%.

Re: Uber’s Losses Widen as SoftBank Launches Bid to Buy Shares

#203

Post by busterarm »

kjksf wrote: post #200
busterarm wrote: post #178

Earlier quoted context omitted.

I'm somewhat reminded of Jack Tramiel's pricing scheme in the mid-late 80s with Commodore. Great, popular machines beating everyone on price until they couldn't afford to anymore. They didn't capture the market and they failed.

They did capture the market. Commodore 64 was a profitable bestseller. Tramiel left Commodore while it was still very successful, founded new company, bought Atari and tried to replicate Commodore 64 success with Atari ST. Commodore failed because they failed to transition from Commodore 64 to a better specced machines, despite having a technological marvel at their hands (Commodore Amiga).

Yeah but it's also well documented how the pricing strategy he chose left the company unable to adapt at that critical time you mentioned.

Re: Uber’s Losses Widen as SoftBank Launches Bid to Buy Shares

#204

Post by wpietri »

ams6110 wrote: post #118
wpietri wrote: post #102

Earlier quoted context omitted.

Maybe. I've interviewed people eager to leave Uber and the name was mixed for us. I see it as an indicator of technical talent, but a culture risk for sure. Clearly a lot of people at Uber at least acquiesced in the face of unethical, abusive, or outright criminal behavior. That's not a character trait I'm excited about having on my teams.

You have to understand human nature though. Most people are more or less followers. They will do whatever a strong leader tells them to do--unless it's something clearly, blatantly wrong or illegal--and they will rationalize it. If Uber had ethical leadership, there would be no worry about any of the technical talent, and they would be the very same people.

People have been trained to be followers. Our industrial-age education system and our industrial-age-derived corporate structures do that training.

That worked adequately for industrial work. But for creative work, following isn't enough. Our whole field is about making computers do the dumb stuff so that humans can focus on the smart stuff. The SV startup model gets much of its economic power from the way that a small group of people can out-think, out-innovate large companies that operate along industrial lines.

But that only keeps working as long as individuals have a fair bit of autonomy. Which in turn only works as long as workers are able to think for themselves. As David Marquet wrote, modern effective organizations don't move information to authority; they move authority to information.

I want to build teams that can spot a ball, pick it up, and run with it. That doesn't work well if they have to run every detail up to the CEO for signoff.

Re: Uber’s Losses Widen as SoftBank Launches Bid to Buy Shares

#205

Post by ProAm »

madeofpalk wrote: post #198
ProAm wrote: post #197

Earlier quoted context omitted.

Of course you can but most taxi companies do not want to be in the app development business. And most other ride hailing apps are not very good. They'd rather focus on their main line of work which is transportation. People know Uber, that app works, people would use it if it was available. The subsidizing is what made them a household name, along with the ease of use.

I understand that there are taxi companies worldwide and I'm sure they operate different by different types of people, but I still think you're overestimating these taxi companies and what they want. I worked for a very big "Old Media" company in Australia when we rebuilt one of their key properties. Their "definition of success" was to _not accelerate the rate of decline_ of page views. Since then I've realised that…

For sure, I agree with that. My original point was Uber has a pivot that they can use to make money. Layoff most the people, license the software, profit. It might not work for everyone, but it will definitely work for some.

Re: Uber’s Losses Widen as SoftBank Launches Bid to Buy Shares

#206

Post by wpietri »

lsiq wrote: post #133
wpietri wrote: post #87

Earlier quoted context omitted.

Even if they manage to kill their competition -- and I'm not expecting they will -- I don't understand what their endgame is. I don't see what their moat is. Ridesharing companies are not hard or expensive to start. They'll have a hard time extracting monopoly rents, and there isn't much of an economy of scale they can reap. And once autonomous cars become part of the picture, I think they're in an even worse positio…

They do have a small moat in the short term; the network of drivers, brand recognition they've built up (even w/ the bad press), the large codebase they have by now, and the amount of capital to start such a business from scratch is not insignificant. However, you are right to bring up autonomous cars. I always thought it amusing that Kalanick et al were so anxious to bet the house on autonomous cars, when in fact, t…

Agreed, except that I would say that Uber has a lead, not a moat. Since the car transport market is 99% local, I don't think it would take all that much money to start something. Look at the competitors that started in Austin, for example.

I also suspect that ride pricing and scale will not be the determining factors. Look at the variety that still exists among car manufaturers after a century of competition:

http://www.thetruthaboutcars.com/2017/08/usa-auto-sales-bran...

There's such a wide variety in terms of both cost and experience that I'd be very surprised to see that drop off to one or two players.

Re: Uber’s Losses Widen as SoftBank Launches Bid to Buy Shares

#207

Post by watwut »

ProAm wrote: post #197
watwut wrote: post #193

Earlier quoted context omitted.

Ubers big magic is subsidising rides. You can do ride hailing app without uber.

Of course you can but most taxi companies do not want to be in the app development business. And most other ride hailing apps are not very good. They'd rather focus on their main line of work which is transportation. People know Uber, that app works, people would use it if it was available. The subsidizing is what made them a household name, along with the ease of use.

They could be food if they would be willing to invest money and refine refine refine. They are not. So, even if they would buy from Uber it would be for cheap.

Plus any other startup or company can build such app to compete.

Re: Uber’s Losses Widen as SoftBank Launches Bid to Buy Shares

#208

Post by scarmig »

philsnow wrote: post #89
misun78 wrote: post #79

Earlier quoted context omitted.

"controlled expenditures through higher pricing and "friendlier" demeanor" - Assuming this refers to Lyft, Lyft's expenses compared dollar to dollar are on-par if not worse than Ubers - https://techcrunch.com/2017/11/14/unpacking-lyfts-projected-... As long as Uber can keep the cost per ride lower than other competitors, it just needs to wait for the burn to end faster on the competitors side before turning break-eve…

even if lyft's burn-to-revenue ratio is higher, their burn is still lower that uber's, and it's going to cost a lot fewer incremental dollars to prop up lyft's burn than uber's for a few years. some interested parties (waymo/alphabet) might be happy to foot that bill.

I've had the feeling that Alphabet has been using Lyft as a cat's paw in its war with Uber. Given its buckets of cash and what Alphabet perceives as the opportunity to dominate the next big market, can't Lyft expect almost unlimited funding? Or even an acquisition once its independence is not an asset?

Re: Uber’s Losses Widen as SoftBank Launches Bid to Buy Shares

#209

Post by newaccount88 »

jdmichal wrote: post #188
robryan wrote: post #177

Earlier quoted context omitted.

Electric cars might do better on that mileage rate?

The IRS puts "variable costs" at about 14 cents per mile. So, yes they may do better, but not significantly better. Also, electric means either battery swaps or significantly longer refueling time. Not a problem for commuter cars with downtime anyway. But for a 24/7 business, that becomes more impactful. https://www.irs.gov/newsroom/2017-standard-mileage-rates-for... "The standard mileage rate for business is based o…

Literally none of the old assumptions will apply. Let's go through some of them.

1. Maintenance. Electric vehicles require far less maintenance than ICE vehicles. (First thing I found on Google: https://insideevs.com/ev-vs-ice-maintenance-the-first-100000...)

2. Vehicle size. Once these systems are up and running, do you think Waymo & Uber, once their systems reach any level of maturity, are going to send you a 4 person vehicle to pick up 1 person? This reduces:

a- the capital cost of the vehicle

b- its cost of maintenance (less parts, etc)

c- the amount of energy required to get from point A to point B

Which brings me to...

3. Price of electricity. Waymo, Uber, et al will get their electricity at wholesale rates.

4. Low cost of capital. The cost to access the capital to buy these vehicles will be lower than anything a peon like you or me could ever access.

5. Bulk-buying 1,000,000 vehicles. No dealers, no dealer commissions, zero customizations, less parts, smaller vehicles, no car manufacturer marketing budget...

6. Maintenance scaling. The need to scale maintenance operations country-wide is going to lead to its own interesting effects. With a hard limit on the types of vehicles in a network, most cleaning and general maintenance will, in time, be doable by human-monitored robots.

7. Ride subsidization will effectively crush any margins any of these companies could ever hope to have.

8. Shared depreciation. Depreciation will be significant per vehicle but overall, cheaper, as each vehicle will have more utilization.

I'd hesitate to guess at the effects of all of the above, but it's not much of a stretch to anticipate an additional 50% reduction here, barring any unforeseen taxes, of course.

You might pay more for the network with great coverage and lux vehicles.

You might pay less for the crappy network with dirty cars and plastic seat buckets.

Etc.

Re: Uber’s Losses Widen as SoftBank Launches Bid to Buy Shares

#210

Post by notahacker »

ProAm wrote: post #197
watwut wrote: post #193

Earlier quoted context omitted.

Ubers big magic is subsidising rides. You can do ride hailing app without uber.

Of course you can but most taxi companies do not want to be in the app development business. And most other ride hailing apps are not very good. They'd rather focus on their main line of work which is transportation. People know Uber, that app works, people would use it if it was available. The subsidizing is what made them a household name, along with the ease of use.

The other ride hailing apps are in the business of selling hailing services to taxi firms and have sales teams dedicated to doing so, are not despised by taxi firms, and provide solutions optimised for regulated taxi firms. If they tend to provide surprisingly few drivers and poor price estimations and the app companies are orders of magnitude smaller in terms of revenue and geographic spread, that's probably an indication the licensed-partnerships-with-cab-firms market is more awkward and less lucrative than it sounds.

And the taxi firms usually won't and often legally can't use Uber's pricing algorithms which is pretty much the only secret sauce to the app, they don't want to ignore bylaws that Uber has cheerfully skirted around and they don't want their expensively-licensed drivers competing for leads on an equal footing with new Uber drivers.

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