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Can Uber Ever Deliver? Even After 4Q Cost Cuts, Uber Lost $4.5B in 2017

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Re: Can Uber Ever Deliver? Even After 4Q Cost Cuts, Uber Lost $4.5B in 2017

#31

Post by emodendroket »

moduspol wrote: post #24
emodendroket wrote: post #19

Earlier quoted context omitted.

I don't think I follow. There's nothing impossible about running a livery service with a cell phone application for hailing, but I don't think current prices are sustainable. It is not a business with substantial economies of sale.

Well, drivers are voluntarily choosing to drive for what they're getting paid. Riders are voluntarily choosing to pay the quoted price. Uber takes a cut from the price to run the part of the business that isn't actually driving cars. The only way the price is subsidized is if the business couldn't be run without Uber's cut covering the non-driving parts of the business, which is unlikely. They're taking ~25% (or more…

On the other hand, they're losing billions of dollars.

Re: Can Uber Ever Deliver? Even After 4Q Cost Cuts, Uber Lost $4.5B in 2017

#32

Post by albertgoeswoof »

The main value prop for Uber hasn’t changed for quite some time, probably not much since UberX, the innovation there is pretty much done.

This puts Governments in the perfect position to disrupt Uber, if they build their own version, feature for feature (let’s face it, it’s a complex app but not that hard to copy) and mandate it on their already regulated taxis / ban uber, their user acquisition costs and marketing costs will be almost zero. They can run it without making a profit and keep fares lower or close to the current Uber position. Win win for everyone

Re: Can Uber Ever Deliver? Even After 4Q Cost Cuts, Uber Lost $4.5B in 2017

#34

Post by mseebach »

EpicEng wrote: post #20
clairity wrote: post #11

Earlier quoted context omitted.

yes, that's how capitalism is designed to work. the window in which you can make outsized profits is meant to be temporary so companies can't just rest on their laurels. it's beautiful when it works.

Capitalism is not "supposed to be" a race to the bottom and then the emergence of a single, monopolistic entity. That's far too simplistic. Price and value are a huge component of capitalism, yes, but the general idea isn't "price below what is sustainable by taking in massive amounts of funding until all of your competitors are sunk and then increase prices."

There's nothing about this that will allow a single, monopolistic entity to emerge. There are probably hundreds of "Uber-ripoff" apps out there by now. Sure, as long as someone is willing to pour VC money into it and give people subsidized rides, sure, Uber can kill off contenders and stay dominant. But the second Uber starts raising prices to extract monopoly profits, someone else steps in and undercuts them. You can probably get started in a city for a few $100k, or even less if you have an existing operation of some sort you can leverage.

The low-barrier-to-entry nature of this market is pretty much perfectly suited for market conditions to prevail and ride prices to stabilize quite near their costs.

Re: Can Uber Ever Deliver? Even After 4Q Cost Cuts, Uber Lost $4.5B in 2017

#35

Post by sol_remmy »

emodendroket wrote: post #16
clairity wrote: post #11

Earlier quoted context omitted.

yes, that's how capitalism is designed to work. the window in which you can make outsized profits is meant to be temporary so companies can't just rest on their laurels. it's beautiful when it works.

That's not really how it's "supposed to" work. It's called predatory pricing and the most ardent free-market defenders claim it doesn't exist because it's economically irrational (check out the contentious discussion and Frankenstein-like text of the Wikipedia entry on the topic).

"predatory pricing"

So they're offering prices below cost and that is considered "predatory"? Last time I checked low prices are good for consumers

Re: Can Uber Ever Deliver? Even After 4Q Cost Cuts, Uber Lost $4.5B in 2017

#36

Post by apike »

sgwealti wrote: post #23

In the claim in the article that they're inflating top line revenue growth, is the argument that they're selling a $100 ride but giving a $20 discount and calling it $100 in top line revenue?

According to the article they are not only doing what you describe, but if due to an error or customer service reason they refund the ride later that day, they still count it as $100 of revenue.

Re: Can Uber Ever Deliver? Even After 4Q Cost Cuts, Uber Lost $4.5B in 2017

#37

Post by mseebach »

emodendroket wrote: post #16
clairity wrote: post #11

Earlier quoted context omitted.

yes, that's how capitalism is designed to work. the window in which you can make outsized profits is meant to be temporary so companies can't just rest on their laurels. it's beautiful when it works.

That's not really how it's "supposed to" work. It's called predatory pricing and the most ardent free-market defenders claim it doesn't exist because it's economically irrational (check out the contentious discussion and Frankenstein-like text of the Wikipedia entry on the topic).

> most ardent free-market defenders claim it doesn't exist

Yes, and the people on the other side of that debate are perfectly reasonable, dispassionate truth-seekers.

Re: Can Uber Ever Deliver? Even After 4Q Cost Cuts, Uber Lost $4.5B in 2017

#38

Post by adventured »

EpicEng wrote: post #21
emodendroket wrote: post #5

Earlier quoted context omitted.

Well, the idea is that they kill off every competing service and then can raise prices. Also that they can beat everyone else to self-driving cars and eliminate the cost of labor. Other articles on NC have called the feasibility of both of those into question.

Sounds like a terrible idea given that this would just open the door for another company to do the same to them. They don't produce anything novel which can't easily be replicated.

Once they acquire a dominant position, the cost to assail it will be astronomical. It already is in fact, which is why Lyft is burning so much cash just in the US market alone ($3 to $4 billion in red ink just in the US).

You're going to have to convince venture capitalists to put in $10 or $15 billion and be willing to watch it all burn, on the nearly impossible task of unseating the market winner. That will never happen. That is not how VCs operate. Which is why Google search has gone almost entirely unchallenged by VC over the last decade, despite being an extraordinary cash cow.

The reason there isn't another Uber competitor getting $7 billion in VC across multiple rounds in the US right now, is the same exact reason there won't be another Uber after the dust settles.

Re: Can Uber Ever Deliver? Even After 4Q Cost Cuts, Uber Lost $4.5B in 2017

#39

Post by crdoconnor »

hari_seldon_ wrote: post #7
emodendroket wrote: post #4

Earlier quoted context omitted.

Probably not great, but what if the model of both businesses just isn't actually viable without massive injections of funds?

Agreed. The dominant strategy seems to be to undercut competitors until they are driven out of business, and then you can raise prices. However, raising prices then gives opportunity for a new ride-sharing service to come in and say that they can compete by offering lower prices for a period of time...

This is a strategy that has "worked" in transportation markets before. This is what the post-privatization 1980s bus wars were all about in the UK.

A few companies won out, consolidation happened, unprofitable routes were dropped and prices rose on profitable routes to a level where bus riders could be more reliably tapped for profits - largely by monopolies and duopolies.

Re: Can Uber Ever Deliver? Even After 4Q Cost Cuts, Uber Lost $4.5B in 2017

#40

Post by maxxxxx »

matte_black wrote: post #13

The only thing Uber can ever deliver is people and things to their final destinations. When Uber shuts down and goes out of business I as a consumer will just roll into the next service, and will not shed even a single tear for all who invested in Uber. Sorry, but thanks for all the cheap rides.

Yes, they are a pure commodity.
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