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Can Uber ever make money?

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Re: Can Uber ever make money?

#81

Post by TheCoelacanth »

dcolkitt wrote: post #60
idlewords wrote: post #45

Earlier quoted context omitted.

Saying that we're going to work to dominate a low-margin sector at a staggering loss for years, so that we can enter an even lower-margin established industry and recoup our losses there, is a gutsy proposition.

Sure is. But remember, that playbook's almost exactly how Amazon became the largest company in the world.

Except that Amazon didn't have remotely close to the level of losses that Uber has. The year Amazon went public, they lost $30 million. Uber is losing a billion a quarter.

Re: Can Uber ever make money?

#82

Post by munificent »

rchaud wrote: post #74

Looking at Uber, WeWork, JustEat etc., I get the feeling there's a growing gap between what we were brought up to believe about entrepreneurship and innovation vs. what the reality is. We're all familiar with the '>50% of small businesses fail' stat (not the real number) and that we should be toiling and not taking a salary for years until we break even, i.e. reach a point where we're no longer losing money on every…

> how is this supposed to create wealth for anybody except the shareholders who got in early with cheap valuations?

Spoiler alert: It's not.

The primary goal of a VC-backup startup is a positive return to its VC backers. Everything else is a necessary evil to attain that primary goal.

Re: Can Uber ever make money?

#83

Post by jsloss »

skywhopper wrote: post #15

There is literally no way for a mass-market taxi service to make money unless they have a monopoly, or some unexpected disruptive technology comes along that gives one company an unassailable advantage in lowering costs. The Uber app was the original innovation, but it's not particularly innovative anymore. Besides Lyft, traditional taxi companies have similar apps in some markets. Skirting regulation and good labor…

I'm not sure about the future profitability of this space, but I think you're disregarding a few key points.

1. The innovation was less the app and more solving supply problems. No app will be able to change that for the taxi business.

2. Competitive advantage in this space is having more drivers and less wait time. That drives folks to use one provider over another. The lock in isn't the tech, but the availability of rides.

You're right that the lock in or network effect in the ride sharing space is very different than other big tech cos (FB, Netflix, AMZN etc) in that they're localized, and should result in more competition.

The bet investors are making is that the market will shake out with one category leader, a runner up and virtually no competition beyond that. Should be interesting to watch.

Re: Can Uber ever make money?

#84

Post by jsloss »

harryh wrote: post #31
ghaff wrote: post #20

Earlier quoted context omitted.

People are willing to pay to get driven around for relatively short distances on-demand so I'm not sure why that's an inherently unprofitable business. I assume many taxi companies and black car companies make money. What's probably true is that they probably have to raise prices and deal with decreased volumes in at least many markets to do so--and probably grow more organically. And it won't be the kind of profitab…

I can imagine that running a taxi company might be a lot like running an airline (a notoriously money losing business). Four out of five of Porter's five forces are working against you: - relatively easy for new entrants to enter the market - lots of consumer substitutes - lots of customer buying power - lots of competition

Is it easy for new entrants though? And is there competition?

Re: Can Uber ever make money?

#85

Post by Marazan »

pbreit wrote: post #67
skywhopper wrote: post #15

There is literally no way for a mass-market taxi service to make money unless they have a monopoly, or some unexpected disruptive technology comes along that gives one company an unassailable advantage in lowering costs. The Uber app was the original innovation, but it's not particularly innovative anymore. Besides Lyft, traditional taxi companies have similar apps in some markets. Skirting regulation and good labor…

Uber had $940 million in Contribution Profit in 2018. It prints money on non-pool rides in mature markets.

What does that mean?

Re: Can Uber ever make money?

#86

Post by mortenjorck »

dcolkitt wrote: post #26
TruthSHIFT wrote: post #7

Keep in mind that this may not change when driverless cars become widely available. Maintaining a fleet thousands of driverless cars may prove to be more expensive than crowdsourcing a vehicle fleet.

There's either two possibilities for the self-driving future. 1) Hardly anybody owns cars anymore. When we want to get from point A to point B, we just call a driverless car from the network. But this type of service is a natural monopoly. When people are ridesharing everywhere, the network with the biggest fleet, becomes the stochastically fastest and cheapest option. Plus add in the fact that they're collecting a l…

There’s a third possible future, where a significant number of individuals buy autonomous vehicles as investments, effectively renting them out on a rideshare aggregator as one might buy an investment property to rent out.

However, this aggregator almost certainly won’t be Uber or Lyft. It’s very unlikely that the time between now and ubiquitous, consumer-level AVs will be shorter than the time before Uber is acquired by Verizon for pennies on the dollar.

Re: Can Uber ever make money?

#87

Post by mywittyname »

govg wrote: post #17

I can only see them making money in three ways : - They scale up massively and capture a huge fraction of the ride sharing market, thus allowing them to offer low cost / low margin rides, but making up for it by volumes : At least in India, they are in a good position, but they seem to have conceded the other markets with high potential for growth like SE Asia and China. - They have a premium offering that is actuall…

Pools are where the money is at, IMHO. If they can put together a good predictive transportation model, then I think they will really have a killer app. Personal transportation is just too costly for regular use. But having an "Uber Bus" that shows up down the street from your house right when you need it, then can bring you home right after work for maybe $5/day will have wide-spread appeal.

Re: Can Uber ever make money?

#88

Post by bobthepanda »

jsloss wrote: post #83
skywhopper wrote: post #15

There is literally no way for a mass-market taxi service to make money unless they have a monopoly, or some unexpected disruptive technology comes along that gives one company an unassailable advantage in lowering costs. The Uber app was the original innovation, but it's not particularly innovative anymore. Besides Lyft, traditional taxi companies have similar apps in some markets. Skirting regulation and good labor…

I'm not sure about the future profitability of this space, but I think you're disregarding a few key points. 1. The innovation was less the app and more solving supply problems. No app will be able to change that for the taxi business. 2. Competitive advantage in this space is having more drivers and less wait time. That drives folks to use one provider over another. The lock in isn't the tech, but the availability o…

1. The regulations that Uber skirted around and then loosened up to provide more drivers can also be used by other companies. The gates are open, but not only to Uber.

2. Drivers and customers are fickle. My market used to be mostly Uber and is now mostly Lyft because all the drivers hate Uber. When Uber and Lyft run out of cash to blow on subsidies, they don't really have much of a selling point.

The problem with Uber's business model is that the main cost is the driver, who is not going to go anywhere anytime soon. It's no Amazon, where they have efficiencies of scale in logistics, datacenters, etc.; you don't get economies of scale by being bigger in the taxi business. It seems more like Moviepass.

Re: Can Uber ever make money?

#89

Post by TheOtherHobbes »

dcolkitt wrote: post #26
TruthSHIFT wrote: post #7

Keep in mind that this may not change when driverless cars become widely available. Maintaining a fleet thousands of driverless cars may prove to be more expensive than crowdsourcing a vehicle fleet.

There's either two possibilities for the self-driving future. 1) Hardly anybody owns cars anymore. When we want to get from point A to point B, we just call a driverless car from the network. But this type of service is a natural monopoly. When people are ridesharing everywhere, the network with the biggest fleet, becomes the stochastically fastest and cheapest option. Plus add in the fact that they're collecting a l…

1) doesn't work except in narrow circs, because there will always be an uncomfortable delay between ordering and arrival. And there are a lot of situations where that's either inconvenient (e.g you're cold and getting rained on) or more inconvenient (missing a flight because an event has removed all the available cars to the other side of the city.)

2) is a huge insurance headache. And most people aren't going to want strangers doing random things in their cars - whether it's leaving crumbs on the floor, spilling booze, or having sex.

It's the AirBNB problem - the service starts off well with high quality buyers and sellers, but over time the reliability of both degrades.

My guess is that 2) will be tried for a while but will not appeal to most owners. 1) will become a thing, but "popular" self-drive-sharing will acquire a sleazy and low-rent reputation.

0) will be an expensive upscale service with guaranteed nice cars and quickest possible delivery.

But (square root of minus one) will be something else entirely - a new disruptive AI-enhanced service that gives users live local price and availability updates on everything, from transport to deliveries to fast food to accommodation to special items.

This will algorithmically disrupt the algorithms of the disrupters, who will of course complain that it's unfair that technology is destroying their core business.

Re: Can Uber ever make money?

#90

Post by benj111 »

pbreit wrote: post #67
skywhopper wrote: post #15

There is literally no way for a mass-market taxi service to make money unless they have a monopoly, or some unexpected disruptive technology comes along that gives one company an unassailable advantage in lowering costs. The Uber app was the original innovation, but it's not particularly innovative anymore. Besides Lyft, traditional taxi companies have similar apps in some markets. Skirting regulation and good labor…

Uber had $940 million in Contribution Profit in 2018. It prints money on non-pool rides in mature markets.

If I make a widget for $100 (50/50 fixed, variable) and sell it for $90, I've covered the variable costs. But If I only have one line, all those fixed costs are attributable to that one line, so its still not making a profit.

If you had multiple lines and one line that wasn't making a profit, but was making a contribution to fixed costs, it maybe better overall to keep that line in place. That isn't what we seem to be talking about here, but it depends how 'fixed' the fixed costs are.

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