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Uber Lays Off 400

nytimes.com

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Re: Uber Lays Off 400

#71

Post by snarf21 »

bobthepanda wrote: post #29
Bootwizard wrote: post #15

Does anyone have any idea why Uber isn't profitable? I never really understood that. It's such a ubiquitous service in a large portion of the world. It seems to me that they have a lot of physical growth, so what is happening to their finances?

People like comparing Uber to, say, Amazon. The major difference is that Amazon benefitted from economies of scale - they spent a lot of time in the red building infrastructure and logistics, but now they reap the benefits by having very good infrastructure and logistics, which only get more efficient the more things they sell. Uber's main expense is the driver. The vehicles pretty much always stay the same size so t…

Well, Amazon also is focused on disinter-mediating everyone. Those people's margins are Amazon's opportunity. Even now they are increasing their fleet into someone else's margins, go check out the Cincinnati airport.

Re: Uber Lays Off 400

#72

Post by criddell »

formercoder wrote: post #26
Analemma_ wrote: post #23

Earlier quoted context omitted.

Most Uber rides are priced below cost to try and drive growth. Or at least, that was the original story they told. Lately it seems more like “Uber rides are priced below cost, because if we price them any higher users will flee to a different ride-hailing service, because we have no lock-in or switching costs”. Uber’s entire business model is selling dollar bills for 90 cents and it’s all going to come apart shortly.

I wonder if there's a predatory pricing case there

I don't think so because they have a positive gross margin.

Re: Uber Lays Off 400

#73

Post by jandrese »

aresant wrote: post #32
xmprt wrote: post #17

Earlier quoted context omitted.

Which is exactly their point. Why localize your marketing when you can build a much more centralized message. This way they spend less on marketing and have a better global brand identity.

I'm not going to fight this one to the death but I have direct experience in this marketplace. It is much more nuanced than "let's be centralized" and the idea of handing it all over to an agency is a joke. Marketing / customer acquisition is literally their highest non-driver line item by a gi-fucking-gantic amount. Sales & Marketing represents $3 - 4billion dollar cost vs a total marketing payroll of ~$165,000,000…

This makes them look closer to a MLM scheme than a traditional business. Most of the corporate focus is on marketing to "employees" at the bottom who end up getting kind of screwed by the system. The product is entirely secondary.

Re: Uber Lays Off 400

#74

Post by mevile »

fluxic wrote: post #39

Love to revisit this piece every few years. Why food delivery will never be profitable: "The Food Delivery Death Star" https://medium.com/@review/the-food-delivery-death-star-85f9...

Pizza delivery is profitable. Pizza comes in a shape easy for transportation, the size and value of the delivery is economical for a delivery business and there's an established culture around ordering pizza for delivery.

The food delivery companies just need to figure out these problems, which a hard, for non-pizza foods.

Re: Uber Lays Off 400

#75

Post by CamelCaseName »

nemothekid wrote: post #68
SilasX wrote: post #63

Earlier quoted context omitted.

Echoing twic's disbelief here. A quick googling turned up Coca-Cola's global advertising budget as being $4 billion/year [1]. >Coca-Cola has made a yearly commitment to large ad spends. In 2017, the beverage manufacturer spent $3.96 billion, in 2016, $4 billion, and in 2015 $3.96 billion on global advertising. But I'm not sure if that's a comparable figure, as "advertising" is only a subset of "marketing". Still, if…

I think driver incentives falls under marketing spend at Uber. Driver Incentives are they will pay driver $X to make $Y trips. Essentially riders are paying $5 and drivers are making $6. I believe this is where most of the money is burned at Lyft as well.

From their S-1:

>Driver incentives. Driver incentives refer to payments that we make to Drivers, which are separate from and in addition to the Driver’s portion of the fare paid by the consumer. For example, Driver incentives could include payments we make to Drivers should they choose to take advantage of an incentive offer and complete a consecutive number of trips or a cumulative number of trips on the platform over a defined period of time. Driver incentives are recorded as a reduction of revenue to the extent they are not excess Driver incentives (as defined below).

>Driver referrals. Driver referrals refer to payments that we make to existing Drivers to refer new Drivers onto our platform. Driver referrals are recorded in sales and marketing expenses, as they represent the receipt of a distinct service of customer acquisition for which there is evidence of fair value.

https://www.sec.gov/Archives/edgar/data/1543151/000119312519... (pp. iii)

Re: Uber Lays Off 400

#76

Post by goobynight »

Bootwizard wrote: post #15

Does anyone have any idea why Uber isn't profitable? I never really understood that. It's such a ubiquitous service in a large portion of the world. It seems to me that they have a lot of physical growth, so what is happening to their finances?

A lot of people use it because it's so obvious that they're operating at a loss. That's why the ride is so cheap. If they brought prices up to what they "should" be, volume would go down or the competition would snatch it up.

If Uber wants to take a loss on my ride, I'll be there every time.

Re: Uber Lays Off 400

#77

Post by ethbro »

whatshisface wrote: post #54
cj wrote: post #33

Earlier quoted context omitted.

I mostly agree, except I'd probably frame it a bit differently: > Need more users pre IPO to juice the growth story Or, "VCs tell us we need to spend their investment quickly in whatever areas will generate a hockey stick growth in valuation. We can always fix our business model when we're ready to." > Cut costs post IPO Or, "We no longer answer to our VCs. Now we answer to the public market who cares a lot more abou…

If public markets care about fundamentals why can VCs exit into the public market with fake hockey stick growth?

Because during the initial window of exit, "All companies look like this" is a plausible narrative.

Re: Uber Lays Off 400

#78

Post by pjc50 »

davinic wrote: post #48
MiroF wrote: post #22

Earlier quoted context omitted.

You literally cannot profitably transport people at the prices they're offering. Uber is just one big bet that the price point of transportation will fall significantly with the advent of self driving and they'll be there to make the money off that margin.

Why would they care about self-driving if most of their drivers are making little more than the cost of operating their vehicle?

Drivers have an acquisition cost in marketing too. And will quit eventually if they keep losing money.

Re: Uber Lays Off 400

#79

Post by aresant »

nemothekid wrote: post #68
SilasX wrote: post #63

Earlier quoted context omitted.

Echoing twic's disbelief here. A quick googling turned up Coca-Cola's global advertising budget as being $4 billion/year [1]. >Coca-Cola has made a yearly commitment to large ad spends. In 2017, the beverage manufacturer spent $3.96 billion, in 2016, $4 billion, and in 2015 $3.96 billion on global advertising. But I'm not sure if that's a comparable figure, as "advertising" is only a subset of "marketing". Still, if…

I think driver incentives falls under marketing spend at Uber. Driver Incentives are they will pay driver $X to make $Y trips. Essentially riders are paying $5 and drivers are making $6. I believe this is where most of the money is burned at Lyft as well.

UBER masks this real number across many of their general line items.

EG they put ~$300,000,000 of the "Driver Incentive" cost into "Cost of Revenue" line item that represents:

- "Any amount paid to a driver that exceeds the revenue earned by that driver (for instance, if a driver’s earnings from a trip exceed the fare for that trip). Excess driver incentives jumped by about $300 million in 2018 from the previous year, largely due to Uber Eats."

And then they stick $1,800,000,000 into "Sales & Marketing" representing:

- "Discounts, promotions, refunds, and credits for customers,"

- - - -

A popular criticism of UBER is that their unit economics are not sound - eg they can't make money at scale on a per ride basis.

So this giant $2.1b glut of Driver Incentives and Customer Incentives is one of the areas to deeply study and build a position around if you'd like to be an UBER stock holder :)

Re: Uber Lays Off 400

#80

Post by JumpCrisscross »

goobynight wrote: post #76
Bootwizard wrote: post #15

Does anyone have any idea why Uber isn't profitable? I never really understood that. It's such a ubiquitous service in a large portion of the world. It seems to me that they have a lot of physical growth, so what is happening to their finances?

A lot of people use it because it's so obvious that they're operating at a loss. That's why the ride is so cheap. If they brought prices up to what they "should" be, volume would go down or the competition would snatch it up. If Uber wants to take a loss on my ride, I'll be there every time.

> If they brought prices up to what they "should" be, volume would go down or the competition would snatch it up

Last I checked, Uber made money on each ride in New York and San Francisco. The model can make money. I just don't know if it can make money everywhere.

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