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Uber Bonds Term Sheet Reveals $470M in Operating Losses

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Re: Uber Bonds Term Sheet Reveals $470M in Operating Losses

#81

Post by geofft »

2anon4this1 wrote: post #73
soup10 wrote: post #58

Earlier quoted context omitted.

They solved the "hail a taxi by pressing a button on your smartphone problem". It's not really subsidized, if they weren't setting piles of money on fire trying to grow really fast(and taking moonshots on autonomous cars), they would definitely be profitable.

In many cities uber is paying drivers a guaranteed $40 per hour to drive regardless of fares during peak times. In many places uber is currently an unsustainable, heavily subsidised operation which would fail in free market conditions, but because of their big stash of VC $$ they are able to survive while eating away at taxi driver market share.

Yup, in NYC, Uber is paying a guaranteed $35K/6 months revenue to new drivers (provided they're online 200 hours per month and accept 90% of trips, but you know). I don't know how much of this they expect to pay out, but taxis work really well in this city (compared to, say, SF), so my guess is that they're competing aggressively. If they raised prices instead of subsidizing the shortfall to $35K, would the popular response to Uber be different?

Re: Uber Bonds Term Sheet Reveals $470M in Operating Losses

#82

Post by digitalzombie »

If the bubble burst now, Uber will be the poster child of what's wrong with start ups.

I would probably be happy if they were to fail, for their past actions toward their competitor and their CEO's comments on the drivers were disgusting.

With the back lash with California's ruling and France, I think the laws are catching up to the new tech service and it doesn't look good currently for Uber. While people may argue that it's just California, California has a big population and a big market.

But a silver lining would be Telsa look like it were doom until Model S and they survived. I personally thought they were going to make it.

Re: Uber Bonds Term Sheet Reveals $470M in Operating Losses

#83

Post by akg_67 »

geofft wrote: post #38

There was a comment thread earlier today about whether Uber is solving rich-people problems or common-people problems. I wonder the extent to which Uber's pricing is sustainable -- are they subsidizing uberX and uberPOOL pricing out of money they're raising, or are the debts just in the pursuit of growth to new cities? Or put another way, if they ceased all growth, froze prices, and laid off all engineering and marke…

My own impression taking Uber is that same trips would have cost me more than twice if I were to take a regular cab. The reported $470M operating loss on $410 revenue seems to be somewhat in same ballpark. I don't believe current pricing is sustainable. I don't see any cost advantage for Uber other than paying drivers less than the drivers-owners of regular cab service.

IMO, Uber may be hoping that once regular cab services are put out of business, Uber can raise the prices. The sustainable long term value prop seems to be ability to call up a cab using mobile app on your phone (request and dispatch portion of regular cab business). Everything else appears to contribute to loss.

I also don't believe time has come for self-driving cars or will be in next 5 years at least. If another technology bust happens before self-driving cars become popular, these projects will go on the shelf if not cancelled (like the pet projects of founders and executives in 2000 dot bomb).

Re: Uber Bonds Term Sheet Reveals $470M in Operating Losses

#84

Post by ajani »

ravenkat wrote: post #2

This is really interesting. I believe this might be attribute to all the Uber promotions in Asia. I have heard from all my friends in India/China that Uber rides are actually free for around 10-15 rides. Also, they are giving tons of money to Drivers to promote Uber in India. An average Uber driver in Bangalore earns 110000 INR per month where as an entry level software engineer in GOOG/AMZN in India earns 80000 INR/…

There are no free rides here in India (at least Mumbai). You get a promo of up to Rs 600 (USD 10) to start with. And that's it. I very much doubt the claims about drivers earning Rs 100,000+. I am going to ask my Uber drivers to and from work about how much they make.

Re: Uber Bonds Term Sheet Reveals $470M in Operating Losses

#85

Post by ajani »

cheriot wrote: post #5
ravenkat wrote: post #2

This is really interesting. I believe this might be attribute to all the Uber promotions in Asia. I have heard from all my friends in India/China that Uber rides are actually free for around 10-15 rides. Also, they are giving tons of money to Drivers to promote Uber in India. An average Uber driver in Bangalore earns 110000 INR per month where as an entry level software engineer in GOOG/AMZN in India earns 80000 INR/…

I'm still surprised that Uber is entering such competitive markets. I mean, in much of the western world, they're using a mobile app to side step cab hailing laws and break long standing taxi oligopolies. Does anyone know what market flaws they're solving in India and Asia?

Regular (black and yellow) taxis and rickshaws exist in Mumbai and very few other Indian cities including Delhi. However only in Mumbai do they ply according to a meter. The rest of the cities, they just charge whatever they feel like. Also most cab drivers will refuse to take passengers depending on destination on a regular basis. Maybe 50% of the time. Other radio cab services like Meru (the oldest radio cab service), need at least a half hour for booking. You also need to provide your destination. Also paying cash is a real pain, because most cab drivers will just claim to not have change and try to pocket it.

Uber is a breath of fresh air here. It doesn't force a destination, you can instantly know whether cars are available or not, generally arrives in 10 minutes or so, and there is no cash payment needed.

Where price is concerned, they've now managed to figure out the right pricing, so that an Uber ride costs only marginally more than a regular cab ride. e.g. Home to work takes around Rs 200 for a regular cab. Uber costs anywhere from Rs 220 (Uber X), to 350 (Uber Black).

Re: Uber Bonds Term Sheet Reveals $470M in Operating Losses

#86

Post by geofft »

joshjkim wrote: post #76
geofft wrote: post #38

There was a comment thread earlier today about whether Uber is solving rich-people problems or common-people problems. I wonder the extent to which Uber's pricing is sustainable -- are they subsidizing uberX and uberPOOL pricing out of money they're raising, or are the debts just in the pursuit of growth to new cities? Or put another way, if they ceased all growth, froze prices, and laid off all engineering and marke…

It would be profitable, but assuming the situation your describe, it would primarily come down to (1) driver churn and (2) costs associated with any adverse legal rulings/judgments. 1. Cost of recruiting drivers is relatively high - probably around $50-$100 per driver. This cost is composed of background check (probably $10-20), the ad that got them in the door ($5-10 for that click), the overhead cost of recruiting…

> Cost of recruiting drivers is relatively high - probably around $50-$100 per driver.

Hrm. Instead of working from first principles, we can poke at some data. Zen99 calculates that Uber seems to be spending some $1M/year on Craigslist ads for SF drivers alone [1], and as of the end of last year, they had about 16,000 drivers in SF [2]. Assuming generously that they recruited them all that year, that's about $62 on Craiglist advertising per driver, much higher than your $5-10 estimate.

There are also incentives like an unconditional $500 on your first ride [3]. In NYC, Uber also offers new drivers a free defensive driving class and doctor's examination at their offices [4], because they need those to get on the road. You will not find doctors to do exams for $2-5.

I would guess total driver acquisition cost, including first-trip incentives, is much more likely to be in the $1000-2000 range, at minimum. And we still haven't gotten to long-term subsidies like uberPOOL, which is what I'm really curious about. Even a $10K driver acquisition cost could maybe be sustainable if each driver lasts over a year on average, since it's a one-time cost. But it needs to pay better than taxi wages + cost of car maintenance for the driver, and at least break even for Uber, in the steady state.

[1] https://tryzen99.com/blog_posts/on-demand-is-in-demand

[2] http://www.washingtonpost.com/blogs/wonkblog/wp/2015/01/22/n...

[3] http://www.driveubernyc.com/try

[4] http://www.driveubernyc.com/defensive

Re: Uber Bonds Term Sheet Reveals $470M in Operating Losses

#87

Post by icebraining »

learc83 wrote: post #70
efuquen wrote: post #61

Earlier quoted context omitted.

My problem with that statement is that it describes every single job you could possibly have, even the very well paying ones. You are always trading your labor to somebody with money, whether it's an Uber driver or the CEO of a major corporation. It's not the "Uber model", it's the money represents an agreed upon denomination to trade goods and services with model.

The important part of wpietri's critique is "during the instants we are directly useful". The CEO doesn't stop being paid when she walks to the bathroom, and a cashier doesn't stop being paid when he's waiting for a customer to show up. wpietri is talking about a shift in the granularity of trading your labor for money, so that you aren't paid for a day or an hour of work, but for the exact number of minutes you perf…

But Uber doesn't represent that shift, since taxi drivers were already considered contractors and paid by the ride.

Re: Uber Bonds Term Sheet Reveals $470M in Operating Losses

#88

Post by icebraining »

wpietri wrote: post #40
personjerry wrote: post #3

Tangential to OP: How does HN feel about the "evilness" of Uber? At my school the general feel is that Uber is pretty evil, notably for its attitudes towards its drivers as well as towards Lyft.

Having worked for financial traders I won't call them the very worst company in the world. But if my choices were working for them or quitting the industry, I wouldn't blink. For me it's more the accumulation of awfulness. They started out as a scheme to time-share limos among young entitled dudebros. They entered the market with the black cars, exploiting a status-good dynamic. They've shifted all of the capital cos…

How is Uber in any way different in terms of "job security" and "getting paid only when they are useful" than taxis?

Taxi drivers were already mostly contractors, who had to pay to work (renting a medallion from one of the rich guys who owned them, renting the car, paying for gas) and then got paid per ride.

I dislike Uber as a company in general, but I don't get this idea that they represent some worsening of the work conditions, as if previous workers were employed with benefits.

Re: Uber Bonds Term Sheet Reveals $470M in Operating Losses

#89

Post by quonn »

crdoconnor wrote: post #63
boomzilla wrote: post #56

Earlier quoted context omitted.

There is no network effect. As soon as you pay the drivers more, and charge the riders less, they will install your app. What keeps drivers and riders from checking both Uber and SuperDuperUber apps at the same time to make/save some extra money?

Networks that have a larger customer and driver base can link them up quicker. That means that, at no extra cost to the network , the customer will end up waiting 2 minutes for a cab instead of 40, and the driver will end up waiting 2 minutes for a fare instead of 40. Would you pay extra for those 38 minutes as a customer? I would. Would you accept a lower commission as a driver if you spend less time waiting for far…

> Part of the monopoly advantage means that they can covertly punish drivers who choose to use competitors' apps by sending them fewer rides. If it's not already here, this tactic is probably coming very soon.

If they try this as a monopoly, the Department of Justice will probably start investigating.

Re: Uber Bonds Term Sheet Reveals $470M in Operating Losses

#90

Post by threeseed »

Tycho wrote: post #41
personjerry wrote: post #3

Tangential to OP: How does HN feel about the "evilness" of Uber? At my school the general feel is that Uber is pretty evil, notably for its attitudes towards its drivers as well as towards Lyft.

Uber has come along and made every single thing about cab journeys better. People complaining about it look like idiots. The only evil here is whatever it was that made it take so long for this change to come about.

People that don't believe that a US company whose business model is based solely on breaking the law in other countries and compromising passenger safety aren't idiots.

And let's be clear in many countries taxi drivers are far more rigorously screened and of course have security cameras. Both of which Uber has been a bit lax at.

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