
Uber operating at big losses, suggests document leak - boomzilla
http://www.bbc.com/news/technology-33800073
======
dpflan
There is an older (by ~13 hours) submission on the same topic with numerous
comments if you want to checkout the discussion captured then:
[https://news.ycombinator.com/item?id=10013798](https://news.ycombinator.com/item?id=10013798)

------
B4CKlash
Is anyone surprised by this? Amazon had a net income of (241,000,000) in 2014
and a market cap well over $100 billion...

I know the comparison is a little strange, but these big startups/tech
companies (i.e. Uber/Amazon) feel remnant of the old Standard Oil days.
Standard Oil would routinely operated at a loss to hamstring competition. A
tech company (similarly) can operate at a loss, undercut it's competition, and
skirt regulation until it reaches an economy of scale. At which point
competition has been decimated and a monopoly (or oligopoly) is established.
The ideal scenario for a profit maximizing business.

~~~
bluedino
Uber isn't Amazon. They aren't selling phones and tablets at cost (or at a
loss) in an attempt to get customers. They aren't investing in things like AWS
or acquiring companies.

~~~
cryptoz
> They aren't investing in things like AWS

Sure they are. Their investments in self-driving cars I think is an excellent
comparison: self-driving cars will become a fundamental backbone of
transportation in the future, kind of like AWS is for the internet right now.
Uber's not the only one of course, but if they can grow to lead the pack with
research, production and _use_ of a large fleet of self-driving cars, then
they are in a very good position for the future.

~~~
dave_sullivan
I've heard talk of self driving cars at uber, but are they really "investing"
in them? Self driving cars will be available for anyone to buy within 5 years
-- Uber would be better off buying some of those. And so will their
competitors.

I'll say this: uber will be the next groupon, zynga, webvan, ... it's laws of
physics, we've seen it before -- take a simple but good profitable product
with early user growth, a big market (ppl needing cabs, groceries, stuff at
discount, addictive entertainment), and then completely kill it through over-
investment. Then they use the money to buy the growth they need to justify
their ever-higher valuations.

Market growth really looks more like a sigmoid than a hockey stick. Towards
the top, near the plateau, it's possible to buy growth to feed the myth of the
hockey stick. By doing this, you are incurring a sort of technical (real?)
debt that is harder to pay back than people realize, particularly as margins
get squeezed by inevitable competition.

In Uber's case, they will also mostly lose in court.

~~~
FatalErrorr
Within 5 years? That's crazy talk man.

------
dmihal
They're still in an aggressive growth stage, they're supposed to be burning
through their cash.

Did anyone really think that $5 Uber pools were money makers?

~~~
mrweasel
>they're supposed to be burning through their cash

I don't think that they're supposed to, that's potentially dangerous thinking,
depending on their business strategy. It's not an uncommon practise though.

~~~
tertius
No, their investors are forcing them to burn through their capital. That's
what capital investment is for.

------
mrweasel
I wanted to ask if anyone seriously believed that Uber was making a profit,
while requiring funding at their current scale, but then again what are they
spending all that money on?

Sure they need developers, infrastructure, marketing and all the stuff
required to run any business, but the drivers and vehicles aren't costing them
money. So why do they need $1bn in cash? It would be very interesting to see
the Uber yearly budget.

~~~
kuschku
Lobbying, lobbying, and lobbying. It’s cheaper to lobby against mandatory
insurance than to actually pay for it.

~~~
icebraining
What mandatory insurance does Uber fail to provide?

~~~
kuschku
In Germany, if you transport passengers commercially, your normal insurance
does not apply. As, if you operate a car, you have to have an insurance, you
have to have a seperate insurance for the cases where you operate a car while
transporting someone commercially.

UberPop did not provide those insurances, and instead said the drivers would
have to pay them themselves. As that is not acceptable for the drivers, and
Uber directly suggests the drivers to just drive without insurance, the courts
ruled that Uber will be fined 240k€ for every business interaction its UberPop
service does without providing this insurance.

Remember, not all taxi regulations in Europe are crazy, most actually make
sense.

~~~
drzaiusapelord
>Remember, not all taxi regulations in Europe are crazy, most actually make
sense.

That's a bold claim. No government is immune from protectionism legislation
and corruption, in fact this is the defacto mode of almost all governments.
I'm getting a little sick of Europeans thinking their shit doesn't stink.
Paris cab drivers were throwing cinder blocks onto cars with impunity last
month. You people aren't special, you're just unbelievable statist to the
point of not questioning your government. The German laws sound corrupt as
well. Everything about the taxi industry is a shitshow. Lets all accept that.
This is why Uber is so exciting and popular. The cab industry deserves to be
disrupted. Considering political corruption over the decades, this path won't
be easy, but its worth doing.

~~~
kuschku
I’m not saying the government is immune from corruption, and while I do not
think protectionism is bad, the government here does not intervene with this
at all.

Uber is not even treated legally as taxi service, but as chauffeur-for-hire
service, meaning they only need to do 2 things: Their drivers have a drivers
license, their cars are insured.

The drivers license for taxi drivers, chauffeurs and bus drivers costs 55€.
fifty-five Euro. That’s nothing.

And one can reasonably demand that cars on the street are insured, as
especially in car crashes it is helpful.

------
kuschku
So, they are ignoring regulations, avoided paying insurance fees and drivers
licenses for months, are equally expensive as normal taxis, are paying their
drivers badly, and are STILL not profitable?

Well, this is a failed experiment.

~~~
dylanjermiah
Regulations imposed to protect incumbents. Evidence on the insurance fees?
Evidence on licenses? Evidence on price? Anecdotally in my city they're 300%
cheaper than taxi's. Evidence on paying drivers 'badly'?

Investing in growth > short term profitability (which they could do of they
wanted to miss future markets)

~~~
kuschku
The court case in Germany has all the evidence you asked for.

UberPop was banned (not UberBlack, though) because Uber refused to only hire
drivers who had a chauffeurs license; because Uber refused to pay insurance.

And anecdotal evidence of the uber pricing is that it’s not a bit more
expensive than any other taxi or chauffeur services.

Paying drivers 'badly': There were multiple submissions about this topic on
HN, use the search.

------
boomzilla
More details in Gawker's article: [http://gawker.com/here-are-the-internal-
documents-that-prove...](http://gawker.com/here-are-the-internal-documents-
that-prove-uber-is-a-mo-1704234157)

------
ianstallings
The profits on a business in a rapid growth period, where everyone expects
losses, is not a problem. It's all about expectations and communication with
the investors. If this is the plan, then they are on track.

------
jshelly
Kalanick is not necessary lying about revenue growth, he just doesn't
differentiate between gross or net which is misleading unless you do your own
legwork into the revenue numbers.

Not much of a story here...

------
userbinator
I think "Leaked documents suggest Uber operating at big losses" would be a
clearer headline. I parsed it at first to mean Uber's losses were due to
document leaks, or that they suggest leaking documents because of losses(?)
Especially when they also have headlines like this:

[http://www.bbc.com/news/uk-northern-
ireland-31771046](http://www.bbc.com/news/uk-northern-ireland-31771046)

------
ebbv
Can't say this is at all a surprise. With how aggressive their expansion has
been, there's no way they were doing that in the black.

------
tibbon
Given their current funding, even at a 400mm/year loss, they could keep going
for several years. Maybe that's the plan?

~~~
justaman
Their plan is to become a household name. A trusted name. Something synonymous
is transportation. Then in 5 or 6 years buy thousands of Google-Cars.

If they keep burning cash like this I dont think they will make it 5 years and
still be in a position to purchase automated cars without additional funding.

~~~
ianstallings
I think you're on the right track and I think the funding for that push will
come from the inevitable IPO, and probably more public offerings after that.
But it will be important to be in the black by then. So right now it's all
about growth and capturing the market.

~~~
tibbon
Yep. Remember how long Amazon lost money for? Seemed to work out for them.

~~~
discodave
Negative income != negative cash flow

------
ForHackernews
Other than marketing, what are Uber's expenses? From the outside, it looks to
me like they've successfully outsourced all their costs onto their
"independent-contractor" drivers? How are they not profitable?

------
wehadfun
Is the majority of the loss from R&D? From what I understand Uber is only an
automated call center.

------
beering
What falls under "Cost of Revenue" and "Cost of Sales" in their documents?

