
Uber's Loss Exceeds $800M in Q3 on $1.7B in Net Revenue - smb06
https://www.bloomberg.com/news/articles/2016-12-20/uber-s-loss-exceeds-800-million-in-third-quarter-on-1-7-billion-in-net-revenue
======
animex
Uber will be a dead Unicorn in the medium future. They've got too many legal
pressures, competitors with native advantages (i.e. the automakers), and their
expansion plans have them overextended. Here in Edmonton, AB, Canada,
regulatory changes have pushed the Uber prices to almost 2x during non-surge
times over regular taxis. Taxi's have stepped up. Local competitors have
sprouted. Carshares are abounding. It's all too much for them to compete
effectively and the drivers are realizing they are making nothing. The driver
pool has significantly dwindled here. The Uber model has no barrier to entry
and they've lost their first-to-market advantage. Doesn't paint a pretty
picture.

~~~
paulddraper
They still have the momentum.

This isn't a start up trying to figure out how to make money (Twitter) or a
company that can't/won't change (Blackberry).

This is a company making money that is pursuing a blitzkrieg on the industry.
They can sit back any day and rake in billions. I agree there isn't a high
entry barrier, but I don't think they've lost the first-to-market advantage.

~~~
danielpatrick
The question is whether they _will_ just be able to sit back and take in the
billions one day.

I have always looked forward to self-driving car networks because of what I
perceived to be their ultra-competitive and ultra-low margin nature.

Then two years ago everyone started talking about an Uber monopoly and I got
super upset. Are we seriously seeing another industry ultra centralize due to
technology?

But I'm beginning to suspect that this may be a massive miscalculation on the
part of Uber and its investors. Maybe it _is_ a low margin, highly competitive
industry and Uber will be remembered as that one company that subsidized
everybody's rides for a few years until it just faded into the background.

~~~
paulddraper
> I have always looked forward to self-driving car networks

As great as that would be, those are still a decade away from common use,
probably much more.

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ChuckMcM
As others point out this isn't necessarily bad, but it does mean that Uber is
extremely vulnerable. If we learned anything in the last bubble it was that
attempting to bootstrap through the power curve is exceptionally susceptible
to capital constraints. Back in the dot com days a number of 'baby telephone
companies' that were building out their networks and spending huge amounts of
money on laying out the infrastructure that was going to carry the traffic
they would get _after_ their build out, meant that any cash crunch had this
amazing multiplicative effect, which resulted in a massive implosion in
practically no time (one customer I talked to in 1999 was putting the
finishing touches on a $1.2M PO on Monday, and when we showed up for the
meeting on Wednesday the doors were locked and the name of an attorney's
office was there for questions. Later I found out they were negotiating
additional funding and even though their business plan was "solid" once some
other companies had gone under, everyone got too skittish to commit. They were
already burning through cash to people who were putting in new fiber cables
etc. They went upside down (more obligations than cash or revenue) on Tuesday
and the bank sent the attorneys (and Sheriff) over to secure the assets before
anyone could walk them out of the building that afternoon. Pilots have a term
for crashes like this, its called "controlled flight into terrain" where
basically right up until the last moment the pilot was flying the plane. So it
can be with startups that right up until the day it isn't flying they are in
control.

Its nice that if Uber does implode (not that they will) that only VC's will
lose their money, of course Uber drivers will be out of their jobs as well but
they hopefully won't be greatly finanically hurt. And of course a lot of
employees that thought they were millionaires will realize that they aren't
(been there, done that, got the t-shirt :-()

I hope at some point in the not too distant future we can get some more
transparency on their financials. I really do consider them the poster child
for the 'dynamic' economy (one where service suppliers and service demanders
are paired in real time for a fee). If they can't make it work it will really
call into question if it is even _possible_ to make it work.

~~~
microtherion
The question is whether Uber is buying _anything_ of durable value with their
billions. Dot-com companies were buying warehouse space, laying fiber,
creating lock-in. Uber _might_ be running competitors out of business, but
it's a business with low barriers to entry, and they're not really locking in
customers or drivers.

They may claim to be building a moat, but to me it looks more like they're
buying overpriced water.

~~~
ChuckMcM
Its a fair question. If I were to speculate I would say they were buying
habits. Specifically transportation habits. The closest analogy in my own
experience is telephone directories. For all of my early life experience there
where printed and bound telephone directories which you consulted when you
needed to find the telephone number of someone you wished to talk to. There
was a very profitable business in selling ads in the commercially oriented
pages.

Google search changed that, over time it became easier to find a phone number
online than it was in the books. Then with the smart phone it combined both
the phone and the number database (search engine) into a single device and now
very few people use phone books.

But that habit changed slowly, over a decade at least to go from early
adopters to the majority of people out there using their phone (or the web) to
look up numbers. So the habit for calling a cab is changing slowly. From
regulated livery service to less regulated ride share service. During that
transition Uber is apparently "spending" billions[1] to connect in peoples
brains 'Uber' and 'rideshare' so that as ride sharing becomes the expected
norm, people will think of it as Uber not "any number of ride share
companies."

[1] It is an odd definition of spend, they are perhaps purposely under pricing
their service (so subsidizing) in order to encourage use.

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nharada
Presumably this is intentional -- Uber could raise prices and make more money,
but right now they're choosing to keep prices very low in order to undercut
Lyft and the cab companies with the assumption that having a monopoly will
return more profits in the future.

At least anecdotally, here in SF Lyft is almost always more expensive than
Uber.

~~~
Cyph0n
I tried Lyft the other day, but after they charged me $25 as an "authorization
hold" without notification, I cancelled my ride and decided to stick with
Uber. Note that Uber's auth charge is usually around $1. $25 may not be a
significant amount for some, but it's non-trivial for a college student like
myself.

I would have been happy had they just notified me first instead of my bank.
Terrible UX to be frank. I actually got in contact with Lyft support on
Twitter, but they did not care and just claimed that it was "standard policy".

~~~
jamez1
A $25 hold for a fare that might be $15 doesn't sound unreasonable? Is ride-
sharing that big of a cost for your day to day?

~~~
ra1n85
When you're so broke that an extra couple of dollars will put you in overdraft
territory, it's not reasonable.

At least they inform you in most hotels. I have not used Lyft - I would hope
they do the same.

~~~
wapz
Not to sound rude but someone who's that short on cash might be better off
going by public transit, walking, or using a bicycle.

~~~
Cyph0n
I use public transport for my daily commute. I use Uber for shopping 2 or 3
times per month, and only on the way back. I think it's tough to save more
than that.

Any tips would be appreciated of course.

------
jeffdavis
Sincere question: what protects Uber from competition enough to imply huge
profits in the future?

Network effects don't seem that strong. People will download an app to save
money, and drivers will download an app to make money. It doesn't cause any
major inconvenience.

In fact, it seems like a market that may approach perfect competition in a
matter of years. There are only two companies now because there are only two
companies willing to lose money. After they start making money, that could
change quickly.

~~~
deepnotderp
Self driving cars change everything.

~~~
jeffdavis
Can you be more specific? Their self-driving tech is worth $70B?

If it's the combination, then I still don't quite get it. Wouldn't any good
self-driving tech pretty easily adapt to ride hailing?

Let's say it's a best case for Uber: there are only few self-driving techs out
there, and Uber is one; and they dominate ride hailing, and start turning a
profit. Couldn't another self-driving tech company snap up Lyft and bundle in
the ride hailing, too?

~~~
alex-
I think a lot of people see todays taxi company being tomorrows ground
transport ruler, once self driving cars are ubiquitous.

The theory being less people will own cars. The savings made on
storage/parking, fuel and maintenance will be greater than paying for
individual rides (with no labour costs).

The car manufactures would no longer be the company the consumer interact
with. i.e. How much does the average consumer care if they are picked up in a
Lexus or a Toyota for the average ride?

This would put the car manufacturers in competition for the taxi companies
business commoditizing the car industry.

Who knows what will happen? Maybe regulation will prevent self driving cars
becoming ubiquitous? or maybe some advance in manufacturing makes it much
cheaper to own self driving cars.

But speculation that Uber pulls this off is the only way that I can see how
Uber is worth over $60Bn (more than ford $50Bn ish, GM $50Bn ish, Nissian
$45Bn ish) while making a $0.8Bn loss on $1.7Bn revenue - as a gamble for what
might end up owning a $400Bn+ market.

------
toasted
Off-topic - but currently in India and the uber experience is absolutely
amazing.

The handful of times we have used taxi drivers, none of them can find the
place where we are staying even with written directions in english and in
hindi or even with a hindi speaking person instructing them via the phone.
There is always some niggle over pricing and whatever you pay them they claim
you are shortchanging them.

With uber they go to the right place EVERY TIME, there is no haggling at all,
they dont try to angle for tips but are very grateful if they get tipped. It
is a complete gamechanger for travel in these areas.

~~~
daughart
In Boston it's practically the opposite experience. Cabbies almost always know
exactly where I'm going and the fastest way to get there, because they've
logged the hours necessary to learn Boston's confusing street system. Uber
drivers are usually flipping between at least 2 GPS systems, and frequently
get lost, confused, and turned around. The rider experience has really dropped
off now that any Joe can make a few bucks as a part-time Uber driver.

------
WhitneyLand
The runway is finite. They have about ~5B in cash on hand and are losing ~3B
per year. They are putting on the spending brakes somewhat but revenue will
have to take off for their valuation to make sense.

They've already said no more dilution, so that limits new sources of
financing. Tick-tock.

------
weremine
Has there been a startup in recent history that was losing this amount of
money per year (planned or not) that ended up going green and successful?

~~~
mikeyouse
Side note, profitability is generally described as "into the black" not the
green. Amazon is probably the best example, their GAAP losses totalled several
billion dollars for a decade or so before they flipped the switch.

~~~
user837387
That completely got me. I thought he was talking about green technology which
did not make much sense to me. Didn't realize he was talking about
profitability.

~~~
mikeyouse
Yeah it's usually clear what they mean with "into the green" but a thread
about electric vehicles definitely makes that confusing.

------
antiviral
Uber is making the rest of us in SV look terrible.

1\. Collect a huge pile of money at sky-high valuations from those who really
should know better.

2\. Ignore any sensible unit economics and undercut local taxi/transport
services until those small businesses go bankrupt since they don't have Uber's
money pile.

3\. Evade local regulations that everyone else follows in the name of
'innovation' even though the reality is they are just taking a free pass on
conducting background checks, and skipping safety guidelines.

What's the endgame here? When they replace all taxis, do they really think
they can just permanently ignore all driving laws?

~~~
rubicon33
Huh? What's the end game?

The end game is a company with self driving cars, having SIGNIFICANTLY less
overhead than they currently do with human drivers. And, probably a ton of
technology patents to boot?

Yea, they're definitely a brazen company, but do you really expect anything
less from a unicorn company? Very few make it this big without cutting some
corners, having some connection, etc.

~~~
qyv
Self driving or driverless? I don't see any significant savings for self-
driving cars, you still need to pay the person and you have the significant
added expense of fleet maintenance. Not to mention liability concerns, unless
they plan in passing that off onto the 'drivers'.

Driverless cars on the other had and still decades away, whether the tech is
ready or not. Society is not yet at a place that will allow the use of full
driverless vehicles on public roads. It doesnt matter how much statistically
better a driverless car is than a human, every single accident will be
magnified. Driverless cars could be our first foray into truly autonomous
robotics within the general public, it is not something that will occur
lightly.

~~~
Fricken
For established tech and car companies, both Uber and Florida have basically
no rules about testing and implementation of autonomous vehicles. Essentially
the only rule is 'don't make us look bad, guys'.

Google is a league ahead of the competition with their Autonomous OS, and
they're getting close to implementing robotaxis commercially in limited
capacities. However, Chris Urmson, ex CTO of the self driving project doesn't
think they'll be able to go everywhere a human can for ~30 years.

Uber's autonomous program is looking pretty sketchy at the moment, but now
that they have Anthony Levandowski to play Darth Vader to Kalanick's Emperor
Palpatine, the project is in capable hands.

Uber's robotaxis need only augment their human network of drivers through the
mid-term, and as the capabilities of their Autonomous OS improves they take
over more responsibility. Still, this is capital intensive and it'll be still
be many years before autonomous vehicles have any measurable effect on Uber's
bottom line, and even then, Uber will still be facing competition from other
companies with robotaxi networks in development, including but not limited to
GM/Lyft/Cruise, The Tesla Network, Waymo, Zoox, and any Automaker willing to
license from the Mobileye/Delphi/Intel partnership.

Uber is currently playing hardball with the California DMV, in some sort of
attempt at asserting their dominance over the law. I'm not sure if they've got
some kind of legit strategy here or not, because I'm skeptical they'll have as
much luck leveraging popular public support against regulators in the
Autonomous Vehicle space with as they've had in the taxi industry.

It's also an inevitability that Uber's labour will organize for better
bargaining power. Legislators seem to side with drivers as 'employees' rather
than 'contractors' in the few regional cases that have made it through the
courts.

Nonetheless, these incomplete financial reports that have been leaking out
make it easy to spin a negative narrative about Uber's future prospects. That
narrative may be on the mark, but we can't know for sure.

------
ylhert
My understanding is that in mature markets, Uber is profitable. The issue is
that it takes a few years to become profitable in a market and so it's extreme
growth pushes out profitability on the whole for a few years

~~~
duaneb
Not before destroying any competition with cripplingly low rates. That's the
problem: I can't hail a goddamn taxi anymore, despite it being cheaper by any
back of the envelope calculation for society as a whole.

~~~
MarkPNeyer
> despite it being cheaper by any back of the envelope calculation for society
> as a whole.

Can you explain this? Not challenging, just curious.

~~~
flukus
The gig economy is going to be terrible for society, everyone is a couple of
bad reviews away from the street.

------
tomc1985
With finances like this, Uber will either collapse in a gigantic, money-fueled
fireball, or decimate transport. How long can everyone hold out?

~~~
aedron
Next, Uber will raise enough money to boil the ocean. Now their self-driving
trucks can go from continent to continent, completely obliterating the
container shipping business!

------
sdenton4
OH! This explains why they're in so big a rush for self-driving cars that they
can't even be bothered to stop at red lights...

~~~
govg
Wasn't it clarified that the incident was caused by the driver and not the
software?

~~~
sdenton4
That's Uber's claim, but given their behavior over the years, I see no reason
to believe them.

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apapli
Uber: the worlds fastest growing charity.

~~~
moxious
So others in this thread are calling it venture capital subsidized
transportation.

Why does the idea of venture capital charity seem so hilariously backwards?

~~~
apapli
Because VCs are using investor money and their investors are looking for a
return. Someone along the line will be pissed off of their investments don't
pay off.

Burning up $800m to subsidise an app with the justification of "market share"
decades before self driving vehicles become the norm is totally fine by me, as
long as it's not my money being incinerated.

~~~
moxious
I use Uber. I like cheap rides. Probably not going to invest, but maybe we
shouldn't speak too loudly about this.

~~~
apapli
I'm with you on that :)

------
untog
After the tens of articles outlining Uber's bad business practices I've been
trying to use other apps as much as I can. What's amazed me is how many
drivers on Lyft and the like are former Uber drivers who left the service. I'm
sure that they've been able to replace those drivers but I wonder if they'll
he able to keep this up for the time it takes to introduce self driving cars.
I suspect not.

------
pfarnsworth
People keep forgetting that Uber didn't have first mover advantage: Lyft did.
UberX came after Lyft, but Uber beat Lyft in execution and strategy.

------
alistproducer2
Here's what I'm not understanding about Uber. There' nothing they provide that
couldn't be cloned. It's clear there's no way to grow into profitability so
once the VC subsidies go away Uber will have to significantly raise prices to
survive, putting them in the same price range as traditional car services. At
that point, what's to stop Yellow Cab from creating their own Uber clone and
eating Uber's lunch?

~~~
jartelt
Well, Yellow Cab could hardly even get credit payments to work in their cabs,
so they are not exactly a technology company. It's not going to be easy for a
cab company to clone what Uber (or lyft) have built during the last 7 years.
Plus Uber has a network of drivers/users that has significant value.

------
free2rhyme214
Speculating Uber's future is just a silly as speculating the NFL draft. The
better question is - how do you provide as much value as Uber?

------
lobo_tuerto
The biggest beef I have with Uber is that they went from a transparent price
calculation to an opaque (and basically always more expensive rate).

So I always write back to their support team and they usually refund the extra
charged money, but it's tiring to have to do this for every long trip I make
with them.

(I'm talking about Uber in Mexico City).

------
beedogs
Hopefully this means they won't be around for much longer. I will not miss
them when they're gone.

------
Wissmania
There is so much irrationality in this thread and in public opinion in
general... it makes we wish I could personally bet on Uber's future success.

However, Uber is staying private, so they don't have to cater their long term
plans to the whims of random people who have no idea what they are talking
about. (I include myself in this category)

------
Swizec
So what's "net revenue" in this context?

I always thought revenue was income before costs, and profit was revenue minus
cost. Gross revenue would make sense as "total income", but net revenue
doesn't make any sense to me. Clearly I'm missing something.

Can someone explain?

~~~
bkanber
In this context it is revenue after drivers' fees but before anything else, ie
HQ, R&D, payroll, etc.

------
rubicon33
Also on track to have the first self driving car AND a ride hailing
application to boot. That can't be cheap.

~~~
stuckagain
I don't know how people get this impression, unless it is by only reading the
comments on this site and never reading any primary sources. Uber's "self-
driving" tech is currently unable to do things that other companies were doing
years ago. Google's car took a blind man to Taco Bell in 2012. Uber's car has
two engineers in the front seat and still blows stop lights and can't make a
right turn.

~~~
rubicon33
Yea, Google drove a blind man to Taco Bell in 2012 and still hasn't released a
self driving car 4 years later.

Meanwhile, Uber's been in the self driving car business half that time? They
already looks more likely to actually have these things on the road, and, they
have the incentive, and cash pool to do it.

Another reason people "get this impression" is that Google has a history of
interesting projects that never made it to market. Waymo gives me more
confidence, but I'm still skeptical.

~~~
stuckagain
I don't understand how Uber "looks more likely to actually have these things
on the road" when Google's cars have been driving people around Mountain View
for years. Please explain.

~~~
badlucklottery
He probably means as a wide release.

I also believe Uber will probably go wide first because the risk (people get
injured, they possibly go down in flames from legal issues) is worth the
reward (they have a chance of surviving as a business by automating human
drivers out of the equation).

Google has money falling out of their ears and will do a wide release when
it's boringly safe.

I much prefer companies waiting until it is boringly safe but I don't think
that's compatible with the money fire Uber has built.

------
rahrahrah
Economies of scale guys. Lose a bit in every transaction but make up for it in
scale.

They're dead.

------
readhn
RIP Uber. Imo it will be gone in less than 24months.

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sqldba
How can they make so much money while also losing so much money?

Isn't it just an app with some staff and lawyers? Where did all the money go?

