
Uber Revenue Growth Slows, Losses Persist as 2019 IPO Draws Near - schintan
https://www.bloomberg.com/news/articles/2019-02-15/uber-results-show-revenue-growth-slows-amid-persistent-losses
======
blunte
Maybe because I'm outside the unicorn bubble I can't see the magic, but I find
something very warped about a business strategy that combines stratospheric
valuation, intentional regulatory non-compliance, perpetual capital
injections, service misrepresentation, and unprofessional corporate
behavior... and results in massive financial losses year after year.

When I try to balance the elements, it frankly looks like an enormous grift.
Some key early investors have probably made out really well, but at what cost
to others involved?

Not that the taxi industry didn't need disruption - it desperately needed a
modern ride calling and fare estimating feature. But being well regulated and
having to compete with a maverick service that simply ignored rules meant that
the taxi industry lost while Uber gained.

Drivers for Uber have come out losers as well, earning much less than
expected.

Passengers did well at first, but surge pricing and eventual regulatory costs
eroded that gain as well.

Late investors? The jury is still out on them, but likely they will be losers
too.

Who won?

~~~
treis
>Maybe because I'm outside the unicorn bubble I can't see the magic, but I
find something very warped about a business strategy that combines
stratospheric valuation, intentional regulatory non-compliance, perpetual
capital injections, service misrepresentation, and unprofessional corporate
behavior... and results in massive financial losses year after year. >When I
try to balance the elements, it frankly looks like an enormous grift. Some key
early investors have probably made out really well, but at what cost to others
involved?

I think you're way too pessimistic here:

(1) A whole industry of rent seekers (medallion owners) was mostly run off

(2) The taxi experience in cities other than NYC, Chicago, and SF got a
million times better. Before Uber in a city like Nashville you call for a taxi
and maybe one shows up at some point. Since Uber you can reliably get a ride
whenever you want. And that's not even talking about discrimination.

(3) Uber caused a dramatic decline in drunk driving. Likely because of (2)

(4) It allowed people to make some money with a flexibility that traditional
jobs don't offer

For me, Uber/Lyft has definitely had the biggest positive impact on my life
out of any tech company in the last decade. The only close competitor would be
Android/iPhone. I don't know if Uber is worth the ~60 billion that they were
last valued at, but they definitely fill a legitimate role.

~~~
therein
> The taxi experience in cities other than NYC, Chicago, and SF got a million
> times better. Before Uber in a city like Nashville you call for a taxi and
> maybe one shows up at some point. Since Uber you can reliably get a ride
> whenever you want. And that's not even talking about discrimination.

That is a good point I hadn't considered until now.

I remember back in my college days in Champaign, IL right before Uber's debut,
I would have to call three separate cab companies a day ahead of time and then
the day of to get a ride to the airport, and only one would maybe show up.

I ended up befriending an Ethiopian cab driver that was really kind and
responsible and only then this challenge came to an end.

~~~
da02
What do you mean by, "and only then this challenge came to an end."? You
simply stopped calling him?

~~~
aplummer
They mean: only after befriending the cab driver did the challenge of getting
to the airport become easy.

~~~
therein
Exactly.

------
justfor1comment
Uber is getting more expensive with time as they try to consolidate losses.
For my commute to work nowadays Express Pool costs the same as UberX did a
year ago. And of course express pool includes overtly long sight seeing
detours and dangerous pick up/drop off points. This is getting prohibitively
expensive and I plan to switch to an electric scooter + public transit in a
few months.

~~~
warp_factor
This is a good summary of the VC economy: Use it as long as it is subsidized
by VC Money, then switch back to whatever you used before.

~~~
alexpetralia
Also the part about one VC passing the buck to the next, allowing them all to
benefit reputationally from asset inflation - until the bubble pops. Then only
the last ones holding the bag lose.

Edit: VC is actually not passing to VC, but larger investment funds like PE.

~~~
bduerst
In the case of unicorns that don't meet expectations, it's usually the
employees who were compensated in stock or options left holding the bag, since
investors try to lock in preferred payout.

------
benatkin
Today I missed getting picked up by an Uber. I think the driver must have
waited like 30 seconds before giving up. Still, it was my bad.

He apparently accepted the ride before cancelling it, because the pickup and
drop-off addresses were different. I got a $6.50 charge instead of the normal
$5.00 cancellation charge. I wrote into Uber about it, and instead of
refunding me $1.50 they refunded to full $6.50 amount.

Sometimes my Uber fares are super cheap. I paid $3.00 to go a mile in snowy
weather in Denver the other day. It was a shared ride but nobody picked up.

I think Uber is spending lots of money, and could probably make their numbers
better by tightening up. They'd lose some of my rides, but probably less than
half of them. In more than half of them public transportation is inconvenient
or unavailable for the full route (the last mile problem is relevant to me).

~~~
liquid153
Has happened to me, I was uber pissed. The Uber driver waited less no more
than 2mns Max.

~~~
nostromo
It's fairly rude to make them wait at all. They're not being paid while
they're waiting for you.

~~~
maaaats
If one could reliably order an Uber that would be great. But no way Im waiting
outside in -10C while the app lies about someone about to pick me up.

~~~
jartelt
More accurate pickup times would really help. I've rushed outside numerous
times after being given a 2 minute ETA. Pretty much every time I end up
waiting outside for 5-10 more minutes after the ETA changes to a longer time.

If I knew the ETA was accurate, I would be more vigilant about being roadside
at the correct time.

~~~
cwkoss
I have never had an Uber arrive as fast as the estimate. Usually takes about
twice as long as app displays when requesting the ride.

Also, there is absolutely no recourse if a driver starts driving in the
opposite direction of you. I had a 3 min estimate, then driver drove 15 mins
away. Called driver and he had the audacity to ask _me_ to cancel the trip (so
I'd still be charged). Was 30 minutes late and had to contact support to get
the cancellation fee waived. Uber used to be the faster way to get to work
than walking/bussing, but no more.

~~~
hopler
In Lyft you just cancel when the driver is late and Lyft automatically voids
the penalty fee before charging you. And I hope they give an internal demerit
to the driver.

------
sherlock_h
Over the long run, at least in the U.S. it seems like Uber/Lyft are edging
towards a comfortable duopoly. Usually their prices move in lockstep (each has
insights into the other company's prices through email receipt intelligence,
credit card intelligence, webscraping, etc.). And their services are fairly
exchangeable. For either one to win there needs to be either a massive cost
advantage or some sort of stickiness factor – which neither have. Will be fun
to follow the '19 IPO season with Postmates on the horizon and DoorDash fat
with Softbank money

~~~
deepVoid
I would not call it comfortable since both are bleeding money every year. In
addition, Waymo, Cruise etc. are all trying hard to put robot taxi's on the
road. When that day comes, it will be interesting.

~~~
jacques_chester
I suspect car companies will move in at that point to disintermediate the ride
companies, possibly spinning up subsidiaries using fleet purchasing to get
around their dealership networks.

It's just as easy to rent a self-driving Camry from Toyota.

Oh and then there's the thing where Google and Apple and probably a hundred
startup hopefuls scraping APIs will try to disintermediate them at the device.

------
b_tterc_p
I think uber’s rewards program will be successful and boost sales. I’ve
switched all of my business meals and longer rides to Uber for this alone.
Other food delivery services don’t offer a clear kickback. Lyft has a nice but
poorly thought out program that gives you $5 in personal credit for every 5
business trips no matter how short.

~~~
Slartie
The fact that you were apparently able to do what you did is a perfect
indicator for the problem behind that "sales boost": it is a straw fire. And a
very expensive one.

How fast will you be gone once the nice rewards give way to price increases
necessary to reach a sustainable business covering expenses, let alone
profitability?

~~~
lozaning
I wont switch. 80% of my ubers get expensed. Keep me fat and happy with
rewards, and I'll keep expensing it regardless of the cost, which doesnt
really effect me, only our controller.

~~~
i_am_nomad
So now Uber's competitors just have to market to your controller, which is in
fact easier than marketing to everyone at your company.

~~~
GCA10
Harder than it seems. AmericanExpress had outsized market share in the
corporate travel market for about 30 years, even though it never struck me as
a superior product to Visa-based cards.

Not sure who they hypnotized to establish that edge, but it became strangely
durable.

~~~
Pyxl101
It always seemed very strange to me that it's legal for company-expensed
credit card purchases to generate _individual, personal_ rewards for the card
holders. (And these awards aren't even taxed?) Something feels underhanded
about it, though I can't put my finger on it.

~~~
dragonwriter
The theory of why normal credit card rewards aren't taxable is that they are a
discount. OTOH, if it's a corporate expensed card or purchase, but the
discount goes to the employee, it seems that either:

(1) the “reimbursement” for the full cost isn't all bona-fide reimbursement,
since you are getting reimbursement for more than you paid after the discount,
and therefore should be taxed like any other compensation from your employer,
or

(2) The rewards you get in that case simply aren't discounts, and should be
taxed as normal, but not employment compensation, income.

(These differ, because #1 has payroll tax implications that #2 does not, as
well as the income tax implications.)

The fact that neither of these send to happen is either a legal loophole with
no strong theory or just an administrative failure.

~~~
ghaff
It’s mostly (with some exemptions) formal policy from the IRS. I suspect the
real justification is that a lot of these things are hard to value, the
numbers are small in the scheme of things, and compliance would be very low.
It actually makes a lot of sense not to put a rule in the books everyone would
ignore.

~~~
dragonwriter
That makes sense, more of an administrative optimization around thw current
conditions than an administrative failure.

OTOH, that makes it an unstable thing to build a business model on expanding,
since the more significant it becomes with entities other than credit card
firms exploiting it as a marketing and loyalty tool, the less it remains the
case that it is efficient to let it slide.

------
georgeecollins
I don't know what to say about this because as a lifelong value investor I
cannot accept the valuation of Uber based on it's earnings. But the same logic
held me back from investing in Facebook and Google, which did not make any
sense to me at the moment of their IPO. How do I decide what Uber's earnings
will be in five years?

~~~
btilly
Warren Buffett's advice on this is simple. If he doesn't understand it, he
doesn't invest. No matter what the rest of the world thinks.

He famously missed the dot com boom. And in the middle of it, gave a private
speech about exactly why, about how few of those companies were likely to be
around in a few years even if the internet were exactly as successful as hoped
for.

He was widely derided as being behind the times, out of date, and so on for a
couple of years. But looking back now, he looks prescient.

If you are a value investor and don't understand how to value it, don't
invest.

~~~
bunderbunder
And it's not like he just flat out didn't invest all the money he wasn't
putting into Geocities and Lycos. He was just putting it into other things,
mostly stuff that was less the hot new thing, and therefore less in demand,
and therefore more favorably priced.

I don't think he regrets his conservatism. From 1990 through now, BRK.A is up
4,200%, while the NASDAQ composite is up only 1,500%.

~~~
btilly
No, he doesn't.

But as [https://alphaarchitect.com/2016/10/10/value-investing-got-
cr...](https://alphaarchitect.com/2016/10/10/value-investing-got-crushed-
during-the-internet-bubble-heres-why/) points out, it looked rather different
when Berkshire lost 44% while the NASDAQ gained 145%. Buffett stood by the
strength of his reasoning. But the rest of the world didn't.

~~~
mlthoughts2018
Until some years later when it did...

------
throwaway-1283
I don't think this is a reflection of Lyft taking market share...more likely
that the ridesharing industry has just matured.

I remember getting so much joy out of requesting an Uber back in the earlier
days. Nowadays I get about as much joy out of Uber(pool) as using the bus,
sometimes less because the wait time has increased so much.

~~~
sjjshvuiajhz
UberPool Express has some things in common with the bus, although I’ve still
never been slapped in the face by a homeless man in an Uber.

~~~
crispyporkbites
I get a bus twice a day in London and not once has this or even the thought of
this come into my head.

~~~
hcnews
I can totally anticipate this happening in SF.

------
NoblePublius
Saudi Arabia owns 10% of Uber and executes people for being gay.

~~~
cheeze
Funny to think that this is just one of the _many_ reasons not to use Uber.

------
kornish
> Of the $11.4 billion in net revenue the company generated in 2018, $3
> billion came in the last three months of the year, up only 2 percent from
> the previous quarter.

To what degree does Uber's main business have seasonality? Are people going
more places when it's nicer out in the Northern hemisphere?

~~~
bunderbunder
I'd expect it to be positively correlated with nice weather in tourist
destinations, because more people would be in town at all. I'd expect it to be
inversely correlated in major urban centers, because the number of people
needing to get around will have less seasonal variability, and walking,
waiting for a bus and riding a bike are all relatively more attractive options
when it's not gross outside.

~~~
moorhosj
Pretty big overlap between tourist destinations and urban centers.

~~~
bunderbunder
There is, but, percentage-wise, the seasonal swing to the number of people in
town is much bigger for Traverse City, MI than it is for New York, NY.

~~~
moorhosj
The discussion was about Uber's overall revenue. I imagine a far larger
percent of their revenue comes from NYC tourists than Traverse City tourists.
Traverse City gets about 3.5 million tourists a year [1] compared to 63
million for NYC [2].

[1] [https://www.record-eagle.com/news/local_news/tourism-
region-...](https://www.record-eagle.com/news/local_news/tourism-region-s-
tourism-industry-continues-to-
surge/article_1ffad0db-14ea-5219-9697-e1918c2a282d.html)

[2] [https://nycfuture.org/research/destination-new-
york](https://nycfuture.org/research/destination-new-york)

------
joshe
What is Uber's long term moat/pricing power? To compete in a local market you
just need to sign up 5000 or so drivers. At a $5 signup bonus that costs like
$25,000. You can just be the third app, most drivers already swap between
Lyft/Uber. You could even form a drivers cooperative and just give all the
charges to drivers (like farmers do).

Regulatory capture seems like the only real route to sustainable profits with
their existing main product. What they really need is something where they are
the only one or two legal providers for a locale.

A different model of what they are doing is using their massive revenue growth
(not profit) to raise money to fund a search for real pricing power with food
delivery, shared bikes, and Uber freight.

~~~
treis
>At a $5 signup bonus that costs like $25,000. You can just be the third app,

Uber can offer those drivers $10 not to switch and their capital will last
longer than yours.

~~~
joshe
Sure right now. But long term? They don't seem to have any kind of moat at
all.

They can't actually do that because it messes with the contractor thing, but
they can do what they are doing with the rewards for a certain amount of
availability.

But still I could just halve the amount I take from the transaction and give
it to drivers. That's surely better for the drivers.

Moat is about them having a long term advantage that makes it hard to compete
against them. Lots of capital isn't enough in 2019.

Long term it seems like the restaurant business, where most are just
scrounging for minimal profits all the time.

~~~
treis
>Sure right now. But long term? They don't seem to have any kind of moat at
all.

They also have the moat of providing a reasonably good service with network
effects. How would you come in and beat the Uber/Lyft duopoly? They can copy
any innovation you come up with and have the capital to beat you in a price
war.

~~~
joshe
Businesses where you burn capital on price wars are low margin businesses.

~~~
treis
(1) Low margin is probably OK given the enormous market Uber/Lyft will share.

(2) They won't actually have to burn capital. No one is going to get into a
price war they obviously can't win.

~~~
joshe
1) We totally agree, ride hailing is a low margin business.

2) Yes! As long as Uber/Lyft act like low margin businesses no one will
compete with them. This means they have no pricing power.

------
HacklesRaised
Lots of great arguments for and against herein, but how about the reality that
the gig economy, that Uber exemplifies, is an unmitigated disaster for
society, as a whole?

------
zby
I really like this analysis: [https://thinkgrowth.org/uber-is-going-to-0-and-
benchmark-kno...](https://thinkgrowth.org/uber-is-going-to-0-and-benchmark-
knows-it-1566fb51b308) :

Taxi service is not a good candidate for a global monopoly - because most
rides are for local population and there is no need for a global trust. Each
dispatcher needs to compete locally. This is different from for ecample AirBnb
- where the customers come from away and need some global entity to trust.

\---

Uber also does not seem to do very well in the self-driving car competition,
which could potentially save it. What is left is maybe some data play and
maybe being useful for spy agencies - a global entity knowing, and also being
able to manipulate, delay or maybe even deny in some cases, communication in
remote states (but that probably would rely on it being a monopoly). But I am
waiting for this to end bad. The SoftBank way of growing the valuation by
doubling their investments seems really crazy.

------
uptownfunk
I didn't see any talk of self-driving cars here. I think they're coming sooner
than we think, and I suspect not having to pay drivers has been baked into the
valuations by some of the firms providing those sweet sweet capital
injections.

I also wouldn't be surprised to see Tesla enter this space, given their
advanced self-driving capability (frankly the one that has come closest to a
normal consumer as myself).

Re: Lyft vs Uber, I go for the cheapest usually, even though I know there are
other differences. Many people who really care about the difference are mostly
drivers. Many friends of mine who use both apps mainly use it to price
differentiate.

~~~
mandeepj
Nah! We have a long way to get to full self-driving. There are just too many
variables, unpredictable conditions - to be baked into a system.

[https://www.cnet.com/news/alphabet-google-waymo-ceo-john-
kra...](https://www.cnet.com/news/alphabet-google-waymo-ceo-john-krafcik-
autonomous-cars-wont-ever-be-able-to-drive-in-all-conditions/)

------
exabrial
This last Sunday morning, Uber made 3 charges to my checking account totaling
over $1.1k total, for three rides at 6:59am, 7:00am, and 7:01am. I haven't
used them in about 2 years (they put me in a car with a guy that admitted to
sexually assaulting his drunk female passengers). It was a nightmare trying to
get ahold of their customer service to return my money. They have no phone
numbers, it's all bots that answer their social media and email.

I for one am excited by the prospect of their failure.

~~~
astura
Why bother contacting Uber at all? Just call your bank and report the charges
as fraudulent.

------
jacquesm
At this stage the only reason they are doing an IPO is to bail out the earlier
investors. You'd be pretty stupid to buy Uber stock, my prediction is that it
will make a nice 'pop' on opening day to ensure the underwriters get away with
it and a swift crash after that when the bottom drops out and all lock up
periods expire.

It's been done before.

------
throwaway-1283
The irony of Uber and Lyft both losing so much money is Lyft especially is
known for paying some of the highest SWE salaries in SF.

~~~
hcnews
The cost of a SWE is nowhere close to the promotions and incentives rolled out
to millions of users (imagine something simple like 5$ per user per month).
SWEs are paid a lot in Bay Area but at least in top companies they are very
well worth it.

Disclaimer: I am a SWE at Uber.

------
mark_l_watson
I wonder how much effect it would have on sales volume if ride prices were
adjusted upwards to the break-even point? They must know what they are doing
but it almost always seems counterintuitive to me to sell below cost over a
long time period.

I like Uber as a service but I don’t really care how they do, except that a
friend works at their AI lab.

~~~
ghaff
It seems odd to me as well. I don’t use these services a lot but when I do
it’s almist always because they’re better than dealing with a taxi. Rarely do
I choose them on the basis of price.

~~~
BillionaireBear
For the most part, a taxi is only better when I'm at either an airport or a
hotel. Otherwise, I far prefer Uber/Lyft because it's on-demand, no cash
needed and don't have to explain my route or destination.

~~~
ghaff
Yep. Sometimes I take a taxi from the airport because it’s right there and
ready to go even though it costs more. Otherwise I will, within reason, use
whatever gives me the best experiencr.

------
TuringNYC
While my story is anecdata I wonder if it speaks to a broader issue: I'm an
Uber super-user. I used uber 400+ times per year in 2015, another 400 times
2016, and then again 400+ times in 2017. Then my rides per year went to 0 in
2018 and 0 in 2019 so far. It wasnt about price, the app just became too buggy
to the point of being unusable. The customer service became unresponsive. I
simply switched to Lyft/Careem/Via.

Certainly this didn't _just_ happen to me. I wonder how many people are in my
situation and how many users Uber has lost. It is nice they are devoting
engineers to far-flung projects like food delivery, helicopter rides, ML-as-a-
service projects (Michaelangelo), and GPU Databases (AresDB) but I honestly
just wish they would fix their main money maker -- ride hailing.

I know this sounds like a sob story, but here are real points:

1\. Cant add a credit card, just get a generic error. No error code that I can
give customer service, just a generic error.

1b. For a while, didnt even get a credit card entry form, just the stupid
green scanner box to photo-scan the card, which didnt work on any of my cards
despite me having a top of the line iPhoneX camera

2\. Cant add any credit cards no matter how many I try. Reach out to customer
service and I get a generic response "I see you cant log into your app."...umm
no. I'm already in the app adding a credit card obviously I can log in.

3\. CAN add credit card, thanks for customer service, probably only because I
started adding Dara Khosrowshahi @dkhos on my irate twitter messages....but
when I try to hail a ride, "Payment Failure" regardless of how many cards I
try. This is the _worst error_ , because it is a silent runtime failure ...who
wants to risk those when you're at the airport desperately needing a ride.

4\. Pickup locations stale (SFO Airport changed ride hailing to the roof of
the airport. Lyft immediately updated their app but Uber had stale pickup
locations. Lyft had a service rep standing at the pickup location helping
customers with the transition, Uber was nowhere on this -- _in their own home
city airport!_ )

5\. Customer service provides useless generic responses and never closes a
ticket. I understand customer service was outsourced to another company, which
I wont name.

6\. I'm a VIP customer in a sense. 2000 rides in a short period of time! Come
on...if you are going to ignore people at least see if they are an early
adopter / megauser and court your top customers!

7\. Tried the pre-pay option using multiple cards...Bam! Payment Failure.
Please take my money!

8\. Within the span of a year in 2017, I used Uber multiple times at airports
in SF, LA, NYC, Singapore, Taiwan. Given all the ML prowess at the firm, don't
they realize I'm a price-insensitive business user? Come on... _this is the
cohort you want on your platform._ Didn't all the ML segment me into the most
valuable cohort?

Sometimes I feel like i'm trapped in some bad A/B test they are doing. I even
tried to delete the entire account and start anew with a new email and new
credit card, but it almost seems like my name itself has been blacklisted. No
response from customer service.

If Uber/Lyft were public companies, i'd be shorting Uber and go long on Lyft.
I love both, but I can already see the disarray.

~~~
staticautomatic
I was a long time and frequent user (started back when you'd text an address)
but quit Uber over a software bug. Was a surge pricing day. I was asked to
type in the multiplier, which was 2.0. After the ride, the receipt showed a
multiple of 2.1 or 2.2 and a charge accordingly. The support people insisted
that I had agreed to the higher multiple (and probably assumed I was some jerk
who didn't understand how surge pricing worked). Fuck that. Game over.

------
bernardlunn
Hmm “Last year, bankers vying to lead the company’s initial public offering
told Uber the market could value it at $120 billion.” Translation is “tell
punters what they want to hear”. Reality, 10x revenue means high quality
revenue and that is far from proven.

------
identity_zero
Let the superficial bad news divert investor interest so that the IPO is
cheap.

------
sjjshvuiajhz
Wonder what happened with that profit in Q1 2018. Odd that the article didn’t
mention it. Was that Uber proving to investors that they can turn the spigot
and generate cash? Or some one-time factor?

------
wankerrific
Still on track to allow SoftBank and the Saudi’s to foist this steaming turd
on to the retail investor.

------
jesse73
The IPO is going to leave the public investors holding the bag

