
Uber Says Sales Growth Outpaces Losses - spuiszis
https://www.bloomberg.com/news/articles/2017-04-14/embattled-uber-reports-strong-sales-growth-as-losses-continue
======
hawkice
Losses up 6% and they're celebrating. I've been at companies like this. "We're
losing money faster than ever, if I keep saying words after that you might be
confused as to whether that matters."

And if you have new or growing product lines that incorporate into both
revenue and expenses like Uber Pool does, you'd see exactly this shift
_without a change in the underlying unit economics_. Which means that, not
only are they losing money faster than ever, but they have no mechanism to
stop the bleeding.

------
pdog
_> Uber said it uses generally accepted accounting principles. Revenue
includes only the portion Uber takes from fares, except in the case of its
carpooling service; the company counts the entire amount of an UberPool fare
as revenue._

Does this mean Uber technically recognizes more revenue from from a $6
UberPool ride than a $20 UberX ride?

~~~
aetherson
This is probably basically about the fact that driver portion is more
complicated in UberPool than in the rest of their services.

It's to Uber's credit that on an ordinary ride, they don't try to claim that
they have revenue equal to the entire fare. That would be an easy way for them
to make their top-line financials look way more palatable than they actually
are (ie, that they lost about $3B on $20B, rather than $3B on $7B).

But it may be genuinely hard to report on just the share of UberPool revenue
that does not go to the driver, as my understanding is that the calculation is
much more complicated in that case.

~~~
nebabyte
Uh, that seems like something they'd get called out on pretty quickly if they
tried, and would make them look worse off with the actual number than if they
just opened with it

Uber's gotten away with a lot of stuff but I doubt even they could pull a
'whoops, forgot our expenses' sleight of hand. Especially since they try and
frame drivers as 'contractors' and not employees

~~~
aetherson
Revenue, not profit. They wouldn't be saying that they forgot about expenses,
just that their expenses come out of $20B in revenue, not $7B in revenue.

------
nickcrowley81
There has never been an above razor thin profit line for fleet vehicle
operations. Uber is a subsidized taxi company. They charge people from A TO B
and take a cut of the fare. The fares are so low compared to taxis because of
this subsidization. The only way they survive as this app form of a taxi is by
drastically raising fares. They will be too far behind the driverless car race
and crash there as well. Let alone the truth of the matter is, the technology
is waaaaaaaay farther away on driverless. Read Financial Times 7 part series
on Uber. They're the only ones truly on top of this sham of a company.

~~~
arjunrc
Do you have the link to the FT series? I can't find anything on Google.

~~~
pktgen
The parent poster is probably referring to the Naked Capitalism series, not
FT. That series is now up to 9 parts:

Part 1: [http://www.nakedcapitalism.com/2016/11/can-uber-ever-
deliver...](http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver-part-
one-understanding-ubers-bleak-operating-economics.html)

Part 2: [http://www.nakedcapitalism.com/2016/12/can-uber-ever-
deliver...](http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver-part-
two-understanding-ubers-uncompetitive-costs.html)

Part 3: [http://www.nakedcapitalism.com/2016/12/can-uber-ever-
deliver...](http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver-part-
three-understanding-false-claims-about-ubers-innovation-and-competitive-
advantages.html)

Part 4: [http://www.nakedcapitalism.com/2016/12/can-uber-ever-
deliver...](http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver-part-
four-understanding-that-unregulated-monopoly-was-always-ubers-central-
objective.html)

Part 5: [http://www.nakedcapitalism.com/2016/12/can-uber-ever-
deliver...](http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver-part-
five-addressing-reader-comments-and-questions.html)

Part 6: [http://www.nakedcapitalism.com/2017/01/can-uber-ever-
deliver...](http://www.nakedcapitalism.com/2017/01/can-uber-ever-deliver-part-
six-bleak-pl-performance-while-stephen-levitt-makes-indefensible-claims.html)

Part 7: [http://www.nakedcapitalism.com/2017/01/can-uber-ever-
deliver...](http://www.nakedcapitalism.com/2017/01/can-uber-ever-deliver-part-
seven-ubers-narrative-vox-stratechery-critiques-naked-capitalisms-uber-series-
defending-uber-requires-ignoring.html)

Part 8: [http://www.nakedcapitalism.com/2017/02/can-uber-ever-
deliver...](http://www.nakedcapitalism.com/2017/02/can-uber-ever-deliver-part-
eight-brad-stones-uber-book-upstarts-prpropaganda-masquerading-
journalism.html)

Part 9: [http://www.nakedcapitalism.com/2017/03/can-uber-ever-
deliver...](http://www.nakedcapitalism.com/2017/03/can-uber-ever-deliver-part-
nine-1990s-koch-funded-propaganda-program-ubers-true-origin-story.html)

------
jish
Didn't all of the "scandals" start in Q4 2016 in the first place?

This is basically saying, look we __were __on a good trajectory from Q3-Q4.

But the question is, what happened after that?

~~~
cavisne
Does anyone seriously think those scandals have hurt revenue?

------
acchow

      “We’re fortunate to have a healthy and growing business"
    

$2.8bn "adjusted net loss" on $6.5bn revenue is healthy?

~~~
georgespencer
The naivety on HN is staggering sometimes.

Imagine your parents give you a $10 loan to start a lemonade stand. You think
you need six years to make them an above market return on their investment of
2x.

You're gonna buy cups, lemons, sugar, and water.

In the first year you think you're going to spend $3 and make $0.

So you have $7 in the bank.

In the second year you think you're gonna spend $2, and make $1.

So you have $6 in the bank.

In the third year you think you're gonna spend $6, and make $4.

So you have $4 in the bank.

In the fourth year you think you're gonna spend $6, and make $6.

So you still have $4 in the bank.

In the fifth year you think you're gonna spend $6 and make $10.

And now you're profitable. In the sixth year you spend $6 and make $50. You
pay back 2x your parents' money.

As long as you were hitting your targets, that loan looks like smart business
from you and your parents are pleased that their investment outperformed the
market and generated a huge return.

If you had trouble hitting your targets, or needed to raise more money
unexpectedly, your parents might have said that they'd want a higher return or
more security (equity) in the business. But if you're executing on your plan,
then that's not gonna happen.

Businesses operate with debt all the time. Some businesses are lossmaking for
a long time. Some businesses are lossmaking on billions of dollars of revenue.
They have high central costs. They have high R&D costs. They have marketing
strategies which require them to subsidise entry-level products and upsell.

The business is healthy provided the following things are true:

1\. They've agreed a strategy and milestones with their investors and board,

2\. They are hitting those milestones by executing on that strategy.

3\. They aren't running out of money ahead of schedule, or running out of
money on specific instruments ahead of schedule (for example they have debt
financing with Goldman which I'm assuming is being used to acquire smaller
companies or subsidise driver fares since that would be expensive to do out of
equity).

4\. The investors are prepared to honour their agreement to fund the company
and truly believe in the milestones and objectives the board has voted on.

Uber has raised $15 billion to date.

In 2012 it lost $20m, in 2013 $15m, in 2014 it lost around $650m, in 2015 it
lost $1.5bn, in 2016 it lost $2.8bn.

The business has burned $5bn give or take, or 33% of its total capital raise
to date.

Let's say that the losses are understated and they've actually lost closer to
$7bn.

They have ~$8bn in the bank or on credit. They have a team of 6,700 which
let's say is 45% engineering, R&D, product and the remainder have a linear
relationship to the busyness and scale of the business.

They don't have to think about raising money until the middle or end of next
year. They could cut their workforce if they needed to get to profitability
quickly for some reason.

You or I might not be comfortable running a business with a $2.8bn loss, but
nobody on here bats an eye when a YC company loses a a million dollars on a
couple of million of revenue with a few million more in the bank. But as soon
as it's a b and not an m, people lose their minds.

~~~
InclinedPlane
The naiveté on HN is staggering sometimes.

Imagine your parents give you a 10 dollar loan to start a lemonade stand.

It costs you $3 to buy the lemons, sugar, water, and cups to make 10 cups of
lemonade, that you sell for ten cents each.

In the first day you spend $3 and make $1. In the second day you spend 3 more
dollars and make one dollar. In the third day you spend $3 and make another
$1. In the fourth day you again spend $3 and make $1. At this point you now
have $2 remaining.

On the fifth day a miracle happens and your mom gives you another 10 dollars,
so you make and sell more lemonade. But you're concerned now so you ask all of
your customers why they're buying your lemonade. They tell you that the only
reason is the price, it's such cheap lemonade! If it were 2x more expensive
they might still buy it, but certainly not at 3x.

And then what happens 4 days later?

Uber doesn't have a business model, they have a house of cards. They can't
make money continuing to operate the way they do now, fares don't cover their
operating costs, even if you factor out costs of "building" or "expansion".
Their paths to success are either forcing everyone out of business by
undercutting them and causing everyone else to go bankrupt, after which they
can raise their prices back to the old market rates; or, somehow managing to
get self-driving taxis on the market in the next 5 years so they can take
driver compensation out of the equation.

~~~
georgespencer
This is nonsense I'm afraid.

I was demonstrating to OP that even if _he_ is concerned by the losses Uber is
making, and doesn't consider $3bn of losses on $6bn of revenue to be
"healthy", it doesn't matter if the plan and the numbers are headed in the
right way as far as investors are concerned.

> On the fifth day a miracle happens and your mom gives you another 10 dollars

This is precisely my point. This does not happen (except at huge economic cost
to the company and its founders) unless you are demonstrating a plan which you
are executing on.

> Uber doesn't have a business model.

Yes, it does. You may not like it, and you may think it's stupid and you know
better than the people who put $15bn into it, but it does have a business
model.

> They can't make money continuing to operate the way they do now, fares don't
> cover their operating costs, even if you factor out costs of "building" or
> "expansion".

Really? A 15% price increase = Uber is profitable[1], and you don't think they
could generate a commensurate margin shift from losing central cost? Get rid
of the team working on driverless and it's a profitable business.

> Their paths to success are either forcing everyone out of business by
> undercutting them

Yep.

> somehow managing to get self-driving taxis on the market

Yep

> or simply continuing to build huge volume, as they have been, and then
> cutting their central costs back to achieve profitability

Oh, you didn't suggest that much easier path to profitability which they could
execute on tomorrow. Weird.

[1]
[https://twitter.com/naval/status/853033099101323264](https://twitter.com/naval/status/853033099101323264)

~~~
legulere
15% of the $6.5bn revenue is $0.975bn, around one third of the net loss.

~~~
dllthomas
As noted elsewhere on this page, Uber "revenue" is not the full price of the
trip - drivers are paid first for most products (pool works differently).

------
slackstation
Sales growth in commodity product that is loosing money on ever sale? I'll
never understand this. Uber won't own the market. There is zero lock-in. If
Lyft is cheaper this week, I'm riding Lyft.

I sold my car over a year ago and use a mix of ridesharing and rentals for
transportation. Uber and Lyft's greatest competition in my life is a small
Google product where people pick up people on their daily commute to and from
work and the drivers are compensated only for gas money.

Locally, there is a company that will allow you to rent an electric car for
free for two hours (it has an electronic billboard on the ceiling).

In the future, cheap electricity and efficient manufacturing might make a
world where rides of a certain distance would be free or extremely low cost in
exchange for advertising.

Transportation is a commodity. For a short ride, I don't care that much about
the differences, whether I'm sitting in a Toyota Corolla or Mercedes S-Class.
It gets me from point A to point B.

In this environment, I think the VCs pouring billions of dollars into Uber are
throwing their money away subsidizing Uber's leadership in commodity market.
Cheaper wins. I get to choose on each ride. There's no lock-in, there's really
no reason for brand loyalty. Whatever is cheaper wins. If it's free, whomever
gets here first wins. If they are both available right now, it's who has the
nicer seat.

This is a race to the bottom and as a customer I'm only going to remember
negative experiences with the brand. Lyft is better by encouraging themed cars
but, they've stopped doing that from what I've seen.

There's a good chance that Lyft and Uber might face huge backlash for bait and
switching drivers when they roll out driverless cars.

I'm bearish on Uber in the long term.

~~~
hackuser
> There is zero lock-in. If Lyft is cheaper this week, I'm riding Lyft.

It makes sense, but I'm not sure it works out that way. Many web services have
zero lock-in (not including those with a network effect such as Twitter and
Facebook) and competitors are a URL away, yet the first ones to gain
(mindshare? marketshare?) seem to keep it: Google search, Amazon, etc.

~~~
greglindahl
Google was the first search engine? Actually, the field was crowded when
Google appeared.

~~~
jimmywanger
Amazon was definitely not the first ecommerce site either.

------
mankash666
What a sham! Instead of spinning BS, just go public if your fundamental
finances are sound.

------
pchristensen
"We'll make it up in volume!"

~~~
JimboOmega
Seriously.

We can double the size of a loss making business! We can lose money twice as
fast!

Actually it looks like losses relative to revenues are smaller than they were,
but that's still not impressive. Especially when it's non-GAAP anyway.

How much money do they have? How did they raise so much without giving any
control away and not going to the public markets? I mean... a billion here, a
billion there, sooner or later it adds up... right?

~~~
georgespencer
They've raised $15bn in total and their last valuation was about $70bn. In
total they've lost around $6bn, meaning that between cash and credit
facilities they have around $8-9bn in the bank.

~~~
codecamper
And when they need to make profit they can easily fire about 90% of their
workforce & keep the machine humming in place.

~~~
cmahler7
can they? Their valuation is entirely based on self-driving cars, if they fire
everybody and give up on that it's over for them.

~~~
georgespencer
I think he's being sarcastic. But it looks like they only need to increase
price by 15% to achieve profitability, so it doesn't require firing 90% of
their staff to get there.

------
code4tee
Uber is demonstrating that they can sell $2 bills for a buck and that there's
demand for that. They've not demonstrated they can establish a real business
here in what has turned into a pure commodity market.

In competitive markets a lot of "me too" competitors pop up all the time. When
you see consumers just picking the one that's the cheapest (i.e. with the most
VC cash subsidizing the ride) and drivers rocking up with multiple phones on
the dashboard as they too game these companies it's clearly all a fools game.
This industry is a race to the bottom, but at least people get to enjoy cheap
VC-subsidized rides while the party's still on!

~~~
georgespencer
> Uber is demonstrating that they can sell $2 bills for a buck and that
> there's demand for that.

I think the consensus is that rides are subsidised by around twenty cents on
the dollar.

Ubers bet is autonomous cars. They pay a 75% fee to the driver. When
autonomous fleets launch in the next few years they'll normalise prices at
around 50%, meaning your $10 ride costs you $5, and each ride has wafer thin
profitability (the additional 5% margin will be chewed up a little by
maintenance costs).

And let's be real: Lyft did $600m of sales in 2016. Uber did $5.5bn. This
isn't just a race to the bottom on price, it's about building a brand.

~~~
prostoalex
> Ubers bet is autonomous cars.

Out of the following contenders:

1) GM (+Cruise Automation), Mercedes or VW with their enormous supply
networks, vendor lock-ins, economies of scale and ability to massively ramp up
a car production when needed.

2) Tesla with their (allegedly unique) battery storage tech, working
manufacturing facility and massive amounts of data harvested from thousands of
Tesla vehicles on the roads today.

3) Google/Waymo with their unlimited budget, ability to partner up or buy
whoever they choose, and nearly limitless amount of software engineering
talent they can suddenly relocate to this project when desired.

4) Avis/Budget, Hertz or other fleet management company that already has a
relationship with car manufacturer and can
own/maintain/wash/clean/park/dispatch a large number of vehicles on the cheap.

5) Uber.

Why is #5 the strongest candidate? Does the dispatch app that displays
available cars on the map create such a strong moat that #1, #2, #3 or #4 will
never be able to replicate? Does Uber have a bunch of aces up their sleeve
that will allow them to build/buy automobile manufacturing facilities on the
cheap? Do they have a know-how of maintaining a large fleet and take care of
simple things like changing a tire or cleaning the car after the previous
passenger puked in it? And do that at scale?

~~~
code4tee
Quite simply at the rate Uber is going it will crash and burn long before
self-driving cars are a thing at scale

------
codecamper
hackernews.. the place for uber quarterbacking.

~~~
jacquesm
> I'm 43 and would like to start a family.

Don't wait for success or money if you want to start a family, there really
never is a 'right' time.

~~~
codecamper
Why does HN limit the depth of replies? Just to keep the page looking snappy &
fresh?

That's pretty awesome that you guys thought of hosting videos. The idea
escaped me, even after watching photo.net & then Flickr. I was working on an
idea back then & the issue was the cost of bandwidth, right? Sure.. put videos
on the Internet... but how would you ever pay for that much bandwidth? I guess
that's why a Silicon valley crew did it. They could somehow see the decline in
bandwidth pricing, understood how much extra fiber capacity there was.

We should have gotten together then. I owned the domain fullscreen.com (and I
made nice websites!)

Software is hard! The winners show what it takes. Just put something out
there! AirBNB ruby on rails! Facebook... PHP! Google... python!

~~~
nebabyte
> Why does HN limit the depth of replies?

OH.

I felt like I was going insane reading some of the comments that seemed like
they had no context. Ha. (Now to figure out what the proper ordering is?
Unless it's deleted)

Thanks for the context

~~~
pfarnsworth
He deleted his initial post. He claimed to have written a taxi app early on,
and regrets not finishing it.

