
Uber, losing billions, freezes engineering hires - 0xffff2
https://arstechnica.com/cars/2019/08/uber-freezes-engineering-hires-amid-mounting-losses/
======
aresant
The sentiment on UBER recently is that they are only surviving by subsidizing
rides and are out of control / there's no future business there.

But that is not an accurate portrayal, here's what's going on when you look at
their un-editorialized results (1):

\- Headlines have portrayed UBER as losing $5b this quarter. This is the easy
one to address as this article touches on - UBER paid out almost $4b in stock
based compensation (one time, due to IPO) that inflated their loss number. The
more accurate portrayal is that UBER burned ~$1.2b this quarter on operations.

\- Of their remaining $1.2b operating loss almost 50% of that is from UBER
eats subsidies. They paid $544m more to drivers to deliver food than they took
in. Why? (a) It is their fastest growing (by %) division (2) It's arguably the
most valuable battleground in logistics - developing a "last mile" delivery
network at scale.

\- Their core business - ridesharing - has improved their gross margin and
unit economics quarter-over-quarter to the point that the discounting is
almost non-material (less than $22m total worldwide this quarter, representing
less than 1/2 a percent of total ride sharing revenue).

\- They have >25,000 employees and >50% of those are international in new
markets that require heavy HR spending. Their move to clip 400 marketing
employees (25% of entire division) last month implies the CEO has confidence
that there is a lot of fat in employee base.

\- Add to that other losses in their "other bets" which is almost certainly
their freight brokering network at -$50m, and the losses appear to be
diminishing.

(1) [https://investor.uber.com/news-events/news/press-release-
det...](https://investor.uber.com/news-events/news/press-release-
details/2019/Uber-Reports-Second-Quarter-2019-Results/default.aspx)

~~~
freyr
> _They paid $544m more to drivers to deliver food than they took in. Why?_

Maybe it's just not a very profitable business to send some guy in a Prius
across town to pick up a burrito, then drive back across town to deliver said
burrito.

I've tried it a few times and it took an inexplicably long time to get my
order, and the food arrived cold and unappetizing. Never again.

~~~
philliphaydon
Here in Singapore, I'm not aware of anyone who uses a car for delivering food.
(we don't have Uber Eats cos they couldn't penetrate the market here)

Grab, Food Panda, Deliveroo, and a couple of others I cant think of, all use
Bikes, Motorbikes, and e-Scooters.

The model works really well here because majority of deliveries are short
distance to apartment blocks.

I can't imagine it working for long distances though. You would end up with
cold food, long wait times, and it wouldn't be very environmentally friendly.

~~~
djsumdog
Well in Singapore, you need a COE just to buy a car, and those can run
$40k~$60k depending on the car type and how many people are bidding for the
limited amount of COEs. That's not including the cost of the car, or the fact
that the COE is only good for 10 years (extensions are for 7 years, cost just
as much and so you're better off just selling/scrapping the car).

Singapore is one of the largest exporters of used cars because of this crazy
system. It does reduce their emission though and they have an amazing fully
automated (driverless) train system.

~~~
barrkel
I don't really see the crazy? Only downside is that need for a car (think
disabled, or parents with disabled children) isn't correlated with wealth or
income, so it may not be as fair as other systems, but rationing by price is
fairly transparent.

~~~
CydeWeys
I wish we had something like it in NYC! We're getting a congestion tax soon
for part of Manhattan though, so that's a start.

------
ZhuanXia
I don't know what Uber thinks its end game is. Uber's "lets burn money to
capture the market and own self driving" stratagem is economically absurd. In
the limit of driverless cars, capital can be turned directly into labor so
anyone with capital will deploy a fleet so long as it is profitable. Talk
about a red ocean. The self-driving dream investors pin their hopes on is a
siren. Ironically, Uber will only be able to maintain value in those futures
where driverless cars don't work out.

Commodities do not have network effects. In general, if you are replacing
labor with capital (in the form of automation) you will not get the network
effects of a two-sided market - which is basically a market failure caused by
our previous inability to convert capital into labor in a manner that scales.
If you are replacing a two-sided market with automation you are going to need
another moat.

~~~
JumpCrisscross
> _I don 't know what Uber thinks its end game is_

There is a massive, profitable courier business in most cities that Uber
hasn't touched. And food delivery is already being explored.

Beyond that, Uber's electronic-dispatch technology has the ability to optimize
garbage pick-up and drop-off; police, fire and medical resource routing;
small-vehicle fleet management for sundry specialized logistics companies; and
all manner of other logistical processes presently centrally dispatched like
taxis were a decade ago.

Uber is burning too much cash. But real-time electronic dispatch of variously-
placed resources to randomly-distributed tasks is nothing to sneeze at. It's a
difficult problem due to its myriad of edge cases, and Uber seems to have
reasonably solved it.

~~~
untog
> Beyond that, Uber's electronic-dispatch technology has the ability to
> optimize garbage pick-up and drop-off; police, fire and medical resource
> routing; small-vehicle fleet management for sundry specialized logistics
> companies; and all manner of other logistical processes presently centrally
> dispatched like taxis were a decade ago.

But why is it going to be Uber providing those services? What's their moat?
Google has an absurd amount of live data from shivers using Google Maps or
Waze as they drive around a city, if they launch a "medical resource routing"
service tomorrow it'll blow Uber out of the water.

~~~
muzani
Uber doesn't need a moat. They built their fortress on an inaccessible
mountain of thin profit margins. Every competitor bleeds lots of money to get
there, and nobody is going to pump a few billions for an Uber competitor. If
anything, headlines like this give competitive advantage by scaring potential
competing founders and investors.

~~~
untog
But... They're losing money. They can't do that indefinitely.

~~~
muzani
They don't have to. They just have to do it longer than the competition.

Remember, Facebook and YouTube made big losses for a while, especially after
the 'exit'. YouTube outlived Vine and started putting in more intrusive ads.
Facebook IPO seemed like a flop, but it went very well and they acquired all
their competitors instead of outwaiting them.

~~~
untog
Uber isn't Facebook or Google, though. Plenty of Uber drivers work for more
than one company, and there's nothing to stop a new arrival from poaching a
ton of Uber drivers, as long as they give the right incentives. Facebook was
protected by network effects, YouTube by the large video library. From the end
user's point of view Uber has no such protection.

------
Renaud
I'm not sure why they limit themselves to food deliveries with Uber Eats.

They basically have a quasi-unlimited fleet of transportation vehicles at
their disposal. How about delivering anything for people and businesses?

The power of whomever cracks this would be in the software handling the
logistics, but imagine that on top of passengers, you could also elect to
transport some bags or (small) boxes for other stuff people may order, or for
small businesses.

You could easily increase the usage of your fleet during non-peak hours
especially.

~~~
bsimpson
"I love my FedEx guy, because he's a drug dealer, and he doesn't even know
it."

\- Mitch Hedberg

------
maxaf
I’ve been conducting a thought experiment. Imagine an Uber competitor that
keeps drivers as full time employees and charges customers a price that allows
it to pay the drivers a fair wage while slicing a modest profit margin off the
top. Let’s discuss if something like this can work.

~~~
listenallyall
Scenario: It's raining. Twice as many people are requesting rides as normal.
You have, as you described, only full-time employees. Go!

~~~
toomuchtodo
Half of people get rides, the other half don’t, as happens with taxis today.
It’s unreasonable to assume the physical world has the elasticity of
technology resources.

~~~
leesalminen
That’s a competitive advantage over taxis, then. It’s one of several reasons I
choose uber over yellow cabs when in NYC (9 times out of 10, anyway).

~~~
toomuchtodo
Up until Uber exhausts cash on hand. And then you’ll be back to using taxis or
public transit, no?

A competitive advantage has no value without a path to profitability.

~~~
dodobirdlord
> Up until Uber exhausts cash on hand.

Uber's rideshare business appears to be almost revenue-neutral. So if you're
waiting for Uber to run out of cash, you'll be waiting a while. Worst case
scenario, they stop pouring money into their money-losing ventures and focus
on rideshare.

~~~
TheSpiceIsLife
Perhaps human mobility solutions should be run as non-profit.

------
woliveirajr
I remember how Amazon, in the beginning, was also non-profitable, wouldn't
succeed, only the core of selling books was becoming profitable after some
time, and so on.

Yes, there was a time when this was real.

~~~
freddie_mercury
This article explains why comparisons to Amazon are misguided:

[https://news.crunchbase.com/news/why-amazons-history-of-
ipo-...](https://news.crunchbase.com/news/why-amazons-history-of-ipo-era-
losses-means-little-for-todays-unprofitable-unicorns/)

Among other things

"Amazon, the patron saint of money-losing companies, lost a combined $2.8
billion over its first 17 quarters as a public company, roughly on par with
what Uber lost in 2015 alone."

------
inflatableDodo
Well, I'm glad they have made at least one major technology breakthrough. Are
they planning to wake them up again in the future when complete self driving
technology is more viable?

~~~
chx
> Well, I'm glad they have made at least one major technology breakthrough

which is what

~~~
inflatableDodo
They've developed this cool new car you can power by burning money. And the
best bit, is it burns other people's money, not just your own.

------
cj
I'm curious, what other companies exist (or existed) with financials similar
to Uber's?

~~~
gorbachev
Any dot.com startup before the bust. Just obviously not at this scale.

~~~
djsumdog
Makes me wish the Fucked Company website was still around. I'm sure Uber would
be on it constantly.

~~~
jacquesm
Maybe you could get this guy interested in doing a re-run?

[https://news.ycombinator.com/user?id=pud](https://news.ycombinator.com/user?id=pud)

------
acd
There will be a future market event when some of the money loosing unicorns
will cards will be flushed.

Or we keep zero interest rates forever which will be an interesting monetary
move.

The current economic system is not long term sustainable.

------
jokoon
I think that it's is a new model for startups:

Disrupt, grow quickly, wait until government start noticing, and liquidate
everything before government and the competition start to adapt.

It's also about the trend/new product effect. People start to use it
massively, then realize it's actually a bad idea or it becomes too expensive
or because they never realized how expensive it is, and that's also where
there is a loss of users.

Result? You have all those workers who have to do something else now, the
competition's business is damaged and users want the benefits of the
disruptive tech but it's not possible. It's a subtle cash grab by exploiting
something that no law prevented.

All in all, that describes perfectly the ineffectiveness of short term
capitalism. Unless a system is properly regulated, I doubt that the silicon
valley can really pretend it's "changing the world". The DARPA and chip
designers did. The rest is unsupervised chaos with cool toy fantasies.

------
msvan
Does this say something broader about the supply/demand of engineering talent,
or is it mostly just a reflection of Uber's troubles?

------
mortdeus
Quick question. If uber and lyft continues to succeed in putting the existing
taxi industry out of a having a job, and then they subsequently manage to also
put themselves out of having a job, how do we get around in NYC and SF so
everybody isn't put out of having a job???

~~~
wasdfff
Everyone is already scootering drunk with two people per. Chaos is the answer.

But ideally your transit will capture more ridership and improve as rideshare
withers, and your ebike will be your last mile solution.

------
mandeepj
How come Lyft is doing much better - comparatively? At one point, they were
considering a selloff.

~~~
syshum
My Guess would be

1\. Lower Expenses, they seem to be just interested in being a Car Service,
not developing Self Driving Tech

2\. Better Service, almost everyone I know has stopped using Uber due to
service issues, most people seem to like Lyft better

3\. Less PR Controversies

~~~
pishpash
2\. You realize they're the same drivers on both platforms right, just
different stickers?

------
enraged_camel
I have absolutely zero respect for tech companies who wantonly and shamelessly
break the laws and abuse their workers in the name of "disruption". They give
the industry a bad name.

As such, I honestly cannot wait to see this company go out of business.

If we're lucky, they will take a large swathe of the "gig economy" with them
when they finally die.

~~~
jsloss
You know there are a large number of people who rely on these platforms to
earn enough to take care of their families...

~~~
jacquesm
You know that:

\- it doesn't matter how the wealth transfer ends as long as untold billions
are burned on a dead end, those people will lose their jobs regardless

\- and if Uber does not go bust that means they've cracked the self driving
problem in which case those people will be out of a job again

\- In the meantime Uber is happy to exploit those people by having them engage
in a thinly veiled race to the bottom, one where Uber sets the rules and they
walk off with the bulk of the gross which they then spend on their own
inefficient machine.

You really can't win with such actors in the market, Uber clearly isn't in it
to be a 'good employer', in fact they've done everything they could to strip
away what rights those people would have had as employees.

------
bluedino
Is this internal engineering for software dev or does it include self-driving
tech?

~~~
pvarangot
I know of people waiting on offers that got the call about frozen hires in
Backend Engineering, Data Engineer and Data Science.

