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Uber, losing billions, freezes engineering hires (arstechnica.com)
335 points by 0xffff2 12 days ago | hide | past | web | favorite | 262 comments

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...

> 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.

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.

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.

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.

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.

Can’t really blame Singapore tho. If they didn’t have a system as they do. The whole country would be in gridlock.

thanks for explaining about COEs for running a vehicle in Singapore. I'd never heard about them. There's a bit more here for curious reader: https://www.valuechampion.sg/basics-of-coe

COE == Certificate of Entitlement

The problem I see is that Uber doesn't understand that their UberEats market is not necessarily the same as their Uber taxi market.

What they fail to realize is that by centralizing their focus on highly populated metropolitan area like NYC and SF they are essentially trying to compete in markets that I wasn't even aware could have restaurants capable of sustaining their businesses when they don't have the option for delivery.

I mean i've been on treasure island and ordered food from just about every notable restraunt in SF you could think of and they all had in house speed delivery services that were willing to travel that far and still managed to get there within 45-75 minutes of placing the order. (presuming you don't order too close to the nightly commute out of the city)

Where Uber should really focus on promoting UberEats is more rural cities like just about every town in the midwest because out here we have a ton of towns with privately owned restaurants that are extremely profitable and yet don't offer delivery services because it's not profitable for them to do so; but it would be profitable for everybody if Uber offered their services as the middle man for every restraunt in town.

I mean i know of like 4 restaurants in town that 3 or 4 ubereats drivers could provide delivery services for and I know that number of drivers would have to grow to 8 or 12 within a year of providing the service. And there is virtually no competition out here and out here car delivery actually makes a lot more sense than trying to figure out where to park in NYC or SF.

Honestly the fact that Uber isn't already implementing this in my town by now, would concern me enough to consider shorting their stock.

There is nothing more telling in my view that a company is headed into uncharted territory it's totally not prepared to navigate than a company not understanding where they aught to set their heading because they haven't got even the slightest clue in which direction all the booty has been buried.

I think you are overstating the opportunity here. Unit economics of scalable food delivery do not support small towns.

Scale requires sales reps to sign restaurants, account managers to maintain the relationships with the restaurants, local operations people to recruit, induct, clothe and support the delivery guys, local marketing managers to get the initial userbase.

And that's not even considering the sprawling single-center infrastructure of smaller towns, with most affluent folk that could in theory order takeout every day living outside the immediate center of the town.

You maximize efficiency (cost per order, or in other words how many orders per hour a salaried employee can deliver, or in other words how little you can pay a non-salaried 100% commission-based delivery partner while they still maintain hourly earnings they deem acceptable) by increasing the pace at which deliveries are made by any single courier.

A dense population and a uniform distribution of popular restaurants will result in a courier going point A to B, B to C, C to D. Each node represents both a restaurant and the next delivery location.

A typical small town infrastructure would result in the delivery person going A->B, B->A, A->C, C->A, A->D, D->A. The town's only two restaurants are located in A, whereas B, C and D are delivery destinations. That's double the marginal cost per order.

Uber owns ~20 to ~30 percent of Grab, JFYI. They specifically exited the Uber brand from Singapore, and pushed Grab.

Grab bought Uber. Because no one used Uber. The only people who really used Uber in Asia were tourists. As part of the deal Uber got a 27.5% stake in Grab.

Grab has always been a better experience than Uber too. Uber was expensive.

“Always been a better experience” is just a personal experience.

Uber launched in SG before Grab did. Many drivers preferred Uber - they’re payout schedule and incentive structure was more favourable. Many riders, both locals and expats, including myself, preferred Uber. Grab undercutting Uber’s pricing was a tactic, just like GoJek is trying to chew off a market share by underpricing Grab today.

I obviously can’t speak for drivers but I have spoken to 2 who both said they preferred grab over Uber because they picked up many more customers.

I never used Uber because it was never cheaper than booking a taxi over the phone.

Grab did a lot more than Uber for their app too. Pretty much from day 1 you could type a taxi stand number in and it would pin the exact location. Uber couldn’t even come close to figuring out where I was standing. So personal booking and usage experience was far better than Uber for sure.

Not a Singaporean. But I have traveled extensively in Malaysia and Singapore and I can attest to the better experience of Grab. The Grab experience (availability, pickup time, price, etc.) was so much better that I never even thought of installing the Uber app in my subsequent visit to these two countries.

As a VN Grab user I love how superior the UX is for Grab than Uber. The subscription packages are great, GrabFood is great, the translation features, rewards system, mobile top up, etc... I don't look forward to returning to the US because I'll have to use Uber and Lyft which are behind Grab by miles.

Same in Vietnam.

It was a South East Asia deal.

Without China (sold to Didi) and SEA, there's not too much of Asia where Uber still exists. In Japan they do. No UberX there, but Uber Eats look like they might be doing okay there. They are (including UberX) still in Taiwan.

I used Uber in Hong Kong.

Ahh yep, they're still in HK as well. South Korea too.

Neither HK or Korea are part of SEA.

Correct, although the context on why that is relevant is missing?

The post was in response to:

>> there's not too much of Asia where Uber still exists

The context is that the deal was for SEA. The deal didn’t include he rest of Asia. I was stating that it exists in HK, Korea, Taiwan, Japan, because these countries are not part of SEA.

Hong Kong isn't part of SEA.

Correct, although the context on why that is relevant is missing?

The post was in response to:

>> there's not too much of Asia where Uber still exists

One of the reason is because Singapore is small compared to US. Its hard and dangerous to travel around motorbikes here

Maybe it's not Singapore that's an outlier, but the US? Delivery in Spain, Portugal, and other European countries is by motorcycle.

I believe in the US, a car driving license is fairly easy to get and used cars are very cheap. Plus, given the driving culture, I assume that in the US people just don't think about motorcycles unlike in Europe or Asia as a viable way to get around.

In The Netherlands, most deliveries are by ebike. This has a lot of advantages:

- Even cheaper than motorcycles / scooters

- No license required

- Excellent bike infrastructure already available

It's a safety in numbers thing. When there are 90 motorbikes and 20 cars at an intersection it's a lot safer to be riding a motorbike than in the US where you might see one or two motorbikes on your commute.

The same thing happens here in Bucharest, but I’d say it’s 80% bikes.

Same here in India

It honestly doesn't strike me as a service for any place other than metropolitan areas.

In nyc it's usually someone traveling 2mi or less on a motorbike/bicycle. The food comes quickly and relatively cheaply.

In the suburbs someone drives a car 10-20mi round trip for what is usually a chain restaurant. No aspect of this makes sense to me economically.

Even in the suburbs there are non-chain restaurants and they are usually much closer than 10 miles. There is no particular reason food delivery would not be successful there.

(and I can confirm, it works great, we do it all the time)

To be fair I said 10-20 mi round trip

While I don't doubt your positive experience, it would be atypical for a suburb to have significant independent restaurants within 5mi of any given point, at least in most of the United States.

In the case of chain restaurants in particular, the food isn't always coming from the place you might think. Deliveroo have been setting up "dark kitchens" in London - a kitchen in a shipping container making brand recipes for them to deliver.


> it would be atypical for a suburb to have significant independent restaurants within 5mi of any given point

Some cities, like Dallas, seem to have a higher percentage of chain restaurants than the average suburb. Other cities, like Seattle, have a ton of restaurants that seem independent but are actually part of a portfolio of restaurants owned by one person, private equity, or a corporation experimenting.

I expect uber eats will scale very well in the suburbs if they can get multiple orders in the same car efficiently. Restaurants are experimenting with food that travels better.

I don't know. The proposition to a non-chain restaurant in the suburbs, of which there are very few to begin with, reminds me more of a Groupon situation where the restaurants come out on the short end. In this case, it's not because they have to discount, it's because it's their reputation that takes the hit for Uber taking too long to deliver. Plus, a lot of local restaurants' margin comes not from the markup on the food, but the markup on the drinks. Many already offer carryout anyway.

> In this case, it's not because they have to discount, it's because it's their reputation that takes the hit for Uber taking too long to deliver.

I haven’t used UberEats but at least with GrubHub/Eat34, this was a big problem and they would routinely lie about it, hoping most people won’t call the restaurant to learn that “the kitchen is busy” meant “your food has been waiting for a driver for 45 minutes”.

Food delivery makes more sense the more people do it. Imagine a situation where an entire street of houses orders delivery at the same time. One driver could make a few stops to pick up food and deliver it all at once. Far more efficient than each family driving to a restaurant separately. I wonder how one could structure incentives to encourage that sort of thing.

It works in developing countries where labor is so cheap and plentiful that you can get orders delivered from across town for less than half a dollar

Next time try selecting nearer restaurants. Their delivery fee is lower and they arrive quicker and in a better state.

If there are none then there isn't much you can do, you have to trade off freshly cooked food for the convenience of having it delivered to you

Honestly I do not get the Uber Eats hype. If I'm sober enough to drive I can get the same food, fresh and on a plate for cheaper. If I'm drunk I'm happy with a pizza delievered by Domino's.

Getting food delivered slowly, cold and squashed into plastic containers is an awful experience, and it ends up costing me thirty bucks.

Yeah, I agree that it doesn’t make sense in the suburbs. It really depends on where you live.

In the center of a large city, you can order something in a minute, pay a couple dollars extra, and have the food at your door in 10-15 minutes. Deliveries are done by bike or scooter and there are hundreds of places to choose from that’ll deliver within half an hour.

It’s great when you’re in the flow and don’t want to deal with the distractions that walking out the door inevitably entails.

If on-demand delivery scaled to the maturity of package delivery (like UPS/Fedex) I can imagine Dominos one day replacing their delivery operations with the future version of Uber Eats.

And it pollutes the environment with plastic trash and exhaust and CO2

I get the extra trash from packaging required for delivery but how is it using extra CO2? The driver would be doing the same distance or less than you because they would be doing multiple pickups and dropoffs in a row so they're only contributing a one-way (more like 1.5) whereas you would have to do the roundtrip.

Delivery packaging is the same as you'd get if you went there in your car.

The appropriate comparison is with cooking at home. Takeaway food is a luxury.

I used it at work for lunches.

I tried ordering a pizza from NYC and it showed up like three days later in Palo Alto and was pretty cold. They also charged me an arm and a leg.

In NYC, at least, I've had Uber Eats orders delivered by a person on a scooter. Same as Seamless/GrubHub, Caviar, etc.

I don't know where exactly you are in NYC, but in Manhattan at least, it's almost always bikes, e- or otherwise.

If a restaurant is within 10 min of me, I just drive to it myself. If its 15+ min one way, I'll use DoorDash, but I don't get why the driver would drive 30 min for $5 including the use of their car and gas.

The only way this works economically is if the driver can batch up deliveries. Pick up multiple orders at one restaurant or a cluster of restaurants, then deliver them all to a series of residences along a route.

I’ve always assumed that DoorDash et al try to do this.

Uber has made it explicit by tossing in free delivery to a list of restaurants that presumably have an order going out near you. You get like 5 minutes to respond to a list of like 4 restaurants usually when you open the app at peak times.

That’s actually very clever. I have never used UberEats but among the dozens of delivery services I’ve used I generally try to minimize delivery/service fees so I end up buying from whichever decent restaurant has a free delivery “deal” going on. I don’t get how these middlemen are making any money from me. I’d see myself using this feature of UberEats if I bother to try the app in the future.

That drives the costs down, sure, but then you end up with food that's been sitting around as the driver goes from restaurant to restaurant and then travels from house to house.

TIL DoorDash actually delivers to where I live from quite a few restaurants--though the vast majority I wouldn't consider. I think they're the only delivery service that covers my address.

To your point, if I were to use them, quite a few of the restaurants are a good 15 minute drive from where I live. Which is further than I'd bother to go to get takeout. It's also further than I'd probably chance to get, say, a burger delivered as I suspect it would be getting cold by the time I got it.

Maybe they are investing in user habits, branding and data, such as : where are the consumers, where are the most wanted food, how frequent is it, at what time, etc. $544m are invested to grow the data machine.

Uber uses the current fleet for now, but once they have more data to analyze, they can switch to a better operational model which would be hopefully profitable.

What is worrying is the aggressive, anti-competitive, potentially illegal (depending on the country) subsidiaries aimed at killing the local competition.

>they can switch to a better operational model which would be hopefully profitable.

So they have been burning billions of dollars in the hopes that there might be a business model in the future?

Maybe it's just that VCs were naive to think that taxis and food delivery were good businesses.

Your sentence seems to insist on "billions", but it's not that much in regard to all the invested money in the world. According to UNESCO (http://uis.unesco.org/apps/visualisations/research-and-devel...), the world's spending on R&D (only) is estimated to be $1.7 trillions. Apple's R&D investment for 3rd quarter of 2019 is $4.2 billions. So, yes, billions are burned in the hope of finding things. Most probably, future generations will even burn hundred of trillions.

Thanks, I'll try that brilliant logic on my wife.

"Sure, hun, the Porsche was expensive, but it's not that much in regard to all the money spent in the world!"

Actually that IS a very profitable business, that is if you can charge people way more than most people are willing to pay.

Surely there's a place that sells burritos near you?

> (2) It's arguably the most valuable battleground in logistics - developing a "last mile" delivery network at scale.

How is Uber Eats any different from the many other operations strapping boxes to the backs of bicyclists? I don't see anything innovative about Uber's last mile logistics compared to Amazon (who aren't even that great) for instance.

It sounds more like an excuse Uber's leadership would make as they desperately search for profitable business.

There is no "last mile delivery network at scale".

Well there is, its called the postal system but there sure as heck isn't any just-in-time last mile network "at scale". You just have fuck tonnes of delivery drivers who need to get paid. There is no magic "at scale" wand to wave over it to make it economically viable.

The excuses for Uber losing money is getting jaw dropping now.

Uber Eats like Uber ride sharing are marketplace businesses.

In order for a new entrant to come in they need to grow both businesses and consumers at the same time. Which is hard with no competitors. But very hard with cash rich companies like Uber trying to stop you.

We saw this all play out in Australia where we initially had Foodora and Deliveroo. Then Uber joined with aggressive marketing and pricing. They pushed Foodora out and the number of businesses in Deliveroo is dropping. It is going to be a winner take all situation. At which point prices will rise and the profits will roll in.

I've found that this isn't the experience. Most options I'm after are available in multiple apps.

More to the point, all drivers seem to use multiple apps. I often get my food in bags from the wrong company. The barrier to switching for drivers _and_ the customers is zero.

As a result this feels less like money spent on a unique strategy and more like money spent buying the business.

It's worth pointing out that in my area of Melbourne the number of places available on any of the platforms is rising, but the platform that is increasing the quickest in my area is Menulog.

Uber Eats just changed their delivery price to be based on distance, which has vastly increased the average delivery fee, and the prices on Uber Eats are inflated over every other delivery platform because of the cut they take.

And in Melbourne CBD, by far the largest number of bikes I see are delivering for Easi.

Not sure that the market is actually struggling here.

Melbourne CBD is a bit of an anomaly as you have a super high concentration of Asian students in one area. Hence the growth of Easi.

But everywhere else Uber is still by far the leader. Foodora couldn't compete. Deliveroo is struggling and Menulog isn't really competitive given lack of marketing spend.

Uber eats doesn't even operate in outer suburbs, Menulog/eatnow does

Restaurants aren't limited to a single service, though. This isn't a winner take all situation. We will end up with an oligopoly but the barriers will be low enough to prevent the winners from being too greedy or complacent.

I’m not sure I agree with your conclusion because the cost of switching is almost zero, and none of the parties involved have an incentive for loyalty. Here in DC, the restaurants heavily promote whoever is giving them the best rate and the drivers all work for multiple vendors, to the point that I’ve had orders from one accompanied by a suggestion to switch to a competitor. If anyone starts raising prices business can shift overnight, and there’s a ceiling over which people stop buying or fallback to the non-app delivery guy.

At which point prices will rise and the profits will roll in

That was Moviepass’s theory too, it didn’t work out so well in practice. Once the price went up people simply stopped using it.

I don't understand why providing subsidized services like this to grow market share is not made illegal. It seems clearly anticompetitive.

I think they claim the prices are not unsustainable once they get economies of scale. Every new company "subsidizes" their customers until they reach a critical mass that allows them to achieve profitability.

Isn't it possible that the sole reason that this market niche exist is because of competitive prices?

Maybe Uber is killing the market it is trying to monopolize and by the time it gets it all, the pricing it will have to practice to actually make it profitable will drive customers back to eating in person in the restaurant

Menulog seems to be getting creamed here too. At this point I'd say it's UberEats' race to lose.

Did you end up trying all three? Was the experience essentially the same?

1 - “desperately search for profitable business” - UBERs core business is a breath away from profitability. And trending quickly in the right direction. Looking at their corporate overhead and new market bets it’s clear they could cut their way to profitability today. But they are chasing a larger prize.

2 - Logistics is mind bogglingly difficult and capital intensive. Uber’s built in driver base has idle time that is an outrageously deep moat in competing in this space. Uber has 3 million drivers, say each vehicle costs $10k avg that is $30b In free capital equipment that they are starting with. Their internal traffic / route data that they collect from all 3m drivers all the time is the richest in the world. FedEx - for example - has “only” 85,000 vehicles.

driver base has idle time that is an outrageously deep moat in competing in this space

It isn’t a moat at all! Every driver has all the apps and picks jobs from any of them. If I use Lyft instead of Uber the chances are I'll get the same driver in the same car anyway. And he’ll follow his in-car GPS to find me and then to take me to my destination so there’s no value in the route data either.

In theory there may be economies of scale in food delivery if a single driver can deliver multiple orders from the same restaurant. Uber Eats already offers free/cheap delivery when there's already an order out to a given restaurant.

It's not theoretical. Uber Eats already does single-origin, multiple-destination batching to squeeze efficiency out of their network (I have a friend who works there). Afaik there are other kinds of batching they have not yet implemented.

They can be successful at it at scale because they already have a massive supply of drivers that they can allocate to rides or picking up food.

Amazon’s food delivery failed and closed last month. Caviar was sold to Doordash. Postmates is struggling.

I see three fundamental issues:

1. Many of their restaurants are simply not geared well for being in the delivery business. They don’t have good parking for drivers. Their menu is built around dining in, not 30 mins in a car. Their delivery packaging is subpar or overkill. They really have to train their restaurant partners to succeed or they won’t get repeat business. They have an inventory problem.

2. The value proposition of food delivery really only exists in the largest cities. Not everyone wants to eat out, but in smaller towns it’s easy to access and social. For somebody who spends 3 hours commuting each day, cooking and dining out lack appeal, but that isn’t a problem for the majority of Americans.

3. There simply isn’t much margin in the restaurant business. Most are happy to run on 1-3% margin. Food cost, scheduling labor around varying demand, and overhead with tremendous fixed and surprise costs. A spike in fuel prices can spell for a losing year, simply based on food cost and reduced demand.

I think a new model of kitchen is in order. An on-demand food service would be able to provide very fresh and hot food in short order, without soggy packaging. It could run by a network of sort of Forward Operating Bases that are positioned around predicted demand, and may move based on data. They may take walk up orders but are tooled around providing delicious food to delivery vehicles. I can imagine a lot of frictionless ways to get food into cars, scooters, or even autonomous delivery wagons, if you knew in advance that is the business you are in. They can take preorders and run their inventories based on that data to avoid food waste. There are no tables to bus, plates to break and wash, or floors to maintain. With good planning the kitchens can be cheap to build, own, and run. And the food can be the very best, made by people in the neighborhood for the neighborhood.

Until all that is common, ya I don’t think the thing works without subsidies. If we did then food delivery would have been much more common; it’s never been a technological problem.

Case in point of delivery optimized to the hilt: Dominos Pizza. It actually all comes down to the menu.

And that assumes that a restaurant business that's geared to delivery and pickup exclusively/primarily is possible. Which AFAIK is mostly limited to pizza and Chinese in most places--where delivery is mostly a solved problem.

Uber's main (only?) advantage here is their ability to take advantage of a shared labor pool. By increasing the demand for driving + food delivery, it makes the Uber labor pool bigger and further increases the lock-in effect so Uber drivers don't want to open other apps.

A guess: it increases usage. Uber has to maintain a two-sided network, and this eg gives their drivers something to do during mid-day lulls.

So am I understanding you're saying that even in their best performing division where they drastically underpay they are losing $22m a quarter and this is good news? I am honestly asking, as I'm not super familiar with their finances.

1) Note that 80%+ of IPOs last year were for companies that were unprofitable - why does the market tolerate this? Shorthand - because many companies IPO to raise capital to build towards profit via scale, capital investment, etc.

2) A way to start understanding this is to understand the benchmark comparison for public market equities is Price to Earnings (PE) ratio.

3) Trying to judge an unprofitable company and develop a P/E that you can then resolve against other similar profitable companies requires one to look at trends, not absolutes. Uber substantially improved that single metric - $22m - YOY while still scaling. If you believe that trend will continue over time, they have a going concern in their core business. Do that for every line item and you can fudge a forward P/E.

4) incidentally the IPO “roadshow” is where the company goes around to institutional investors and bankers (who then communicate w their high net worth retail investors) and tell the story of the trend and roadmap to building a high value sustainable biz.

5) A decent article primer about the current market, why investors are ok w/low or no profit, etc is here -> https://theweek.com/articles/835726/reason-many-unprofitable...

- - - -

> why does the market tolerate this?

Because the market is insane.

Uber has yet to prove that their core business can actually make money. A large part of the appeal of Uber is that they're cheap, nobody has proved that customers are willing to pay enough for an Uber for them to turn a profit.

I'm legitimately surprised that they're _still_ not making profit on ride sharing. I just kind of assumed that the insanity had stopped. Running at a loss to gain marketshare is a fine and reasonable strategy if you think you actually have a plan to make money later, so far Uber's plan is to spend even more money expanding to other related markets hoping for profitability. I would never buy shares in Uber.

Other than fleecing retail investors (which is of course a wholly plausible reason), I seriously didn't understand why Uber didn't take the opportunity provided by kicking Kalanick out to revamp pricing as needed to be profitable.

If you have to do it sooner rather than later anyway, why not do it sooner? They knew (or should have known) that self-driving wasn't going to be there for decades. Why not bring prices to sustainable levels and let the chips fall where they would?

The cynic suspects it's because various people could continue to milk the cow for a while.

The current execs seem to be just following the incentives given to them. Investors are willing to spend more money for "marketshare" than profit, under the delusion that they can turn profit later.

Uber and ride sharing in general is especially screwed because there are other ride sharing services funded by other investors who are _also_ willing to burn money for marketshare. As soon as one of these companies tries to increase pricing for profitability, customers will move to a different platform that is still subsidizing rides.

Seems like a "Congratulations you've played yourself" state for the entire industry.

Terrible industry to invest in, essentially there are other investors who are willing to lose all of their money to ensure that you lose most of your own. It's almost a clever little wealth redistribution engine lol.

Re 1:

How much more scale can Uber realistically hope to achieve? They're in virtually every US city, and they already have over 50% of the on-demand ride business in a lot of places. They've passed the inflection point on the S-curve: If the unit economics don't work out today, it's unlikely that they ever will

Also, it is my understanding that the $22 million loss you cited is exclusive of marketing expenses. That's troublesome because certain driver subsidies are paid out of the marketing line-item (under the dubious justification that the bonuses are attractive to new drivers). To be sustainable, the core business needs to generate enough cashflow to cover those bonuses, too.

Re 2 and 3:

I'm sympathetic to the idea that useful metrics for valuing established companies are not necessarily useful metrics for growing companies, _but_: The fundamental problem is that I don't see a path to profitability (to make the share price worth more than the "scrap" value of whatever assets, including IP, Uber owns).

Contrast this with Tesla (another rapidly-growing company): They have double-digit positive unit gross margins and less than 1% market share. Maybe the stock is over-valued, maybe they won't execute, but it's clear that the company can be profitable (and they've had profitable quarters).

Re 4:

[My cynical take] Right, that's why they've started the Uber Eats product. It gives Uber cover to remain unprofitable for a few more years, until Uber Eats has the same reach as ride share and it's clear that Uber eats isn't a sustainable business, either.

I think parent is arguing three things:

1) The bulk of their apparent loss is a one-time expense

2) They are improving the unit economics of ride sharing and that, if the trend continues, they will be positive in the future.

3) The divisions that are losing money are new ventures like Uber eats and represent a short-term investment that should payoff

If they can reach positive unit economics after subsidies, that would be great for the company. It is still unknown, especially since Lyft and other companies are competing in the space.

> 2) They are improving the unit economics of ride sharing and that, if the trend continues, they will be positive in the future.

I think the main contention is that they could as well be at their max expansion right now.

Not in a purely hypothetical way, but because the actors of the market had the time to digest and react to Uber’s business.

In particular, drivers, legislators, scooter/bike rentals, etc. could be legitimately seen as forces stopping Uber from keeping with their business practices and business model.

Also the stock based comp is non cash so it impacts net income but not cash from operations. CFO - Capex is a better measure of a companies cash flow.

I guess you'd have to see historical margins to make any sort of reasonable projections, but I think GP is saying that they've so increased their unit margin on the ride-hailing to near zero that it's dishonest to say they're running it a massive loss and have no route to profitability.

It's nice that you've made this high effort post to dispute all the "haters" but I'm still confused as to how I can order food for a 5% markup, while some driver gets paid for 45+ minutes of his time, gas and car maintenance to deliver it to me. Something doesn't add up here, and your uppity attitude just makes me think you're heavily invested.

1 - I am not heavily invested.

2 - Misinformation poisons and I’m trying to surface facts that are being overrun by a narrative.

3 - Misunderstanding one of the largest entrepreneurial & capital efforts in our lifetime, especially on HN, will inevitably slow other entrepreneurs journeys who miss the real story and how to apply these lessons themselves. That’s why I wrote the parent comment.

4 - With your “uppity” comment let’s limit the ad hominem yes?

5 - Broaden your thinking around how “eats” eventually becomes a business worth having. Research “cloud kitchen” concepts - this is an amazing space with giant scale, an unnessesarily distributed supply side (most B+ quality delivery food is more or less the same), and massive loyalty / customer LTV

1 - Fair point, that was me creating a straw man, I got emotional and I apologise

2 - Depends on perspective, from my point of view the narrative on HN at the moment seems to be in your favour and you're not going against much, hence my antagonistic comment

3 - Misunderstanding implies there's merit, which you seem to be very sure of - I'm just saying be careful, this has all the signs of blowing up and if you're right it won't be because there's been writing on the wall

4 - Refer to 1), again, unfortunately I got emotional and my comment could have been written with more substance and less bullshit

5 - Talking about "cloud kitchens" just makes me feel like I'm talking to someone from a different planet.

Thank you for your response, aka why I love HN we can have discussions not pissing contests.

You are probably right about my bs martyrdom on this topic, HN is better informed.

I am on planet earth although head in clouds :). But really look through the cloud lens of:

1 - people order a lot of takeout, and mostly the same thing with same frequency (Thursday is Chinese night, etc)

2 - Uber owns a lot of data around who is ordering what and when. This data is similar to amazons general product info and how they can manage the insane logistics of same day stocking, not even to mention same day delivery.

3 - setting up a massive production line kitchen in a rent efficient space (aka not retail, industrial at 30% the costs) with the same predictive models amazon uses to stock “same day” is many times more efficient than mom and pop restaurants.

4 - Transport costs can be mitigated with an Uber pool like model or a heavily tip reliant model (like Amazons prime now)

Fun fact - Travis K after leaving UBER is heavily investing time and money in cloud kitchen space.



Hey, thanks for the comment. I appreciate the response and likewise, glad that we can have a civilised discussion on here, even though I started it out a bit on the rough side.

I agree with you on the fact that there's a huge amount of potential to improve upon existing systems of producing and delivering food to people, transporting people from point A to point B, and so on.

Where I think our opinions differ is that I'm way more cynical in the ability for these first-mover advantage companies to deliver substantial value in a way that will make them profitable and sustainable in the long run.

I may be wrong though, and no one wants to be the guy who made that Dropbox comment on HN a decade ago about why it's useless. But I stand by my opinion and when it's proven I'm wrong I will eat my words without complaining.

FYI, Dropbox (DBX) is now trading below its IPO price.


Anyone curious about cloud kitchens should watch this:


Devils advocate: they could keep charging a 5% total markup to the customer but once they're dominant they can start making deals with restaurants under the guise of "if it weren't for us, you'd never get this order to begin with" to get a percentage of the regular meal cost? Seems kinda shitty from a moral standpoint but I agree that the current up charge isn't sustainable.

I appreciate the devil's advocate. To be frank, I just made up the 5% figure, it's based on my observations looking at Uber Eats, Deliveroo, and similar apps. Though the theme seems to be the same, a lot of times you'll see they actually match the in store prices, which makes absolute no sense to me.

I had an experience with a Deliveroo driver, who told me the restaurant took an hour to make the food despite saying it was ready and that's why the delivery was almost two hours late. He ended up waiting for one hour at the restaurant for them to make my order. He was asking me to make a complaint against the restaurant because there's not much he can do.

My small order for a single person, costing £7.50, took two hours out of this person's life. Now I'll admit I don't know how the system works and whether the people get paid to wait around doing nothing but I very much doubt it, and actually felt bad that I made some person trying to make a living wait an hour at a restaurant so he could use his own vehicle to deliver a burrito to me, possibly at a loss.

But yeah everything's fine, let's keep going

Why doesn’t matching in-store prices make sense to you? You are not taking up valuable table space, so it ends up cheaper for the restaurant. The delivery service is certainly taking a share of that benefit.

The problem with that is that the restaurant business is low margin in the first place. So Uber cutting into the restaurants' margins will quickly make it not worth it for the restaurants.

Kind of like how Groupon and Living Social often made these money losing deals with small businesses. Many of those businesses figured out that the one time influx of customers was not at all worth it, which is why both Groupon and Living Social are shells of their former high-flying unicorn selves.

The delivery companies charge the restaurant, up to 35% of the meal value. In addition to the delivery fee that is shown to the end user.

The figure is probably about 30% on average, can be lowered to 25% or 20% for extremely desirable or high volume restaurants that have brand value and demand.

This summary is a bit out of date on the competitive landscape, but gets the basics right: https://www.mckinsey.com/industries/high-tech/our-insights/t...

Yes, they already do this

Economies of scale might give the market owner such a huge advantage in food delivery logistics (coupled with ride logistics etc), that it’s worth losing a lot until inflection. The winner forces everyone out, and gets there by spending more up front.

Yes, if this happens, this is good, from a monetary point of view. If the end goal is that the multi-billion dollar corporation who forces everyone out from the market makes as much money as possible, then this is great, for them at least. I guess there's some praise to be given out because everyone wants to be like that, and wishes they were smart enough to be the first to dive into this burning pile of VC money.

But what if the goal is something else like creating a profitable, sustainable and efficient service that benefits both consumers and producers? Too boring for shareholders I guess.

What food delivery logistics? Ubereats is not tackling any part of the food preparation, food supply chain, or even the problem of keeping food hot.

All they're doing is pick up and delivery. There's no moat there and there's not a lot of untapped profit margin there. Ubereats could win in this market tomorrow and it still wouldn't be worth billions.

Don’t know how it is with uber eats but most other delivery services bundle the meals so one driver can deliver to multiple addresses with one trip.

I keep hearing about this 'uber didn't lose the money' argument, but this also coincides with a hiring freeze. this comes at a time when talent for engineers is extremely hot. if everything was growing as you say, then it wouldn't make sense to start throwing things overboard

That doesn't automatically mean that they need to hire more engineers. Maybe they also have a reasonable amount of them, and since the older products have matured their focus can be shifted to the newer products instead of hiring new people for new products.

At the end of the day it's still a 10 years old company that has never made money.

Unless they pull something similar to Amazon when they released aws I don't see that changing. (Like engineering their own self driving car, but we all know that'll come too late to save them)

Ok so there is a backstory behind each piece of bad news. Still, tons of bad news is still a ton of bad news. Most successful businesses should have a string of good news. Especially after being in business for a decade.

> Still, tons of bad news is still a ton of bad news.

I think the point is that it's not bad news. Losing money can be good for a company if it's being done in a way that leads to long-term growth. Amazon didn't have a profitable quarter for ~7 years after its IPO: https://www.theatlas.com/charts/BJjuqbWLz

Amazon also actually owned assets and supply chains instead of owning nothing apart from an app on a phone that countless of competitors have already copied.

> Losing money can be good for a company if it's being done in a way that leads to long-term growth.

I guess. But being profitable while growing is better.

As far as I can tell, your comment only makes the case for the subsidy problem at Uber stronger by arguing that the subsidy problem is still generating growing losses even after accounting for IPO-related stock compensation costs.

This has been a highly analyzed criticism of Uber since day one. See the Naked Capitalism series on it. It boils down to the fundamental economics of taxi businesses and the intrinsic costs of ride supply in illiquid ride markets like suburbs.

Last miling food with drones sounds more feasible, but I don't think that requires $500m in investment.

That is absolutely not feasible right now.

To start with, many cities have no fly zones around their airports that already cut down on who you can serve. Then there's the fact that you need a sizable drone to carry a payload big enough for meals. The bigger the drone, the bigger the landing zone you'll need.

Flight times are heavily limited by batteries which means you'd have to swap batteries frequently. Then there's the fact that you'd need someone to pilot them, at least for the landing part. On top of that drones would be heavily limited by the weather.

And all that is not even getting into liability and FAA regulations. There is no way Uber or anyone else is gonna be air dropping food deliveries without charging a pretty big fee and even then there'd be a lot of limitations.

Google (Alphabet subsidiary Wing) is already operational with their drone delivery service in Australia and Finland. The drones don't land, they lower the order.

Available food payload is 1.2kg for now - which is on the "slightly limiting" for a dinner for 2 people, but many cuisines can work quite well.

> but I don't think that requires $500m in investment

Honestly, $500m sounds like a wild underestimate for what it would take to get last mile drone delivery working. Remember that this is something that's currently (mostly) illegal! There's clearly a lot of work to be done.

I don't think the fact that it's mostly illegal would discourage Uber. But compare it to Uber Eats: those driver subsidies, they're never going to get that money back. A drone last-mile R&D budget could at least lead to something. Even if it's imperfect and still requires some labor, maybe it vastly cuts cost. E.g., drivers are assigned drones, and they go from the driver's car, parked on the street of the destination, and fly to the front door to drop the food off, so drivers get more throughput while running their deliveries.

> - The easy one, that this article touches on, is that they paid out almost $4b in stock compensation that inflated the loss number to "$5 billion" that I see everywhere, the actual number is they burned ~$1.2b this quarter.

Why would you value their stock at 0 to get that 'actual' number?

That was the result of a one time cost, their IPO, not a continuing operating expenditure. So, that $5b figure doesn't fairly represent how they will perform as a business in the long term.

> Why would you value their stock at 0 to get that 'actual' number?

It's a one-time non-cash expense. Allocating to a single quarter is an accounting convenience.

Stock comp represents an economic cost--shareholders are diluted by it. But allocating it now or then, here or there, is arbitrary. As such, when making longitudinal statements (e.g. is Uber's economic position improving or receding), stripping out such items is standard.

Well, it's not really a one-time cost. It's a cost which will recur in pretty much every quarter with a one-tome magnitude.

While I don't know the specifics about UBER, some companies have RSU that vest only upon liquidation event, eg an IPO, which would inflate the number for that quarter, since you're effectively paying out all stock compensation owed to employees all at once.

Yes, that’s the magnitude part. But Uber relies very, very heavily in RSU compensation and those expenses will show up every quarter going forward.

As long as it was prorated to previous quarters in the previous evaluations I guess that is fine.

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.

> 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.

> 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.

> What's their moat?

They’re actually doing it. At scale, practically everywhere.

> if [Google] launch a "medical resource routing" service tomorrow it'll blow Uber out of the water

I’m doubtful. One, it’s Google. Logistics requires lots of customer interaction. Uber isn’t great at this, but it’s better than Google.

Also, being able to theoretically do something is different from actually doing it. The problem isn’t routing. It’s knowing which tasks to bundle in what order. It’s knowing where tasks which haven’t been ordered yet are likely to emerge. It’s knowing how long a task might take. It’s knowing which tasks require what, and who is best placed to accept it. It’s mediating disputes between the various parties involved, and properly incentivising them.

> One, it’s Google. Logistics requires lots of customer interaction. Uber isn’t great at this, but it’s better than Google.

That's usually said when talking about Google's free services. In my experience when you're paying them money they're very responsive.

And I'm still not sure what makes Uber's tech all that notable. They simply have more drivers than their competitors do, it stands to reason the customer experience is better.

> In my experience when you're paying them money they're very responsive

In my experience, they're 50/50. They're also totally unreliable as a commercial partner. You don't want to outsource your logistics to Google only to learn about the service being cancelled in a press release.

Problem is Google's never deprecated a logistics network before. We really have no idea how the company would try and operate in that area. They've certainly been careful not to deprecate services in Cloud. But yes, you're right about customer service. Google Play/YouTube springs to mind on the developer/creator side.

In my experience Uber is also 50/50 with regard to customer service, so again I'm not sure what the persuasive argument is.

> That's usually said when talking about Google's free services. In my experience when you're paying them money they're very responsive.

I'm the admin for a company gsuite. We can certainly get a google representative on the phone, but when they can't do anything for us, it doesn't qualify as responsive.

It took like 4 meetings to get invoiced billing. They wouldn't consider disabling links on email. They like to redesign the admin UI to make things take more clicks. There is no way to merge two G Suite accounts. I don't remember my other complaint, but they told me I had a good idea, but please post it in the customer forum to see if it would get done --- I've seen what happens to ideas in the customer forum, nothing, since I frequently end up there looking for how to do reasonable things that are impossible.

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.

Uber doesn’t HAVE a moat. I use a different ride share service in each European city I travel to, and they each do pretty well.

If all your product does is get you from point A to point B then I don’t care if it’s Uber or BobsRideShare.

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

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.

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.

Lyft doesn't seem to be going away anytime soon in the US. If anything, Lyft is much larger than it was a few years ago. In China and a number of markets where Uber invested heavily, the competition won the war of attrition.

Really a reply to muzani

Facebook lost money for 2 years, right at the start. That's it.

It would cost billions to be a global competitor to Uber. But nearly all rideshares are local. A local company can compete at a much more acceptable price, and use its local knowledge and connections to gain an edge. There isn't much advantage to being global in Uber's market.

Things that don't support the ad business are never going to be very high priorities for google. Is a medical resource routing system going to pop out of someone's 20% time? Doubt.

For a while, in NYC at least, they tried the courier model, but that was a few years ago. Not really sure why it did not continue.

> For a while, in NYC at least, they tried the courier model, but that was a few years ago

Courier services are high-risk operations sensitive to reliability.

My guess is Uber's network wasn't optimized for reliability then. Food delivery has similar reliability requirements, but the stakes are lower. (Failed food deliveries produce complaints. Failed courier runs produce litigation.)

Which history are we seeing all over again? Amazon in 1997 losing money selling $5 books for $4, or pets.com losing money selling $50 bags of kibble for $40?

Except most of Amazon's money is made off AWS, and not retail. Amazon today would be very different if AWS didn't exist.

Yes, that was the point of the question: whether today's Uber is the first chapter of a larger plan to build a profitable business on top of a much simpler and possibly even inherently money-losing set of transactions, or whether it's already in its final form and is just a bad idea.

I'm constantly amazed at the number of upvoted, top-level comments on HN (on any topic) where the underlying premise is first, thousands of people with actual skin in this game are wrong, whereas I, a drive-by commentator, posess True Understanding. I'm not suggesting that a large number of personally invested people is proof of correctness -- but certainly it reeks of arrogance if your argument assumes without proof that an uninterested commentator is better informed than all of them. More so if your only comment, given such a grand assumption, is to reiterate basic economics.

At least you could try to explain how you think it is that so many are mistaken about something so elementary that it fits in two short paragraphs.

Investors have been massively wrong before on all kinds of things which has led to market crashes. So the fact that some investors believe Uber will become a strong, profitable business in the foreseeable future doesn't count for much.

The market is not perfectly rational. It's vulnerable to hype and there's a lot of money to be made by exploiting that hype and selling before the bubble bursts.

Those investors just need to find greater fools.

The success of Lyft just shows how little moat they have. The core of their business is so simple and so easy to copycat.

Driverless cars are a very long way away.

And even longer for Uber style use cases where you need to either be able to read street signs or know the parking rules in every street around the world. Not to mention that Uber drivers rely on breaking the law eg. Stopping in non stopping areas like bus lanes. Self driving cars going to do that ?

And confused how the economics are so better for self driving cars given that they are likely to be far more expensive.

I'm also super confused about how the first company to develop self driving cars will win everything. Firstly, it's hard to say when a car is truly self driving and even once regulators say it passes the tests, I'm sure companies will continue investing money into improving the experience so R&D isn't going to get any cheaper. Also, self driving cars cost a ton to operate and manufacture. Probably more than the amount Uber and Lyft are paying drivers right now. Considering all these factors, it probably won't be another 10 years until the economics of driverless cars works out. In this sense, I think Uber's biggest competitor isn't Lyft or Waymo. It's Tesla since Uber is trying to shift people away from car ownership.

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.

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

- Mitch Hedberg

I assume because its not very efficient at all. A 10 mile trip in LA in traffic will burn a $4 gallon of gas in everything but a brand new fuel efficient car. Most people willing to sit in traffic for hours after work to scrape a few more bucks are not in a brand new car. That’s potentially $4 a trip just from the gas alone. At that markup I’ll bike to the store and save the planet.

Even amazon outsources their last mile delivery to contractors who absorb these costs somehow (probably by abusing employees and/or making them pee in bottles to make quota).

When you are doing the courier stuff for companies, you likely want to get it right from the beginning. Maybe they are practicing and collecting data while delivering food. Things like time it takes it to deliver on certain route, which couriers are reliable, how many deliveries couriers can make, how much to pay them etc.

Because how a taxi works is not how a courier works.

Taxi's occasionally do courier work but there's a reason why courier services exist and it's not just all taxi firms.

They tried this already. Google "Uber Rush".

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.

> Let’s discuss if something like this can work

In New York, London and San Francisco? Sure. Anywhere else, there isn't enough density of destinations and density or wealth to make on-demand service competitive with hired cars.

That said, the full-time requirement would also wipe out taxis in most cities. That turns a broken-down car for anyone but the wealthy into a potentially life-destroying experience. Weighed against the benefits around drinking and driving, et cetera, something between full-time employment and the current situation seems apt.

I'm not sure if someplace like Lancaster, PA (totally random example; it's a city I enjoy visiting) even needs a service like Uber. There is nothing in the value prop that demands that it be scaled up, down & out to fit everywhere in the world.

> I'm not sure if someplace like Lancaster, PA (totally random example; it's a city I enjoy visiting) even needs a service like Uber

I dive in Dutch Springs (near Bethlehem, Pennsylvania) from time to time. Bus out of New York and Uber for the last mile. Without Uber, those are hotel, restaurant, equipment, facilities and bus expenses I would not be spending there.

You don't need an app for 50% of that use case. You need taxi drivers hanging out at the train station/bus depot.

People that want to stop drunk driving would disagree. Taxis are way to unreliable in the vast majority of US cities to be used as transport to/from a dinner with drinks.

Yep. The primary way I get to/from drinking events is Uber/Lyft. The other use case is when going somewhere without parking. Taxis were always very unreliable for trips like this; they'd show up late or not at all, especially for leaving events late at night.

This is what I don't understand. When I lived in the Boston area, I used Uber instead of taxis, because of this neat little feature Uber (and Lyft) had called "showing up". Sometimes when I called a cab company, I wasn't even able to reach the dispatcher (maybe 20% of the time, because I was often calling in the very early morning). When I spoke to the dispatcher, I could never be certain that he actually understood what I was saying. If those hurdles were overcome, there was about a 75% chance that taxi would show up, but the time of arrival was always uncertain.

I could not have cared less about the cost of Uber. I'd have paid ten times the cost of a cab, in order to have a service I could rely on. I've never once been stood-up by an Uber or Lyft driver. Reliability is what's important - little things like the car not being filthy and the driver not screaming at me about the Yom Kippur War are just extras.

Why don't taxi companies just clone (as closely as they can) the Uber dispatch and driver tracking technologies?

As I understand it, taxi companies have done just that - they now have apps as well.

The Amish. No joke.

My dad's from there. The guy who lives next door to my grandparents drives a truck for the Amish since they can't.

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

Same deal as it is now no? Its not like you recruit more drivers during a rainstorm in the current model. You dangle hazard pay to make your employees grab their keys and drive after hours, same as any job with full time employees and sudden after hours demand.

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.

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).

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.

> 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.

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

So are you going to start this business now or wait until Uber folds?

Start what business? Have taxis gone out of business? Or did they adopt their own ridehailing apps and continue to exist? I still see cabs everywhere in NYC, Chicago, and SF.

If you can’t kill taxis with tens of billions of dollars of VC investment, how does the last bit of cash Uber has help?

This seems based on the assertion that people are only using Uber because it's cheaper which, as far as I can tell, is completely unfounded.

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

It's a real pity that there is no 'HN Quotes' section, I'd definitely nominate this one.

That's a pretty terrible solution. Leaving good, willing-to-pay customers out in the rain? Not really customer-service oriented, are we?

Customer obsession is worker abuse veiled as clever business practices.

Workers > Customers > Shareholders (this is Costco’s stated priority by the way; they do very well and treat their employees well)

Try to get Costco to show up at your house 7 minutes from now.

That’s the point

There could still be “surge” pricing though, as long as the company paid the employee-drivers overtime. So perhaps drivers who are “off” could be incentivized to drive during the additional demand.

Assume all drivers (taxi or Uber alike) have the same rights as other employees (min/max working hours, minimum pay, benefits).

If the idea of “independent contractors” is punctured so that Uber has to ensure drivers make minimum wage in 40h after their own operating expenses, then Uber won’t have a huge competitive advantage anymore.

This is handled the same way 24/7 availability is handled. The company employs some multiple of the employees it needs to handle regular demand during the day. Some of these employees happen to like working at night. Others like working during the day. All are required to put in some number of hours per week in order to qualify for the perks that come with full time employment.

When a spike in demand occurs, a page goes out to all employees who currently aren’t on the road requesting that all those who can do so safely proceed immediately to an area that has unfilled demand.

These hypothetical employees are expected to be 24/7 on-call? If they're required to have their "pager" on and respond to pages, this is unreasonable. Nobody would put up with such absurdity. If they aren't, it's also unreasonable, after all, nobody would put up with such absurdity.

Put in work preferences. Would like to work hours X; is willing to be notified of opportunities for overtime hours Y. When it's a big deal time, call up everyone who seems to be legal for DOT workrules, regardless of their preferences.

Awesome. I've put in a full day of work and I'm finally chilling out with my kids playing Xbox, can't wait to "immediately" get my ass back on the road. Not exploitative at all.

So long as the pay is good enough without answering any overtime calls (ie at least minimum wage plus operating costs for 40h per week) then I don’t see the issue with some limited voluntary overtime.

The q is: can the driver play Xbox with his kid and get him a higher education, with the pager off? Then it’s an ok solution. Otherwise not.

As a public company with shareholders? Never.

Once you go public, the shareholders by and large drive your you revenue decisions. Don’t hit your revenue goals? Stock tanks and you lose money.

If Uber remained a private company, it’s possible. However if the goal is growth a massive IPO and cash grab, then your idea is antithetical to their goals.

If they stayed private and did what you said and the goal was a modest profit and staying under the radar? Totally possible, but that has to be the goal at the outset and keeping employees will be hard if you have to keep up with cost of living adjustments, bonuses, etc to stay competitive with other industries competing for the same talent

The operative word in my blurb was "modest". Screw the shareholders; or rather, screw the public shareholders. I don't want their money because it comes with strings attached: demands that the business operate in an unethical and inefficient manner. Those types of shareholders are crazy can take their money to the casino for all I care.

However, I'm sure there are other shareholders who might appreciate a "modest" dividend instead of a meteoric rise and trading potential. Where are those people? Aren't they the true smart money?

Isn't that called a "car service"?

Perhaps, and there are plenty of those around. You're a fellow New Yorker, so you can readily conjure up the image: crummy Lincoln Town Car, leather seats that reek of stale tobacco, driver who talks on the phone while operating the vehicle, payment in cash (plus the tolls!), ordering process that involves speaking on the telephone... You know, the typical Brooklyn-based car service that dispatches cars via the radio from a storefront office.

Uber's greatest contribution to the industry is the discovery that customers want a nice and smooth experience. Order using a smart phone, ride in a nice car (or perhaps a luxury one, or a larger one, or one with a child seat - you have options), and don't worry about payment and how much you owe in tolls.

So, my pitch is that this convenience can probably be made to work as a business that doesn't abuse its employees and doesn't flood the roads with idle drivers. And also doesn't burn investor cash in order to conduct a price war. That's just bananas.

It isn't 1982 anymore, taxi businesses and regions have apps now. Uber's value add is their pool of drivers' reach.

I called out “Brooklyn car services” specifically because I still see such operations around town. I’m assuming they survive because there’s a group of users who are beyond the reach of new technology.

I’m sure there are taxi services that offer conveniences similar to Uber, but none have enough name recognition for me to name even a single one off the top of my head. It’s possible that they need marketing help. It’s also possible that they aren’t looking to grow beyond whatever niche they serve now.

> I’m assuming they survive because there’s a group of users who are beyond the reach of new technology.

This thought experiment is fun, but based on a lot of assumptions like these.

I believe that's what taxis are.

Uber zero hour drivers are footing all the startup investment to provide their end of the service. They paid for the car and are paying for insurance, petrol and upkeep. On top of that Uber is saving on holiday/sick pay, employee contributions...but more importantly they can afford to hire any driver without worrying about firing them, and that could be the deal breaker on zero hours vs full time.

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.

This article explains why comparisons to Amazon are misguided:


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."

>I remember how Amazon, in the beginning, was also non-profitable

I laugh out loud every time someone points to a terrible business and someone else defends it with, "But Amazon was also unprofitable!"

There are far more bankrupt companies than there are Amazons.

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?

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

which is what

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.

It's a joke, punning on the headline and cryogenic freezing

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

Moviepass lol

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

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

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


At the risk of sounding like an alarmist, I’m starting to suspect Uber will be the Bear Sterns that goes under and kicks off our next recession. I’m not certain our economy & social safety nets could absorb the sudden unemployment of a large portion of the gig economy.

All those drivers would just start the next day driving for Lyft etc. Most drivers already drive for multiple platforms, so it would be a mostly seamless switch. Just losing one platform in the gig economy doesn't remove either the customer demand or the drivers.

No, because the likely last straw would be over-onerous regulation, and that would end up killing all gig companies.

I wish. But the reality is that if that regulation comes, it's going to be state regulation and not federal, so the effect would take years to unfold and be state by state and never reach 100%.

Groupon was the first famous example.

Google offered to buy Groupon in 2010 for $5.75 billion. Current market cap of Groupon is only $1.4 billion.




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.

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.

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

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???

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.

Invest in those private Chinese cab / bus services around the chiantowns, I guess.

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

What makes you think Lyft is doing better than Uber?

The biggest chunk of Uber's non-stock losses came from Uber Eats. They're sacrificing profits for growth right now in food delivery.

The ridesharing business is more stable than food delivery. So both Uber and Lyft have better ridesharing profits. Uber theoretically has more potential value than Lyft (food delivery/freight). To capture that extra value, they're spending more money.

Joel Spolsky has a great blog post about "Land Grab" companies: https://www.joelonsoftware.com/2000/05/12/strategy-letter-i-...

I think it all comes down to Lyft being a smaller company, last I checked Lyft only had operations in the US and Canada. They are not a player in the delivery market either.

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

My guess: Lyft let Uber make all the mistakes, learned from them and only spent money on things that avoided the worst mistakes that Uber made.

You paint them as wise and restrained while they are actively in a price war with less money than uber. The candle is lit from both ends.

> My guess: Lyft let Uber make all the mistakes, learned from them and only spent money on things that avoided the worst mistakes that Uber made.

If Uber is serious then they should learn from that and become Uber 2.0


They're not. If (when) Uber does eventually collapse, I bet Lyft will have to switch to more standard Taxi rates (they already do in a lot of places) in order to not go under themselves. They're operating with losses as well.

Lyft has bought up a lot of bike share, e-scooter rental and other alt transport companies. So that might shore them up for a bit longer.

Uber has scooters and bikes now too

beating or coming up short on estimates just means you were bad at giving the market guidance.

doing better or worse than a competitor is a matter of underlying economics and the efficiency of the business.

once you remove future investments (eats, freight) and just compare the core ridesharing business, Lyft is doing worse than Uber.

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

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

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

Sorry, that's not true. Please check - https://level5.lyft.com

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

My experience with Lyft was cars in generally worse condition and fewer PoC drivers and the dumb fist thing. I stopped using Lyft a long time ago so I'm sure that's changed. Uber has been rock solid for me and has only gotten better. UberEats has especially improved a lot in the past year.

EDIT: The PR controversies pretty much disappeared along with Travis and along with Uber's hyper-growth. I question that avoiding the "PR controversies" was the right move, sometimes.

Lyft develops self driving tech.

Lyft is interested in developing Self Driving, but not directly, only as investors/partners.

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