Uber lost $7m a DAY in the first half of this year Casual-labour powered carpool dispatcher Uber lost $1.27bn in the first half of 2016, or almost $7m a day. And the losses are increasing. Losses in Q2, which saw Uber throw in the towel in China, were $750m, according to insiders who whispered to Bloomberg. So how did Uber manage to lose so much money? The company owns no …
Stupid investors put money into company with a repeatable, unprotectable business plan and fail to ensure it makes any kind of profit whatsoever.
Sorry, but at least it's only investor's money. It's when it starts being taxpayer's money that it grates.
However, you are a damn idiot to invest billions in a company that literally just throws money away for years and never has anything significant come back.
Facebook is much worse for that. THey have yet to make a profit and no way of actually doing so, yet they throw $16 Billion dollars for WhatsApp and another $1 billion on Instagram, neither of which seem to help the whole "make a profit" problem, since they can't even keep themselves afloat.
We are nearing a second Dot-com crash and its things like this that are going to cause it.
Facebook make large and growing profits and have no significant competition in the 'I'm stupid and want to broadcast my life' sector.
Whatever else is wrong with it, you can't argue that it's been anything but good for investors in its life so far.
Uber has always looked stupid to me. Think the end of its gravity defying ride may be nigh.
> Facebook is much worse for that
I take it you haven't read Prof. Damodaran's article? He makes a very insightful analysis of the company, and of the car sharing industry in general.
In any case, I have to disagree with you in that "Facebook is much worse." Facebook has two valuable assets: lots and lots of personal information of people all over the world, and lots of eyes on their webpage. Both are a marketer's wet dream, but importantly, they require few if any assets on the ground, so short of blacklisting Farcebook at the network level, there is nothing to stop them from reaching everyone with an internet connection. They can also accommodate local competitors better, where those (co-)exist.
On the other hand, Uber (no umlaut?) has a very fragile business model, in the sense that it is almost completely at the mercy of local forces, as they have found out in China and India. They would have probably been Ok, if they had focused on the States only, which is a market that presumably they do understand. Indeed this is what their competitor Lyft (sic) have done.
Lastly, and from a purely personal and subjective point of view, what is it with their name? What was their marketing guy thinking? Maybe in San Francisco or wherever they come from it has a more innocent connotation. Über, in German, is a common preposition (and prefix) meaning things like over, above, etc., nowt wrong there¹, except that from an English-speaking point of view I have always associated it with the Nietzschean concept of Übermensch in its latter, manipulated form that became a fundamental tenet of a certain first half of 20th century German political movement that I need not name.
At least Lyft sounds illiterately hipster, as opposed to emphatically sinister.
¹ Though even in Germany, the first line of their hymn ("Deutschland über alles") is rarely sung these days as it has all the wrong connotations.
>Facebook is much worse for that. THey have yet to make a profit
Granted I hate Farceb0rk for plenty of reasons but I think you are thinking of some of the other unicorns who don't even report financials. Facebook business model is remarkable lucrative (see full year 2015 results below) of getting idiots to upload their life for free because like lemmings all their idiot family and friends do so. This data is then packaged up and sold to advertisers. Yeah a lot of their acquisitions are very questionable I agree (funny how that happens with a CEO in his 20s and 30s with not enough adult oversight). I also agree silicon valley is back to backing garbage like they did in the first tech wreck. This time though we won't even get to watch Triumph hump the Pets.com liquidated sock puppet.
Facebook Full Year 2015 Business Highlights
Revenue - Revenue for the full year 2015 was $17.93 billion, an increase of 44% year-over-year.
Income from operations - Income from operations for the full year 2015 was $6.23 billion.
Net income - Net income for the full year 2015 was $3.69 billion.
You may want to re-think that statement. Facebook made $2 billion last quarter. They collect money from advertising, they collect money from businesses to 'promote' their pages and probably other stuff, but those the big ones.
WhatsApp wasn't really worth $16 billion because they already had most of those users they were buying, and had a messaging app, so I'm not quite sure what of the point of that was but that's only two years worth of profit (less since it is growing pretty fast)
If you want to complain about nearly profit free massively overpriced companies due for a crash, look at Amazon and Netflix. But Amazon lived through the first crash unscathed so I wouldn't short their stock, that's for sure. Must be a lot of closely held stock in the float, or they dispense lithium at their investor meetings.
Re: "If you want to complain about nearly profit free massively overpriced companies due for a crash, look at Amazon and Netflix."
The problem is that you need to look at profit before tax in the key business areas. So for example Google makes a huge profit on it's search activities and then 'invests' it in its R&D business, namely driverless cars, and so makes a very small profit/loss for tax purposes.
Amazon, if memory serves me correctly is now highly profitable in its retail operations - from a retail viewpoint, but it has invested much in Kindle and possible futures and so to the casual observer appears to be balanced on a knife edge.
It back to the traditional declare a dividend or invest in the brand and aim to grow the share price.
The global economy is about to go through a reset. Microsoft have barely paid a dividend to it's investors, but their stock price has rocketed over the years (as now Amazon Google and Facebook). We have reached "peak everything" including software. Tech and software is being thrown in every direction possible but there is less and less people need be able to afford to implement.
Uber will end up with the crappiest dirtiest vehicles and the most lowly qualified / educated / skilled desperate drivers. Their business model is flawed. Facebook will likely have a similar problem as other start-up's pip them with new fads. The technology industry is fragmenting as each try to outdo the other in a bid to retain dominance. They only have each other to poach off.
>Stupid investors put money into company with a repeatable, unprotectable business plan and fail to ensure it makes any kind of profit whatsoever.
And the fact that investors put money into this kind of long-shot is a grave indictment of the rest of the economy.
Perhaps higher interest rates on savings might see off this kind of madness.
"Uber’s goal is to achieve a monopoly, at which point it can reduce discounts to drivers and increase rates to passengers."
My idea of a sharing economy is that people offering services and people buying services do so for mutual benefit and that neither takes unethical advantage of another, because we all share the commonwealth of society. That is, being decent.
Uber's owners, who are billionaires, have said they are a paradigm changers. True: they screw the drivers, imperil the passengers, cheat the Revenue, and trouser profits monstrously disproportionate to what they put in, not unlike the original plutocrats of the 1860s-1890s.
But at least, as with their quoted words above they show they are excellent capitalists. As Adam Smith said, capitalism leads directly to monopoly unless the government steps in to enforce a fairer playing field.
"As Adam Smith said, capitalism leads directly to monopoly unless the government steps in to enforce a fairer playing field."
The quote is of course: “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices”
Smith's point of course was that intervention was needed to ensure that the market actually was free. The practical reality that he understood 400 or so years ago was that maintaining a free market without government intervention was in reality (regardless of what the barking wing of the neo-liberal school of economic thinking might opine) a non sequitur.
It seems there doesn't need to be any correlation between revenue/profit for investors to spunk billions on a tech business, so how can I declare myself a tech business, and get everyone to start investing in me??
I promise to grow every year (I can provide toenail and hair clippings as proof!), I can produce crap everyday, and I promise that I will burn through no more then €100,000 a day! I'm social (whatever that means), hip, and if you really insist I will move to Shoreditch. Come on VC Investors go the next "cool" step and invest in me!!!
I'm assuming the 100k a day is for expenses. You will also require a suitable renumeration package, a pension benefits package, a golden parachute and finally some stock options, just in case some gullible/desperate mega corp wants to buy your $BEELLLION tech "business". Other than that I think you have an excellent business proposal.
I'd like to invest, where do I send my cheque?
Look up the story of CYNK Technology. They made billions off of doing next to nothing. All you need is press attention and then you can start going around to VC's until you can get listed on the NASDAQ and, with some creative PR, suck billions from the stock market.
All you need is a buzzword-stuffed idea, a slick looking website, and someone to write press releases for you. You may need to move to the Silicon Valley area to be close to the money trough..
You have forgot two important aspects:
1- Using the buzzwords Disruptive Technology (i think that means assaulting someone with a mobilephone)
2 - Walking around with a sense of entitlement and wondering why people arn't climbing over each other to give you money.
Of course you also need some crapoy mobile phone app that foes things like draw moustashes on cats.
As the article points out, this isn't even a proper company. It's a website, plus a few lawyers, connecting people who want to go somewhere with people who want to take them. (Funnily enough, that's also a pretty good description of lastminute.com just before the bubble burst.) You could *certainly* run a web-site that lost less per day than that.
Yes, it's 1999 all over again, but this might actually work out for them. I already hear people say they're "Ubering" somewhere or "calling an Uber." If they can put so much pressure on Lyft that they fold, they have a near monopoly on disruptive phone-based ride-sharing service, _and_ Kleenex-level brand recognition.
Better to do this now, before the big IPO happens and those cranky investors won't let the company spend any money that isn't guaranteed to return 1000% in less than a month.
I already hear people say they're "Ubering" somewhere or "calling an Uber."
Really? That just sounds weird. "Calling an Uber" maybe ok'ish. but "Ubering somewhere" just sounds stupid. I'd lay odds that people saying "i'm Ubering to Shorditch tomorrow" wear sandals, always fasten the top shirt button while not wearing a tie and have an artfully crafted beard, even the women!
http://www.standard.co.uk/news/transport/uber-driver-takes-sleeping-woman-on-35mile-detour-across-london-a3331746.html
Well that's one way to beef up the profits!
Edit:- The pic, red eye FFS!
Has no one at the standard heard about PS or Picasa even to get rid of flash photography problems?
Still she looks OK even as something out of the Omen, maybe not the hat though!
Groupon was also a fast growing business, and they seemed to be inevitably successful. But in the end, like Uber, they had two problems: 1) They relied on uninterruptible supply of people willing to offer something really cheap 2) there was not much barrier to enter the market.
Apart from their ventures in self-driving cars, there isn't much that Uber does that is very hard. The fact that they were so successful shows how complacent the taxi industry has been, rather than how intelligent their system is. Which means, it's eventually going to be harder to justify leeching a 20% cut, when the only thing they do is connect providers to customers.
Uber might think that self-driving cars are going to come soon enough that they can solve their problems, but it seems highly doubtful that they can convince regulators that self-driving cars are fine to have on the road, especially after pissing off half the local governments on the planet.
Self driving cars won't help them unless they have a monopoly on self-driving cars. Something I guess the big car companies, and others interested in autonomous cars will never let happen.
Self-driving cars can also make taxi services less useful - if my cars brings me where I need, and then goes parking itself somewhere, and then comes to bring me back, I can forget taxis and drivers but when I'm too far away from my house.
I am sick of yanks and their "disruptive" business models.
Burning millions in capital to depress wages is a terrible business model. They (and their investors) need to be made to understand that they will NEVER have the monopoly they want.
If a company even starts to smell dominant it needs to be nuked.
Mr. AC said "If a company even starts to smell dominant it needs to be nuked."
Dangerous ground there, Mr. AC. Should we get rid of Intel, because they have such a large part of the PC chip market? And then AMD as well, since they would be the biggest remaining post-nuke company.
And let's get rid of Android on mobile phones, and Apple following them. Then we can start on Samsung as a mobe-maker, and work our way down that line, trashing Motorola and Huawei and HTC and whoever's next.
What's left afterwards - a pile of smoking, glowing rubble in every single industry?
Not for me. What we have isn't perfect, but it tends to self-correct, sometimes with a nudge.
Never is a long time, especially with governments being influenced to sign up to TPP and TTIP to protect the intellectual property and business practices of said yanks. The only problem at the moment is without profit there is no tax so the US government isn't getting a cut. Once that changes the lure of having a percentage of half the worlds point to point journeys will be too much for fhe US 'lawmakers' to ignore. One day we may find ourselves invading Italy for their WMD's and their ride sharing and taxi profits.
Maybe it fell out of their pockets when they made some sharecropper wash their clothes in a washing machine the sharecropper had to pay for, using detergent and water the sharecropper had to also pay for, and hope Uber's price would be greater than the sharecropper's total costs.
Every time a pyramid scheme begins to falter, the first excuse uttered by the executives is that the low level employees and the customers are at fault for the losses. The claim is that the employees are too expensive, and the customers are too cheap.
Don't believe a word of it. Uber's aggressive expansion strategy is its hubris, as evidenced by the financial report, so the current situation is 100% the fault of Kalanick and his cronies. More money than brains is definitely the case here.
This this this!!!
Any time you want to predict the top of a bubble or a company's inflection point from growth to decline, it's one of these indicators:
- Executives buying corporate jets if they didn't have one already
- Lavish spending on conferences, etc. for senior management
- Buying or renting a new headquarters (see Sun for an example of that one.)
Also, people forget that executive compensation isn't limited to money or stock. Companies routinely give "loans" to execs for real estate purchases, which are conveniently forgiven later on. They pay for expensive cars, "business dinners," private security forces, family vacations, etc.
I don't know why more people don't just form corporations and funnel all their personal expenditures through them. I did IT support for executives of a large company way back in the day, and it was not uncommon to see their secretaries processing massive expense reports covering things that were obviously personal expenses.
All of these business models would work fine so long as they were the government-sanctioned option in the Soviet Union. But for them to be profitable elsewhere we have to assume that at some point either "market forces" or government intervention will somehow make them a monopoly.
At least with the South Sea bubble and tulips there was a real product in there somewhere, rather than (as the article states) an arbitrage system that seeks to take extremely high percentages.
"Casual-labour powered carpool dispatcher".... LOL
Still pushing the "sharing" descriptor, eh? Liars.
I'm still waiting for that one Uber driver to use a turn signal or not park in a bus stop or not make a u-turn inside an intersection or...
It's not *really self-correcting if it "needs a nudge".
Compared to regular taxi services, I love Uber. They're generally cheaper, more reliable, and more consistent than a standard taxi, barring occasional excessive surge pricing. Unfortunately, the "cheaper" part always seemed like it was going to bite them in the ass. There are certain economic realities that just can't be hand-waved away, so the only possible outcome has always been that they would have to raise prices. The question will then become whether their service is sufficiently superior that it can compete with the taxi companies when there's more price parity. My guess is that it will continue to thrive in some markets, primarily those which are underserved by traditional taxis or in which the taxi companies have continued to fail to compete effectively with improvements in consistency, technology, and service. Otherwise, they're in for a tough fight.
that back then, companies went bust and left lots of valuable stuff behind. We had companies laying fibre on mass, we had moderately well educated engineers. Whole carriers were formed by buying "failed" companies cheaply.
Now we have companies like Uber, which are of no actual value for society. They work by exploiting people and cannot even get a profit from that. If Uber goes down, and it eventually will, there will be nothing left except for lots of data which might get sold around for a bit, until it eventually becomes valueless.
Financials during growth stage aside. I have no idea how this will turn out say 5-years from now.
I see one sided and mostly negative comments here.
FWIW, as someone who used the service, and talked to the drivers I would like to offer a more positive perspective. It is not all so bad.
For the consumer, Uber (and I would assume Lyft, etc. too) is a refreshingly positive experience:
* A much cheaper ride
* More prompt service
* More pleasant/convenient ordering of the service
* Full transparency on price, route, car and driver ahead of getting on the car
* Ability to rate (if you care about these things)
* No tipping required, you say "thank you" and leave.
All the drivers I asked about this "exploitation" were all (so far) all very positive too:
* It allows them to work for themselves (no unpleasant demanding boss)
* At the time and place of their convenience
Cheers
I used a google number to setup my account. First pickup and dropoff went fine. My CC was charged, payment accepted, I was happy. Used Uber a few more times it was fine.
Months later I tried Uber again, this time it gave me an error message about my phone number.
Tech support said google numbers are not allowed! What? So you changed your policy and you're going to prevent a paying customer from using your service?
Dumb move. Dumb company. I'll never use them again. Uber is run by idiots that's why it lost 7 million a day.
To make things even more idiotic, they have a page on their site that explains how to setup a google phone number, and walks you through the process. Idiots.
It would seem the Silicon Valley "burn rate" model is still alive and well.
I would love to know how they are losing so much money. That would make an excellent case study for future disruptors to follow (or not).
Mind you, Amazon had to burn cash for years before it started making money, and now Bezos is talking about 30 hour work weeks.
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