Uber had $6.6bn on hand at the end of June [1]. That means they are down to $5.1bn.
Absent cost-cutting, that implies a 9 to 12 month runway. Even if SoftBank injects $1bn, that could only mean a few months’ runway. A large fine in the Waymo case [2] could literally bankrupt them.
The (buzzword warning) hyper-growth startup model is in essence 2X revenue, 1.5X costs. Repeat until inevitably profitable - and I say inevitably because with enough time, 2X revenue, 1.5X costs gets to profitable. The only variable there is having a long enough runway.
Uber seem, from the financial data I have seen, to be sticking to that playbook down to the 3rd decimal place (exaggeration for effect). When Uber does turn the profitability corner, it will be at a level well over a billion a quarter.
Sure it's a risk, but if any company was setup to be huge, had followed almost all the meta-rules on growth and looked to be hitting those growth targets, it is certainly Uber.
And YoY (backing out the Q4 numbers to Q3 numbers), bookings grew 80%, revenue grew 20%, and losses grew 56%. Assuming that "costs" are revenue+loss, costs grew 34%, still faster than revenue.
>The (buzzword warning) hyper-growth startup model is in essence 2X revenue, 1.5X costs. Repeat until inevitably profitable - and I say inevitably because with enough time, 2X revenue, 1.5X costs gets to profitable. The only variable there is having a long enough runway.
it is like gambling with doubling (or even tripling) down each time - with enough time you will inevitably win and as result will reap a huge profit in total. Now if just somebody write me a blank check backed by an unlimited bank account... On practice though, even if got that check - what if the casino can't match my next 3x bet?
The same thing with Uber - the important thing isn't just the Uber's money runway. The other side's "runway" (i.e. total size of the market) is also extremely important - are there enough people on Earth needing enough rides so that that amount of rides would allow for that "2x revenue 1.5x costs" model to reach profitability?
Now if just somebody write me a blank check backed by an unlimited bank account... On practice though, even if got that check - what if the casino can't match my next 3x bet?
It will never come that far. Even if you truely have no limits (and with doubling and trippling you arrive at mighty high amouts, even if you start at $1) casinos have themselves covered.
It's called a table limit. At one point you just can't raise your bet anymore.
That is exactly his point actually. It's an example of why the model breaks down in reality despite the math working in theory. That's why it's called gambling whether it's a casino or a startup.
Except gambling has the odds stacked in the house's favour. There is no such problem with a startup.
Will revenue double forever? No. Will revenue double for 100 years? No. Will revenue double for 10 years? Hmmm. Will it double for a year? Lets just say yes. Solve for between 1 and 10, and place your bets accordingly.
Yeah I am really perplexed with Uber's business model. They can't survive much longer and they can't keep getting injections of cash to stay alive, can they? It's rumored they'll IPO in 2019, if I remember correctly, which means they have to somehow survive until then to at least reach that stage.
Are they planning to raise prices? Cut employees? What are they planning on doing here?
The idea is to drag the entire ride hailing industry underwater long enough to drown out competitors, and the trick is to do this without drowning themselves in the process.
This is the nature of "predatory" pricing.
There is something to be said for volume and if a couple competitors die in the process then Uber's volume can only go up. Unfortunately their competitors have found a variety of ways to keep from being dragged down (eg: regulatory support of municipal taxi orgs) or ways to keep oxygen expenditure stable (eg: controlled expenditures through higher pricing and "friendlier" demeanor).
Is that really the idea? Do you know how large the ride hailing market is?
I am almost positive the point of subsidizing the price of the rides is to get you addicted/ build up a habit or get you comfortable using the service.
I think they are aware of the competition and are comfortable owning 60+% versus trying to get 80%+.
Their revenue is growing which is still wild despite bad press.
>Unfortunately their competitors have found a variety of ways to keep from being dragged down
Not a bad point but it is highly dependent on the market. In the US, Uber is 4x Lyft in market share.
A common problem drivers cite is that Lyft pays better, but the volume of Uber riders is much much larger.
I am not a fan of Uber, just extremely bitter at poor journalism, hence , I stopped reading at the first paragraph.
>Not really. The revenue for a company selling dollar bills for 80c each will keep increasing until all the cash is gone as well.
The rides that I have taken are not subsidized. Maybe it's not statistically significant but I have yet to see the subsidy in the major cities that I have traveled in.
> The rides that I have taken are not subsidized. Maybe it's not statistically significant but I have yet to see the subsidy in the major cities that I have traveled in.
>That week, Uber’s market share dropped 5 percentage points compared with the previous week, from 81 percent to 76 percent, according to Second Measure data. Lyft’s market share gained about the same amount that week. Other ride-sharing companies, including Gett and Juno, saw a nominal increase that week.
Even if they manage to kill their competition -- and I'm not expecting they will -- I don't understand what their endgame is. I don't see what their moat is. Ridesharing companies are not hard or expensive to start. They'll have a hard time extracting monopoly rents, and there isn't much of an economy of scale they can reap.
And once autonomous cars become part of the picture, I think they're in an even worse position. Suddenly they're not competing just against would-be moguls. Now they're up against the car companies, who have strong brands, deep pockets, and the ability to make cars at cost. Imagine, for example, BMW extending their leasing business to on-demand car use. We also have existing car rental companies that will be eager to get in on the action. And that's not counting the zillion other outfits with strong brands and a taste for expansion. Apple, for example. Virgin. Amazon.
I just don't see how this ends well for them. At best, I think 10 years from now they'll be the next Groupon: the hot startup everybody everybody loved but now nobody talks much about and is trading at a fraction of their peak valuation.
Offerings like Uber Pool and Lyft Line are the future of the business and depend entirely on economies of scale. Putting multiple paying passengers in the car at once and reducing driver downtime completely changes the economics, but only if there is a high density of riders and drivers.
Edit:
There are two possible stories here about Uber and Lyft's losses, and we can't tell which is right from the outside.
1. Uber and Lyft are in a price war death spiral, heavily subsidizing all rides to compete. Their only hope is for all competitors to die, so they can take over the whole market and raise prices. Then vague hopes of lowering costs with self-driving tech and take the surplus as profit. The plan doesn't seem viable, since they have no moat and they can't outspend GM and other self-driving players.
2. Uber and Lyft can actually make a profit in mature markets, but choose to subsidize rides in growing markets, on the theory that growing the market size increases the long term profit opportunity. The data we need to evaluate this idea isn't public, however Uber did a "prove it" quarter in 2016 where they turned the spigots to be profitable in the US. They are now pursuing growth in the US again, expanding to a larger territory and expanding Pool and other offerings like flat-rate passes in mature cities. Under this model, Uber could at any time decide to become profitable, but the revenue growth would stop, placing a cap on the valuation. Notably, there is no "predatory pricing" here.
With internal finances, we could easily tell whether option 2 is valid. You can bet Uber is constantly doing experiments on price elasticity of demand and knows exactly where the truth is. You can bet Softbank has seen numbers we have not. If Uber wants to IPO, I would expect them to provide additional public info, possibly pivoting to profitability again in the US. But doing a pivot like that permanently reduces the size of the opportunity, allowing Lyft to capture that new market instead, so they may be reluctant to do it large scale.
True, but that doesn't necessarily make a company hard to start. There are a zillion niches in transport that could be profitable places to get traction. Uber Pool and Lyft Line might be the future of cheap transport, but as Uber itself shows, you can have a decent business just at the high end of the market. There are several companies in the rides-for-kids department. Taxis do a significant business in hospital-specific transport, both of patients and of urgent medical delivery.
To start a rideshare company, you only need to do reasonably well in one segment in one geographic market. Then you have a basis for expansion into other areas, other segments. Contrast this with a search engine, where people really expect you to be good for everything and covering the entire internet.
The problem though is that they led the way by breaking down all the regulatory barrier to entries. Whats to stop anyone from starting a ridesharing company tomorrow?
I would argue there isn't really a network effect for lyft or uber or any ride-sharing company for that matter. There might be brand and price effects for the companies to battle over amidst both riders and drivers.
I'd say there is a network effect for ride-sharing in aggregate, neither Lyft nor Ueber has been good at locking drivers and riders in with loyalty programs to try to keep people solely on their platform.
More drivers means faster pickups for riders, and more riders means less downtime for drivers. Drivers doing more rides per hour means they can be paid less per ride, lowering the price of a ride and further increasing demand. Sounds like a network effect to me. Offerings like Lyft Line and Uber Pool multiply both of these effects.
Yes, and which were started after 2013 or even as early as 2013?
The truth is that all the viable competitors are likely already out there and it's going to be very very difficult to replicate what these incumbents have without burning ridiculous amounts of capital.
If the Softbank deal closes, we'll likely see a wave of consolidation with Softbank orchestrating acquisitions by Uber. It's very common for relatively young markets to consolidate over time.
No one in their right mind would start a new company to compete with the existing TNCs in 2017.
Just looking at the ones active in Austin, Fasten, Chariot, and InstaRyde were started in 2014; Fare in 2015; Ride Austin in 2016.
Ride sharing is essentially a local business with very low barriers to entry. You don't need to replicate what the incumbents have right away. You just need a modest number of drivers (who can also be driving for the incumbents) and a modest number of customers.
Some were listed by local news as the leading rideshare companies.
That seems sufficient to me. It's hard to name any company started in the last few years that is a major market player when then have a bunch of competitors. New businesses take time to grow.
The discussion here is about whether Uber has a moat. The point being made is that it's pretty easy to start a rideshare company. Which it is. That one hasn't become major yet isn't proof that one can't become so. As long as there's room for new companies to start and be sustainable at modest scale, then Uber can't extract monopoly rents.
Sorry, I'm not interested in playing "bring me a rock" with you. You can do your own research. If you discover something important, let me know. But until then, I stand by my opinion that the rideshare market has low barriers to entry.
They do have a small moat in the short term; the network of drivers, brand recognition they've built up (even w/ the bad press), the large codebase they have by now, and the amount of capital to start such a business from scratch is not insignificant.
However, you are right to bring up autonomous cars. I always thought it amusing that Kalanick et al were so anxious to bet the house on autonomous cars, when in fact, they are the company's greatest existential threat long-term. Once those cars are readily available and street-legal, there's nothing stopping Enterprise or Avis or the automakers themselves from becoming overnight competitors.
And once drivers are taken out of the picture, ride prices will plummet. Margins will also thin because of the likely extreme competitiveness of this market. I would not want to be an Uber investor that's for sure. In theory, the "winner" will be whoever scales the most (i.e. has the most capital to put into their fleet) and has the most effective marketing. In practice, prices may be close enough that people will rent car X because they like brand/model Y better.
If I were on Uber's board, I would advise against trying to win that war which they will lose once/if the automakers get in on it, and instead get creative about how to conquer the market in a more niche way.
Someone is going to have to program self-driving ambulances :)
>And once drivers are taken out of the picture, ride prices will plummet.
1. This is probably further out than a lot of people assume. Reliable door to door fully autonomous in dense cities is one of the hardest use cases to solve but it's more or less what you need for self-driving taxis.
2. The pricing probably also won't "plummet." The IRS mileage rate (about 53 cents/mile) is probably a reasonable floor to use. That's still about half current Uber rates.
The IRS puts "variable costs" at about 14 cents per mile. So, yes they may do better, but not significantly better. Also, electric means either battery swaps or significantly longer refueling time. Not a problem for commuter cars with downtime anyway. But for a 24/7 business, that becomes more impactful.
"The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs."
2. Vehicle size. Once these systems are up and running, do you think Waymo & Uber, once their systems reach any level of maturity, are going to send you a 4 person vehicle to pick up 1 person? This reduces:
a- the capital cost of the vehicle
b- its cost of maintenance (less parts, etc)
c- the amount of energy required to get from point A to point B
Which brings me to...
3. Price of electricity. Waymo, Uber, et al will get their electricity at wholesale rates.
4. Low cost of capital. The cost to access the capital to buy these vehicles will be lower than anything a peon like you or me could ever access.
5. Bulk-buying 1,000,000 vehicles. No dealers, no dealer commissions, zero customizations, less parts, smaller vehicles, no car manufacturer marketing budget...
6. Maintenance scaling. The need to scale maintenance operations country-wide is going to lead to its own interesting effects. With a hard limit on the types of vehicles in a network, most cleaning and general maintenance will, in time, be doable by human-monitored robots.
7. Ride subsidization will effectively crush any margins any of these companies could ever hope to have.
8. Shared depreciation. Depreciation will be significant per vehicle but overall, cheaper, as each vehicle will have more utilization.
I'd hesitate to guess at the effects of all of the above, but it's not much of a stretch to anticipate an additional 50% reduction here, barring any unforeseen taxes, of course.
You might pay more for the network with great coverage and lux vehicles.
You might pay less for the crappy network with dirty cars and plastic seat buckets.
Very few of these points have anything to do with ICE vs EV. Most of them are automated vs not. (1) and (3) are maybe valid, though if you don't think large fleet operators aren't hedging their fuel purchases... Even my local school district buys desiel for buses via wholesale and futures.
And regarding (8), many taxis are rented by drivers for their shift, with multiple shifts per car per day. Uber could be doing the same right now, but they'd rather rely on drivers not realizing the full value of their car and giving the difference to Uber.
2021 : Electric Self-driving on-demand FLEET Car 1000 miles/month SUBSCRIPTION from Google, DiDi, Uber, Renault/Nissan,Tesla, VW,Toyota,GM for $400/month
> 2. Vehicle size. Once these systems are up and running, do you think Waymo & Uber, once their systems reach any level of maturity, are going to send you a 4 person vehicle to pick up 1 person? This reduces:
a- the capital cost of the vehicle
b- its cost of maintenance (less parts, etc)
c- the amount of energy required to get from point A to point B
Which brings me to...
> 3. Price of electricity. Waymo, Uber, et al will get their electricity at wholesale rates.
> 5. Bulk-buying 1,000,000 vehicles. No dealers, no dealer commissions, zero customizations, less parts, smaller vehicles, no car manufacturer marketing budget...
> 6. Maintenance scaling. The need to scale maintenance operations country-wide is going to lead to its own interesting effects. With a hard limit on the types of vehicles in a network, most cleaning and general maintenance will, in time, be doable by human-monitored robots.
> I'd hesitate to guess at the effects of all of the above, but it's not much of a stretch to anticipate an additional 50% reduction here, barring any unforeseen taxes, of course.
> You might pay more for the network with great coverage and lux vehicles.
> You might pay less for the crappy network with dirty cars and plastic seat buckets.
Etc.
Agreed, except that I would say that Uber has a lead, not a moat. Since the car transport market is 99% local, I don't think it would take all that much money to start something. Look at the competitors that started in Austin, for example.
I also suspect that ride pricing and scale will not be the determining factors. Look at the variety that still exists among car manufaturers after a century of competition:
See my response above. The buyers of these vehicles are going to be the networks themselves, which will eliminate most if not all car brands.
The car brands know it, which is why they're panicking.
(Why ALL car brands? Because you're going to have companies like Bosch and Foxconn competing. I'd like to see Ford beat Foxconn at a challenge like this.)
Maybe, maybe not. Cars are Americans' most expensive status good. We might end up in a PRT-ish world, where transport is practically a utility, in which case you'd be right. But it's also plausible that people will continue to pay for social cachet and self-image enhancement.
This would be especially true if people continue to own or lease private cars, which I'm sure will continue at some level for decades at least. Look at how much stuff families keep in their minivans, for example. Or all the tradespeople who keep working materials in their trunk.
Or look at commuters. Taxi-ish providers like Uber and Lyft will have a hard time dealing with commutes because they'll have to buy a lot of vehicles to cover the peak that just won't get used much during the off hours. If people treat it like a minibus, where they share, then the providers might do well. But I suspect a lot of people will be willing to pay up for a private commute, at which point they might as well just have a dedicated car. In which case, the market will look a lot more like it does now.
BMW extending their leasing business to on-demand car use
BMW has no choice but to do this, as do all the strong brands. They can't compete in a world that you don't care about the brand because you're riding journey-by-journey with no personal investment.
> Ridesharing companies are not hard or expensive to start.
There is a lot of work that goes into the infrastructure behind companies like Uber and Lyft. You need good engineers that build products that are reliable and well tested, to work 24/7.
It is a hard problem. A lot of the smaller city taxi companies that have apps contract to larger vendors as well.
You need good engineers that build products that are reliable and well tested, to work 24/7
So did newspapers - the very definition of mission-critical computing is the the paper HAS to hit the stands the next morning. Didn't save them from half-arsed competitors running glorified blogs...
The backend systems can be SaaS. Amazon could do it. Anyone can then buy a local franchise for that backend service in their area. Or it could be offered whitelabel.
Sure. But compare with Flywheel, which has less than 50 employees and produces a perfectly adequate app. Infrastructure is also much easier at small scales. And as you point out, this is pretty easy to outsource. That means that that Uber's engineers are not making much of a mote.
As long as Uber can keep the cost per ride lower than other competitors, it just needs to wait for the burn to end faster on the competitors side before turning break-even.
> As long as Uber can keep the cost per ride lower than other competitors, it just needs to wait for the burn to end faster on the competitors side before turning break-even
Uber have joined loss leading with scale, a combination that works if one has access to an endless spigot of money. The scandals have impacted Uber's fundraising. Time for eyes to match stomach.
I predict, in addition to lay-offs, we'll soon see more Didi-style hand-offs of offshore ride-sharing markets. Southeast Asia to Grab et al seems reasonable.
Disclaimer: this is not investment advice. Do not buy or sell anything based on this Internet comment.
And hence the potential Softbank deal, who can broker these mergers across the various asian markets. This is also why Softbank is so keen on investing in Uber over Lyft. With Lyft, the best Softbank can muster is a parternship of equals amongst disparate localized companies, which is nothing but a mess in the end. Uber allows them true mergers where one side absorbs another and both come out with a net value-add. An Uber with one or more majority regions along with stakes across the globe can be a massive massive company.
Also Disclaimer: this is not investment advice. Do not buy or sell anything based on this Internet comment.
even if lyft's burn-to-revenue ratio is higher, their burn is still lower that uber's, and it's going to cost a lot fewer incremental dollars to prop up lyft's burn than uber's for a few years.
some interested parties (waymo/alphabet) might be happy to foot that bill.
I've had the feeling that Alphabet has been using Lyft as a cat's paw in its war with Uber. Given its buckets of cash and what Alphabet perceives as the opportunity to dominate the next big market, can't Lyft expect almost unlimited funding? Or even an acquisition once its independence is not an asset?
Definitely this. It takes a lot of effort to burn through as much cash as Uber is and moving the needle in Lyft's favor requires a lot less effort, which is where things get dangerous for Uber.
I'm somewhat reminded of Jack Tramiel's pricing scheme in the mid-late 80s with Commodore. Great, popular machines beating everyone on price until they couldn't afford to anymore. They didn't capture the market and they failed.
Tramiel left Commodore while it was still very successful, founded new company, bought Atari and tried to replicate Commodore 64 success with Atari ST.
Commodore failed because they failed to transition from Commodore 64 to a better specced machines, despite having a technological marvel at their hands (Commodore Amiga).
Currently the biggest drag on their expenditure is drivers. Their golden bullet is making an efficient transition to self-driving, all while maintaining a leading position
But it's the crux of their entire business model -- saturate markets to kill competition so they can do whatever they want with the financial side of things.
If Uber had to, they could flip the profit switch. They haven’t chosen to because they’re reinvesting in growth, but if it was an existential question they could survive in the short term.
Reinvesting for growth is a terrible euphemism for subsiding taxi fares.
When they flip the switch they become more expensive that a regular mini-cab. Customers will leave in droves, drivers will leave in droves. There s no loyalty to a middleman.
The QC alone makes Uber’s business model viable. Holding drivers accountable with ratings makes Uber worthwhile at a premium over regular cabs, and significantly expanded the market. The only real risk at that point would be Lyft, the company that started the price war in the first place.
Uber may or may not be subsidizing fares, but they’re also spending tons of money on engineering and product development, both on their existing product and in an attempt to develop self-driving cars. That’s growth.
But when customers leave in droves, they can respond by reducing infrastructure and doing layoffs, and then they'll probably still be profitable.
With Uber, I think there is some degree of loyalty just because of the ubiquity and convenience. Plus, I imagine their prices will be more or less the same as a taxi since they don't have the expense of dealing with the regulatory overhead (since they just blatantly ignore the law instead)
Oddly enough, when I compare Uber to Lyft in the East Bay, 99% of the time Lyft is cheaper by at least $3. Even Uber Pool is usually the same or slightly more expensive than a dedicated Lyft.
I have no idea why (maybe less drivers?) but I already stopped using Uber because of that. If their prices when even higher then I'd simply never use them again instead of the occasional time that I do now.
Honestly if they need to make money, they can lay off a ton of staff, and license their logistics software to a lot of companies. It wouldn't be what their game plan has been, definitely a severe pivot but they would be a money printing machine for years to come.
> they can lay off a ton of staff, and license their logistics software to a lot of companies.
I have a feeling this isn't as easy as you think. There are some great talks on Uber's microservice architecture and it's pretty insane. They could create new services, but I have a feeling their existing infrastructure is very custom. They've got over 1,000 microservices and it's actually difficult to get an exact number.
"Too many engineers" is the impression I tend to come away with whenever I attend a tech talk by someone from the more fiscally beleaguered of the tech darlings.
The talk is invariably about some really impressive bit of software that appears to have required equally heaping measures of smarts and money to build, and also appears to be a $10 solution to a 10¢ problem.
Yet technology has never been a problem or a limiting factor of Uber. Uber deserves plenty of criticism, yet it seems rich to blame technology when they grew from nothing to enormous with few if any hiccups. It worked.
But yeah, extraordinarily few internal projects can be turned into an external project without enormous rework. It's only the myth of middle managers who perceive software as a growing asset who think otherwise.
That explains most of the engineering culture in the Valley, really. Even the "leadership" is on board with it, because they have their own resume driven development to pursue.
"license their logistics software to a lot of companies."
It's quite tricky to package an internally used system into something that can be sold and used by others. It most likely takes years to get to any significant amount of sales.
I politely disagree. Taxi companies hate ride sharing companies. As an industry that refused change for decades saw a software company come in and eat away market share quickly. If Uber were to 'go away' and allow the taxi company to use the ride hailing software they would be all over it. [1][2][3][4]
And this is just the taxi industry, there are plenty of industries that would love to use a logistics software to help their business. The only real magic Uber has is this software, the rest is easily replaceable or overhead.
Of course you can but most taxi companies do not want to be in the app development business. And most other ride hailing apps are not very good. They'd rather focus on their main line of work which is transportation. People know Uber, that app works, people would use it if it was available.
The subsidizing is what made them a household name, along with the ease of use.
The other ride hailing apps are in the business of selling hailing services to taxi firms and have sales teams dedicated to doing so, are not despised by taxi firms, and provide solutions optimised for regulated taxi firms. If they tend to provide surprisingly few drivers and poor price estimations and the app companies are orders of magnitude smaller in terms of revenue and geographic spread, that's probably an indication the licensed-partnerships-with-cab-firms market is more awkward and less lucrative than it sounds.
And the taxi firms usually won't and often legally can't use Uber's pricing algorithms which is pretty much the only secret sauce to the app, they don't want to ignore bylaws that Uber has cheerfully skirted around and they don't want their expensively-licensed drivers competing for leads on an equal footing with new Uber drivers.
Yeah to be honest I wasnt even considering the pricing algorithm but just the supply/demand matching portion of it. I feel there is a lot of value there, billions? Maybe but probably not, but I feel this is a huge asset if they run out of runway and need to stay in existence.
I understand that there are taxi companies worldwide and I'm sure they operate different by different types of people, but I still think you're overestimating these taxi companies and what they want.
I worked for a very big "Old Media" company in Australia when we rebuilt one of their key properties. Their "definition of success" was to _not accelerate the rate of decline_ of page views. Since then I've realised that these types of businesses are ran by people who are motivated differently than 'us'.
For sure, I agree with that. My original point was Uber has a pivot that they can use to make money. Layoff most the people, license the software, profit. It might not work for everyone, but it will definitely work for some.
They could be food if they would be willing to invest money and refine refine refine. They are not. So, even if they would buy from Uber it would be for cheap.
Plus any other startup or company can build such app to compete.
Im not sure what you mean by 'They could be food'?
Any start up could build this, but most companies don't want to deal with an MVP and the bugs that come with it, or a startup that may or may not exist in 6 months, etc... Companies will over pay for enterprise grade software if it has a history of just working. This is why Uber has an advantage, software that has a track record of doing what it says it does.
Every taxi company on earth would buy this immediately.
Every taxi company on Earth (well, at least in the UK) has an app of their own now, even if it's just a white-label with their branding applied. They all let you book a journey and tell you the name of the driver and the reg plate of the car, and have a nice animated map of how far away the car is. No-one will buy it.
They are trying in the US as well but most the apps are garbage and no one uses them. Uber (and Lyft) are ubiquitous now and I think there would be a much higher adoption rate if they licensed it. Most companies also do not want to be in app development, if you could just buy software that works and focus on the core of your business companies would be much happier. This happens in giant enterprise-y businesses today. They consistently overpay on software that just works and lets them get along with their actual work.
But as I mentioned above the taxi industry is only the first immediate one I'd tackle, there are plenty others.
And that would justify a 50 billion dollar valuation? They would need to create multi-billion dollar market to make it worthwhile. And also learn selling to businesses.
Oh the valuation doesn't mean anything except to new potential investors. It's essentially a made up number that means nothings especially since they are not earning a profit and don't look to any time soon.
But that aside, yes a pivot would require them to do things differently, just as in your example learn selling to businesses However every taxi company in the world would jump at this opportunity immediately. The same industry that refused change for decades and had their parade rained on when Uber came around would greet this change with open arms. Especially if Uber were to 'go away' as a result.
There are going to be down rounds for Uber in the future no matter what, valuation means nothing if your business won't survive.
Their revenues are in the billions per year, and so their investors would be looking for new revenues in the billions. The assumption that there's an untapped multi-billion dollar market for logistics software that they could quickly dominate - quickly enough to avoid running out of money - seems unwarranted.
I've used UberEATS a couple times, but after figuring out that it's basically impossible for delivery people to make much real money off of it I feel really bad.
Revenues are in the billions, but profits are nil, and if it comes to bankruptcy vs pivot and earn a profit everyone will find it acceptable. Of course they'd want billions, they want an ROI from the unicorn, it might not be there in its current unicorn form.
Very interesting situation they are in. Part of me wonders if the negative press coverage is driven in part by the investors losing confidence in management's business acumen (vs ethics / culture), and using the press to push travis and others out
TO my understanding (probably not a full understanding), Uber's business model to date has always been predicated on subsidizing cheap fares and wages that at least keep lots of drivers around. The idea was at some point this would be sustainable and the subsidies would go away. It is unclear now whether such a point exists
Uber could cut costs, ie massive layoffs, but imagine what that would do to its talent base. Who would stay at uber amid massive layoffs when the hiring market is so strong?
THey could try to improve unit economics by charging higher fares or squeezing drivers further, but it is unclear how much more they could squeeze drivers, and if fares rise materially, a lot of their business goes to lyft or goes away entirely.
i rarely used uber when i was in NYC or non-SF places in CA. in SF uber might still be viable because public transportation is so terrible, but in many other cities uber could disappear and people wouldnt miss it all that much
Can they successfully raise money at a huge valuation with that case unsettled, news that they (almost-certainly-illegally) hid a data breach, a potential class-action lawsuit about sexual assault by their drivers, a business model that shows no signs of breaking even, etc. etc. etc.?
If so, they then probably think they can go public with all of that baggage.
That is exact time 2019 January google Waymo will be having driver less full autonomous Ride hailing service at least in 10 US Cities in limited routes of each city to begin with ( as Phonix driver less service is LIVE at this time).
Unless Uber driver less technology is ready for deployment for real world Ride hailing service by 2019 January (even in small limited routes in those 10 cities), Uber is in big trouble !!!!!
I think this Uber 30% lowered valuation is result of this two factors of perceived RISK that is
a) running out of money in one year
b) driver less technology readiness by 2019 for real world use
Waymo won't bankrupt Uber. If Uber loses, they will appeal. Uber will run out of runway for other reasons before they're done with the appeal.
What a loss to Waymo might do is make an Uber IPO much less attractive. It might even be the difference between an IPO happening and not happening. And that might be the difference between Uber getting another year or two of runway and them dying in 2018.
"Waymo won't bankrupt Uber. If Uber loses, they will appeal. "
So?
They'd almost certainly be forced to put up a very large bond to do that, assuming they can get it.
In some jurisdictions, this can be 100% of judgement + interest. IIRC, in the 9th circuit, it's at the discretion of district courts, but given the financial situation, if they did have a multi-billion judgement against them, and not a lot of runway, what makes you think a judge won't make them put up a full bond to appeal?
These cases actually often do bankrupt businesses, and the predatory lawsuit creditors take over (though usually that happens more in patent cases) :)
Absent cost-cutting, that implies a 9 to 12 month runway. Even if SoftBank injects $1bn, that could only mean a few months’ runway. A large fine in the Waymo case [2] could literally bankrupt them.
[1] https://venturebeat.com/2017/08/23/uber-is-still-burning-cas...
[2] https://mobile.nytimes.com/2017/11/29/business/waymo-uber-tr...