One must understand that "profit" isn't always as rosy as it may seem, and "loss" sometimes isn't as bad. A company can show a lot of profit, but digging deep you'll realize that most of it is stuck in receivables. This wasn't really a bad year for Uber, they became Cash Flow Positive for the first time [1]. The reason for their loss was valuation decline of its stake in Didi and Grab [2].
> The loss was due almost entirely to revaluation of its stakes in Grab and Didi in Asia and autonomous driving technology enterprise Aurora in the United States, the earnings report said.
If I understand OP correctly then Uber is in fact making money, they just have some depreciating assets on their books.
It's like if your net wealth went down this year because your 401k declined. That doesn't mean that you're broke or even poorly managing your finances.
You can have a positive cash flow (budgeting and living within your means) while still having your overall net worth decrease.
You’re mixing up stocks and flows. Uber had the equivalent of a worker in the following situation:
* their salary goes up. They can now cover all of their living expenses + save
* the value of their stock portfolio goes down
Are they poorer? Yes, on paper. But they aren’t losing money, defined as their living expenses costing more than their salary. In terms of salary vs. expenses they are doin great
Buffett has long decried measuring business performance based on fluctuations in value of holdings
My point was that while they are suffering huge losses this year they are actually doing fine.
Seems the situation is similar with Uber, just that they were unlucky to become cash flow positive at the same time the market went down significantly.
Man, I wish I could go to the gas station and tell the attendant I'm going to pay them what gas should be worth if you ignore all the shenanigans in the middle east.
Uber, as much as I dislike them, seems to be cash flow positive.
So it’s more like ‘well shit, my stocks are tanking but I got a raise at work that more than offsets any cost of living increases’. No problems paying for gas, but year over year balance sheet is all in the red.
The key caveat of their cash flow positivity though is stock-based compensation.
It's a very complicated debate about how much one should actually care, but as an investor in equity the company being cash positive (on the basis of operating activities) due to dilution(because that is what stock-based comps entails) isn't cool.
Pulling the numbers from Bloomberg for Q2 2022: Cash from ops 439, stock-based comp 470.
Tesla got lifetime cashflow positive after burning $6B in accumulated losses, and has now paid all of those back prompting investors to ask for stock buybacks.
Uber is just a terrible waste of capital to have an app company with an accumulated deficit almost five times as much as Tesla which makes cars.
Uber was essentially a financial instrument for VC investors to pump and then dump on the public markets. It's main function was to produce creditability rather than be an actual business.
And the worst part is that business world has watched Uber (and WeWork, et. al.), and have tried to emulate the model with every new company created since.
When money is free, this is what people will do, because it makes them money. It's interesting to see things crash and burn though now feds raised rates.
Don't forget to raise rates far above the modes of transportation they were meant to replace. It's not unusual for Uber to cost triple what a cab would here in NYC for a trip home after working at night.
Uber provides far less value than it used to since they stopped burning through VC funds as much to keep their prices artificially low. One advantage was you got a single price without needing to tip. Now tipping is similar to a cab. Another was that you can use an app to get one. Now you can use the Curb app to hire a cab. Another was that you could always pay with a card saved on your phone. Now you can use the Curb app to do this whether you hail with Curb or hail on the street. You type in the pairing code in the Curb app and you're set.
Curb is a bit more expensive than a street hail but generally less than Uber due to a lack of surge pricing. When it's raining, Uber is about 2x the price of a cab. When it's busy after an event at Madison Square Garden, Uber is about 3x the price of a cab. On a recent Friday evening, Uber was showing $105 for a 25 minute ride with a relatively long wait. I hailed a cab and it was $28 for the same ride. Both prices exclude tip.
Note, of course, that this is my own personal experience in NYC over the last year and will not apply to all cities or even all locations in NYC.
I think this is an overly cynical take. I think the majority of Uber's investors (along with a surprisingly high fraction of the tech community) genuinely believed that self-driving cars were just a few years away, and so Uber's stated business model was viable: in the few years it takes to develop self-driving cars, sell rides at a massive loss to get customers accustomed to cheap taxi transportation and destroy existing taxi markets, and then switch customers who are now addicted to Ubering everywhere over to self-driving cars, thereby yielding absurd profit margins.
And to be fair, had self-driving cars indeed become commonplace by now (as many people ~10 years ago believed would have happened), Uber would rightly be one of the world’s most valuable companies.
I'm genuinely curious how those who claimed full self-driving would be a thing by today broke out between:
1.) Techno-optimists including those who saw the extremely rapid progress in ML across various domains after very little progress for decades. If we've made so much progress in 5 years, surely we can achieve almost anything in ten more even if we're not quite sure how!
2.) People whose self-interest was wrapped up in it happening so they just didn't want to probe too deeply.
3.) Those who knew it was probably flim flam, but hey whatever parts the rubes from their money
4.) Those who just figured that so many people who apparently believed in it can't possibly be wrong. (And there were a bunch of, especially, younger people who really wanted this world where they didn't need to own a car.)
I think it was mostly (1) and (4), with (1) feeding (4). There was a lot of "this time it's different" about the current AI bubble, though I think it's fading a bit, now.
The non-cynic in me tends to agree. There has been remarkable progress. I was just in someone's Tesla "FSD" beta a couple of weeks ago and it was pretty impressive. It's also a long way from being able to be turned loose on arbitrary roads in arbitrary weather without a human in the loop. But it can be easy to dismiss all the work it can take to solve the "last 10%" of many problems. And, of course, there's a general mindset in tech to be positive about overcoming obstacles as opposed to being "it will never work" about some technology.
I do think today there's a better appreciation of just how challenging it is for AI to deal with an unconstrained physical world.
I don't think self driving cars were part of the original Uber plan. It was bolted on after it became pretty obvious the business isn't sustainable. Uber was a behemoth before they did any self driving RnD.
You give an extremely charitable explanation. Given what we know about Kalanick character I doubt if your explanation is reasonable.
Uber's public launch was in 2011. It only offered limos, at rates competitive to traditional limo services. This would have been a sustainable (albeit much smaller) business.
Uber didn't start offering unsustainably cheap rides until mid 2013, when UberX was launched. Its self-driving research program was announced not long after in early 2015, so it's quite plausible that a long-term pivot to self-driving was indeed part of the UberX business strategy from the beginning.
Uber’s only path to levels of profitability commensurate with its VC valuation in 2013 that wouldn’t have involved self-driving cars would instead have required that the demand elasticity for taxi rides be so low that after getting people Ubering everywhere, Uber could successfully raise prices above the level of the taxi services it displaced without demand falling off a cliff.
Although Kalanick probably believed Uber was just that good, I doubt his investors did.
Is this really true? How do you learn to classify when others are bull shitting you vs. when they're sincere? Specifically, how do you tell when a founder or investor is in it for a pump-and-dump vs actually trying to build a lasting business? Uber has built incredible tech, negotiated deals globally, become a vocabulary word (i.e. let's an get an uber.) Uber's engineering blog shows real complex ongoing projects.
Or to put in reddit terms: how do you know when you've joined a pump-n-dump business?
There's probably a big grey area between "This is a really hard problem but we've got smart people and I think we have a decent shot" and "This is a really hard problem and odds are we'll crash and burn but we'll have given it a shot and made lots of (personal) money in the mean time."
I largely agree with the take that Uber is an inefficient company, but I don't think Uber is as simple as "an app company". Uber's main challenge is people. They're basically one of the largest employers on Earth (est. ~4 million drivers). They operate across all regions. All of that adds complexity.
> They're basically one of the largest employers on Earth (est. ~4 million drivers).
I thought Uber's line was that the drivers were independent contractors. By their own logic Uber only employs the engineers and support staff that actually work at Uber not the 4 million drivers.
Edit:
> They operate across all regions. All of that adds complexity.
I thought the idea was that by operating in multiple regions Uber could leverage economies of scale and deliver ride-hailing services cheaper than traditional taxi companies. Is this hypothesis completely incorrect then?
Anytime you bring up the fact that Uber has far too many engineers someone inevitably brings up the a defense along the lines of "you don't understand how complex it is" or "they operate in so many different markets, so of course they need that many".
So your theory is probably correct, economies of scale don't exist. This is the same reason why a delivery company in Texas isn't also doing bike courier deliveries in Hanoi. On the surface it is very similar but they really have nothing to do with one another.
Pretty much yes. A local taxi services usually pays for their drivers and a few dispatchers. In my city they'd even introduced basic mobile apps around the same time Uber popped up. There's not really many places for money to go to waste.
Uber removes the dispatcher and then introduces software engineers, translators, product managers, SREs, executives, scrum masters, marketing, sales, etc.
From a customer perspective Uber is often worse as well. Pre-booking simply doesn't work. A traditional taxi company will make sure they have someone available at the right time for the booking. Uber just hopes someone will be available 30 minutes beforehand. Uber also doesn't seem to make it obvious to the driver that it's a pre-booking as they often show up 15 minutes early and angry that I'm not ready for them.
Someone I know was just complaining about what a crap shoot Uber pre-booking is for airport dropoffs. The taxi services out where I live aren't great either in general so I just eat the cost of a private car.
I'm not sure I've ever really understood the scale argument. Sure it's not developing the app. And OK--it's a single app and brand in many (though not all) different cities and countries. But how many people are flitting from place to place sufficiently for that to be a significant market? Heck I've been one of those people and I've rarely used Uber/Lyft.
> Tesla got lifetime cashflow positive after burning $6B in accumulated losses, and has now paid all of those back prompting investors to ask for stock buybacks.
Sorry to be dumb, but can you explain this sentence a bit further? What do you mean by "burning $6B in accumulated losses"?
Not really. Last quarter for example, they had $14.6 billion in automotive revenues of which $344 million was regulatory credits or a little more than 2%. They had $4.1 billion in automotive gross profits so regulatory credits made up about 8% of their profits.
Elon talks about it in the 2022 investor update [1] below.
It means that they burned $6B in total before becoming profitable and eventually paying it all back. So they are now lifetime profitable on a cash basis.
Its only a bad investment if it has zero value at the end of those 10 years, or stops producing cash flow then. OTOH, if its producing enough cash flow to have a market value of many times more than the 6B initial investment, it might look like a bargain.
TSLA market cap is currently greater than 600B and it produced 6B in positive cashflow in 2021 alone.
I can see Uber (and many many tech companies) become profitable by significantly shrinking their tech and HQ workforce, removing driver/rider incentives and admit that the total addressable market is much smaller than they thought.
I think this is what will happen when interest rates go up and free money stops. Unfortunately, this will mean a lot of tech workers will lose their jobs and/or have their salaries decreased significantly.
If they do this, their stock will collapse. They are priced on future growth (which is already getting a lot less valuable), so if they admit there is a cap, they will start trading at a reasonable P/E ratio.
Edit: P/S ratio, not P/E ratio. Of course their P/E ratio is negative right now.
It'll be interesting to see what happens when they end up with a viable business but one that is probably never going to return the crazy returns that were originally priced into the valuation.
There are tons and tons of these across all sectors left over from a prolonged era of incredibly cheap money.
Most of these companies don't actually have a lot of "secret sauce" that can be exported to other companies like this. Maybe they could do it trading on their brand image, but dedicated logistics software companies would likely offer a much better product. Internal products tend to be built to internal needs, and aren't always great quality.
Not really. It's just a bunch of basic demand/supply algorithms. Nothing special. I doubt Uber can make a generic version that other businesses will buy.
If you think about what its sales are, it should be trading a lot lower than 1. Most of what it is doing is matching a buyer to a seller, and taking some amount of that transaction in exchange for facilitating the transaction (I think ~30-40%). Today, it counts the entire price of a ride as revenue, and the entire cost of that sale as an expense.
In comparison, if you use Uber's ideas of what is revenue and what is an expense, Ebay (another transaction facilitator) had a P/S ratio of 0.34 in 2019 with a fee of ~10%. Ebay does not count revenue the same way Uber does - they only count their fees as revenue.
Another transaction facilitator, Costco (yes, I am comparing Uber to a retail chain - it makes the same fundamental trade), has a P/S ratio of 0.89. Walmart is 0.61. Nobody who retails something from a wholesaler has a P/S ratio greater than 1. Uber is an online retailer of taxi services.
Most two-sided platforms treat their fee as their earnings, and thus can claim a very healthy margin. Uber doesn't.
That's been the narrative for many years, though. The idea that "...they're unprofitable by choice in pursuit of growth..." is indistinguishable from a bad business model. Most locales already have Uber alternatives that are sustainable and have a better service quality, the only reason Uber has marketshare in these locales is because Uber is cheaper... due to the loss-making behaviours. If Uber removed their incentives, they'd immediately lose marketshare to the local competitors that are already sustainable. Uber is incentives, Uber is investor-subsidised transport.
The first company to ditch driver incentives is likely to be the first to have folks going "huh, no drivers on service X available... I'll try service Y" and collapse.
After reading your comment I had an image of a New York City cab driver and his medallion and the meter, him looking over his shoulder saying “Welcome back” as he hits the meter.
>> That guy is bankrupt and homeless now. His medallion was worthless
Good riddance! The reason why people rushed to uber was that the taxi services were so bad. You can still see people near the taxi station/taxi cars waiting for uber. Wonder why...
That being said it looks like, unfortunately, the taxi industry is not over yet.
Yup. My slavish devotion to “personal responsibility” means I can’t even understand how decisions made at a corporation, insulated from the very personal responsibility I care so much about and powered by unlimited piles of cash can run human lives.
Homeless is an exaggeration. That guy is just bankrupt now. I don't understand why it took so long for many of those medallion holders to declare bankruptcy, though. I suspect it's because they are often immigrants from cultures where bankruptcy (or the equivalent) is associated with shame... In the US, bankruptcy is (or should be) associated with freedom.
The real asshole is the $TAXI guy. I wonder what happened to him.
Uber is already bleeding drivers and customers in favour of Bolt in many markets. Also uber has become rife with scams. Bolt is not profitable either but it manages to keep people happy.
Its an estonian startup, very popular in east europe for instance and from what i read africa. I am surprised they havent entered the us market. It’s like uber but with better pricing.
It happened a few times that drivers picked up the ride, then they’d simply not move. It forces you to cancel the ride and in effect they get paid for doing nothing. Usually this type of scam happens at late hours and in areas where people are known to have partied so they dont notice or dont bother reporting to uber.
> removing driver/rider incentives and admit that the total addressable market is much smaller than they thought. I think this is what will happen when interest rates go up and free money stops.
Ah, for the halcyon days of 2014 when we could blame high taxi fares on the low-tech bureaucrats running medallion rackets.
Uber and taxi fares are pretty much neck and neck these days. How much more could they cut driver compensation?
> I think this is what will happen when interest rates go up and free money stops.
And what happens to pension funds if interest rates go up and stay up? What happens to government spending on debt as a percentage of tax revenues? What happens to personal debt service as a percentage of income?
The modern world isn't going to work with positive REAL interest rates. So I'm skeptical they're going to stick around for more than a year without causing a bigger depression than The Great Depression.
> Unfortunately, this will mean a lot of tech workers will lose their jobs
As far as I can tell, Uber doesn't employ developers - you just have a chance to become their "technology partner". And while there are probably 3500 of them, once this pyramid scheme called Uber falls, many of these people will go elsewhere. The question is: will that be a bad thing? From the point of view of the total benefit to the society, it's probably better that they work on truly sustainable products.
It's funny how angsty 2018 era San Francisco was about ride sharing. Everyone thought it was "big tech is crushing the world", when really it was "vc's and endowments are going to subsidize your rides for 10 years because they are terrified of missing out". Thanks Yale!
Rides were $5 cross town in SF. Those losses? They are still subsidizing them, just by less.
This comment thread is a case study in confirmation bias. People are looking for data to support their belief that VC-backed tech businesses endlessly light cash on fire. And, refuse to dig a layer deeper to get to the truth, which is that Uber is currently already a fundamentally profitable business.
Uber's free cash flow was +$672m and +$382m in the last two quarters. The reason they reported negative income was due to huge write downs in past investments.
For all those who have been flabbergasted by Uber's propensity to burn cash, the last two quarters are an opportunity to learn a lesson in business, if you're up for it.
I imagine they are spending to push their numbers pretty hard right now; I regularly get 40% off of $25 coupons on UberEats that bring the delivered price down to below what I'd pay at the counter, not even counting gas and time to get there and back. That can't be sustainable, but I get the coupons faster than I spend them.
If you dig into the numbers of the taxi market you'll learn that this market had very low margins even before Uber "disrupted" it (certain local markets excluded). Good for me that I realized this before I focussed on this "obvious" and tempting market with my own company.
The only real disruption Uber delivered was that it got rid of the employees every taxi company has and convinced many people that driving for them is a win (although often this is not true, if you consider all expenses).
Certainly there is some small efficiency gains through the app and disrupting some nonsense regulations (e.g. here in Germany a taxi has to return to its station before it can pick up a new passenger). But the major part is the employee trick.
Maybe they bet on the self-driving cars, but they sold ATG and so this can't be part of their plan.
1.) Self-driving, especially to the degree necessary for a taxi service, was never going to happen in a timeframe that was economically interesting for Uber and
2.) Prices were always going to have to end up in the ballpark of taxis and private car services to be profitable--with everything that implies for the size of market/network
3.) Uber did offer a better experience than many existing taxi companies but that wasn't really a material moat and taxis now widely offer apps
Honestly think in 10-20 years (if we survive till then) we can tell our grandkids stories about how we basically got subsidized by VCs and sovereign wealth funds to enjoy Uber,DoorDash,Airbnb,etc deals due to ZIRP.
I don't think people would interpret it that way, especially if it was red. But maybe surrounding the value in parentheses is a more unambiguous way to denote "this figure indicates a loss" but I'm not sure how well-known that is
If you are curious how they went from $496M in 2021 to already $8.5B in 2022 despite promising to accelerate their profitability even more, $7.3B of those appear to be from "revaluation of Uber’s Aurora, Grab, and Zomato stakes". That's still more losses, though.
Their promise to accelerate profitability was likely for their own operations and not their investments (where presumably they have much less control). $8.5B is a pretty big loss, but it might be unrelated to their actual business. That said, investors would be buying the operational business (still at a loss but EBIDTA profitable and seemingly making progress to overall profitability every quarter) and the Investment business (seems to continually lose money).
The emporer still has no clothes. But as is the tech startup way, the investment round ponzi scheme has worked brilliantly. Pre-IPO investors got their profits and then passed the black hole to foolish stock market investors.
There are a lot of Uber defenders on HN. I suspect they are current or former employees or are people involved in other startups which play the same ponzi game.
Uber did do one thing well, and that was to create a modern and usually effective way for riders to get taxis on demand. Presumably (can't know as I'm not a driver) they also provided a good way for any driver to get riders.
But they've done so much so wrong... starting with willfully ignoring local regulations (which allowed them to charge less than legal taxis) and continuing with poor driver vetting and monitoring which has resulted in some terrible events occurring with drivers and passengers.
Uber should be held up as an example of how twisted capitalism has become and why regulation is often necessary and should have teeth when it exists.
The problem is that US politics is so dependent on and addicted to corporate finance that there is no incentive to fix this. It's more of the "as long as I cash out, I'll do things that are bad for the public". This is especially true when the people who write the laws are shareholders.
The losses are primarily due to it writing off equity investments in food apps and self driving cars. It made a profit as recently as Q4 2022. Revenue (a much harder number to manipulate than profit) has been growing rapidly.
My understanding is that they're able to keep operating by selling more stock and by paying officers in stock. Uber would die if the stock price drops enough that it can't get enough cash to keep operating through those things.
I've been telling people for years. All the HN darlings, all these amazing innovative unicorns, and Uber especially, only exist because of unlimited investor money and price dumping.
A while back I did a cursory search through YCombinators "most successful companies", and guess what: https://news.ycombinator.com/item?id=27485360 Hundreds of millions of dollars lost every year for years.
Uber is mostly just the biggest example of how many people with disposable income will happily consume lots of services if they're priced well below what they cost to provide.
I see Uber as a very expensive land grab for self driving taxis. Once self driving technology works, especially if multiple companies get it working around the same time, merging/integrating with Uber gets you into the app that everyone is already using to call a ride.
If self driving technology reaches the point where it can operate commercial taxi services legally and more cost-effectively than regular taxis, the people holding that collection of IP and licences won't need to spend $100bn on an app company to find customers.
People switch apps almost instantly once there is better service elsewhere. Nothing gets you searching for a new taxi app quicker than seeing a 10 minute wait for your Uber.
There is almost 0 stickiness to taxi apps like Uber or Bolt or Lyft or [...]
Except that Uber sold it’s self driving division so they are unlikely to be at the forefront of that transition. There is nothing special about their app/platform so they are unlikely to derive significant profits just from that.
The problem is even if/when you get to a reasonable facsimile of self-driving for easier conditions, e.g. highways in good weather, that does very little to get you door-to-door service in generally urban areas in most kinds of weather.
How this company cannot make money is beyond me. Surely developer accounts on Apple and Android can't be this expensive right? Billing is easy as all the drivers are freelancing. You could easily run this service with only a few teams.
> The loss was due almost entirely to revaluation of its stakes in Grab and Didi in Asia and autonomous driving technology enterprise Aurora in the United States, the earnings report said.
[1]: https://auto.economictimes.indiatimes.com/news/aftermarket/u...
[2]: https://gadgets360.com/apps/news/uber-net-loss-q1-2022-usd-6...