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How is it possible that Uber loses money? Besides marketing and customer support, what other expenses do they have?

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CharlieLazie
99
 Posted 11 months ago

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I know driver pay is a big expense.  However, they are paid be the portion of the fare while Uber takes commissions.  So what are other expenses do they have?  How are they not profitable?

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    SteveBausch
    87
     11 months ago

    They are expanding their business.

    It's prefectly ok for a business to lose money when they are expanding.  They are investing in new staff, recruiting, local offices, marketing, etc.  Those cost a lot of money.  In the beginning those are all expenses with no profit.  

    Uber's ambition is still strong.  While they pulled out in some markets, they are opening up new locations al the time, even in the smaller cities around the world where the profitability may be suspect short-term.

    Let's give them a bit more credit.

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    brownbear
    597 Rider
     11 months ago

    Marketing is expensive first of all. They also have R+D costs. All that software and apps is expensive to develop and maintain.

    But they are privately held so we only know so much.

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      ant
      122 Rider
       11 months ago

      And let's not forget that r+d includes new development they are doing, like the self driving cars, uber elevate like someone else pointed out, etc. Uber has a lot going on.

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    bBerman81
    267 Rider
     11 months ago

    UberELEVATE

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    RedANT
    1029 Rider Driver
     11 months ago  (edited 11 months ago)

    Driver pay isn't really an expense, because the driver is earning those fees from the customers.  It's all FREE MONEY for Uber, but like crackheads, they just want to steal more to pay for their addiction.   Driver picks up passenger.  Passenger pays and Uber get without doing a thing.  No expense.  (All expenses are paid for by the drivers)

    Their problem is wasting money on ventures like self driving cars.  Rather than perfect their core business and become profitable, they simply chose to fail in multiple fields simultaneously.  Unfortunately for them the cash cow is sick and not producing milk anymore, leading to desperation and increasing theft from drivers.  Once they lose their drivers their core business that floats verything else will fold and Uber will fade into the history books as one of the greatest scams in history. 

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      Wes
      1556 Rider Driver
       11 months ago

      The APP developement, the computers required to maintain a healthy data environment, and the staff to develop and maintain the system is significant!!!  The cost of constantly replacing drivers, doing background checks, recruiting, paying staff at local hubs, having call centers, advertising and marketing and legal defense.  This is just a few of the items that has a very REAL cost to Uber.  Until you've actually tried to start and maintain a business, you can't appreciate the tremendous costs involved.

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        RedANT
        1029 Rider Driver
         11 months ago

        App development?  How many people do you think they need to develop and deploy a horribly buggy app?  There are thousand of people that develop apps from their homes.  Why is it that Uber can't do so even with the financial resources available to them?  Is the app improved?  No.  did it add more destination filters and other enhancements that are important to drivers?  No.  What EXACTLY was done that required an army of software people to deploy and maintain?  I don't see it. 

        Healthy data environment?  When I tried to cash out this morning the system was "down."  Does anyone here remember the data breech last year that Uber paid to sweep under the rug?

        Does Uber have expenses related to driver background checks and recruiting?  Sure, but it's minimal compared to the funds disbursed daily. Why hasn't Uber just invested in the background check company?  Inquiring minds want to know.

        Expenses are expenses.  ...

        Read more...

        App development?  How many people do you think they need to develop and deploy a horribly buggy app?  There are thousand of people that develop apps from their homes.  Why is it that Uber can't do so even with the financial resources available to them?  Is the app improved?  No.  did it add more destination filters and other enhancements that are important to drivers?  No.  What EXACTLY was done that required an army of software people to deploy and maintain?  I don't see it. 

        Healthy data environment?  When I tried to cash out this morning the system was "down."  Does anyone here remember the data breech last year that Uber paid to sweep under the rug?

        Does Uber have expenses related to driver background checks and recruiting?  Sure, but it's minimal compared to the funds disbursed daily. Why hasn't Uber just invested in the background check company?  Inquiring minds want to know.

        Expenses are expenses.  All business have them.  The difference is that if I lost billions of dollars for 38 consecutive quarters, there's now way I'd empower these passengers to

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          Wes
          1556 Rider Driver
           11 months ago

          Hey listen Redant, I'm on your team.  But I'm also deeply involved in another industry and deal with small businesses as well as larger corporationss.  I just know from experience that most folks that haven't had experience with business development can't even begin to imagine how incredibly costly it is just to "be in business".  With all the federal regulation and BS, it's almost impossible to start a small business today, and that's simply a fact.

          How many people do you think it requires to maintain the 'buggy" app (as you say) that serves over 100,000 drivers at any given point.  Trust me, this isn't being maintained in a bedroom.  It's in multiple offices where the rent alone is millions of dollars a year for their facilities.  But that isn't the biggest expense.  Their legal bills are ginormous.  Have you hired an attorney lately.  Imagine hiring teams of attorneys.  Because they do, over and again.  Marketing?  It's...

          Read more...

          Hey listen Redant, I'm on your team.  But I'm also deeply involved in another industry and deal with small businesses as well as larger corporationss.  I just know from experience that most folks that haven't had experience with business development can't even begin to imagine how incredibly costly it is just to "be in business".  With all the federal regulation and BS, it's almost impossible to start a small business today, and that's simply a fact.

          How many people do you think it requires to maintain the 'buggy" app (as you say) that serves over 100,000 drivers at any given point.  Trust me, this isn't being maintained in a bedroom.  It's in multiple offices where the rent alone is millions of dollars a year for their facilities.  But that isn't the biggest expense.  Their legal bills are ginormous.  Have you hired an attorney lately.  Imagine hiring teams of attorneys.  Because they do, over and again.  Marketing?  It's another enormous expense.  How much do you think the TV ads we all see for Uber cost?  Can you say millions?  Because it is! 

          Yes, to me and I suspect to you as well, it makes sense to raise rates so that we all make more money, thus fewer drivers quit and everything calms down, BUT, i can assure you that will NOT happen until after the IPO.  Uber had tremendous growth in ridership again for 2017 and up even more for 2018 thus far, so they aren't possibly going to do anything to slow their growth until they become profit focused and that will be (IMO) AFTER the IPO when they will have no choice but to turn it around for their shareholders.

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            RedANT
            1029 Rider Driver
             11 months ago

            You assume that I'm your run of the mill Uber driver, living on the cusp of homelessness and with no relavant business experience. 

            My background:

            Former instructor at the Naval War College and the US Naval Academy.  More than 2 decades spent at the DIA, CIA, and the White House.  (Really)

            After retirement I earned my Series 7 and Series 63 and spent several years as an advisor with LPL Financial, then moved on to be an analyst with Oppenheimer Funds. (I also hold insurance and real estate licenses)

            While I drive a few hours a week to get out of the house, I also manage my 7 rental properties. 

            Unlike Uber, when I run my own businesses, I've always found success.

            My point:  I thrive on information analysis, and have some relavant experience with business building.  Every ounce of instinct tells me that the Uber house of cards is in its death throes, and that Uber leadership will do anything necessary to make a $100 billion IPO happen.  Current...

            Read more...

            You assume that I'm your run of the mill Uber driver, living on the cusp of homelessness and with no relavant business experience. 

            My background:

            Former instructor at the Naval War College and the US Naval Academy.  More than 2 decades spent at the DIA, CIA, and the White House.  (Really)

            After retirement I earned my Series 7 and Series 63 and spent several years as an advisor with LPL Financial, then moved on to be an analyst with Oppenheimer Funds. (I also hold insurance and real estate licenses)

            While I drive a few hours a week to get out of the house, I also manage my 7 rental properties. 

            Unlike Uber, when I run my own businesses, I've always found success.

            My point:  I thrive on information analysis, and have some relavant experience with business building.  Every ounce of instinct tells me that the Uber house of cards is in its death throes, and that Uber leadership will do anything necessary to make a $100 billion IPO happen.  Current investors have faced the reality that Uber isn't going to be the breakthrough they were sold on by Travis Kalanick, and they're just looking for a return of their investments. They need new investors so they can cash out.

            Do you really not see that?  

            Dara never believed in the self driving car scam, but he's now pushing the lie because he needs a more diverse prospectus to survive an Uber IPO.  (Daras $100 Million bonus contingent on a $100 Billion IPO is a damn powerful motivator)  People will invest in Uber, but not in a company whose sole business is an increasingly regulated and not at all profitable rideshare business.  They need more diversification, so they formed Uber Eats, invested in autonomous vehicles, bikeshare, etc.  Of all their companies, Uber Eats is the only one thats even partially profitable, and even that is only in limited markets.  

            A "technology company" isn't going to survive by renting bicycles at $1 /hr.  A "technology company" isn't going to survive when they steal from their drivers and need to resort to misleading advertising and huge bonuses to lure new drivers.  A successful company CANNOT survive with a 94% annual attrition rate.  A successful business can't spend such a huge percentage of "their earnings" on legal fees and failing technologies.  This is NOT good or sustainable business. 

            If a company steals money from its drivers, bleeds money on failing projects and legal fees, and still can't turn a profit even when drivers absorb almost all operating costs, it's time to close up shop and move on, because this business isn't going to survive. 

            Curious... how did you come to the conclusion that you came to? 

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          chawes
          704 Rider Guru
           11 months ago

          The app itself is just a front end to the real magic, which happens in their server infrastructure. They deal with millions of rides per day, and have to handle them all in real time, with (hopefully) no downtime. It is an engineering feat. Developing an app from your living room is one thing, swiftly handling massive traffic levels is a whole other ballgame.

          The fact that it appears to be a simple app is perhaps what's most impressive. Whatever my feelings of Uber the company are, their engineering teams deserve some credit here. They make it look easy.

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            RedANT
            1029 Rider Driver
             11 months ago

            Plenty of companies have critical It infrastructure with similar reliability and uptime requirements.  NONE of them, however, bleed through hundreds of millions of dollars every quarter. 

            That said, the app is still the face of Uber.  App development as it currently stands can be done by 5 geeks in a garage, and certainly not up to par with one would expect from a muti billion dollar organization that relies on it.  Can they add features like extra destination filters?  (Lyft did)  Even after acknowledging it in the "360 degrees of change" from last year, the team was still unable to solve such issues.  What "development" do they do besides design the interface to interfere with the Lyft UI? 

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              Wes
              1556 Rider Driver
               11 months ago

              Just for the record, we DID have additional destination filters for a while, but they took the number back down to 2 a day after they realized it was drastically reducing the number of available drivers and furthermore degrading the overall operation of the database.

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      Bigfrank
      410 Driver Driver Rider
       11 months ago

      It's all about paying tax , how can they lose money when they are charging loan shark commissions , brainwashing , and using us as slaves ??  It will come back to them and I wouldn't want to be in their shoes.

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    DWang02
    105 Rider
     11 months ago

    Rates are simply not high enough.  They intentionally keep their prices low in order to gain marketshare, dominate the market, and drive other businesses like taxis and limos out of business.

    It's a typical predatory tactic that can be accomplished by start-up companies that are playing with funny money of investors.

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    ippei
    1201 Driver Rider Guru
     11 months ago

    They spend $800 million a year on Autonomous Vehicle development.  I just posted the article here:

    https://ride.guru/lounge/p/investors-tell-uber-to-ditch-self-driving-car-program-report-says

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      brownbear
      597 Rider
       11 months ago

      That is too much money to spend on a pipe dream...

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    chawes
    704 Rider Guru
     11 months ago

    Their lawyers must be making a butt load of money, don't forget that.

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    FitBitMeIn
    136
     11 months ago

    There is still R&D.  You'd think it's pretty low as their product is built, but they do quite a bit on improving algorithms, introducing complex and new pricing, new offerings, etc.