Re:Uber, losing billions, freezes engineering hires
by labcomputer on Sunday August 11, 2019 @01:12PM
(#20669160)
Re 1:
How much more scale can Uber realistically hope to achieve? They're in virtually every US city, and they already have over 50% of the on-demand ride business in a lot of places. They've passed the inflection point on the S-curve: If the unit economics don't work out today, it's unlikely that they ever will
Also, it is my understanding that the $22 million loss you cited is exclusive of marketing expenses. That's troublesome because certain driver subsidies are paid out of the marketing line-item (under the dubious justification that the bonuses are attractive to new drivers). To be sustainable, the core business needs to generate enough cashflow to cover those bonuses, too.
Re 2 and 3:
I'm sympathetic to the idea that useful metrics for valuing established companies are not necessarily useful metrics for growing companies, _but_: The fundamental problem is that I don't see a path to profitability (to make the share price worth more than the "scrap" value of whatever assets, including IP, Uber owns).
Contrast this with Tesla (another rapidly-growing company): They have double-digit positive unit gross margins and less than 1% market share. Maybe the stock is over-valued, maybe they won't execute, but it's clear that the company can be profitable (and they've had profitable quarters).
Re 4:
[My cynical take] Right, that's why they've started the Uber Eats product. It gives Uber cover to remain unprofitable for a few more years, until Uber Eats has the same reach as ride share and it's clear that Uber eats isn't a sustainable business, either.
How much more scale can Uber realistically hope to achieve? They're in virtually every US city, and they already have over 50% of the on-demand ride business in a lot of places. They've passed the inflection point on the S-curve: If the unit economics don't work out today, it's unlikely that they ever will
Also, it is my understanding that the $22 million loss you cited is exclusive of marketing expenses. That's troublesome because certain driver subsidies are paid out of the marketing line-item (under the dubious justification that the bonuses are attractive to new drivers). To be sustainable, the core business needs to generate enough cashflow to cover those bonuses, too.
Re 2 and 3:
I'm sympathetic to the idea that useful metrics for valuing established companies are not necessarily useful metrics for growing companies, _but_: The fundamental problem is that I don't see a path to profitability (to make the share price worth more than the "scrap" value of whatever assets, including IP, Uber owns).
Contrast this with Tesla (another rapidly-growing company): They have double-digit positive unit gross margins and less than 1% market share. Maybe the stock is over-valued, maybe they won't execute, but it's clear that the company can be profitable (and they've had profitable quarters).
Re 4:
[My cynical take] Right, that's why they've started the Uber Eats product. It gives Uber cover to remain unprofitable for a few more years, until Uber Eats has the same reach as ride share and it's clear that Uber eats isn't a sustainable business, either.