Re:End of the Line for Uber
by spywaregorilla on Monday August 16, 2021 @10:05AM
(#28198238)
> This author has an axe to grind with Uber for some reason and they’re pulling out all of the old tropes about misunderstanding growing startups. No, Uber is not going to disappear soon when they run out of money.
By definition, yes, Uber will disappear when they run out of money. The money is what keeps them there. People have been foretelling the end of uber for quite some time because the trajectory hasn't changed. They're losing billions every year. What's unique about now is that they're running out of billions to lose. It'll still be a few years before that happens.
> They’re going to gradually adjust their business model to focus on profitability instead of using their investment money to expand and grow.
This is pretty much impossible without a fundamental change in what the service is and who the target market is. Are you so confident that they'll be able to do this? And what if they fail to adapt? If they scale back to only profitable urban areas, at high prices, running trips between the airport and back, for a tiny fraction of their original goals, are they really the same company they were before?
> The entire purpose of investment money is to expand and grow, even at a loss. It’s not some unique bug that Uber isn’t yet profitable.
Everything is relative. They're losing a couple billion per year. Would you say this if they were losing ten billion per year? 100 billion per year? 100 trillion per year? The reality is that the very start of that line is a lot of money being lost for very low prospects of eventual profit.
> That was the plan, and to be completely honest Uber has been executing their growth plans quite well.
They really have not. They've had to withdraw from several countries because it wasn't working. To me it feels they've greatly overextended.
tl;dr
uber has $7.7B in current assets. They had $9.8B at the start of the year.
If you somehow removed 100% of their r&d costs and 100% of their general overhead costs, they would still be losing hundreds of millions of dollars in the past six months. Their financials are tricky to interpret, because so much of their real costs are hidden in "sales & marketing". It makes it look like their gross margin on rides is healthy but they need to shave overhead. The reality is that keeping their head above the water in terms of driver supply on the gig model is extremely expensive.
By definition, yes, Uber will disappear when they run out of money. The money is what keeps them there. People have been foretelling the end of uber for quite some time because the trajectory hasn't changed. They're losing billions every year. What's unique about now is that they're running out of billions to lose. It'll still be a few years before that happens.
> They’re going to gradually adjust their business model to focus on profitability instead of using their investment money to expand and grow.
This is pretty much impossible without a fundamental change in what the service is and who the target market is. Are you so confident that they'll be able to do this? And what if they fail to adapt? If they scale back to only profitable urban areas, at high prices, running trips between the airport and back, for a tiny fraction of their original goals, are they really the same company they were before?
> The entire purpose of investment money is to expand and grow, even at a loss. It’s not some unique bug that Uber isn’t yet profitable.
Everything is relative. They're losing a couple billion per year. Would you say this if they were losing ten billion per year? 100 billion per year? 100 trillion per year? The reality is that the very start of that line is a lot of money being lost for very low prospects of eventual profit.
> That was the plan, and to be completely honest Uber has been executing their growth plans quite well.
They really have not. They've had to withdraw from several countries because it wasn't working. To me it feels they've greatly overextended.
tl;dr
uber has $7.7B in current assets. They had $9.8B at the start of the year.
If you somehow removed 100% of their r&d costs and 100% of their general overhead costs, they would still be losing hundreds of millions of dollars in the past six months. Their financials are tricky to interpret, because so much of their real costs are hidden in "sales & marketing". It makes it look like their gross margin on rides is healthy but they need to shave overhead. The reality is that keeping their head above the water in terms of driver supply on the gig model is extremely expensive.