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Businesses The Almighty Buck Transportation

Leaked Documents Suggests Uber Is 'Losing Millions' 206

New submitter DaneTerry88 points out an article about the financial state of Uber, poster child for the sharing economy. Documents leaked to Gawker seem to indicate the company is still far from profitable, despite its popularity. "They show operating losses of more than $100m (£65m) in the second quarter of 2014, albeit coupled with steady growth in revenue." Uber did not deny the leak, but pointed out they are still building the business, which requires a lot of investment. The company has been valued as high as $50 billion, and only a few days ago received a $100 million investment from Microsoft.
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Leaked Documents Suggests Uber Is 'Losing Millions'

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  • by Thagg ( 9904 ) <thadbeier@gmail.com> on Saturday August 08, 2015 @12:24AM (#50273457) Journal

    There are two ways that I can see growth helping Uber:

    1) They are expanding their locations; and using the profits of their existing locations to develop the new ones. At some point, they will stop growing, and the profits should increase.
    2) If they are losing money in cities where they are well established, then by growing they will destroy the existing taxi industry; then they can raise rates dramatically and increase profits

    The thing is, it's hard to see where Uber's costs are. They develop software, but that's a pretty small investment considering the hundreds of thousands of rides a day people take.

  • by Anonymous Coward

    They keep breaking laws and having to pay out the ass in fines. Their model won't be profitable until they buy off enough lawmakers to get the regulations changed.

    • by NoNonAlphaCharsHere ( 2201864 ) on Saturday August 08, 2015 @01:59AM (#50273661)

      They keep breaking laws and having to pay out the ass in fines. Their model won't be profitable until they buy off enough lawmakers to get the regulations changed.

      The next round of Uber stories we'll be reading will involve their being named as co-defendants in wrongful death lawsuits involving unsafe vehicles. In my state, cabs and limos have to go through a state safety lane twice a year. Cab/chauffeur drivers have to have special training and licenses. And cab/limo companies carry PLENTY of liability insurance, and are pretty picky about who drives for them. Uber can try to hand-wave all of that, but sooner or later, huge jury payouts are going to run them into bankruptcy.

  • Uber is already dead. As soon as they automate driving do people really think that governments are going to allow private taxi companies to be run at a profit as they start to automate mining, agriculture and energy production? Of course not.
    • As soon as they automate driving...

      So Uber is good for at least 20 years. ;)

      • As soon as they automate driving...

        So Uber is good for at least 20 years. ;)

        At least until after the Moller Air Car comes out.

    • Uber is already dead. As soon as they automate driving do people really think that governments are going to allow private taxi companies to be run at a profit

      Yes, because rich people will still want to use nicer cabs.

  • The guys made an app used by drivers (who get a % of X) and riders (who pay X). Where does the money go? I'd be equally surprised if Paypal is said to 'lose millions'!
    • by Trepidity ( 597 )

      They're subsidizing the fares to gain market share. Customers are currently charged less than drivers are paid, so Uber's cut is negative. This makes it easier to grow because it lets them offer more aggressive pricing to customers, undercutting taxi fares, while still paying drivers high enough rates to rapidly grow their pool of drivers.

      Their hope is that long-term they will gain enough market power to raise fares and/or pay drivers less.

      • They're subsidizing the fares to gain market share. Customers are currently charged less than drivers are paid, so Uber's cut is negative. This makes it easier to grow because it lets them offer more aggressive pricing to customers, undercutting taxi fares, while still paying drivers high enough rates to rapidly grow their pool of drivers.

        There was the story that in China, "drivers" ask their mates, friends and family to book drives, which they never perform. So mom books a drive, pays $10 to Uber, which pays $12 to the driver, and then the driver and his mom split the $2 profit, with no actual driving ever happening.

        • by Trepidity ( 597 )

          Nice arbitrage play! Seems like it'd be a little tricky to get away with, since Uber's app phones home with locations for them to track the progress of the trip. You'd have to run the app in a rooted phone that's running some kind of route-planning simulator, with enough nondeterminism that it looks realistic. But probably not impossible.

  • by captnjohnny1618 ( 3954863 ) on Saturday August 08, 2015 @12:49AM (#50273527)
    Pardon my ire, but Uber's management has clearly demonstrated that they are interested in the exact opposite of sharing. They can go fuck themselves and stop pretending that they're interested in helping anyone other than themselves.
  • by EmperorOfCanada ( 1332175 ) on Saturday August 08, 2015 @12:54AM (#50273533)
    This sort of mad rush for the finish line tends to upset the men in grey suits. But when you are in a gold rush you don't spend time making detailed maps, building beautiful camps for the miners, setting up a day care, and otherwise making everything perfect. You yell "Charge!" and run at the enemy with your sword waving above your head.

    Even the business plan should simply read we don't really know and even then the plan will change. Love Uber or hate uber we must all admit that it is shaking things up. I recently took a normal taxi in my city from the airport for the "standard" $55 plus a tip. I took uber back to the airport for $32 and no tip. But also at the airport I asked the first driver what the charge was and he said, "Standard charge $75 same as everyone else." except that he was a "Limo" driver. So the first taxi driver in my new city lied to me and tried pulling a fast one. With Uber this sort of crap is massively curtailed.

    So on this issue get back to me when uber has finished growing; if at that point they still don't have profits then it might not actually be an uber good business model.
    • But when you are in a gold rush you don't spend time making detailed maps, building beautiful camps for the miners, setting up a day care, and otherwise making everything perfect. You yell "Charge!" and run at the enemy with your sword waving above your head.

      Uh, what? Were you a speechwriter for George Bush or something? Talk about disconnects... *shakes head as if to clear it*

  • That's why every few years they have a new ridiculously higher valuation, accompanied by another round of funding.
  • So apparently if you don't post profits immediately, you are a failed company? Isn't it standard to post losses for 2-3 years before you become profitable. Well, 3 years in California. After 3 you cant write off the losses from your company anymore.
    • by plopez ( 54068 )

      No. Only if you are in Silly Valley running a "milk the investor" scam.

      • The point was that you invest more than you can afford and post losses for 3 years so you can write them off, then magically start making profit after you can't write the losses off anymore.
    • Isn't it standard to post losses for 2-3 years before you become profitable.

      Uber has been in operation since 2010. Therefore they have had 5 years to post a profit.

    • Rule of thumb is to expect 3 years without any influx of outside cash. In most businesses this translates to profit. There are exceptions.

    • So apparently if you don't post profits immediately, you are a failed company? Isn't it standard to post losses for 2-3 years before you become profitable. Well, 3 years in California. After 3 you cant write off the losses from your company anymore.

      Why would you incorporate in California when you can incorporate in Delaware?

  • Lawsuits? (Score:4, Insightful)

    by rsilvergun ( 571051 ) on Saturday August 08, 2015 @01:47AM (#50273633)
    I assume it's just fighting off the lawsuits. Their business model is fundamentally sound. Horribly, horribly vile, but sound. They find folks who recently lost a job and still have a decent car, declare them 'contractors' while forcing them to act as employees in all respects (can't work for anyone else, work when we say or we fire you, use our phone, etc, etc), don't pay benefits or unemployment. They get the benefits of employees without the responsibilities, which for a society like America where we're based our entire quality of life on your job ends fabulously for the employer.

    Uber's just like Amazon. They'll keep getting money because if they can clear their hurdles (for Uber it's legal, or Amazon it's just killing brick n mortar) they'll be insanely profitable. If you're a billionaire investor then you can afford to wait it out.
    • > while forcing them to act as employees in all respects (can't work for anyone else, work when we say or we fire you, use our phone, etc, etc)

      I don't drive for Uber, but as I understand it drivers can set their own hours? Or am I wrong?

  • >Documents leaked to Gawker

    Into the trash it goes

  • Any idiot can run a company in the red, doubly so when it's already established. The CEO likely has no idea how to even read the books or why a bottom line is actually important because it often makes no difference in how they are paid.
  • They build an app to hook up drivers with riders, and then they take a cut of the fare.

    The drivers shoulder the large CapEx costs of buying a car and the OpEx costs of maintaining it.

    So what is Uber spending their money on? Lawyers and lobbyists?

    • Buying more drivers. They give bonuses out to drivers, and the total amount is more than their cut of the fare - so they are basically subsidizing every ride. It's like the old 2000 dot-bomb days of losing money on every transaction but the plan is to make it up with volume...
  • "...over a protracted period of good times, capitalist economies tend to move from a financial structure dominated by hedge finance units to a structure in which there is large weight to units engaged in speculative and Ponzi finance. Furthermore, if an economy with a sizeable body of speculative financial units is in an inflationary state, and the authorities attempt to exorcise inflation by monetary constraint, then speculative units will become Ponzi units and the net worth of previously Ponzi units will

[A computer is] like an Old Testament god, with a lot of rules and no mercy. -- Joseph Campbell

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