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Businesses The Almighty Buck Transportation

Uber Spent $10.7 Billion in Nine Years. Does It Have Enough to Show for It? (bloomberg.com) 91

Posted by msmash from the closer-look dept.
An anonymous reader shares a report: What makes Uber Technologies the most valuable venture-backed technology company in the world? Investors say size and growth. The business is transforming global transportation networks. On closer inspection of its financial performance, Uber also pioneered a very expensive way of establishing a market and staying on top. Uber has had little trouble finding investors eager to buy into its vision. It relishes telling backers about gross bookings, or the amount riders pay for service. That number is enormous, totaling $37 billion last year. But most of that goes to drivers. Uber's cut, or net revenue, came to $7.4 billion. Compared to public companies with similar valuations, Uber's revenue lags well behind. At the same time, Uber has worked to downplay its persistent losses. Because the company doesn't disclose financial results with much consistency, it's easy to lose sight of how much of investors' money Uber has spent. Since its founding nine years ago, Uber has burned through about $10.7 billion, according to a person familiar with the matter. Over the past decade, only one public technology company in North America lost more in a year than Uber lost in 2017. None has burned such a tremendous amount in the first stage of its life, according to data compiled by Bloomberg.
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Uber Spent $10.7 Billion in Nine Years. Does It Have Enough to Show for It? More

Uber Spent $10.7 Billion in Nine Years. Does It Have Enough to Show for It?

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  • Emperor without clothes (Score:5, Insightful)

    by sprins ( 717461 ) on Tuesday March 06, 2018 @03:25PM (#56218637)

    There, I called them out.

    Never have I understood the appeal of a glorified taxi central. But then I’m from the time when BOO.COM was worth a fortune (shortly).

    • Well unlike the Dot COM days. Uber is actual trying to sell a service, and not just an idea. Also it is normal for a company to run in Debt for a while, as all its money it is taking in from investors is going toward capital investments. However this isn't an endless pot. As the economy is showing signs of slowing down investment may be less bullish, and Uber may need to turn a profit soon.

      • Except it appears it's not all going towards capital investment.
        It's going to operating expenses.
        The only assets it has is an app and a brand name

        • The only assets it has is an app and a brand name

          A) You are greatly discounting the incredible value a world-wide brand name has.

          B) If they have "no assets" just where are all those Uber self driving trucks [techcrunch.com] coming from? What about the self driving car assets which they have been working on for years? You seem to be totally ignoring very real office space, equipment and R&D expenses that have been incurred over the years and give the company real value.

          C) I also find it laughable that someone on Slashd

      • Keep in mind that Uber is just a software and services company - there are many other examples of doing far more for far less. For comparison (since I'm in the videogame industry), they could have easily created 20-40 AAA MMOs with that budget (each written from the ground up), which are typically among the most expensive and complex games to make. It seems like an insane amount of money for some relatively straightforward software services to me, even allowing for their internal back-end services we can'

      • Also it is normal for a company to run in Debt for a while, as all its money it is taking in from investors is going toward capital investments.

        That's true - for companies that require capital investment. One the reasons Amazon took so long to become profitable was they were (and are) investing in their warehouses and distribution network. In the same vein, Tesla has had to spend tremendous amounts of effort and money retooling it's factories to produce the Model 3 and solving production problems.

        Uber is

        • Where's all the money going? Hookers and booze... you can't run a dot com without LOADS of hookers and booze!
          • A good bit of the money is going to ride subsidies. The cost of those uber rides would be a lot more without them.

        • That's true - for companies that require capital investment. One the reasons Amazon took so long to become profitable was they were (and are) investing in their warehouses and distribution network. In the same vein, Tesla has had to spend tremendous amounts of effort and money retooling it's factories to produce the Model 3 and solving production problems.

          The other thing that these companies had in common was large economies of scale. Amazon was selling books at less than their cost, but more than what their costs would be once they had sufficient volume. This let them grow to the point where they were able to sell at the volumes that they needed to be able to make a profit. There was some truth to the old joke that they were making a loss on each sale, but making it up in volume.

          With Uber, it's not clear that the cost of providing a taxi ride is noticea

          • With Uber, it's not clear that the cost of providing a taxi ride is noticeable different if you have 100 taxis or 1,000. Particularly if you're not actually building things like the centralised maintenance / fuelling facilities that normal taxi companies use to lower their costs.

            That's the point - Uber doesn't have any of those costs, they're borne by the individual drivers. Uber doesn't have any costs that reasonably explain where all that money went.

      • Re: (Score:2)

        by rtb61 ( 674572 )

        The only real goal behind the finances of UBER, get to IPO with maximal expectations of infinite profit and profit on commissions and sales of insider shares at IPO time and then bet the crash of the stock for the cherry on top profits. The problem is, a scummy company often has scummy executives and this bunch proved to scummy to keep the illusion going and building it up even more, right up to IPO time. UBER is pretty much proving to be a bankster pump and dump, which is struggling due to repeated failure

    • Never have I understood the appeal of a glorified taxi central.

      I definitely see the appeal of hailing a taxi from a smartphone versus calling and talking to a person. As a user it is convenient for me to click a few menus. And for a business it means your central dispatch doesn't need as many people operating phones.

      As to how Uber turns that into a $1B/year business when they have no way to monopolize exclusive use that basic idea is beyond ludicrous.

    • Let's strip the article summary of distracting commentary and just show the most important revenue numbers used against Uber...

      ...last year... Uber's...net revenue, came to $7.4 billion.... Since its founding nine years ago, Uber has burned through about $10.7 billion...

      So, Uber spent $10.7 billion over 9 years and now they make $7.4 billion in net revenue every single year. Where's the problem here?

      This author stuck a bunch of fluff between big numbers hoping you would just remember the big numbers and not the context between them.

      • Re: (Score:1)

        by Anonymous Coward

        The spent part is losses. The revenue part is not profit. Comparing loss with revenue does not make any sense. Investors have spent $17B on Uber and value to investor (private market value) is about $50B (the other 10-15B goes to founders and employees and is not available to investors). This is a good return but not that great for the risky investment they made (7/10 VC investments lose money and they have to cover that in 30% successful investments. Much like book publishing). So at best Uber is an averag

        • Re: (Score:2)

          by Ranbot ( 2648297 )

          The spent part is losses. The revenue part is not profit. Comparing loss with revenue does not make any sense.

          First, I never said revenue was profit and I understand the difference, but those were the data points given. We have to assume there some percentage of $7.4 Billion per year is profit (Uber won't tell us), but it won't take a very high percentage of 7.4 Billion per year to offset a $10.7 Billion loss spread over 9 years.

          Second, if comparing loss with revenue doesn't make any sense, then it doesn't make any sense for the article author to make the comparison either.

          • Re: (Score:2)

            by jeremyp ( 130771 )

            First, I never said revenue was profit and I understand the difference,

            No, I don't think you do.

            We have to assume there some percentage of $7.4 Billion per year is profit (Uber won't tell us),

            No we don't. Why do we have to assume that any part of $7.4 billion is profit?

            Last year Uber had revenues (income) of about $7.4 billion. That means $7.4 billions were paid into its bank account.

            But Uber had expenses of about $9.4 billion (estimated because they don't publish financial information much). That means $9.4 billions were paid out of its bank account. Profit is calculated as income - expenses or $-2 billion.

      • Re: (Score:2)

        by jeremyp ( 130771 )

        Revenue is not profit. Gross revenue is what gets charged to the customers. Net revenue is what is left to Uber after the driver takes his or her cut.

        Burning through $10.7 billion over nine years is an average loss of $1.2 billion per year. If they lost $1.2 billion last year on revenues of $7.4 billion, that's pretty bad. In fact, it's worse than that. Uber's loss last year was closer to $2 billion.

    • I understand the point of a taxi central. One app that can get you a ride anywhere in the world. I just think you need to make a profit doing so. Because it's going to be a highly competitive business you can't put too much weight on recouping losses later.

    • Their business model is built around evading taxi fees. Which means municipalities that used to get significant revenue from taxi licenses are going to start stomping on them really hard, any day real soon now!

    • Have you head of economies of scale?

      Uber was the first global taxi service on the planet. They share the cost of developing their software systems across the entire planet.

      Most taxi companies before Uber serviced a single city, or maybe just a few suburbs of a city and just like uber have been operating on very small margins, with most of their revenue going to their employees. So essentially most Taxi companies would be classified as small businesses and as consequence of this was their software systems

      • Re: (Score:2)

        by jeremyp ( 130771 )

        Most taxi companies before Uber serviced a single city, or maybe just a few suburbs of a city

        The idea of economies of scale is not new. So you have to ask yourself why there were no global or even national taxi companies before Uber. The reason is that the taxi business doesn't scale. The economies of scale are not big enough to offset the increased organisational overhead.

        Furthermore Uber has only scaled the dispatch service to the whole globe. The things that really cost a taxi company money - cars, drivers, servicing, licensing are as small scale in Uber as it is possible to be. Ubers drivers al

        • "why there were no global or even national taxi companies before Uber." the answer to this question "The reason is that the taxi business doesn't scale" is completely and utterly wrong!

          Next time you step into a cab take a look at what they're using to communicate with their dispatch. I'm betting you'll see either something that looks like it was made in the 80s or a custom Windows Mobile panel that is based on technology from between 1998 and 2006,

          The reason why there were no global taxi software companies

  • upper management has a lot of really nice stuff!

  • family of a six-year-old girl who was struck and killed by an Uber X driver got an pay out from uber that must of cost them alot.

  • It has mindshare and marketshare (Score:3)

    by H3lldr0p ( 40304 ) on Tuesday March 06, 2018 @03:36PM (#56218699) Homepage

    That's probably more than enough for the VC and other investors. They want as much marketshare as they can get while the getting is both cheap and the PR is good. They want to turn this into as much a monopoly as they can. Displacing traditional taxis and public transportation in the minds of the public so that when they've reached a monopoly position they can extract as much money as they can.

    That's the plan.

    • That's probably more than enough for the VC and other investors. They want as much marketshare as they can get while the getting is both cheap and the PR is good. They want to turn this into as much a monopoly as they can. Displacing traditional taxis and public transportation in the minds of the public so that when they've reached a monopoly position they can extract as much money as they can.

      That's the plan.

      I'm not a fan of Uber but barging into marekts with Lawyers and ride giveaways is expensive.

      If they establish a position in enough markets it should be fairly simple to ramp down the expenses and become profitable.

      I think their biggest risk is the regulatory apparatus becomes fractured enough that the per municipality management and lawyer bills never cover the costs.

  • When you consider the amount of money spent with all the scandals, lawsuits and bad news. (Frankly I'd be amazed to see a positive story on Slashdot on them...) It's a pretty conclusive no... About the only thing amazing is how much longer will this trainwreck keep going before it blows up or sinks.

    • Re: (Score:1)

      by Anonymous Coward

      It's actually worse than that. Because now a lot of "long term" Uber drivers will find out their real income when it comes to depreciation of their vehicles... Oh, what's that you say... it can literally be over a dollar per mile when factoring in long term costs... but but, I made $26 an hour... so uh, crap. Guess I better buy a bicycle.

      • If you drive a vehicle all day every day and regularly maintain it, it will last well over half a million miles.
        That's not an uncommon mileage for a courier or taxi vehicle.

        Although my experience is with Japanese cars.

        • If you drive a vehicle all day every day and regularly maintain it, it will last well over half a million miles.

          The Uber rules specify the maximum age (possibly mileage as well) of the car. It doesn't matter if the car will last a million miles when you have to replace it after 100k miles.

          • 100k miles is pretty average for a 10 year old car. The Uber limit is 2007 or newer. Just driving 100 miles a day will rack up over 365k over 10 years. Limiting that to 100 miles per working day, its still 200,000 miles.
            I drive 30 miles a day just going to work and back. There are thousands more just in my part of a small country who drive 60 miles a day commuting.

            500,000 miles over 10 years is not unreasonable for a car that's driven as part of a full time job.
            I've been driving for 20 years and never been

      • Most smart Uber drivers are driving Priuses. Lower TCO. I got an Uber driver (paid for by my car dealer) that was driving a TRUCK. Figured he was barely covering his car payments.

  • Where I live the UberMoto drivers wear spectacularly ugly helmets. Designing something that awful must have cost a fortune.

  • Pro-Uber Post (Score:5, Interesting)

    by Carcass666 ( 539381 ) on Tuesday March 06, 2018 @05:01PM (#56219177)

    I'm going to get modded down to oblivion, but I'm going to say something good about Uber. I don't use it much in the US, but used to live in Manila, Philippines and travel there about once per year. Having Uber there has been a godsend for me. The taxis there are often nasty and in poor repair, the drivers see an American and half the time start in on how their meter is broken, and, in general, they are a pain in the ass to hail unless you are at a mall and willing to stand in a long line.

    Uber works well for me and for my wife when she's there (also American, BTW), an order of magnitude better than taxis. The rates are low enough that I almost always tip significantly above the fare. Some of our staff over there do the "side hustle" thing and enjoy making the extra money.

    I know that my experience isn't everybody else's; and Uber in the US is a different beast. Uber absolutely needs to take proactive action regarding background checks and I know that will raise the price. It will still be better than the taxis, at least in Manila.

    • Re: (Score:2)

      by mjwx ( 966435 )

      I'm going to get modded down to oblivion, but I'm going to say something good about Uber. I don't use it much in the US, but used to live in Manila, Philippines and travel there about once per year. Having Uber there has been a godsend for me. The taxis there are often nasty and in poor repair, the drivers see an American and half the time start in on how their meter is broken, and, in general, they are a pain in the ass to hail unless you are at a mall and willing to stand in a long line.

      I'm calling bollocks about living in Manila. Anyone who has lived in the Phils... or even holidayed there for any length of time knows that you never use the taxi meter... You don't ask about the meter, don't even think about it. Before you get in the taxi you tell the taxi driver where to go and what you will pay, I.E. "NAIA 600 peso, Salamat".

      I've actually lived in the Philippines, you'll never get away from the fact you're white... but you can act like an ex-pat rather than a tourist.

      I'd never use

      • If you are going any length of distance to somewhere that is not a known landmark (NAIA, MoA, whatever), a cab driver is going to bump-up any pre-negotiated rate much higher than what the meter would be. Every time I got in cabs with Filipinos, they always got the cab driver to turn on the meter if they started complaining about traffic and were trying to set a fixed rate. If you dictated set rates that the cab driver didn't haggle with you about, I'm sure you were making his day.

        I'm not sure what kinds o

    • I'm going to get modded down to oblivion, but I'm going to say something good about Uber. I don't use it much in the US, but used to live in Manila, Philippines and travel there about once per year. Having Uber there has been a godsend for me.

      I also only use Uber abroad; when you don't know the local habits or rules, it is very reassuring to use a service that you know.

  • The losses (primarily from an extreme and presumably controlled r&d and lobbying spend, I presume, not from too little recent vs too high service operator costs) are to be expected.

    Theyâ(TM)re on track to become the worldâ(TM)s biggest vehicle owner/operator (both road and drone) as car ownership will plummet (and it will. Fewer drivers, particularly genY+, smaller insurance pools, higher insurance premiums, even fewer drivers, feedback loop; meanwhile cost of ride from uber will drop, particularly when most expensive part of uber (driver) is removed, and at some point offer faster than car drone service. Even more feedback loop. It wonâ(TM)t go to zero, just like desktop PC sales didnâ(TM)t... but itâ(TM)ll shrink substantially with alternatives ). For uber, making the insane investments required in r&d (first In road traffic management, then in self driving, then in large scale drone fleet management per their collab with NASA) is the only right way to get there. Thatâ(TM)s how Iâ(TM)d be doing it. R&d off raised investment capital and loans registers as losses.

    I really donâ(TM)t see the problem. Iâ(TM)d WANT them to be doing this if I was a (medium-long term) investor.

  • Bike sharing and skateboard sharing is where urban dwellers are now.

  • Uber is NOT a typical VC investment or a typical startup company. Often reports of VC activity and standards remove transactions involving Uber (and a few other choice companies) from their statistics and totals. The investments in Uber are so massive and strange that they skew the entire VC market.

    That said, Uber is not the first company to run at billions of dollars of loss on the promise of future payoff, and they won't be the last. At least Uber is taking private investor money (which comes with the e

  • None has burned such a tremendous amount in the first stage of its life, according to data compiled by Bloomberg.

    Musk will take it as an affront and a personal challenge. He will raise tons of money, do incredible things, lot of more superfantastic than a taxi company that is not a taxi company, things that wow people with tremendous achievements. Only thing he wont do is to make a profit for his investors, otherwise ...

    • Actually, since electric cars have a significantly lower TCO than internal combustion, he might have a (temporary) market advantage. A fleet of Tesla Model 3 vehicles would be awesome for self-driving taxis.

  • Spent 10 billion over a decade, revenue of 7 billion in one year, what am I missing?

    There is no way Uber's infrastructure/staff costs even remotely close to 7 billion a year.

    What else did we learn from the article? That Uber gets about 20% cut of what you pay for the drive. That's more than I'd thought (about 10%).

  • not theirs (the top people at Uber in their posh offices).

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