Why Uber Is Losing Money


Uber is going public at a
valuation of over $75 billion. The world’s biggest ride-hailing
business is hitting the market just weeks after
smaller rival Lyft. When you think about the
excitement surrounding Lyft, multiply that for Uber. This is more global. It’s diversified. So there’s certainly a lot
of excitement from public market investors. Uber is far from making money. It reported an operating loss of
$3 billion in 2018 after losing more than $4
billion the prior year. During its roadshow, Uber compared
itself to Amazon as it explained its money-losing
business to investors. Why Amazon? Because the now wildly successful
company didn’t make a profit for several years after it
went public in 1997. But Uber is n’t Amazon. For one, Amazon had little
competition in the e-commerce space when it IPO ‘d. It also had a valuation of
$438 million compared to Uber’s $75 billion. Still, some investors are
far from being scared away from Uber’s red ink. In the U.S. alone, Americans spend
about $1.2 trillion on personal transportation and
Uber really is at the forefront of this move from a
personal car ownership model to more of transportation
as a service. And I think investors really do
believe that humans will one day forgo owning their physical cars
in favor of an on-demand service like Uber or Lyft. Uber was founded as UberCab in
2009 by Garrick Camp and Travis Kalanick. The app launched in San
Francisco in July 2010. It allowed users to hail, via an
app, black town cars but was still more expensive than
taking a taxi. It then dropped cab from its
name and launched in New York City and Paris. But in 2012, another ride-hailing
company entered the market. You had Lyft come into the
picture and they came around and said you know we’re going to
give Uber some competition on the lower priced end of things. And from that came UberX, which is
now sort of Uber as we know it, the cheap alternative
to hailing a taxi. Uber now operates in 63 countries,
700 cities and has completed over five billion rides. There are also more than
three million Uber drivers worldwide. Taxis accounted for 99 % of
ride-sharing trips in the U.S. in 2012. And now, with the rise of
Lyft and Uber, taxis represent just 12.5%. So why is Uber
losing so much money? First, they have
to pay drivers. And now drivers are
asking for more. Drivers united, will
never be defeated. Increased competition with Lyft
has created tensions with drivers who complain of low
pay rates and unfair compensation. It’s expensive to navigate the
regulatory environment in each city and to
ensure the business. Insurance costs for Uber
ride-sharing products increased $1.3 billion from 2016 to 2017. Credit card processing fees and
driver incentives also drain the company of money. On the rider side, they also
have to make it appealing. Entice the rider to come to
Uber and use its platform instead of going to Lyft. So in this way, Uber and
Lyft both spend millions and millions of dollars to attract and
keep people on their platforms. Uber’s growth to number one
has been riddled with controversy. In 2017, after multiple scandals,
Uber founder Travis Kalanick stepped down. Uber CEO Travis Kalanick is
out, after shareholders staged a revolt. Meanwhile, Lyft gained a reputation
for being the friendlier of the two. Uber has certainly had a
more troubled history than Lyft. Lyft has had a better
reputation with drivers for instance they introduced tipping from the
very beginning, Uber only introduced tipping a
few years ago. At IPO, Lyft was valued at just
over $20 billion but its stock has had a rocky start. The Lyft IPO has been a
bit challenging and the revenue multiple that people are using to
value Lyft, people are well sort of look to apply that to Uber
as as a way to get a sense for valuation. Also, some of the trends that
were outlined in Uber’s S-1 filing can raise
some questions. Specifically, the fact that you’ve
seen a pretty sharp slowdown in revenue growth at Uber
over the last few quarters and significant declines in
its take rate. Uber’s total revenue for
2018 was $11.3 billion with ride-sharing bringing
in over 80%. Uber Eats is the second biggest
source of revenue for the company at $1.4 billion. But Uber has put a lot
of focus on diversifying into bike sharing, scooters, Uber Freight, air
taxis and even its own autonomous driving technology. All of which require a lot
of investment and has slowed growth towards profitability. If you believe that this industry
and Uber and Lyft are going to be profitable, you believe that
at some point in the future self-driving cars are going to
help them get there. Uber’s Advanced Technologies Group, or
ATG, which works on self-driving vehicles, recently announced
a $1 billion investment from SoftBank,
Denso and Toyota. A sign investors may see
it’s serious about long-term growth. ATG took a hiatus after one
of Uber self-driving cars killed a woman in Arizona last year. Uber’s rapid growth in many directions
has meant a lot of spending. However, some analysts
predict Uber will become profitable eventually. In terms of when Uber
could achieve profitability, we’re still several several years away. I’d say four or five
years away at least. Uber is part of a big
wave of Silicon Valley companies rumored to go public in 2019. So will it be
a smart investment? Uber really is the number one
player in virtually all of the markets where it operates a
ride-sharing business and an online food delivery business. And over time that number one
kind of leadership position in those respective markets should
translate into a more resilient business, a
more profitable business. I think the important thing for
investors to know is that this is a bet on a company that
aims to be the so-called Amazon of transportation. They have
humungous aspirations. They don’t wanna focus
on just the U.S. market. They want to be global. They want to be diversified. They’re looking at a $5.7 trillion addressable market. So when you look at Uber,
you’re really betting on the future of transportation not
just ride sharing.

100 thoughts on “Why Uber Is Losing Money

  1. To the reporter of this report.. you need to understand the real basic fundamental of how uber works. At 2:31 you said “uber needs to pay its drivers” uber is making $75 billion because of the drivers. There are no self driving cars yet. So you need to gain little bit of more knowledge. #cnbc

  2. I think when tesla finally comes out with their fleet it will crush uber in the end.. you can buy a tesla go to work put your car on the fleet split the profits with tesla for doing nothing have your car returned by the time you get ready to leave work go home and spend the earnings your car made for you whil you doing your other job.. that sounds like a win win there..now the big hurddle is making tesla cars affordable to the every day worker…

  3. I don't understand why people say that working for Uber is bad. It isn't, well at least not for me. Every weekend I make up to $600 minus $60 gas that's about $520 for just 2 days and doing UberEats only. I don't like driving people around so I just drive food around lol

  4. Yeah my ass their losing money, I hope tryp comes to my area asap so they can run the scummiest rideshare app UBER out of business.

  5. Lyft is cheaper, Progressive liberals will continue to hurt Uber just look at what is going to happen in California very soon once that Communist Governor signs the bill. It’s highly likely Uber & Lyft leave Communists California because all there drivers will be known as employees with that new law going into effect January 1, 2020.

  6. Uber should offer profit share to drivers who allow them to advertise on or in their cars. That way they can start selling marketing services to advertisers.

  7. Why would anyone want to listen to a young woman talking? Everything that has happened in the last 120 years has been a slow march to destruction.

  8. If investors believe Uber will become profitable , they don't understand that Uber is committing suicide by cutting drivers rates so much that they are only able to make a living in the big cities. I can speak from experience that in my smaller city , drivers are everywhere and are in competition to earn minimum wage, while risking their lives. Furthermore, self driving vehicles are a very long way off. Why, They don't work……

  9. If no one cares about poor drivers loosing money due to greed, why should we care about a company who’s loosing money for no apparent reason?

  10. It's like this, large exclusive Ride Transportation companies mainly taxi companies historically have been unprofitable is all the big ones yellow United Checker Etc all of them went belly-up, it's absurd to think some techies in San Francisco can do better in the profitability department though they might do better in the technology department.. comparing them to Amazon is a false comparison

  11. Its like avoiding tax. You put loses in your balance sheet and government is like ok no tax for you. It has become a trend for most online business models.

  12. Uber and Lyft are the modern incarnation of the robber barons. They do need to be fought, to be resisted. But drivers need to stop waiting for someone to come save them. NO ONE is coming. The must resist. They must BE the resistance. They have to stop whining and start acting. Together. It's so easy. So very easy to hurt these companies in a big, big way. As soon as drivers stop waiting to be saved.

  13. UBER IS A CRIMINAL ANTI AMERICAN TERRORIST GROUP THAT MAKES A LIVING OFF BANKRUPTING THEIR OWN WORK FORCE.
    DRIVERS MAKE THEM ALL THE MONEY, BUT NOW THEY ROB THEM FOR EVERYTHING, ONLY GIVING THEM A LITTLE MORE THAN GAS COSTS.
    UBER IS A DOMESTIC TERRORIST GROUP AND NEEDS TO BE BANNED FROM AMERICA!

  14. ubers loses money not because of driver rates. it's those bloated executive salaries and the ridiculous amounts of money they pay to companies who are outsources

  15. The second Uber turns a profit, competition will flood the market. The product is generic and the app can be replicated. Competition will keep ride prices low as competitors jockey for market share. This is already happening with Lyft and Uber and neither are profitable. Ride share companies are not Amazon. Amazon has no competition and it has so much infrastructure in place that it cannot be easily replicated.

  16. And the IPO isn’t going well. See what happens when you cut driver pay, especially with their top drivers? The dime a dozen drivers, mostly uneducated foreigners, they go through like toilet tissue.

  17. Uber and Lyft are losing customers to their top drivers, which siphons the A list customers who are put off by bad drivers. Most business professionals and the wealthy prefer private drivers who have proven themselves to be safe drivers with Uber. How do I request you next time? is a frequent question that their good drivers, usually retired educated professionals themselves, often get. It doesn’t take much to poach them. If thousands are doing that, the rideshare companies lose their 25% and those customers rarely return. Once they prove themselves to, say, the wife, they end up taking the entire family, compounding the loss. Lack of due diligence in screening their drivers will ultimately lead to their ulterior goal, driverless cars. And most of their good customers will be lost. That’s why investors are wary of both.

  18. People will forego owing their own cars in exchange for uber?" Lol stupidest thing I've ever heard! Maybe unmarried childless couple will but families never!

  19. It amazes me how all the people at the bottom do all the work but all the money goes to the top. We let these companies use us to make money while we do all the work and can barely pay our bills. When workers come together, quit working these jobs, these businesses will get it together…but too many people live in fear and will continue to be a slave for a little bit of money….the working poor! Slave mentality is just as bad as corporate greed!

  20. Yea , Uber is loosing money. But they can pay 45million to CEO. Uber CEO Dara Khosrowshahi salary and total compensation: $45 million – Business Insider.Apr 11, 2019.

  21. This is the best time to stop driving for Uber, I drove for Uber before and at the end of the day after you deduct all your expenses gas, wear and tear, ect you making about 9 to 10 an hour. Uber lately is taking 40 to 60 % of rides. I won't work for a company that's takes all the money they want from my hard work so they can invest on how to give me the boot. THAT'S THE STUPIDEST THING EVER, YOU TAKE MORE FROM ME SO YOU CAN INVEST ON MY REPLACEMENT.!!!!!!!!!!! IT IS UP TO YOU DRIVERS TO BE STUPID THERE ARE OTHER BETTER OPTION!!!!!!!!!

  22. I dont know if Uber uses outside credit card processing companies. if it does that cost can be eliminated by doing its own processing. However, I believe that Uber is spending money on developing driverless cars.

  23. Uber was started as a way for people to earn extra money apart from their daily jobs. So that model worked initially and few drivers earned hell lot of money due to incentives. But now majority of drivers work full time as Uber drivers and this model is not supported by Uber. They have to make a change which they haven't done yet. I have sympathy for Uber drivers but future is not with them. With self driving vehicles driving jobs will become redundant in not so near future.

  24. Can't wait till this company goes belly up. All they do is take advantage of people who need money. And yes I've never drove for them. Or lyft for that matter they are not any better.

  25. Giving up my car, I don’t think so.
    May be partner with lots of clubs and pubs so I can get wasted and in need of Uber more often 😅
    Also, what happened to the idea of creating a sort of capsule rail system what would allow you to set your destination giving you privacy, almost like a personal cab. 😅
    All the time good ideas are replaced by great ideas and Uber seems like it would be replaced any time now or at least for a different company model.

  26. In order to make uber a success they need to make super low fares it can only be achieved by lower pays to the drivers or finding cheaper alternative to them ,so individual cab owners have no future in this business as sooner or later there will be self driving ubers available

  27. Transportation as a service will be the future standard? No thank you. That might be OK for some things in life, such as Netflix streaming in lieu of owning a huge movie catalog, but relying on Uber for all of my transportation needs instead of owning a car is a bit crazy. Transportation is too critical of a necessity to allow some soulless corporation to control aspects of it in my life.

  28. The ride charge substantially changes during booking to when we have to pay at the end of the ride. That's cheating by Uber.

  29. The research done for this video makes little sense right now. Just look at the statistics:
    (1)
    the Uber app has 500 millions download (this means more people use it = customers). While Lyft has only 10 millions downloads (less customers).

    (2)
    Lyft pays less to its drivers, which forces more of them to quit. Which also means less income for Lyft. While Uber still pays the drivers a little more, which means drivers make more money and Uber takes away a certain percentage from each ride.

    (3)
    The video says Uber has to pay the driver. Really!!!!!!? I don't think so. I'm a driver for Uber and Lyft and all I do is have my app downloaded, use my car and my fuel to give ride, charge a rightful fee for my service, and Uber takes away a percentage from my earnings. In a sense, uber is just an app that allows me to get in touch with the customers.

    There is just so much misleading information in this video that only an Uber or Lyft driver would understand.

  30. Passengers drugs make the ride unsavoury. If nobody did crack uber may have interest keeping business but it's way too f**ked up.

  31. uber drivers should do strike for not driving uber for one month all over the world. lets see what they can change. they definitely increase the wages for the drivers. 27% deduction from uber should be included tax like other employee do. one thing i can say they can't replace the human drivers with robot for now and future. one Robot can drive like human being is a science fiction story not in real life.

  32. Uber and Lyft are like satellite radio. They’re gonna figure out the only way to profitability is by merging and by the time they do that, the iPod of transportation will come. Boom, no more Uber

  33. Operating loss $3 BILLION??? It's a huge sum. Look like they have given $100 to each rider as tips just like giving tips at restaurants….. NONSENSE!!!

  34. Uber and Lyft are great for riders but not for drivers. I feel bad for the yellow cabs they basically ruined the transportation market. Ultimately, they are just using drivers until the self driving cars become legit.

  35. I drove for 3 months….last month was over saturated…..I made good money for awhile….but eventually….the ware and tear on your vehicle will catch up with you….drivers bragging about their pay on social media caused the saturation. I looked this up….90 percent of drivers don’t last 1 year. Uber doesn’t stand behind the driver.

  36. Self driving vehicles will be even less financially viable for them. They just do it to keep their investors dreaming and that investor money flowing. Classic Silicon Valley Bubble Ponzi.

  37. Like them or hate them; they will dominate… Dont so many people hate fb, google and other big corporations for stealing people's data? Have they gone out of business ? … Its not long before the self-driving takes over. It will cost them for gas/ maintenance etc- but their profit will shoot upwards. Soon the job of taxi drivers will become as extinct as the dinosaurs. Taxi drivers need to adapt NOW. Uber have already won the game especially with heavy investment into self-driving tech. They already are the amazon of transportation . Even if their self-driving tech sucks ; tesla will lease / sell them their cars and auto -pilot tech

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