Leaked Uber financials from 2012 to 2014

http://recode.net/2015/08/05/yes-uber-lost-a-lot-of-money-and-it-will-lose-more/

by prostoalex • 11 years ago

98 101 11 years ago

icpmacdo• 11 years ago

I dont think Uber is going anywhere soon. It has such a strong brand. Everyone I know trusts uber a lot more than there local cab companies.

puranjay3• 11 years ago

I do wonder what will happen once Uber starts charging market rates. Right now, your ride is subsidized by Uber. Once it comes time to turn on the profits, you'll have to pay more - substantially more in some markets.

Will you still use Uber? Probably. But many who started using Uber instead of, say, taking their own car or using public transport, just might go back.

everly• 11 years ago

I suspect that the data they possess on usage rate during surge pricing will be extremely useful for making those projections.

danieltillett7• 11 years ago

This is actually something that is pretty straightforward to find out (assuming you actual want to know the answer). You just jack up the prices in a single market and see how much price elasticity there is.

My feeling is that the taxi-like market is a commodity market, but if I was going to invest at a $50 billion valuation I would want Uber to tell me that have looked into this in detail and can provide me with some hard data.

aikah• 11 years ago

I do wonder what will happen once Uber starts charging market rates.

That's an excellent question and the answer is it wont be cheap. That's why, in countries where Uber operates, a clear legal framework is needed so that Uber doesn't end up with a monopoly. If Uber is allowed to operate somewhere then anybody should be able to do that without the need for an army of lawyers and lobbyists or it's just replacing the old boss with a new boss and in the end nothing's going to change for the consumer. That's what I hate with the whole situation.

morgante2• 11 years ago

I do wonder what will happen once Uber starts charging market rates. Right now, your ride is subsidized by Uber.

Do you have any evidence of that? I'm 99% sure Uber is profitable on a unit and customer basis.

danielweber4• 11 years ago

Uber is making money off of each ride. "Money they charge the end user" minus "money they pay to the driver" is a value that increases significantly each quarter.

They have a bunch of other expenses, but those are expected to lessen in the future. Training (of both customers and drivers) should fall to near-zero, for example, over time.

scurvy• 11 years ago

That's odd to me. Everyone I know thinks that Uber is shady and uses Lyft. Very people use Flywheel in SF as it just gets you a cab. But at least a cab driver (generally) knows where they're going, rather than relying on GPS because they're from the East Bay and don't know the city at all.

Uber's app history of tracking people is also not great. I use Lyft when I can. Last time I used Uber was in New Orleans, and even then I used the mobile web version.

prostoalex2• 11 years ago

The competition would likely be smaller competitors chipping away at juicy chunks, like Wingz focusing exclusively on airport rides (and competing with UberX on price) and Blacklane promising higher level of service at cheaper rate than Uber Black.

andyidsinga2• 11 years ago

yep ...if it gets as easy to bootstrap a ride sharing company it is for chat apps with the mobile address book competition might be tough on uber. see also http://continuations.com/post/77698925932/facebook-massively...

jfoster6• 11 years ago

Yeah, I just tested myself: can I name any of the prominent taxi companies in Sydney (where I live)? Maybe; is Silver Service the name of one, or is it a type of taxi? I'm not sure, but it's the only one that comes to mind.

bsder• 11 years ago

The real question is: do you care?

I personally don't care which taxi company carries me on my journey.

mootothemax• 11 years ago

I dont think Uber is going anywhere soon. It has such a strong brand. Everyone I know trusts uber a lot more than there local cab companies.

They seem to be following the same pattern as large supermarkets:

- Move into an unserved area

- Offer goods/services at rock-bottom prices

- As competition reduces, increase prices and squeeze suppliers

- Profit, profit, profit!

An interesting example of this is Tesco (https://en.wikipedia.org/wiki/Tesco), who at one point were receiving one pound in seven spent in the UK. According to the wiki, that's now widened to one in every ten pounds.

The other interesting angle is that Tesco have been hugely profitable until this year, when they reported a loss of nearly six billion pounds. We'll have to see what happens next.

rtpg2• 11 years ago

Wait, so Uber spent $900 million dollars? I thought that considering they offload so much of the costs of running of the business( EDIT: through having drivers buy the cars, for example), they wouldn't have such high operating costs.

Though according to this[1] article, Uber's at 3000 employees worldwide. What are those employees doing?

EDIT: For reference, Greyhound's 2014 operating costs were 600 million pounds (50 million in profit).

[1] http://techcrunch.com/2015/05/28/uber-new-hq/#.bb69xm:poPo

austenallred2• 11 years ago

Despite popular belief, apps and communities don't run themselves. Uber is scaling at an ungodly speed, and they're hiring a ton of people to do so. Seriously, look at how many jobs they're hiring for right now: https://www.uber.com/jobs/list (then realize they're doing this in hundreds of cities simultaneously, in addition to the hundreds they're already in).

I'm actually blown away that they're losing so little, given the amount of revenue they're bringing in. Those are, despite what it may seem, really good numbers. If they can reach scale and capture the market (not trivial)... wow.

rtpg2• 11 years ago

1200 job openings... that's impressive.

I agree that you need people to expand, but it never hurts to question how many people you actually need. Nobody denies that megacorps probably have many redundant positions, it's not possible for a company with 3000 employees to have them either.

bradgessler• 11 years ago

Another thing to keep in mind is that über would have to pay corporate income tax, to the tune of 30%, on any profits made in the US. It seems like they're doing a good job (or are insanely lucky) at reinvesting their gross income back into their company growth while keeping their burn rate relatively low to the $6.9b in raise capital. (e.g. they've only cut $0.5b into their $7b cash stash).

forrestthewoods• 11 years ago

Subsidized ride fares. Especially when entering a new city for the first X months.

jfoster6• 11 years ago

I haven't seen the data, but I bet a huge percentage of it is subsidized rides. They essentially use free rides as a carrot for users to learn the value of Uber.

The great part for Uber is that once they've trained their userbase, that cost largely disappears.

prawn• 11 years ago

Also to keep drivers more motivated than they'd otherwise be. I'd say that they're trading VC money with drivers in order to have a dominant position by the time the drivers are no longer required.

jasonsync• 11 years ago

Walmart tactics.

Open in new town. Sell at a loss to get customers. Go on hiring spree.

Local business can't survive the mass exodus of customers and employees.

Once the only job in town is Walmart and the only store left is Walmart you slowly raise prices and profit.

puranjay3• 11 years ago

Uber is active pretty much everywhere. They're truly aiming to corner the entire global transport market. They're putting in $1B in India alone.

When the dust is settled, you're going to get a company that controls the private transport industry in an area that stretches from San Francisco to Kolkata

For an industry that was once dominated by small local players, this is truly mind blowing.

I don't think there is a single startup that is as obsessed with aggressive growth as Uber

duncanawoods• 11 years ago

> controls the private transport industry

But is their money buying control of anything? They are not buying control over a resource, like "all the tin mines in China" or something. Is it just spend on market creation that a fast follower can piggy back on for free?

rodgerd• 11 years ago

When the dust is settled, you're going to get a company that controls the private transport industry in an area that stretches from San Francisco to Kolkata

Yay! Disintermediation! Smashing monopolies!

Oh, wait.

beagle32• 11 years ago

They're spending an awful lot for control of a market that is expected to disappear within a few years when self driving cars mature.

Of course, they are aware of it and are investing in being a leader in that market - but they're fighting with global giants over there, not the local Taxi outfits.

empressplay• 11 years ago

So what's the model? Put the taxis out of business and then jack up the fares to what the taxis were? Who's winning, then, exactly? Not the consumer...

danieltillett7• 11 years ago

In theory if they can lower the costs substantially through innovation over the current taxi model they can grow the market out of private car usage. This would mean all parties (except car manufacturers) will benefit.

friendzis2• 11 years ago

In transportation business major costs are vehicle depreciation/maintenance/consumables (fuel, insurance, tires, etc), wages and you can include domain specific expenses (insurance, driver health chek-ups).

  * You can't reduce DS expenses. You can offload them to drivers, but that will still be reflected in prices
  * You can reduce wage cost by eliminating administrative load by having tools (apps, backends) do the job. Considering the size of Uber they are just transfering wages from operators to engineers.
  * You can't reduce wehicle depreciation. You can reduce maintenance costs by having own workshop. Taxi companies might have that, for Uber that would be next to impossible due to practical reasons. You can reduce operating costs by buying fuel/insurance/etc in bulk. Agin, easy for cabs, difficult for Uber (not impossible though).

The only place I see Uber can compete is having innovative algorithms route the cars by adjusting for projected demand. Unless they have huge army of dedicated drivers, drivers driving for multiple companies kind of defeats that advantage. currently Uber does compete by exploiting legal frameworks and not labeling their drivers as professionals and their service as transportation. This is not a major factor in operating costs though.

brc3• 11 years ago

Car manufacturers will benefit.

What matters is passenger miles driven, not total number of unique car sales.

If you open up a new pocket of driving demand because it's easier to get a lift, then the total passenger miles driven goes up. Even more so if it is a pickup/dropoff model with 'empty miles'.

More miles driven->Cars worn out faster->more sales. More sales of likely generic cars less obsessed with expensive annual styling tweaks. More sales -> fewer models -> longer model runs = more profit.

I'd say the car companies are happy.

jfoster6• 11 years ago

It's actually build a better service, give each user subsidized (or free) rides so they get to experience how much better the new service is, then stop handing out free rides like candy.

mattmanser• 11 years ago

You just said the same thing, but framed as a positive.

Use VC money to put taxis out of business then jack up the price and let the service level plummet as cheap immigrants become the drivers.

rorykoehler2• 11 years ago

If they do that someone else will out compete them.

visakanv2• 11 years ago

I wonder if it'll eventually make sense to have free driverless cars that serve you with ads. That would be interesting.

dpflan• 11 years ago

Uber is certainly aggressive and maintains their attitude throughout. I would like to see Lyft's financials compared to Uber's considering Uber's global dominance target and Lyft's decision to focus on US domestic [1].

Source:

[1.] http://www.mercurynews.com/business/ci_28566633/lyft-forgoes...

joshjkim3• 11 years ago

Basic rundown of Rev / Loss from reports:

Q1.12: 1.4M / 3.4M Q2.12: 2.1M /2.3M Q3.12: 4.3M / 5.4M Q4.12: 8.2M / 7.0M Q1.13: 12.9M / 7.3M Q2.13: 19.3M / 8.1M 2013 (total): 104M / 56M Q1.14: 45.6M / 52.2M Q2.13: 56.9M / 108.8M

Rev grew faster than losses consistently all through 2012 and 2013 which is really amazing (2013 is when Uber jumped from a 330M valuation to a 3.5B valuation so investors noticed too)...then losses abruptly charged ahead in 2014 (see data pulled below).

Uber launched China in Q1 of 2014 - they are basically betting huge on China / India, and smartly being very clear to their investors that the $$ is for that very costly cause, so they can earmark the cash they are burning for international expansion as "meant to be burned." Also, if the bet goes the wrong way, they can (sort of) cleanly write it off as a failed (billion dollar) project, and ask investors to focus on their (hopefully by then) cash-cow business in the US.

Burn is all about international expansion, which is SUPER expensive, especially at the rate they are attempting. There is an insane learning curve that costs a lot of money to get on the other side of (hiring, culture, regulations, consumers, marketing are all different in each country - not to mention the fact that local competitors have all those in line already!) - look at pretty much any major US company that has attempted to succeed in China.

Good luck!

andygates• 11 years ago

So what happens when they've aggressively expanded into all their target markets and are still not profitable and have nowhere else to go? Pure expansion is pretty much the sign of a first-mover bubble company who will collapse with their advantage being copied by calmer second-movers...

yummyfajitas2• 11 years ago

Expansion costs money, running operations is cheaper. So when growth stops, profit happens almost by default.

Simple math. Suppose opening a city costs $10 (once) and returns $1/year in revenue.

Year 1: Open 1 city, loss = $10.

Year 2: Open 3 cities, loss = $29 (spending $30 on new cities, gaining $1 from year 1's city).

Year 3: Open 9 cities, loss = $86.

Year 4: expansion stops, profit = $13.

hoopd2• 11 years ago

It wouldn't be the first time.

What happens to the disrupted sector is the people who work there go find new jobs. Then when the giant monopolizer fails the sector can't return to the way it was before, too much knowledge has been lost.

Example: if WalMart closed tomorrow most of the thousands of small and medium sized businesses they put under wouldn't come back.

If Uber's model turns out to be unrealistic long-term the intellectual capital lost from the global taxi cab sector will only be partially recoverable.

When a company grows based on money they've earned it's the normal process of scaling. When they grow based on money they've borrowed it's no longer the market giving them the thumbs up, it's a couple of dozen investors. By the time WalMart was rapidly expanding it was clear their business model worked, might be evil but it works. It's not clear that Uber's business model is even legal.

joshjkim3• 11 years ago

You are right, IF the early markets are still not profitable - the key numbers that we don't have are: how are the first 100 cities they launched doing? how are the first 10 cities they launched doing? If those cities have achieved profitability or are approaching it, then it works. Unfortunately, we don't have those #s.

However, if you look here there's some indication that earlier markets were at least closing the operating loss gap: QQ4.12: 8.2M / 7.0M Q1.13: 12.9M / 7.3M Q2.13: 19.3M / 8.1M

Losses slowed dramatically here, while revenue grew. Note, Uber was still launching cities at this point, but had already taken most of the major US markets - my guess is that SF + NY + LA were getting closer to paying for themselves while they streamlined their launch process into smaller markets in the US. I feel OK making that guess because it's hard to believe that an investor would not have asked for that, and it's hard to believe that an investor would value Uber at $3.5B (the valuation at that time) if that wasn't happening. (Note - I understand that investors are not always actually this rational, I'm just making an assumption in this case).

I imagine the pitch was: look at our early markets, they are cash-cows, and we know how to make them. Now, give us $XB to go make more of these cash-cows please and don't ask us about losses for a long time, thanks! Which is why they don't really care about these leaked #s.

Animats• 11 years ago

As the article points out, the real question is whether Uber is making money in mature markets, such as San Francisco. If the mature markets aren't highly profitable, Uber is way overvalued.

the_economist• 11 years ago

They make 20% of every ride. What costs do they really have in a mature market? A bit of customer service and maintaining the app. I don't see how it could possibly do anything but print cash in mature markets.

untog• 11 years ago

Drivers won't be Uber drivers forever - they'll need to keep pushing to hire new drivers to replace ones that drop out.

And don't write off customer service - it is expensive.

philfrasty• 11 years ago

"leaked"

kfk• 11 years ago

What is interesting is that those volumes put Uber no where close to a monopoly player in the taxi/"car lifts" market. They are just 1 player and I think people use them because their app is cooler than calling a taxi by phone or razing your hand. I don't know, I wouldn't put money on them. Maybe their app, who knows, could be useful for taxis once uber goes away?

coldcode• 11 years ago

Ultimately Uber wants to corner the market on providing automated cars. Having drivers is just the stepping stone. If you are synonymous with providing rides then when automated transportation is available, everything thinks of you.

zekevermillion• 11 years ago

Of course, Uber could hunker down in one market and start making a profit. But they are trying to form a global monopoly in all the major urban markets. New capital is going to dry up pretty soon unless they are prepared to go public. Either Uber has to lower its sights to limited regional domination, or it has to go public. Given their MO I would think they are preparing for the latter option.

curiousjorge2• 11 years ago

I think Uber thinks lighting piles of cash on fire is somehow a competitive edge builder, when the more money they burn faster, the bigger the return they need to make on a razor thin margin, zero barrier to entry market with no network effects. As soon as they've knocked down the walls of regulation and stretched out thin and begin to make any profit at all, it will signal other new entrants. The newer entrants are more likely to succeed thanks to the road that has been paved by Uber. Uber's solution: burn more money acquiring unprofitable new market threats if they miraculously make enough cash if they get another boatload of naive investors.

Afterall, Uber does not own the cars or drivers. As soon as somebody else is willing to give them a better cut or or they are able to get more money per customer, they will always go there.

tl;dr: Uber has absolutely no sustainable long-term economic moat built around it and lighting cash on fire may drive current competitors out, it will not work as soon as they attempt to recoup those costs (profit signals market entrants, uber does not own drivers, cars, or customers due to zero cost of switching - it's just a fucking app).

ismail2• 11 years ago

Note: we built a rideshare matching system so this is from my experience

single person with 1 car has no network effect. 1+ passengers does. See my post above.

Leaked Uber financials from 2012 to 2014

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