Uber Lays Off 400

https://www.nytimes.com/2019/07/29/technology/uber-job-cuts.html

by moltensodium • 7 years ago

515 298 7 years ago

berg01• 7 years ago

dvt• 7 years ago

When I was at Edmunds (working on a fairly profitable ad tech product), Uber was actively poaching from our team; a few ex-coworkers (albeit mostly engineers) moved up to SF and hopefully they didn't get axed. We can chalk this up to "business as usual," but let's not forget people's livelihoods are at stake.

crispyporkbites• 7 years ago

If your CV has marketing @ Uber on it, I doubt your livelihood is going anywhere

luckylion• 7 years ago

but let's not forget people's livelihoods are at stake

Meh, but let's also not pretend that they didn't make a lot of money by working for a company that treats the people that provide the actual service, the drivers, like shit.

ProAm• 7 years ago

Profitability doubts after the IPO? Everyone in the world knew they were never close to profitability pre-IPO, this is just the reality of being a publicly traded not profitable company. Can't funding round yourself out of this one anymore.

rolltiide3• 7 years ago

Well you can... the terminology is just different

They’ll say “saudi investors bought into secondary offering at X share price” instead of “round completed at Y valuation!!!” Which is just X share price of last purchase multiplied by total shares in existence

Public companies can do secondary offerings from treasury or from creating brand new shares from nothing (dilution)

Liquidity is one of the benefits

mdorazio• 7 years ago

Yup, also from selling bonds.

bduerst8• 7 years ago

But then what's the planned payout for those secondary investors? Liquidating on the market would plummet.

askl56• 7 years ago

“saudi investors bought into secondary offering at X share price”

I think Beyond Meat are currently demonstrating the perils of doing a secondary offering whilst the company is unprofitable.

itchyouch• 7 years ago

400 people at say 40k salaries or around 80k with benefits is around 32 million. Definitely a significant chunk of change, but barely scratching the surface for offsetting 1B in losses.

omarhaneef2• 7 years ago

https://www.payscale.com/research/US/Employer=Uber_Technolog...

dymk• 7 years ago

Marketing Manager
Average: $67,935

And that's for a manager. 40k may be a little low, perhaps they're making 50 or 55, but it's not unreasonable for a normal marketing job.

CydeWeys4• 7 years ago

You think Uber employees are only making $40k???

mabbo• 7 years ago

The poor schmucks in marketing that are being let go? Probably. Dev salary aren't the norm, remember.

phil2482• 7 years ago

In most of the country $40k/year is a very reasonable salary for a full-time, mid-level office role.

DannyBee• 7 years ago

The all in cost is almost certainly 150-200k.

Gibbon1• 7 years ago

Doesn't really move the needle, chicken feed is chicken feed.

30 million, 60 million, 80 million. Point still stands.

Traster• 7 years ago

It's probably more along the lines of "Each employee was on average earning $100k and was responsible for an advertising spend of $5m"

aresant8• 7 years ago

From a non-paywalled source (1):

1) These cuts appear to be exclusively in the marketing department taking department from 1,200 to 800 - that is a BIG ASS cut of 33% [EDIT from 25%].

2) Seems like this was a warning shot by CEO Khosrowshahi who comments "[M] any of our teams are too big, which creates overlapping work, makes for unclear decision owners, and can lead to mediocre results." - I'd be doing my best work @ UBER right now or warming up the resume.

3) Uber has >25,000 FTE worldwide as of article writing.

https://www.latimes.com/business/technology/story/2019-07-29...

tootie• 7 years ago

That's 33% actually. And while that's a huge cut, that's also an absurdly large marketing team. There's a reason most big companies hire agencies to do marketing. It's not their core business and you can roll over staff willy-nilly without affecting your head count.

aresant8• 7 years ago

In a two sided marketplace customer acquisition and marketing are absolutely fundamental.

Uber operates in >600 major cities across the world at this point.

1200 employees would indicate about 1 person per market per side of the market.

Cacti• 7 years ago

25,000FTE does not include their drivers, right?

sambroner• 7 years ago

Hot take: This seems like it's directly related to the IPO itself. I'm imagining this cause and effect:

Need more users pre IPO to juice the growth story -> Hire more marketers -> Cut costs post IPO

I'm not arguing it's effective, but it's certainly a reasonable outgrowth of the various goals they've had over the last year or two.

cj• 7 years ago

I mostly agree, except I'd probably frame it a bit differently:

Need more users pre IPO to juice the growth story

Or, "VCs tell us we need to spend their investment quickly in whatever areas will generate a hockey stick growth in valuation. We can always fix our business model when we're ready to."

Cut costs post IPO

Or, "We no longer answer to our VCs. Now we answer to the public market who cares a lot more about the fundamentals of our business. Now we need to improve our fundamentals to push our market cap upward."

whatshisface• 7 years ago

If public markets care about fundamentals why can VCs exit into the public market with fake hockey stick growth?

MegaButts3• 7 years ago

I don't disagree with what you're saying, but I think there is a more cynical take that Uber exemplifies.

The VCs do everything they can to drive up the valuation, except make money. They then sell their shares to the public markets for an incredible profit and let them deal with the problem of actually making money.

I fear venture capital (and Silicon Valley) is much more about value extraction than value creation these days. I am still somewhat young so I have a limited frame of reference - maybe it was always like this.

Obviously you can find examples to support either side. Amazon and Facebook weren't the money making machines (for all the talks of Amazon not making a profit, AWS clearly does and their free cash flow is insane) they are today when they went public. But there are far more companies that didn't turn out that way.

Travis Kalanick was very clear that Uber could not survive without self-driving cars. And that doesn't seem to be panning out.

kaonashi• 7 years ago

Making robberies into larcenies. Making rapes disappear. You juke the stats, and majors become colonels. I've been here before.

saalweachter• 7 years ago

Is it normal to have layoffs a quarter after your IPO?

adamstober• 7 years ago

Layoffs are "more normal" at more tech companies at more lifecycle stages than many people realize.

If you're interested in tech layoff data covering people who work in the San Francisco Bay Area, read an analysis that I published: https://medium.com/layoff-aid-blog/tech-layoffs-are-surprisi...

tanilama• 7 years ago

This doesn't surprise me per say. The number is nevertheless smaller than the number of engineers they hire, and they only had a handful major services to offer.

Bootwizard• 7 years ago

Does anyone have any idea why Uber isn't profitable? I never really understood that. It's such a ubiquitous service in a large portion of the world.

It seems to me that they have a lot of physical growth, so what is happening to their finances?

btgeekboy• 7 years ago

They’re trading cash to build their moat (keeping out competitors, investing in self-driving). From what I can tell, at least.

ForHackernews• 7 years ago

That's the theory, but I have no idea what this "moat" is supposed to be. Apps to hail a cab are interchangeable commodities as far as I can tell.

yaseer• 7 years ago

They have to offer significant promotions and sell their rides below the rates of other taxi companies, in order to obtain market share.

They've been doing this to grab market share for the last decade. Undercutting competition is not a profitable business.

jjn2009• 7 years ago

Its partially because they are in a war of attrition.

MiroF2• 7 years ago

You literally cannot profitably transport people at the prices they're offering. Uber is just one big bet that the price point of transportation will fall significantly with the advent of self driving and they'll be there to make the money off that margin.

randyrand• 7 years ago

They do make profit on each ride, but not when you account for administrative overhead (which is huge because of their ridiculous headcount).

davinic• 7 years ago

Why would they care about self-driving if most of their drivers are making little more than the cost of operating their vehicle?

SilasX4• 7 years ago

You literally cannot profitably transport people at the prices they're offering

That's not my understanding of the figures, which say that they're charging plenty enough to cover the costs associated with the ride, but are blowing lots of money on aggressive marketing. The transportation costs (i.e. driver pay and customer service) are not what's killing them.

williamDafoe7• 7 years ago

I think this is utter BS. the reason Lyft and Uber are not profitable is that they keep fighting a war for customers with each other! The last time I compared a taxi to a Lyft it was $17 versus $34. Lyft could easily charge 50% more except Uber is trying to kill them by wasting investor money!

Analemma_• 7 years ago

Most Uber rides are priced below cost to try and drive growth. Or at least, that was the original story they told. Lately it seems more like “Uber rides are priced below cost, because if we price them any higher users will flee to a different ride-hailing service, because we have no lock-in or switching costs”. Uber’s entire business model is selling dollar bills for 90 cents and it’s all going to come apart shortly.

formercoder• 7 years ago

I wonder if there's a predatory pricing case there

xienze• 7 years ago

It seems to me that they have a lot of physical growth, so what is happening to their finances?

This is the story of just about every Valley startup. Seemingly greater losses the larger the userbase grows. When asking how this is possible, everyone will answer "you just don't understand, this is a good thing."

jumbopapa• 7 years ago

There's nothing that sets them apart from competitors so it's a race to the bottom. If you're a rider you're always going to go to who has the best price and if you're a driver you're going to go to who pays you the most. If they ever hope to be profitable they need to cut labor costs or have a distinguishing factor.

bobthepanda• 7 years ago

People like comparing Uber to, say, Amazon. The major difference is that Amazon benefitted from economies of scale - they spent a lot of time in the red building infrastructure and logistics, but now they reap the benefits by having very good infrastructure and logistics, which only get more efficient the more things they sell.

Uber's main expense is the driver. The vehicles pretty much always stay the same size so they don't actually benefit from economies of scale. And drivers (and customers) are fickle; most drivers and customers have more than one app on their phone. If Uber hikes prices or slashes driver compensation people will just leave. Uber has a growth story if you believe that AVs are just around the corner, but that's a pretty big if.

Uber mostly made it to the IPO with the help of Softbank, one of if not its largest shareholders. Softbank had a $100B Vision Fund. With that kind of money you could be unprofitable for a while and still be a going concern.

ronaru• 7 years ago

Amazon was cash flow positive after few years of existence. Uber, as far as I under stand, is still isn't. https://www.reuters.com/article/us-uber-ipo-breakingviews/br...

snarf21• 7 years ago

Well, Amazon also is focused on disinter-mediating everyone. Those people's margins are Amazon's opportunity. Even now they are increasing their fleet into someone else's margins, go check out the Cincinnati airport.

femto113• 7 years ago

The view that "Uber's main expense is the driver" is essentially backwards. The current economics are more akin to drivers paying Uber to find them business. Drivers pay for all of the physical expenses of a ride (like gas, maintenance, depreciation and financing charges) and provide all of the labor. Since it would almost certainly cost Uber much more to buy the vehicles, pay for the gas and hire the drivers as employees it is fairer to say "Uber's main income source is drivers".

AV only offers a growth story if you believe the drivers' earnings are high enough to more than cover the additional costs to Uber of buying, fueling, and maintaining the AV fleet. With AV prices likely to be significantly higher than traditional vehicles for the foreseeable future and since most studies show drivers' net income near minimum wages this seems pretty unlikely to me.

Tiktaalik• 7 years ago

It's a grift that will never be profitable.

omarhaneef2• 7 years ago

The best way to understand this is to look at their financial statements:

https://investor.uber.com/news-events/news/press-release-det...

Generally, you would go to the 10-K to get a quick snap shot.

I direct you to look at the "CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS"

You can see that they made about 1.4B (in Q1) after paying the drivers but then they spent 2.2B on:

Operations and support, Sales and marketing, Research and development, General and administrative

Note, of these categories, Sales and Marketing was the largest and eliminating it completely (not recommending this) would get them to break even.

davewritescode• 7 years ago

Agreed, but like others have pointed out “marketing” includes marketing to drivers with incentives to drive. They’re not running advertisements they’re subsidizing rides on the driver and passenger side and calling it part of their marketing spend.

The problem with Uber is that their technology isn’t that innovative and their platform isn’t that sticky.

goobynight2• 7 years ago

A lot of people use it because it's so obvious that they're operating at a loss. That's why the ride is so cheap. If they brought prices up to what they "should" be, volume would go down or the competition would snatch it up.

If Uber wants to take a loss on my ride, I'll be there every time.

JumpCrisscross• 7 years ago

If they brought prices up to what they "should" be, volume would go down or the competition would snatch it up

Last I checked, Uber made money on each ride in New York and San Francisco. The model can make money. I just don't know if it can make money everywhere.

dheera• 7 years ago

... and if they brought prices up to what they "should" be, I'll just use Lyft. Or if that isn't an option, get to my destination on my own.

quickthrower23• 7 years ago

Drug dealers have been known to sell drugs to someone new cheap (perhaps at a loss) to get them hooked, and then once they are hooked jack the price up. Uber is trying to do that with transport.

sarah180• 7 years ago

Do you have a cite for that? I'm skeptical that there are a lot of "I don't know you, have some free drugs" organized loss-leader operations happening.

I suspect this is actually mostly propaganda and exaggeration, and that the actual practice—to the extent it exists—is more like offering a small sample to a well-known existing customer.

colinmhayes2• 7 years ago

What happens when the consumer realizes this drug dealer has jacked up prices because they're giving product away? They go to the corner and find a cheaper alternative.

codingdave• 7 years ago

The marketing team had more than 1,200...

I fully admit that I'm not in marketing, so there are surely nuances I don't know. But that scale of marketing department is orders of magnitude above any other place I have worked, with the possible exception of IBM in the 90s. Just maybe... this was a reasonable move.

rlanday3• 7 years ago

Uber's business model has the same problem as Groupon's, which is that they don't really have economies of scale. Every market requires a new team of people to run promotions to attract drivers and customers and match supply with demand.

smallgovt• 7 years ago

I can understand why every new market requires an operations team on the ground, but marketing ought to be centralized.

ethbro2• 7 years ago

"Do things that don't scale" ... and then cash out before the market notices.

larrydag• 7 years ago

Yes. Seems to be a mostly variable cost business. That means you need to lower your per unit cost. This might be their plan.

exadeci• 7 years ago

Yeah, Groupon did something similar in France, hired hundreds of sales guys to go to every possible shop in every city then fired them all and kept just a handful in each city and a team of permanent ones only contacting by phone in the main office.

dawhizkid• 7 years ago

The "marketing manager" role at Uber is an operations role and part of a local operations teams. Your main job is not "brand marketing" but attracting new drivers and managing local incentive spend.

They've most likely (wisely) decided to centralize those decisions, so not a huge surprise.

FWIW, the operations teams (small, local, non-technical teams stationed random cities around the world) built Uber into what it is today. Scaling/automating those jobs was always an inevitable.

freewilly10404• 7 years ago

Why is it wise? It wouldn't surprise me if some of the best strategies for this kind of ops is location specific.

aresant8• 7 years ago

Uber's marketing / customer acquisition cost is their highest non-driver line item by a significant multiple.

They spent ~$3,200,000,000 ($3.2 billion) on sales & marketing in 2018 of which ~$1,800,000,000 is direct media / HR cost to drive customer acquisition.

In 2019 this number, as of the first quarter, has gone up substantially to a >$4b run rate.

With a burdened cost of $150k/yr for every single member of the 1,200 marketing team that makes up $180m of the total.

Uber operates in 600+ international major markets.

1200 employees (5% of organization total) covering and executing nuanced marketplace approaches for a budget of that scale is not out of range.

(1) https://qz.com/1592971/uber-ipo-filling-reveals-how-it-spend...

twic2• 7 years ago

Have you got the right number of zeroes there? Three billion per year?

SilasX4• 7 years ago

Echoing twic's disbelief here. A quick googling turned up Coca-Cola's global advertising budget as being $4 billion/year [1].

Coca-Cola has made a yearly commitment to large ad spends. In 2017, the beverage manufacturer spent $3.96 billion, in 2016, $4 billion, and in 2015 $3.96 billion on global advertising.

But I'm not sure if that's a comparable figure, as "advertising" is only a subset of "marketing". Still, if the latter is basically just the former plus salaries, it still suggests Uber is overpaying and/or has some inefficiencies in how they operate here.

[1] https://www.investopedia.com/articles/markets/081315/look-co...

user59944614• 7 years ago

Just fire half of them to save half the money.

Marketing has large budgets to spend (multiple of their salaries) on marketing campaigns. They're usually incentivized to spend as much as possible on whichever marketing campaign they can come up with, with little accountability on whether it brings any ROI.

It's the equivalent of software engineers wanting to use the latest tools for resume building, no matter the situation. The difference is that marketing lives on spending money, hence cutting headcount there has a big multiplier on cost savings.

moksly• 7 years ago

Uber operates in 600+ international major markets.

Maybe it’s because I’m from a small country, but can a single country have more than one “major international market”?

dalbasal3• 7 years ago

Since we're talking about tech startup marketing budgets, it's a good time to reread http://www.paulgraham.com/yahoo.html

By 1998, Yahoo was the beneficiary of a de facto Ponzi scheme. Investors were excited about the Internet. One reason they were excited was Yahoo's revenue growth. So they invested in new Internet startups. The startups then used the money to buy ads on Yahoo to get traffic. Which caused yet more revenue growth for Yahoo, and further convinced investors the Internet was worth investing in. When I realized this one day, sitting in my cubicle, I jumped up like Archimedes in his bathtub, except instead of "Eureka!" I was shouting "Sell!"

cortesoft2• 7 years ago

Makes me think of my days working on a facebook app in 2007-8... every single app had the same revenue stream - selling installs to other apps. The price per install was crazy high, and this was before Facebook started enforcing rules about shady practices, so every app would do things like "Install this other app, and we give you these perks in our app"

It was ridiculous. There was no real money, just app developers paying each other for installs.

mrnobody_67• 7 years ago

40% of all invested VC dollars go to Facebook and Google in the form of customer acquisition costs

vmurthy3• 7 years ago

Thank you for this. Lovely read! :-)

noego• 7 years ago

Your comment reminds me of something Dan Luu had written about.

https://danluu.com/sounds-easy/

I can't think of a single large software company that doesn't regularly draw internet comments of the form “What do all the employees do?"

Granted he's mostly talking about engineers, but I'm sure someone more knowledgable about marketing could write an almost identical essay.

mr_crankypants2• 7 years ago

I can't think of a single large software company that doesn't regularly draw internet comments of the form “What do all the employees do?"

I also can't think of a single large software company that doesn't, in the long run, survive by either endlessly buying and extracting all the value out of smaller software companies, or creating a moat that makes it almost impossible for new competitors to emerge.

Having worked for a small software company that got acquired by a large one that used the former survival strategy, and therefore witnessed firsthand the subsequent doubling of headcount and simultaneous halving of overall productivity, I can offer one of what I assume are several possible answers: Paperwork. And lots of it.

aresant8• 7 years ago

A really simple way to think about this.

The promise of software at scale is that the marginal costs of selling one single additional unit are basically $0.00

As a result if your product sells for $500 you can spend $495 and still make money.

This leads to all sorts of adventures in driving that additional marginal unit sale such as:

- Localization - eg Microsoft Office is available in 102 languages! So now we need a local market product manager, sales team, distribution team, translator, QA, etc, etc.

- Enterprise - Huge swaths of money spent on conferences, thought leadership, any bullshit you can think of to potentially get a decision maker CTO to befriend somebody on your sales team.

- Government! - Selling to the gov't is extremely profitable but extremely long and complex sales cycle. Now we're hiring lobbyists, contract specialists, etc, etc.

- Support - Happy users are your mostly likely next buyers

etc etc

gridlockd• 7 years ago

Up to a point these arguments make sense, after that the much better explanation is Parkinson's Law.

Of course all these employees are doing something. People will always invent more unnecessary work if the budget is there.

If the budget isn't there, the unnecessary work just isn't done and nobody notices.

raverbashing• 7 years ago

My guess is: a specialized marketing team per country. Also remember they have to market to both sides: rider acquisition and driver acquisition

ryguytilidie• 7 years ago

I do recruiting and I had a client tell me they wanted a Design Manager from a specific set of companies. This included Uber. When I looked at how many Design Managers Uber had, I was blown away. I remember them having 50+. Seemed crazy.

grecy2• 7 years ago

Marketing runs the world now, because we've reached a point where companies really, really have to convince people to spend their money on whatever useless product is being pushed.

Ever notice there isn't marketing for potatoes, bread, rice, etc. ? People buy those things anyway. The latest smartphone? gotta convince everyone to buy it.

At my last company engineering spent $10m installing fiber into some remote community. The marketing for that project was $15m.

So the marketing around "doing something" costs more than actually doing it.

rightbyte• 7 years ago

15 million? How can local ads for a fiber network be so expensive? Just pay a bunch of kids to hand out flyers. Fiber is usually something people want.

If your numbers are correct it sounds like some kickback scam.

pessimizer2• 7 years ago

Quoted film budgets are usually about half the actual budget as a rule of thumb, because they don't mention the half spent on marketing.

That's why films are often known as flops even when they make their "budgets" back. You're not in the money until you double the budget.

edit: Also, considering the vast majority of that marketing money is spent before the film comes out these days, and all the sales are made within a month - as much is spent on convincing people that a film that nobody has seen is going to be good as is spent on the film.

sjg0074• 7 years ago

There's plenty of marketing for potatoes (Idaho), pork, milk, pistachios, avocados, beef, chicken etc... Usually trade groups but still.

themagician3• 7 years ago

Marketing is all they are.

The driver aren't employees. The cars in the fleet aren't their assets. The insurance is handled by someone else and there is no licensing.

Uber, itself, is just an app with a giant marketing department. The app itself isn't even that different than it was in 2011. 99% of the functionality that people actually use is exactly the same as it was when they started.

QuixoticQuibit• 7 years ago

Doesn’t Uber also lease cars to drivers? I was surprised to see in the Bay Area that so many drivers had fairly new cars. I asked one about it and he said that Uber leased it out. Presumably a portion of the driver’s income goes directly towards the car.

freewilly10404• 7 years ago

The "just an app" critique is often repeated and makes no sense. The app is just the interface.

owaislone• 7 years ago

Uber has stalls in popular areas like shopping malls in all major cities. I see at least half a dozen Uber employees trying to sign people up to be drivers all the time. Considering the number of international markets they operate in and the nuances of each market, I don't think it's as that surprising.

yashap• 7 years ago

When you grow as fast as Uber has been, you accumulate a TONNE of fat. Multiple teams hiring people for the same role, creation of roles that have no real value, too many middle managers, etc.

It’s so hard to not get into this state during rapid growth, and to get out of it, and return to being a focused, lean, efficient (and eventually profitable) company, layoffs are basically the only answer. Often LOTS of layoffs. In a few years, I’ll bet many other departments at Uber are hit the way marketing just was.

paxys• 7 years ago

It was expected to happen, now that they have to scale down on aggressive expansion and focus on making their existing markets profitable instead.

fluxic• 7 years ago

Love to revisit this piece every few years. Why food delivery will never be profitable: "The Food Delivery Death Star" https://medium.com/@review/the-food-delivery-death-star-85f9...

mevile• 7 years ago

Pizza delivery is profitable. Pizza comes in a shape easy for transportation, the size and value of the delivery is economical for a delivery business and there's an established culture around ordering pizza for delivery.

The food delivery companies just need to figure out these problems, which a hard, for non-pizza foods.

Scoundreller3• 7 years ago

Also helps that pizzas themselves are dirt cheap to make. Anything that makes them expensive is chargeable. Continuous production is easy and cheap, so doubling your volume by adding delivery is achievable with the same kitchen.

ghaff3• 7 years ago

Well, Chinese food is also a commonly delivered item in many places--including but not limited to cities. So I'm not sure pizza is all that unique.

That said, a lot of food delivery is some high school kid driving his car around mostly working for tips. You start tacking on the costs of a large delivery-as-a-service company and your costs go up a lot without all that much economy of scale.

bduerst8• 7 years ago

Is it though?

Most pizza delivery is an ancillary service to the restaurant itself. Are there very many profitable pizza-delivery only businesses?

Also you could argue that for the genre of restaurants where delivery is profitable as an ancillary service (pizza, chinese, etc.), they already offer delivery and there isn't any profitable market for the restaurants where they didn't have it before.

bob_theslob646• 7 years ago

Lol but what about the person who makes the pizza? Taking 30% is steep.

HaloZero• 7 years ago

Grubhub makes a profit? https://en.wikipedia.org/wiki/Grubhub

jcims3• 7 years ago

Drone delivery will fix that.

golergka• 7 years ago

Great article, thanks for the link.

But I can't help but notice that these numbers are all for US, and US is a very prosperous country with low income inequality and high-paid workers. In other countries, where labor of low-level workers costs less (compared to the purchasing power of those who order delivery) it could be a completely different picture. Here, I earn a salary which would be around middle-class in US, and yet, my Uber ride usually costs around $3-4 (as opposed to $30 in the article).

vmurthy3• 7 years ago

If fund raising is any indication of this prediction (my bet is yes), look no further than the two big players in India - Swiggy and Zomato [0] and [1]. Losses are in the range of 70 million dollars or so for FY17-18 [2]

[0] https://www.livemint.com/Companies/9cuyxq0GMXuDWaGuMWYsZL/Sw...

[1]https://inc42.com/buzz/zomato-in-talks-for-1bn-war-chest-to-...

[2]https://www.livemint.com/Companies/cjK3T36vZl1easaVBMXVNN/Sw...

deminature• 7 years ago

Grubhub has been profitable literally since the late 90s. This article is terribly researched.

duxup• 7 years ago

Someone did a calculation about what they were paying drivers of they were converted to an hourly rate if you averaged it.

IIRC, it was somewhere near minimum wage. If you can't make a profit or are far from profitable and your front line workers are making that little money.... how do you ever without dramatically raising prices?

I really doubt corporate office cuts can achieve it.

akeck• 7 years ago

If a public company open-sources something (as Uber has done on occasion) that gives them a competitive advantage, could they be sued by shareholders for giving away something valuable?

_delirium• 7 years ago

Not successfully unless there's a smoking-gun type thing, like someone involved in the decisions having a clear conflict of interest with a different company they own. Courts generally won't second-guess business decisions, and if Uber says something like "we open-sourced this to build goodwill", a court is going to say fine, weighing the pros and cons of that strategy is their call, and if shareholders disagree with the strategy, they can elect a different board.

beefman• 7 years ago

They overhired so badly it's an existential threat to the company, and not even from a cost perspective. Should lay off closer to 4000, but that would have negative cultural impact too. So they're stuck. Always slightly underhire so you can be sure you didn't overhire.

williamDafoe7• 7 years ago

Companies that perform layoffs have underperforming stock over the next 5 years. so they are trying to lay off a small enough number of people that they don't appear to be the weakening company that they are....

rsp1984• 7 years ago

Can someone with insight into the matter explain, from a high level, what the big concerns are over Ubers ability to run profitably?

In my naive view they are "just running an app" / acting as a mobility marketplace and they make money on each transaction. Given the traction and market dominance they have this sounds like a really attractive business. So how do they manage to run such big losses every year and which items on the expense side are so crucial for the business that nobody at Uber dares to cut into them?

cosmodisk2• 7 years ago

It's not just an app. Apart from employing tons of highly paid engineers in Bay area and the rest of the world,they have to deal woth less glamorous,offline part of the business: local "recruitment" centres,where drivers have to be recruited,trained,etc.This is the probably in most larger cities.Also, the cost of acquisition of customers is in the tune of $billioms every year.Ads, subsidies, initiatives and etc. Uber absolutely can be profitable, however it feels like im order for it to be one it'd have to sack 70% of their back office,reduce the number of driver and agree to heavily adjusted valuation..

sbarre• 7 years ago

Literally read the rest of the comments in this thread and that should give you a lot of additional information.

EnFinlay• 7 years ago

I have no insight into the matter.

My guess is that their traction and market dominance are far more fragile than you think. Because their drivers are contractors and not employees, they can't be forced to only work for Uber, so even though they created the pool of drivers, they have not "captured" them. So a huge cost is the ride subsidies which maintain their market position. Once the ride subsidies end, there is no reason that a locally focused company can't compete for the same drivers and riders.

From what I've read, when Uber started their app technology was borderline magical (pushed the boundaries of what smartphones could do), but since that's no longer the case, there is much less of a barrier to entry.

CydeWeys4• 7 years ago

They are selling lots of rides at less than the cost to provide said rides. That's how they're losing money.

If the price of the rides were correct, they'd lose market share to competitors, and fewer people would be willing to pay them.

TrackerFF• 7 years ago

Right now I would assume uncertainty being one huge risk. They have so many laws to follow, and to some certain get around - I wouldn't be surprised if they have teams of high-$$$ lawyers (on retainer) in every single country they're operating in, and probably lobbyists too.

Then there's local competition. Most countries have their own uber-like startups, which may be competitive in other areas.

And as others have mentioned, this business model doesn't scale very well. For every new country they enter, they have to hire new teams, do the marketing, put themselves into the laws of the land.

But I specifically think the law-aspect is the largest risk to them. One local ruling could basically wipe out their margins and business model, and essentially put their investments at a loss in said country.

It's not like they can enter a country with a 100% absence of established Taxi companies - wherever they go, and have gone, there have been opposition that's tried to get them classified as a regular taxi company.

projektfu3• 7 years ago

The big concerns are whether drivers will continue to accept the pay they are offered. In 2018 they spent $837 million on excess pay to get drivers to accept certain trips. Insurance costs are also high, a large portion of their revenue.

Assuming their chart is representative of an average booking, $1 in excess incentives corresponds to a $10 booking. If so, 15-20% of their bookings appear to produce no revenue and cost money through excess incentives. They must be doing this to stay ahead of their competitors and/or encourage people to use the app.

Once the gross revenue picture is done, you have the relatively fixed operating costs. They are spending a fortune on marketing and consumer incentives, as are their competitors.

Overall they lost a bunch of money but made up for it through selling off the Russia/SEA businesses for a few billion. They also marked up their investment in Didi (which I believe they spun off before). But that's a paper increase.

So, they could become leaner. They also may continue to grow their way out of the hole. They do make money on most transactions. But becoming operating-profitable is a matter of putting competitors out of business and increasing demand for rideshare generally. They also need to get people to pay for the currently unprofitable trips. (Personally, I wonder how often they are leaving revenue on the table with their incentives.)

freewilly10404• 7 years ago

What sorts of trips are not profitable for them?

ummonk• 7 years ago

It is possible that consumer demand would greatly reduce if they had to pay prices that are sufficient to cover the cost at which drivers are willing to drive.

My general impression is that Uber and Lyft have artificially inflated the size of the ride sharing market by subsidizing rides with investor money.

squarite2• 7 years ago

Well if any of those 400 are in SF/NY, and are reading this, we're hiring for a marketing manager for my team at Square! PM me or apply here: https://www.smartrecruiters.com/Square/743999690593237

rb808• 7 years ago

Link says job has expired

squarite2• 7 years ago

eek thanks! replaced.

UberIsAnnoying• 7 years ago

I hope it included the people responsible for sending me the most abusive SPAM campaigns I have had in years.

1) I never subscribed to these e-mails

2) The e-mails contain a link to unsubscribe in this format: click.uber.com/f/a/<strings>

3) You get redirected to uber.com/unsubscribe

4) They make you manually fill your e-mail

5) When you press unsubscribe:

- It makes a request to uber.com/api/unsubscribe?email=<email-address>&et_job_id=&et_list_id=&et_batch_id=&message_uuid=&content_identifier=

- Response is always 404 Not Found (Tested on Firefox, Chrome, IE, Edge)

spectramax• 7 years ago

I am no lawyer but pretty sure this violates:

https://en.m.wikipedia.org/wiki/CAN-SPAM_Act_of_2003

buckminster• 7 years ago

Sure it does, but ignoring regulations is Uber's schtick. Using their services is the moral equivalent of buying stolen goods.

BigJono2• 7 years ago

Uber's engineering is dodgy across the board.

There was a good year or so period where I ran into 4 or 5 critical bugs that stopped me using the service entirely for days or weeks at a time. One of the dumbest was being unable to enter a credit card because the form required a field that wasn't being rendered. 6 months later I switch credit cards and again can't use the app for weeks because it wants a 5 digit postcode even after setting the country to 'Australia', but the server side check was still working and 86'd any combination of bs 5-digit code that was working.

Several times I've had something go wrong with the ordering system itself (on the UberEats side). Once an order was put through twice and two meals showed up on my doorstep. Another time I copped a cryptic error message followed by a Javascript crash and my card was charged but no order was logged upon refreshing the page (which indicates to me that something wasn't properly atomic and maybe some business logic was happening on the front end that shouldn't be? Presumably fixed now, I hope)

Even right now, as I type this, there's a bug on UberEats introduced in the last few days or weeks that's leaking variable names through to the front-end. I've got 'components.BadgeSoldOut.message' and 'components.CartItemCustomization.upTo' all over the place. I'm sure when that gets fixed another one will crop up next week.

404s and broken systems seem par for the course.

muks• 7 years ago

Here's an example of the quality of Uber's customer support: https://twitter.com/muks/status/1137237193657868289

This was after I reported that my 72 year old mother was asked to get out of the car by the driver after sitting in it, because he learned of the destination after starting the trip and did not want to take her there. Uber does not show the destination to the driver before starting the trip.

I was probably speaking to a bot, or nobody had the patience to fix the problem.

Edit: I haven't used Uber since that incident.

throwaway082729• 7 years ago

Engineering will be next. Expect this from more companies in the valley as the reality of being a public company looms on the newly public companies.

gionnierob• 7 years ago

I bet they get to profitability before driverless cars. The alternative is Taxis, which are an awful experience. And ubiquitous driverless cars could be a decade away or more.

muzani• 7 years ago

I had an impression that they hired lots of people at very high salaries to build fast and establish a presence all over the world.

Now that they have something nice built and are all over the world, it's a great time to cut costs. A lot of the people they've hired probably have some equity and so they're probably just fine getting laid off after the IPO.

kaikai• 7 years ago

Not if they're still in the lockup and can't sell off stock in order to cover the taxes from exercising.

williamDafoe7• 7 years ago

The last few years both companies give out stock grants every month after 1 year so if somebody is laid off they don't lose equity because they already own the equity outright. Lyft even allowed people to keep their vested stock options for seven years after they leave.

chiefalchemist• 7 years ago

Uber operates in 600+ international major markets.

.75 persons per market? While I'm sure that cost ads up, in terms of "human resources" it's relatively minor at best.

codesushi42• 7 years ago

Good. I hope this is the beginning of the end for this awful tech company. Good riddance.

billpg• 7 years ago

Uber actually employ people?

Uber Lays Off 400

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