Money Why Uber lost $2.2 billion in 9 months

12:20  12 january  2017
12:20  12 january  2017 Source:   Vox.com

Uber is finally giving the public a glimpse of its stunning trove of transit data

  Uber is finally giving the public a glimpse of its stunning trove of transit data This summer, Uber completed its two billionth ride. The milestone came just six months after the company tallied trip number 1 billion, a testament to…This week, Uber is sharing a sliver of that information through a new project, Movement. The dedicated website uses anonymized, aggregated Uber data to create a snapshot of vehicle travel times—you might say, movement—across customized date ranges, and along particular routes, in a given city. The site is geared toward urban planners, policy wonks, and city officials but anyone can request access. Eventually, Uber says it will be open to the public.

It’s not unusual for a new company to lose money as it seeks market share and traction, but Uber is testing investors’ patience to a degree that’s unprecedented in the history of Silicon Valley. A December report from Bloomberg showed that the car-hailing app lost over $ 2 . 2 billion in the first nine months of 2016. That’s a staggering sum, and leaked documents suggest that Uber ’s losses have grown in scale along with the company — rather than shrinking in a way that suggests a clear path to profitability.

It’s not unusual for a new company to lose money as it seeks market share and traction, but Uber is testing investors’ patience to a degree that’s unprecedented in the history of Silicon Valley. A December report from Bloomberg showed that the car-hailing app lost over $ 2 . 2 billion in the first nine months of 2016. That’s a staggering sum, and leaked documents suggest that Uber ’s losses have grown in scale along with the company — rather than shrinking in a way that suggests a clear path to profitability.

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It’s not unusual for a new company to lose money as it seeks market share and traction, but Uber is testing investors’ patience to a degree that’s unprecedented in the history of Silicon Valley.

Uber's self-driving tech could just be an 'autonomous top hat'

  Uber's self-driving tech could just be an 'autonomous top hat' General Motors Vice-President Mark Reuss sat down for an interview with Business Insider in which the company veteran discussed Donald Trump, the strong US auto market, and self-driving cars. His thoughts on autonomous vehicles were especially interesting and provocative.GM's position on autonomous tech is closely tied with its acquisition of self-driving startup Cruise Automation in 2016 and it's $500-million investment in Lyft.

While Uber makes billions in the U.S. and countless other countries where they’re available, they’re also losing billions , too. To get an idea how this is happening, however, you have to understand how the company makes their money in the first place. Uber relies on drivers, independent contractors, and some employees for their revenue. While the company’s revenues are supposedly at .5 billion in the first nine months of the year, a loss of $ 2 . 2 billion is staggering, even for a major company like Uber . No one knows why Uber is losing so much money.

San Diego, Struggling to Shift Away From Driving, Falling Short of Climate Goals (KPBS). Study: America’s “Net Tax” on Gas Has Fallen by Half Since 2003 (Carbon Brief). Legislation Allowing Vote on .5 Billion MARTA Expansion Introduced in Georgia (Curbed). Trying to Make Nice With Cities, Uber Releases Traffic Data (WaPo). Vox: Why Uber Lost $ 2 . 2 Billion in Nine Months . AP: Call Uber and Lyft “Ride Hailing” Apps, Not “Ride Sharing”.

A December report from Bloomberg showed that the car-hailing app lost over $2.2 billion in the first nine months of 2016. That’s a staggering sum, and leaked documents suggest that Uber’s losses have grown in scale along with the company — rather than shrinking in a way that suggests a clear path to profitability.

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CHART: The decline in Sydney taxi plate prices since the arrival of Uber

  CHART: The decline in Sydney taxi plate prices since the arrival of Uber Ride share services such as Uber have had a pronounced impact since their arrival in Australia in late 2012, and not just on the hip pocket of consumers.  As this excellent chart posted on Twitter by Jamie Hall shows, it's also had a large impact on the cost of taxis plates in Sydney.The Uber effect pic.twitter.com/efoKm9d45r— Jamie Hall (@jamie_hall) January 11, 2017After topping out at $430,428 in September 2012, the average transfer price has now fallen to $217,500 as at the end of last year.

Which is why Uber is investing so heavily in self-driving cars. It just spent 0 million on the autonomous trucking company Otto, in the interest of bolstering its own (likely very expensive) self-driving research and development. Remove the driver from the equation, and profitability suddenly looks less out of reach. Uber 's bumpy road to world domination. Uber ’s new self-driving Volvo SUVs have been spotted in Pittsburgh Oct 25, 12:24pm EDT. Uber reportedly lost .27 billion in just six months Aug 25, 4:14pm EDT.

There’s a reason for the snark: Republicans, who control the Senate, are starting to hold nomination hearings before the nominees have completed background checks and ethics clearances that are traditionally required of Cabinet appointees. These were the first two standards that McConnell demanded of Obama’s Cabinet nominees eight years ago — and the Obama administration met — when Democrats controlled the Senate. Why Uber lost $ 2 . 2 billion in 9 months .

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Uber has has raised $11 billion from venture capital investors to pay the bills so far, but if losses continue at their recent pace, even that massive war chest will only last for a few more years.

Uber has been repeatedly touted as a new model for urban transportation. But if Uber never becomes profitable, that will suggest a different interpretation: that Uber hasn’t really transformed the transportation market at all. It’s just convinced some gullible investors to subsidize a lot of peoples’ taxi rides.

There are some smart arguments on both sides of this debate, but I suspect Uber really has figured out how to make the taxi market more efficient. However, this might not actually matter that much in the long run. The car industry is on the cusp of introducing self-driving cars. That has the potential to totally transform the industry, and Uber is gambling that its strong position in ride-sharing will give it an equally strong position in a self-driving car market that could be a lot more lucrative.

Google Maps’ redesigned ridesharing feature lets you hail an Uber without ever leaving the app

  Google Maps’ redesigned ridesharing feature lets you hail an Uber without ever leaving the app Google today announced a small update to Google Maps that makes it easier to hail a ridesharing service like Uber, Lyft, Gett or Hailo from the app. With this update, Google Maps now feels a bit more like the native apps those services already offer. Instead of showing you a list with only a few ride options, the app now shows a map with the location of nearby cars and a larger list of options for each service (no word on whether the UberChopper will ever make an appearance in this menu, though).

In the first nine months of this year, the ride-hailing company lost significantly more than $ 2 . 2 billion , according to a person familiar with the matter. In the third quarter, Uber lost more than 0 million, not including its Chinese operation. At the same time, the company’s revenue has continued to grow even after leaving the world’s most populous country.

Why Uber lost $ 2 . 2 billion in nine months (Vox). Good article by Timothy V. Lee summarizing a lot of what has been written about Uber and the billion that it has raised from investors — money that goes toward subsidizing its losses. The big question is when or what will help Uber turn the corner to profitability. Capturing more market share? Certainly. But here’s Timothy’s theory

Uber might be following Amazon’s strategy

Uber has lost money every year since it was founded in 2009, and its losses seem to keep growing. An obvious interpretation of these results is that Uber’s fundamental business is unsound, and the company will never reach profitability.

But it’s important to remember that Uber’s results during its first eight years look a lot like those of Amazon during its early years. Every year from its founding in 1994 until 2000, Amazon lost more money than the year before, leading skeptics to wonder if the company could ever turn a profit.

But Amazon’s investors knew that Jeff Bezos wasn’t just lighting their money on fire. Amazon sold books differently than a conventional book store, using a website and warehouses instead of expensive retail locations staffed by hourly sales clerks. As a result, Amazon’s costs per book sold were always lower than those of Borders or Barnes and Noble. And thanks to economies of scale in software and warehousing, Amazon’s costs per book kept going down as the company grew.

Amazon’s unprofitability during the 1990s was an illusion created by Amazon’s aggressive investment in growth. Amazon was spending a lot of money on things like warehouses and new software that were going to take a few years to pay off. The company could have turned a profit earlier by spending less on these things, but Bezos convinced Wall Street that it was worth prioritizing growth over profits (indeed, when investors briefly soured on tech companies after the 2000 stock market crash, Amazon simply shifted to a lower gear and began showing modest profits).

Uber is sending out mapping cars to Australian streets

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Martin Cowen / Tnooz: Uber allegedly loses 0 million in three months but China sale nets $ 2 . 2 billion profit. Twitter updates search results so tweets are displayed by relevance, not in reverse chronological order — Twitter is updating its search results so that tweets will be ranked based on relevance instead of by timeline, bringing search in line with what users have experienced on their timeline for the past 10 months .

Bloomberg, citing a person familiar with the company’s finances, reported the company has lost more than $ 2 . 2 billion in the first nine months of 2016. Over the same period, the ride-sharing company generated an about .76 billion in net revenue—the amount it generates after paying drivers. Why Uber Is Losing Money Faster Than Any Tech Company Ever.

The optimistic case for Uber says that it’s just pursuing an even more ambitious version of Amazon’s strategy — that Uber’s core business is sound, but Uber is investing heavily in things like expanding to India and developing self-driving cars. Perhaps all that new spending is simply offsetting the profits of the more mature parts of Uber’s business.

Without access to detailed financial data, it’s hard to say for sure if this theory is correct. And as a privately-held company, Uber isn’t under any obligation to publish its financial results. But at a minimum, Uber’s core business probably isn’t as disastrously money-losing as its top-line numbers suggest. Uber really is investing heavily in geographic expansion as well as research and development — and those investments should expect to pull down profits in the short run even as it sets the company up for potentially larger profits in the long run.

Critics say Uber’s core business is unsound

Yellow cabs drive on 7th Avenue towards Times Square in...© Provided by Vox.com Yellow cabs drive on 7th Avenue towards Times Square in... In an epic five-part series of blog posts, transportation industry analyst Hubert Horan lays out the case for skepticism about Uber’s hype. In his view, Uber just doesn’t have a cost advantage over its competitors the way Amazon did. Amazon saved money by getting rid of expensive retail stores and sales clerks. In contrast, an Uber ride still requires a car, a driver, and some fuel just like a conventional taxi ride. So there isn’t much room for Uber to undercut its competitors.

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In the first nine months of this year, the ride-hailing company lost significantly more than $ 2 . 2 billion , according to a person familiar with the matter. In the third quarter, Uber lost more than 0 million, not including its Chinese operation. At the same time, the company’s revenue has continued to grow even after leaving the world’s most populous country.

“This industry has a simple cost structure,” Horan says. “Labor is about 58 percent, fuel is 9 percent, and so forth.”

Of course, this flies in the face of many customers’ experience. It sure seems like Uber has figured out how to provide a cleaner, faster ride at a lower fare. But Horan argues that this is entirely a reflection of the subsidies provided by Uber’s investors. Uber rides aren’t actually cheaper to provide than conventional taxi rides, Horan believes, it just seems like it because Uber is taking a loss on every ride.

An obvious objection here is that Uber’s investors are not idiots. They know perfectly well that “lose money on every ride and make it up on volume” isn’t a viable business model. And when they made their investments, they presumably had access to internal financial data that isn’t available to the rest of us. It seems very unlikely that Uber could convince investors to give it $11 billion to continue pursuing a business model whose numbers didn’t add up.

Horan argues that Uber is accepting big losses now in an effort to drive conventional taxi companies and rivals like Lyft out of business. “Their growth is predatory,” Horan argues. “They are trying to displace more efficient producers.”

Once it does that, Horan predicts, Uber will enjoy a robust monopoly in the taxicab market. And it will be able to make big profits by raising prices — especially surge prices — and ultimately charging customers more than they were paying before Uber came along.

Uber’s vast network makes taxi rides faster and cheaper

Uber drivers strike over fare cuts in New York© Provided by Vox.com Uber drivers strike over fare cuts in New York The other possibility — one that seems more likely to me — is that Uber really has figured out ways to make the taxicab market more efficient. I see three big ways that Uber’s model is superior to conventional taxicabs.

This is how much we spent on apps last year

  This is how much we spent on apps last year We spent a while lot of time — and money — using apps in 2016. The market research company App Annie just surveyed the app landscape, and says we spent 900 billion hours using apps. That’s 150 billion more than the prior year, and constitutes a record."This is both a combination of more people using smartphones globally and users spending greater amounts of time on them as more and more functions migrate to mobile (banking, video streaming, dating, etc.)," says AppAnnie's senior vice-president Danielle Levitas. And we downloaded some 90 billion apps, on both the Apple iTunes app store and Google Play, vs. 77 billion in 2015.

Fast forward three months , when overnight Bloomberg reported that Uber 's cash burn problems continued, and in the third quarter, Uber lost another 0 million, bringing its total loss for the first nine months of the year to "significantly more" than $ 2 . 2 billion . "the company's head of finance, Gautam Gupta said that subsidies for Uber 's drivers are responsible for the majority of the company's losses globally". If I were an Uber driver I would ask, if I can get Uber to subsidize me, why should I spend money on fuel to go pick up an obnoxious, drunken customer who wants me to blow him or he

Why Uber survives and thrives in China (Part 1).

The most obvious one is that smartphone hailing is inherently more customer-friendly than having to call an old-fashioned taxi dispatcher. The Uber app gives customers a realistic estimate of how how long it will take for a car to pick them up. And once a customer hails a cab, it allows him to track a car’s progress.

That’s much nicer than the traditional taxicab model where you’d call for a cab and then have to wait an unknown period of time for it to arrive — with no way to track the car’s progress. Before Uber came along, calling a cab was so inconvenient and confusing that many people didn’t even bother.

And Uber’s pickup times have gotten even shorter as the company’s fleet has grown. The more drivers a ride-hailing company has on the road, the closer the nearest car will be to any given customer — and hence the less time customers have to wait to get picked up. This creates a virtuous circle: more drivers improve the customer experience, which attracts more customers. And more customers attract still more drivers. In short, Uber is expanding the market for taxi services. It’s not just taking business away from traditional taxicabs.

A similar virtuous circle operates on the driver’s side of the market. As Uber gets more customers, it reduces the average distance a driver must drive to reach a customer — and hence the amount of time they waste driving without getting paid. A larger market also helps to smooth out demand, reducing the average time a driver spends waiting for the next customer call. The result: as Uber grows, its drivers are able to complete more fares per hour of work.

And this suggests one hole in Horan’s argument: if Uber can use driver time more efficiently, that really could lead to a sustainable cost advantage. Suppose the greater density of Uber’s network allowed the average Uber driver in a city to complete three fares in an hour, compared to two for a conventional taxi driver. In that case, Uber could charge customers 30 percent less than conventional taxicabs and its drivers would still be able to earn 5 percent more per hour.

Uber to pay $20 million to settle U.S. claims it misled drivers

  Uber to pay $20 million to settle U.S. claims it misled drivers <p>Ride-hailing company Uber Technologies Inc has agreed to pay $20 million to settle claims by the U.S. government that it exaggerated prospective earnings in seeking to recruit drivers, documents filed with a federal court on Thursday showed.</p>The company had posted on its website that some Uber drivers made more than $90,000 in New York and $74,000 in San Francisco when the real earnings were considerably less, the Federal Trade Commission said in a court filing.

ALL VIEWS. Tap to find out. The ride-hailing company Uber continues to hemorrhage money. No official figures have been released by the privately held firm, but sources tell news organisations that between July and September it lost more than 0 million (772 million euros). Uber is in a price war with rival Lyft in the US and has also been spending heavily on things like experimental self-driving cars. For the first nine months of this year it lost well over $ 2 . 2 billion (2.12 billion euros). However net revenue – the amount of money from fares – continues to rise.

In economics jargon, this is known as a network effect. It’s the reason that eBay has a stranglehold over the collectibles market and Craigslist dominates online classified ads. Sellers list their goods on these markets because they have the most buyers; buyers go to them because they offer the largest selection. Once a dominant company is established in a two-sided market like this, it’s hard for anyone else to create a viable competitor.

Horan is skeptical of this theory, arguing that in the pre-smartphone era there was no tendency for the biggest taxi companies to dominate the market. But it’s possible that the economics of smartphone-based hailing is different from the conventional taxicab market where passengers called a dispatcher on the telephone. Old fashioned taxi dispatchers didn’t have detailed GPS data to determine which taxicab was closest to a particular passenger. Uber’s software does.

This suggests a reason Uber is spending so lavishly to gain market share in cities around the world: the company may believe that network effects will make each city a winner-take-all market like classified ads. If Uber allows some other company to become dominant in a particular city, network effects will start working against them and it might become impossible to dislodge them. So Uber is offering lavish subsidies to both drivers and passengers to try to become the dominant taxicab operator in as many markets as possible.

In some ways, this dovetails with Horan’s view that Uber is trying to create a taxi monopoly. But there’s one important difference: if Uber’s dominance is cemented by lower costs made possible by network effects, that would imply that Uber could become profitable without ever raising fares to pre-Uber levels. An Uber-dominated market might be a lot more efficient than a competitive one, leaving room for lower fares, higher driver compensation, and healthy profits for Uber shareholders.

This is all a dress rehearsal for self-driving cars

Salon Viva Technology, Startup connect au Parc des expositions de la Porte de Versailles© Provided by Vox.com Salon Viva Technology, Startup connect au Parc des expositions de la Porte de Versailles Ultimately, it might not matter all that much who wins the conventional ride-sharing market, because that market is likely to be transformed by self-driving cars within the next decade.

Whether or not you think Uber’s past innovations have given it a cost advantage over conventional taxicab companies, it’s clear that these cost advantages are small compared to the potential cost savings that could occur if self-driving technology becomes available. Driver compensation accounts for more than half the cost of a typical cab ride, so a self-driving car company could charge half of what conventional taxis charge and still make a healthy profit.

The real prize in the ride-sharing wars, then, isn’t the conventional ride-sharing market itself. Rather, it’s the opportunity to become the customer’s gateway to the emerging self-driving car market. There are good reasons to think that most self-driving cars will be hailed on demand rather than owned by individual drivers. If that’s true, having the most popular ride-hailing app will be a huge strategic advantage in the self-driving car market.

If that’s Uber’s real strategy — and the company is investing heavily in self-driving technology — then the profitability of the company’s existing ride-sharing business might be beside the point. Even if Uber can never turn a profit charging its current fares with human drivers, the company will definitely be able to turn a profit renting self-driving cars at those rates.

The big risk for Uber’s investors, however, is that dominance of the human-driven ride-sharing market might not actually translate into a strong position in self-driving technology. If Waymo — Google’s self-driving car subsidiary — or one of the carmakers gets usable self-driving car technology before Uber, it might not be very difficult build a rival ride-hailing app. And then the billions Uber has spent to dominate the human-driven ride-hailing market might prove to be wasted.

Uber to pay $20 million to settle U.S. claims it misled drivers .
<p>Ride-hailing company Uber Technologies Inc has agreed to pay $20 million to settle claims by the U.S. government that it exaggerated prospective earnings in seeking to recruit drivers, documents filed with a federal court on Thursday showed.</p>The company had posted on its website that some Uber drivers made more than $90,000 in New York and $74,000 in San Francisco when the real earnings were considerably less, the Federal Trade Commission said in a court filing.

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