Trying to understand why Uber is not profitable

Intuitive Surgical Vater
Oct 17 18 Comments

Long time ago, an Uber driver told me that Uber just connect them to customers and take money from that. Uber doesn't need to pay for gas, car maintenance etc.

But Uber is still not profitable last time I checked. What did they spend so much money on? I am thinking an analogy with real estate agents, not sure how they could lose do much money.

Be gentle please, I am not in SW, so I don't quite understand the operations of Uber.

TC 130K

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TOP 18 Comments
  • Oracle
    not_larry

    Oracle

    PRE
    Amazon
    not_larrymore
    High TCs for SWEs.
    Oct 17 4
    • Lyft DuNv13
      No. It’s driver incentives, marketing, user acquisition, discounts, etc. They lose money on every ride and food delivery because of that. The running joke is that if we really wanted to hurt our competitor, we should just use their platform more
      Oct 17
    • Oracle
      not_larry

      Oracle

      PRE
      Amazon
      not_larrymore
      😃
      Oct 17
    • Uber tvBN63
      Same is true for Lyft, of course.

      Well, not for food delivery.
      Oct 17
    • Facebook public2
      Yall should pull a silicon valley and do it lol
      Oct 17
  • Must be my high TC
    Oct 17 0
  • New EhIG67
    Uber loses money on every car ride. It has to pay drivers enough to keep them incentivised to drive but prices low for riders. It's made especially bad by the fact that Lyft exists and they are also in a price war
    Oct 17 0
  • Cigna frtesd4532
    They reinvest the money they are making to expand in new markets, research new initiatives (Uber eats/self driving cars for example), and improve their products. If they decided to stop aiming for growth they could easily cut back on these things and be profitable but they'd be missing out on profit over the long run. It's like how amazon was not profitable for a long time while they aimed to grow.
    Oct 17 0
  • LinkedIn Uranus⛢
    Uber doesn’t make much money on its revenue. Its gross margin is very thin compared to G/FB.
    Oct 17 0
  • Facebook public2
    Employees, marketing, insursnce, and low margins to protect or grow market share.
    Oct 17 0
  • Twitch jellybeano
    Many startups don't seem to understand that established industries aren't wholly inefficient. They spent tons of money to buy market share of thin-margin opportunities.

    Uber, Lyft, BlueApron, Groupon, etc. don't have a chance unless they bring something new to the table besides a frictionless app.

    I believe grocery/food delivery companies will also tank when they go public.
    Oct 17 3
    • New / Mgmt
      xsAS42

      New Mgmt

      PRE
      PARC
      xsAS42more
      All last mile logistics is pure garbage. Amazon is the only company to pull it off and we know all the other plays they have that keep them afloat.
      Oct 17
    • Facebook h2648psj
      That's interesting. I wonder if it's because last mile problems are just too different in every geo/city, so it's just really hard to find scalable solutions.
      Oct 18
    • New / Mgmt
      xsAS42

      New Mgmt

      PRE
      PARC
      xsAS42more
      It's really because the only true solution there is autonomous, but society is no where close to that yet.
      Oct 19
  • Microsoft
    Tier 1

    Microsoft

    BIO
    #1 in Prestige
    Tier 1more
    If I understand correctly, Uber makes money on rides at the typical price, but then offers so many discounts and promos, that they end up making a loss overall.
    Oct 17 0
  • Ford gOfF28
    One huge spend for these companies is insurance. As it was described to me, a large amount of money goes to insurance for things like lawsuits. The person I spoke to worked at one of these places recruiting data scientists to help reduce their insurance costs by small percentages, which could be why Uber and Lyft and others want self driving cars. No driver, less chance of something happening to the passenger where the company could get sued.
    Oct 17 0
  • Intuitive Surgical Vater
    OP
    Op here, thank you all for such thoughtful answers. Looks like most would agree it's the thin margin probably due to discounts and promotions, as well as paying the attempt to grow
    Oct 17 0
  • New / Mgmt
    xsAS42

    New Mgmt

    PRE
    PARC
    xsAS42more
    High salaries + high marketing spend = death
    Oct 17 0

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