Uber will fail like PanAm

Uber BarH
Feb 17 50 Comments

Dara foolishly thinks losing money in the short term will return long term values. He wants to become a low operating margin, high volume business - like Amazon. Uber is not a low cost product because of OH leverage, but only bc they heavily subsidize their fares - like PanAm. Amazon has a cash cow bankrolling their low margin business, Uber does not. if Uber doesn’t put up a positive cash flow cow in the next 3 years, Uber will be forced to largely scale down their operations and make it profitable hence most of you in Sf will be laid off in favor for cheaper employees else where. Your RSUs will be worth 20-45% of the value today. Run, run fast, run far, you don’t want to be a part of this when it implodes.

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TOP 50 Comments
  • Workday gluon23
    Interesting post. Why tag salesforce?
    Feb 17 0
  • Microsoft ThxObama
    Dont worry, Dara will leave just at the right time. See Expedia.
    Feb 17 0
  • New / Eng sparked
    The other thing that is going to really hurt Uber’s profitability moving forward is the cost of entry for competition is insanely low so the second Uber starts making serious money they are guaranteed to find themselves in a race to the bottom against new comers.
    Feb 17 4
    • Amazon JSnowflake
      Yeah, Uber's core business has network effects but pretty low switching costs for both marketplace participant sides. There is no dopamine feedback reinforcement loop like in our favorite social media plays. And minimal economies of scale once you have sufficent marketplace density on both sides in a given geolocale. Maybe I am missing something but it looks like they are desperate to find a cash cow business to strap onto their scale.
      Feb 17
    • New / Eng sparked
      Yep, it looks the same to me as well. I think their best bet is to somehow leverage their rather global network. Similar to how amazons biggest asset in the product space is there physical FCs and distribution network, if Uber could leverage their driver network on a basis that isn’t 1:1 consumer:driver I think you start to build something that isn’t easily replicated. I just have no idea what that service would be that hasn’t already been perfected by others through other means
      Feb 17
    • Amazon JSnowflake
      Turned down a very high level offer from Lyft last year because of these business model concerns and worries about how that will impact IPOs for both companies. Still think it was the right call but time will tell. The people in leadership there did not inspire confidence. If they do well it is more out of luck than intentional strategy. Uber is positioned better but is spending more to find the real business model. Don't know what Lyft is doing.
      Feb 17
    • New / Eng sparked
      Yea right now I’m taking Uber over Lyft given the decision; Uber has fixed (or is actively fixing) their leadership issues and seem to realize long term they need to come up with a better more sustainable business model. Lyft seemed to just be capitalizing on Uber’s distinction which has cleared up. I’m not seeing any innovation out of Lyft at all let alone a solution to the business model issues
      Feb 17
  • New / Design susiedo
    Companies like DoorDash are now outselling Uber Eats though, so even that part of the business is now under threat.
    Feb 17 12
    • Uber / Eng DgoQ22
      Uh, that’s Uber’s total funding. We are talking about Uber eats here right?
      Feb 17
    • New / Eng komma
      Feb 18
    • Uber / Eng DgoQ22
      That’s as dumb as saying Apple Watch cost hundreds of billions in development cost because apple spent so much money on r&d in total.
      Feb 18
    • New / Data blueski
      Not really, as Uber is only Rides and Eats. Apple has hundreds of products.
      Feb 18
    • Uber / Eng DgoQ22
      Uber has way more than rides and eats
      Feb 18
  • New / Eng SharmaG
    Software is a winner takes all situation. Uber is going to build a huge ecosystem around transportation that nobody will be able to beat. People should think beyond near term tactical issues.
    Feb 17 5
    • Google sunnyvale8
      You cannot extrapolate Amazon to transportation. They are very different things. Uber is selling this idea to investors, but week have to see how this falls apart
      Feb 17
    • New / Eng SharmaG
      Somebody is going to build it because the market would love to have it. Uber is ahead of everyone in this area -- it is their opportunity to lose.
      Feb 17
    • Google sunnyvale8
      There is no such opportunity.. it's only in your head
      Feb 17
    • New / Eng SharmaG
      Then you don't buy the stock and I will. Simple.
      Feb 17
    • Google sunnyvale8
      Sure
      Feb 17
  • New / Finance
    CivilLines

    New Finance

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    CivilLinesmore
    On the other hand, UberEats has become one of the fastest growing delivery platforms in the world. They have a delivery network in every country (thanks to Uber cab). Granted UE is subsidized by Uber cab, which doesn’t make sense since Uber cab is a shitty margin business.
    Feb 17 6
    • New / Finance
      CivilLines

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      An aggregator vs delivery platform
      Feb 17
    • Google Warhammer
      Also Doordash came from nowhere to beat Uber eats.
      Feb 17
    • Uber pyMs44
      What’s your source Warhammer?
      Ubereat has far more deliveries than grubhub globally. And it did that in a shorter amount of time.
      Doordash has even fewer deliveries than Grubhub.
      Feb 17
    • New / Finance
      CivilLines

      New Finance

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      Patently false, DD isn’t beating UE
      Feb 17
    • Google Warhammer
      It seems based on some credit card transactions. Search online for more information.
      Feb 17
  • Facebook nosoupforu
    Fwiw Over last 4-5 months ubereats has become so expensive that pretty much stopped using it.
    Feb 17 1
    • Intel trd_pro
      I love UE and have used it 100 times, but man the raised fees the last couple months have been brutal. Sometimes 10-12$ on certain restaurants or areas of town. Sucks. They are either trying to gouge or losing drivers and have to pay more to get drivers into certain metro areas.
      Feb 17
  • Google L7@AWS
    Uber has gotten so expensive I started using it less (not in Bay Area)
    Feb 17 0
  • This comment was deleted by original commenter.

    • Google sunnyvale8
      Don't you think ppl will go back to driving or public transport when Uber increases prices by 50 to 80 percent? Not to mention competition to uber
      Feb 17
    • Google sunnyvale8
      So you are saying Uber will make up for margin with volume. It doesn't work like that on the taxi business..
      Feb 17
    • Google sunnyvale8
      Adding more users will not make the program profitable. Raising prices will, but the business will start shrinking
      Feb 17
  • Facebook goman
    Unless they become profitable or have any breakthrough in self driving it is difficult to keep up their valuation if they IPO
    Feb 17 0
  • Microsoft / Eng pxXW78
    That’s exactly what happened to Chinese Uber Didi Chuxing, laid off 15 % of staff
    Feb 17 0
  • Google sunnyvale8
    Why don't you get off your ass and go and eat at the restaurant
    Feb 17 4
    • Uber undead
      Because dragging my kids to a restaurant is a pia
      Feb 17
    • Google sunnyvale8
      Lol most restaurants offer food pick up. So your kid can be at home while you can pick up.
      Feb 17
    • Uber undead
      Um...leaving little kids at home alone? Lol. Not a parent, eh?
      Feb 17
    • Google sunnyvale8
      I am. My wife watches the kid when I run errands
      Feb 17
  • Amazon hsysysvsbh
    Isn't Uber churn net negative? That means that each new customer is worth something over time and possibly infinite source of revenues and profits. Has that changed? Do you have any data to back it up?
    Feb 17 1
    • Uber BarH
      OP
      Growing a negative cash flow customer base increases losses, and mix that in with cross selling even higher loss margin products. That’s cash burning fast homie.
      Feb 17
  • New / Eng sparked
    Uber needs to start increasing costs as some point; whether they succeed for fail is almost entirely hinged on whether or not consumers are okay with the increase which I would estimate needs to near 50% if the govt continues down the path of forcing them to actually employ their drivers and provide benefits
    Feb 17 0
  • Uber BarH
    OP
    Oh accidentally
    Feb 17 0