Why is this misleading claim repeated so often? They are profitable on every. single ride. Even including all the marketing costs, they're profitable on the rideshare.
It's the investment into new ventures like Uber Eats that cuts into the revenue because it' expanding so fast.
uber makes money on every ride. they operate at a loss annually because they invest everything in expanding to avoid paying taxes - like most companies do.
What really surprises me is that people simultaneously claim Uber cannot possibly be profitable while lambasting it for taking too much of a cut.
Which one is it? Either they're being greedy with excessive margins or dangerously dependent on venture capital to sustain an unprofitable business model.
There is a misconception that Uber loses money on every ride. If you look at their SEC filing, it's not how they actually work (I won't have time to do that search for you now but will try to edit my post later). TL;DR of their SEC filings:
They're not losing money on every ride, they just have such a high baseline of fixed costs (payroll being one) that they haven't started being profitable. Doing fewer rides right now is actually killing their profitability.
According to the Q1 reports, rides are actually profitable for the company. They just lose money on other segments, like Eats, and spend an absolutely massive amount of money on "platform R&D" (many hundreds of millions per quarter).
The 'rides' division of Uber is profitable, or at least, was profitable before Covid. The rides division brought in a net positive of $742m in 2019. Uber as a whole is not profitable since they lose money on their Eats, Freight, and self driving divisions. The Rides division has only recently been profitable; it lost money for over a decade and started being profitable in 2019.
Rides is profitable because Uber has significantly reduced subsidizing rides. They also have cut expansion in many developing markets. Finally they raised prices in developed markets.
See their 2019 Q4 financials - they now claim to make, on average, a 24% margin on every Uber ride.
One thing I don't see reported very often is the one figure that is most important. Unit profitability. Whether they are profitable it not while growing so much is of no consequence.
Is Uber profitable on a per ride basis? Are these other delivery companies profitable on a unit basis? If not, are they close and will small price increases make them profitable?
This suggests to me that marginal rides are profitable, even if they aren't profitable enough to cover fixed costs of software development or investments into new geographic markets.
The whole “Uber makes a profit on the ride” stat is broadly just creative accounting that counts the revenue and ignores most of the costs including the huge back office operation to build and support the app, marketing, admin, etc etc.
Yes it’s good that they charge the customer more than they pay the driver, but that doesn’t translate into a “profitable transaction” from a business standpoint. If it takes $X millions in engineering costs to build and maintain an app required for that ride to have occurred then one needs to prorate that cost across each ride as a cost and so on. There are lots of examples of these creative “our transactions are profitable” claims like WeWork’s much ridiculed “Community Adjusted EBITDA” metric.
The fancier your metrics need to be to show you are “profitable” the bigger the red flag should be that all is not well in Oz.
If you look at Uber financial reports, you’ll see that they earn profit on rides, and their losses are due to their attempts at expansion in other segments.
Uber used to subsidize rides a lot, and it still does in some foreign markets where it is trying to get a foothold, but this is not really happening in US anymore.
It's the investment into new ventures like Uber Eats that cuts into the revenue because it' expanding so fast.
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