Uber's New Strategy: Buy Unprofitable Companies, ???, Profit (vice.com) 69
Uber's new strategy is just like its old one. Make its money-losing business bigger by buying other money-losing businesses like Postmates. From a report: After Uber's merger talks with food-delivery company Grubhub fell apart, Uber has now set its sights on Postmates, according to the New York Times. Uber Eats, the ride-hailing company's food-delivery unit, is just as unprofitable as the rest of Uber's business operations, but that hasn't stopped the company from reportedly offering $2.6 billion to takeover Postmates. Uber has been searching for ways to stay afloat during the pandemic as its core ride-hailing business has collapsed and its business model of misclassifying driver-employees as independent contractors to save on labor costs is coming under increased scrutiny in California and nationwide. In its Q1 earnings call, Uber reported that rides were down over 80 percent and it had recorded an eye-watering loss of $2.9 billion (it has never recorded a profit), but there was a bright spot: food-delivery was up by 54 percent since last year.
Still, it's not clear that Uber Eats -- or an acquisition of Postmates -- will be enough to save the company. In March, Rideshare Drivers United, an app-based driver advocacy group in California, released a wage claim tool to let drivers claim stolen wages and unpaid business expenses; a mere 4,000 Uber and Lyft drivers have filed claims in excess of $1 billion. Last year, there were well over half a million Uber and Lyft drivers last year and reports have pegged Uber's annual driver retention rate at around 4 percent. Mind you, this is only in California and only includes wage claims -- there is also a growing call for Uber to pay state unemployment insurance taxes in not only California but the rest of the country, a prospect that could cost billions more if realized.
Still, it's not clear that Uber Eats -- or an acquisition of Postmates -- will be enough to save the company. In March, Rideshare Drivers United, an app-based driver advocacy group in California, released a wage claim tool to let drivers claim stolen wages and unpaid business expenses; a mere 4,000 Uber and Lyft drivers have filed claims in excess of $1 billion. Last year, there were well over half a million Uber and Lyft drivers last year and reports have pegged Uber's annual driver retention rate at around 4 percent. Mind you, this is only in California and only includes wage claims -- there is also a growing call for Uber to pay state unemployment insurance taxes in not only California but the rest of the country, a prospect that could cost billions more if realized.
I'm helping (Score:5, Informative)
Postmates is a food delivery company. You can infer this, but I don't think the summary or linked article say it outright. The linked article is a regurgitation of a NYT article that does say it outright.
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Negative money singularity (Score:4, Funny)
They are hoping the negative money forms a vortex and collapses on itself due to its own debt.
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Uber isn't 40 years behind on payroll (Score:1)
When Uber promises retirement pay for work done this month, they, like virtually all private private companies, make those payments in the pay period they earned. They send the money foe the retirement benefits over to Fidelity WHEN YOU EARN IT.
They never got 40 years behind, so they don't have any new to catch up. If they get your work this year, they pay for it this year. They don't just hope that they'll be able to pay for it 40 years from now.
Only Enron and USPS pull that scam, so only Enron ajd USPS
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I think you have retirement plans and 401(k)s confused.
requirements for a defined contribution plan [irs.gov] which is basically have an actuary sign off on the plan and say how funded it is. A defined benefit plan is not a fund it and forget it. If you retired employees keel over and die from a pandemic you get to keep the money and move money from liabilities to assets on your balance sheet.
On the other hand if someone comes up with an antibody treatment that cures 99% of all cancers then you will probably have a
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Quoting the very paragraph you linked "have to compute the funding required for the plan ...the contributions required by the plan document must be made".
USPS did not fund their plan. They then started complaining when they were told they needed to have a plan on how they would actually make the payments they promised to people who had worked for them. The complaint is that they're now required to start getting closer to following the rules everybody else has to follow, the very rules referred to in the l
Re: Uber isn't 40 years behind on payroll (Score:2)
Last I checked 71 billion, 2019s revenue, was greater than 69 billion, 2004s revenue. Not, 30% less.
Using actuarial metrics like the private sector does the USPS has grossly over funded their pension plan. The reason the USPS doesn't offer two day delivery is because legislators who have received hundreds of thousands of dollars from FedEx barred the USPS from offering the service. You are making a gish gallop argument of throwing out falsehoods that are not obvious to the uninformed and take more time to
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> Last I checked 71 billion, 2019s revenue, was greater than 69 billion, 2004s revenue. Not, 30% less.
https://www.usinflationcalcula... [usinflatio...ulator.com]
When you come dollars from many years apart, you have to include inflation so you're comparing constant dollars. That's why I said "in real terms".
It used to be a burger and Coke at McDonald's cost 25 cents for the meal. :)
You should tell USPS to stop it (Score:2)
> USPS doesn't offer two day delivery because legislators who have received hundreds of thousands of dollars from FedEx barred the USPS from offering the service
"Priority Mail Express offered by the Postal Service. It provides guaranteed 1-Day or 2-Day expedited service by 3 p.m"
-- https://pe.usps.com/businessma... [usps.com]
> a gish gallop argument of throwing out falsehoods
Quite.
Btw, have you never actually BEEN to a post office in your life? They advertise their one-day and two-day offerings all over the w
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Re:Negative money singularity (Score:4, Insightful)
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The postal service has been consistently profitable since I can remember. What on earth makes you think different?
Oh, I know: the way they are forced to assume every postal carrier lives for 75 years after retirement and that phantom pension liability is what makes them look unprofitable.
Underwear Gnome, South Park (Score:2)
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OK, we all "get" the South Park references, but I don't "get" why they are unprofitable.
This is nothing like Tesla that has to manufacture, in the U.S., a large, heavy, high tech product and do their best to match their product and supply cost to what customers are will to pay.
Uber is just a franchise, no, along with an "app" for qualifying passengers and drivers, matching them on trips and all of that. It is "just" information technology. Yes, I know software systems take serious resources to develo
Re:Underwear Gnome, South Park (Score:4, Interesting)
OK, we all "get" the South Park references, but I don't "get" why they are unprofitable.
Have a look at the Hubert Horan articles on Naked Capitalism. He explains why they will never make money.
https://www.nakedcapitalism.co... [nakedcapitalism.com]
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Can Uber Deliver: Part 21? No thanks.
If you can't answer in 20 parts or fewer, it isn't worth reading.
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Can Uber Deliver: Part 21? No thanks.
If you can't answer in 20 parts or fewer, it isn't worth reading.
If you can't define or plan to make a profit (like, ever), then your company probably isn't worth valuating.
Which of course is exactly why Uber is a publicly-traded company worth $50 billion dollars.
You couldn't lead Uber to profitability with a dozen billionaires leading the way. 21st Century Capitalism didn't care. Obviously.
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And the GP's question remains. Why? It doesn't take billions to write an app. Paypal made money off just the float with pretty much the same infrastructure.
Re: Underwear Gnome, South Park (Score:1)
Uber was already competing directly on day one, fighting over a limited number of customers who use cabs.
Not exactly. Uber's business model relied upon customers who'd been previously served by a mix of cabs (realtime) and blackcars (booked in advance), by essentially creating a new industry - "app-dispatching of [already regulated] black/livery cars." They cost at least twice as much as cabs but people loved the convenience so much, no one but cab companies gave a shit... until Lyft came along with their model ("illegal pirate taxis utilizing any asshole with a four-door car") at which point Uber followed sui
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OK, we all "get" the South Park references, but I don't "get" why they are unprofitable.
Have a look at the Hubert Horan articles on Naked Capitalism. He explains why they will never make money. https://www.nakedcapitalism.co... [nakedcapitalism.com]
Does Uber have any path to profitability? None is apparent, and nobody inside or outside of Uber has been able to articulate a half-way plausible theory of how Uber could achieve sustainable profitability.
Yes, and this was basically stated in their IPO.
Not sure which one you define as worse here, the fact that Uber literally could not define a path to profitability as they drummed up a mullti-billion dollar valuation and IPO, or the fact that the investing market that pumped billions into that bullshit valuation no longer cares about profitability in Capitalism.
Either way, it's fucking insane.
Normally startups do not undertake major expansion without a core business producing strong positive cash flow, and major synergies between the businesses; Uber has neither.
Well, that was the norm at one time in history. We commonly refer to that era as the "dot bomb".
Greed doesn't car
Why aren't pizza delivery guys quitting in droves? (Score:5, Interesting)
I followed your link to Naked Capitalism and listened to the Hubert Horan interview by radio DJ and one-time SNL cast member Harry Shearer on Why Uber Will Never Break Even.
The gist of it is that Uber is passing off all of the vehicle expenses -- loan payment, gas, repairs and insurance on to the drivers, who are not encouraged to bring along a sharp pencil to add up all those numbers when they sign on. The average driver, however, figures out that it is they who are being taken for a ride, and they quit, after about a month. It is this churn of drivers that is costing Uber so much money, with the claim that Uber spends $500 in marketing and other expenses for each driver they recruit.
Don't you have the same problem with pizza delivery drivers, so why aren't the big chains like Dominos and Little Caeser's in financial trouble? It is my understanding that many if not most food delivery drivers slap a magnetic Little Caeser's sign on top of their personal vehicle, and keeping your head above water financially is a real problem for those drivers?
Is this why Uber is buying up all of these food delivery services, the One Ring to Bring Them All, and In the Darkness Bind Them strategy of gaining total monopoly control over gig-driver franchise operations?
The other thing I don't "get" from Mr. Horan's anti-Uber obsession is that the traditional taxi market has a serious over-demand problem on Friday and Saturday nights, when most people working 9-5 M-F jobs "want to go out on the town."
I "get" that you have all of this capital tied up in an automobile that only gets used on Friday and Saturday night, not to mention how do you pay a living wage to a driver who only finds work two evenings per week. On the other hand, would there not be a group of people who own a personal vehicle and would be willing to work Friday and Saturday nights as a supplementary, second job for a working person or a sideline for a retired person. Could the Uber model not work on this basis? Or are the "suits" at Uber that greedy that their "skim" is too large?
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Ubereats is ultimately stuck in the number of customers they can get. Many will not order delivery unless it is delivered by employees of the place that made the food, not the cheapest person they can randomly find who has no responsibility for the state the food comes it and can blame the restaurant, ewww. How many hit job viral videos of drivers fucking with food will it take to cripple sales, not that many and it will happen a lot, it is a doomed business. Uber was always a massive bankster pump and dump
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OK, we all "get" the South Park references, but I don't "get" why they are unprofitable.
Have a look at the Hubert Horan articles on Naked Capitalism. He explains why they will never make money. https://www.nakedcapitalism.co... [nakedcapitalism.com]
If anyone actually had the answer to why Uber shouldn't be successful, we probably wouldn't be sitting here talking about a debt-riddled company that's "worth" $50 billion dollars, being publicly traded on the US stock market after pimping a utterly worthless IPO.
20th Century Capitalism was still somewhat buried in profit and common sense. Today, it doesn't matter if 21st Century mega-corps make money or not. They're Too Big To Fail anyway, and most modern economists don't have an answer for limiting that
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Uber probably struggles to make money for the same reason Ebay does. If you're an intermediary between people, you'll be the one who gets blamed for everything. Even the most casual research will show that Uber very much has been blamed for everything.
Quite a large portion of humanity is worth negative dollars per hour in any service industry. My understanding is that more than half of retail applications are bounced by a personality test. It gives a glimpse of how bad a bad employee can be.
Re:Underwear Gnome, South Park (Score:5, Interesting)
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OK, we all "get" the South Park references, but I don't "get" why they are unprofitable.
This is nothing like Tesla that has to manufacture, in the U.S., a large, heavy, high tech product and do their best to match their product and supply cost to what customers are will to pay.
Uber is just a franchise, no, along with an "app" for qualifying passengers and drivers, matching them on trips and all of that. It is "just" information technology. Yes, I know software systems take serious resources to develop, deploy and maintain, but this is nothing like building a 60 kWHr battery pack that has to last a minimum of 8 yrs and 120,000 miles or whatever the warranty, in the shock, vibration and temperature-cycle environment of an automobile?
Not sure why you think the technical complexity of a product, has anything to do with the amount of Greed a company exhibits to the detriment of themselves.
Uber is blatant evidence of this, but the biggest problem isn't Uber. It's the fact that they're a "successful" company who's getting away with Capitalistic fraud on every level. There is nothing that makes financial sense with Uber, to include why they even justified an IPO.
As others have said before, the stock market is nothing more than a measuremen
Huh? (Score:2)
"a mere 4,000 Uber and Lyft drivers have filed claims in excess of $1 billion"
So as an employee these people, on average, let Uber and Lyft steal $250,000 from each one of them?
That sounds very wrong.
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Under federal law (the FLSA) you are by law owed lawyer's fees. Additionally, if you can demonstrate that you lost money (interest on loans, late fees, even inability to make a downpayment on a hous
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No, they're asking for $250,000.
If they are asking for depreciation on their vehicle, gas, etc, let's say it was $10,000 a year. They can go back 3 years. So that's $30,000. Triple pay owed, which can be used as a penalty, could make that $90,000. If the lawyers had asked for 33%, since lawyer's fees can be recovered would make that $135,000. So, we're more than halfway there. In fact, we can quickly figu
Game of Monopoly (Score:2)
As long as investors keep such endeavors afloat, such strategies will continue. It seemed to work for Amazon: gain market share at the expense of profits, and become a near monopoly.
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The difference is that Amazon has both infrastructure and a network effect. So there are barriers to entry for new competitors. Jet.com and others failed.
But for ride-sharing, there is no infrastructure and network effects matter far less. Many drivers drive for both Uber and Lyft, so there is no way for Uber to push Lyft out of the market. When both Uber and Lyft pulled out of Austin, local ride-sharing companies were up and running in less than a week.
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The more participants you have in the system, the better the rider-to-ridee matches.
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The more participants you have in the system, the better the rider-to-ridee matches.
Yes, that is true.
BUT there is only so much money to go around. When you have too many companies providing the same service, none of them can make enough money to stay in business. You either end up with no service at all, or, a monopoly where there's only one company providing that service.
The thing that doesn't get talked about enough is that Uber's business model is fatally flawed.
People simply are not willing to pay the prices that are needed for companies like Uber to be highly profitable. The taxi
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Fair points. But I'd add that Uber and Lyft are duking it out for market-recognition, as the ride-hailing industry moves eventually to driverless cars.
Does anyone have both Uber and Lyft apps on their smartphones? My speculation is that people pick one and use it consistently.
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Does anyone have both Uber and Lyft apps on their smartphones?
I do. I use Lyft 95% of the time, but I would be happy to switch to save $1. I would most likely get the same driver since most Lyft drivers also drive for Uber.
Revenue pyramid (Score:2)
However, here in the 2020s, it may be more of creating a company with a shit load of revenues and numbers of customers. See, the way valuations of businesses in the l
??? == Becoming too big to be allowed to fail? (Score:4, Insightful)
Hey it worked for Boeing, Fannie (and Freddie) May, AIG, GM, Chrysler, Citigroup, JP Morgan, Wells Fargo, Goldman Sachs, Morgan Stanley, Capital One, Key Corp, Bank of America...
Who needs to make a profit when you can threaten that by going under thousands of employees will be out of work?
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Citigroup, JP Morgan, Wells Fargo, Goldman Sachs, Morgan Stanley, Bank of America are all highly profitable. Boeing is highly profitable over time, even if they had a bad year.
Are you still bitter about something from more than a decade ago? Why? Envy? Get over it.
Eye-watering (Score:3)
Eye-watering? If by eye-watering you mean "laughing so hard that I'm crying", then sure, it's eye-watering.
An already unprofitable business model that relies entirely on social interaction and mobility, during a pandemic. What a surprise that they're not doing well.
What I'd like to know is, how much company money have the executives blown on hookers, coke, and private jets over the years.
Failed investment paradigm (Score:2)
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Compared to malinvestment and inefficiency, I think loss leading doesn't even factor into the losses all those companies except WeWork had.
Uber lost 10 times more on R&D than driver compensation for 2018-2019. AirBnB revenue should be almost pure profit ... I have no idea how they can even spend billions, sure legal compliance for every country is an expensive pain but billions?
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, hopefully this augurs a return toward sustainability and corporate diversity. Surely the stupendous losses of Wework, Uber, Lyft, AirBnb, (and therefore Softbank) have put the fear of god into VCs by this stage.
I'm hoping exactly the opposite. I work in the tech industry, and these sort of ridiculous investments drive up wages and benefits for tech workers. I'm hoping we can keep this ball rolling until I retire.
a few years from now, if successful (Score:3)
Uber will be a booming online porn or electric car part manufacturer or some other random thing that has fuck all to do with livery, run by people who know nothing about anything.
Buying unprofitable companies ~= sound strategy (Score:2)
Buying unprofitable companies can work out, and has worked out for many companies. Companies can be unprofitable for a variety of reasons, including mismanagement. If you think you can buy a failing company and do a better job, you can get it for cheaper than if it was profitable.
Aside from mismanagement, if you have a better supply chain and/or other resources, you can make an unprofitable company profitable. Economies of scale applies. I'm not saying it's possible with these particular companies, but
21st century stupid. (Score:3)
I think Uber is trying to kill the competition thinking without the competition then it can get all the big bucks.
The economy doesn't work like that. Competition is a good thing, even for the company that has to compete.
Lets take a look at Apple iPhone sales. In general it is still going up, even with the competition with Android Phones, the growth of Android around 2012 actually spurred more iPhone sales.
Why is that? It seems counter intuitive.
Well the iPhone had a niche market when it came out. You had to be already an Apple Fan, and was willing to pay a lot for a phone. The biggest worry for me when I went with an iPhone years back was will this device be worth the price, or will it be like my Palm 3 that I used it a few times and spent the rest of its life in a corner. So a lot of people didn't really think they wanted such a device. A few years later Android (and Palm WebOS) came out. With a competitive system this means that non-Apple fans had something to get, so more and more people had smart phones, which caused others to want to get them. So when it was time for someone to say, I am going to get a Smart Phone I will look at my options and pick what I would like to get. So they will give a serious look at Apple iPhone and the Androids. Then make a decision. A good number of times they will choose an iPhone.
What Competition did was expand possible customer size where say only 3 million people wanted an iPhone having competition created a market of 3 billion where now even a minority of people choosing your product will still lead to better growth.
These Gig Companies that Uber is buying and probably killing. Doesn't seem like a good plan to me. Because they are finding markets that Uber probably hasn't explored yet. Killing them, means these markets will not want to go to Uber because they don't feel the need for it.
I live in a Rural Area. I cannot get Pizza delivered. Nor is any practical Uber service. So I live without the service. Now if a small company started serving my area I may consider it. If it gets popular Uber may see it a growth opportunity and will enter that area too. Where I may find Uber offering some services that the other company doesn't offer. I may still stick with that smaller company too, as it will probably try to do things to keep itself competitive.
The 21st century everyone is so concerned about cutting costs of business, but there is little effort around getting customers.
You don't understand their business (Score:2)
And you don't understand their long-term strategy. And it's really none of your concern. But go ahead and tell them they're doing it all wrong.
Shouldn't we understand their business? (Score:5, Insightful)
Uber is a publicly traded company.
Shouldn't the public know what the strategy is so that people can make sound investment decisions? Shouldn't the SEC know what the strategy is to ensure that they are working within the law?
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Uber is a publicly traded company.
Shouldn't the public know what the strategy is so that people can make sound investment decisions? Shouldn't the SEC know what the strategy is to ensure that they are working within the law?
Read up on it in Uber's official documents and get back to us then.
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I read their latest 10-K filed with the SEC, specifically the risk factors section. Here's some of them:
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Uber is a publicly traded company.
Shouldn't the public know what the strategy is so that people can make sound investment decisions? Shouldn't the SEC know what the strategy is to ensure that they are working within the law?
one would think this would be a core component of the investment decision. It boggles the mind that it is not.
Only companies like ENRON want to make sure no one understands the business model.
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Shouldn't the public know what the strategy is
The parent didn't say anything about the public knowing, they said the public "don't understand". That is correct. Uber's strategy is public knowledge. Here you go: https://s23.q4cdn.com/40796975... [q4cdn.com] it's only 168 pages.
No way (Score:2)
Uber's leadership has always proven itself forward looking and totally above board. Why would you start to doubt them now?
We're in a Global Depression (Score:2)
There are no risks for the people at the top. Risk is something for you and me. Have fun next month when the extra
the missing step (Score:1)
Law of inadvertent consequences (Score:2)
That said, Rideshare Drivers United may succeed in killing the business model and put most, if not all, of their members out of business.
I think it's pretty clear... (Score:1)
that most of these things like "Uber" are nothing but large-scale money laundering operations. There is no other reasonable or sensible explanation for why "investors" would continue to pump in funds.
Most biased article ever (Score:4, Interesting)
Uber drivers are profitable. At least the ones I've driven with and discussed the economics with seem to be making a lot. The ones carefully tracking their expenses and taking full advantage of the pricing are making close to 30CAD/hr after expenses. Compare that with taxi drivers in Ontario who make less than minimum wage after paying to rent the car and medallion.
California's law is BS. They have lots of office workers/ IT workers in that state that are classified as contractors who don't set their own hours, work in their employer's office, use their employers desk, computer and tools and can't refuse a given task.
Having ridden in taxis and ridden in Ubers I can tell you which ones are cleaner, better maintained and have drivers who are more alert because they haven't just worked 20 hours. The taxi companies were corrupt monopolies that deserved to die. I hope Uber doesn't go bankrupt. I would be fine if they raised their prices 30%-40% to stay in business.
I've heard this one before (Score:2)
Uber: We may lose money on each one. But we'll make it up in volume.
No expenses + Inertia of business (Score:1)
Toys R Us (Score:2)
Corporate welfare isn't a new strategy, sticking actual taxpayers with the liability of mismanagement has been around for years.
The Ponzi Scheme of Ambition (Score:1)
This remains the best analysis of Uber I've seen:
The Ponzi Scheme of Ambition
https://www.linkedin.com/pulse/ponzi-scheme-ambition-anand-sanwal [linkedin.com]