Sure, but their sales are subsidized by VC dollars. I don't have all the data, but everything I've heard in every city says Uber pays drivers more than they charge riders, hence the enormous 10 digit losses annually. And once they raise rates, people will use their services drastically less. The question is can they make driverless cars work before they run out of money? And I really, really doubt it. That's many years away, and I don't think Saudi Arabia is going to give them a few more billion dollars.
Agree with this. Revenue is deceptive when you're undercutting the competition, especially when there's no profit to show for it.
And pay incentives for drivers are not only the surge charges but how many completed rides. That's likely to make sure there's enough supply on the road.
It may be the case they are losing money on rides - it may not be - you said it yourself 'I dont have all the data'. I dont think people should be so quick to say they are losing money unless you see the real numbers - which none of us will ever see until they do an IPO.
In my experience, the drivers are usually very happy to talk about Uber - including how much they're making. They will often tell you what they're getting paid for the same ride, which you can compare to how much you're paying. I have never seen them get paid less than what I was paying, and am often surprised how much more they're making (it can be 3x depending on the promotions).
Yes, this data is limited. But all signs point towards Uber hemorrhaging money with no easy way of becoming profitable. And we know that competition can easily swoop in by looking at Austin, where Uber and Lyft left. It's a race to the bottom until self-driving cars are a reality.
The maths in that article is terrible, all venture backed startups will have expenditure > revenue (because you're investing today for future revenue), you have to look at unit economics to understand if this is a problem or not (i.e. do customers cost more to service than revenue they generate).
I wonder if there is any legal argument that there is a trade 'dumping' issue if Uber are selling their services lower than the cost of producing the service. Maybe a news article to look forward to in 2017.
Even if they can, they won't have a structural moat. Too many others are developing this technology. Either someone will disintermediate private self-driving car owners a la AirBNB, or other tech companies will run fleets, or the car manufacturers will run fleets in the manner of GE's engine-hours program.
Uber is the greatest transfer of wealth from VCs to middle-class professionals in history.
The valuation isn't artificially high, it's a result of an unprecedented growth curve.