Eli5: I saw that Uber is still not making money, how is that possible, they have a lot of people working for them, worldwide known and also if they dont make any money how are they still alive?
In: Economics
TL;DR: Focusing on quick growth and future value rather than “profit now”.
In some cities, they are profitable – once they get established, push the competition out, and have enough drivers, they start raising prices for riders while either lowering or at least not raising as much what the drivers get.
Elsewhere, they’re trying to get established in order to be profitable later. In those cities, they often used to pay drivers more than the rider paid, just to get more drivers, more riders, and generally get people “hooked” so they can push out competitors and get profitable later. I would expect them to be out of this stage in most places though.
This is common for “growth companies”, and investors are OK with it because of the massive profits they expect to come after the growth phase. Being profitable in the growth phase could even be seen as a *bad* sign because it could indicate that the company isn’t spending enough money on growing/expanding more.
Uber also spends money on support, driver monitoring/onboarding, fraud/failed payments, and most importantly: running and developing the app. The technical infrastructure is most likely inefficiently written and requires unreasonable amounts of hardware (or paid cloud resources) to run, because they focused on quick growth not optimization and “grew up” in an “infinite investor money” environment. Additionally, while it may not look like the app does much, building all the different integrations and features (in one region you can pay cash, in another you can rent certain scooters on Uber, elsewhere they offer helicopter taxi services) does require developers for the apps (Android and iOS) and the backend servers that support it.
I suspect that Uber is now transitioning from “growth” to squeezing what they have in most markets, which is likely part of the reason why my experience with Uber recently has been worse and worse: worse drivers, worse availability, higher prices… – we’ll see whether they’ll manage to turn highly profitable, or continue to burn money while running out of potential growth. *That* would be their end – because without growth, there wouldn’t be much reason to give them more money to burn in the hopes of them becoming profitable later.
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