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
Uber gets money from the bank that they give to drivers, but the money that Uber gets from customers is less than they borrowed originally.
Let’s say you get an Uber that costs $30. Uber will pay the driver, credit card company, app stores etc about $20 on average. So Uber gets $10 of that $30.
Then they’ll spend $5 on advertisements and marketing.
Then they’ll pay their corporate employees (execs, customer service, app developers, product developers and others) about $7.
So they’re spending $32 for every $30 they generate.
They can do this because they got money from investors and not all of those $32 in Costa are cash costs, Uber pays some of their employees with stock which is a cost, but doesn’t actually require cash from Uber).
Uber (like a lot of tech companies) has investors that believe that it will become profitable at some point. So they keep Uber not only alive but even give them the money they need to grow more.
In return the investors will get a share of the profits once they turn a profit
Lulz, they will never make any money, I could have told you that a decade ago. Companies like that are in the business of fleecing investors and they’ll stay in the business as long as investors keep giving them more money, which can keep on going for a very long time.
Ride sharing apps are a genius idea, but they are not really monetizable in a way of building a hundred billion dollar company. If Uber were to ever try and make any actual profit, they would immediately lose their entire business to competitors. It costs fuck all to make and run a app that does the same thing that uber does and companies around the world doing the same thing are dime a dozen.
So why is Uber’s market valuation that high? Simple, there are a lot of superficial investors out there who don’t really think through where they are giving their money. This is excel investing, show them growth and revenue and they’ll think no more of it. The fact that uber doesn’t get to keep any of that revenue goes unnoticed.
Uber ran at a significant loss using investors money to “disrupt” the taxi market with the idea being they’d edge out all their competitors while having low overheads by not actually owning any cars or having any employees themselves.
They succeeded in disrupting the market but their overheads are higher than they’d predicted and regulators all over the world have made them responsible for things they’d wanted to avoid such as treating drivers as employees.
Now they’re at the point where they can’t just burn investors cash anymore they had to increase their prices. But now that Uber doesn’t have the cheapest option and the service has gotten less reliable as their competitors have launched apps, allowed card payments etc they’re struggling to find the right balance of price and volume so they’re still losing money.
They’ve also been impacted by the world wide economic difficulties where people are spending less on hospitality in general so they don’t have as many people on nights out needing rides and the increase in home working/remote meetings means they have less business travelers.
[This](https://doctorow.medium.com/no-ubers-still-not-profitable-2b8054e375ea) is a good read (but not at 5yo level).
Unless I’m horribly mistaken, the premise of this question is wrong as Uber has reported positive earnings (ie profit) the past 2 quarters (which is why they are now included in the SP500 index).
Uber is profitable for the past few quarters it’s one of the few reasons their stock has been pumping lately. This is ragebait
Rich people nowadays don’t want dividends (profits) because they get taxed off that. Instead, what they do is require their companies to put all the money into growth, so that the shares themselves inflate in value. Then when they want to buy something or pay for recurrent expenses, they take a loan backed by the inflating value of their stocks. There is currently no way to tax this, so as long as stock prices get higher, they pay no taxes. the same thing happens at the corporate level: Can’t get taxed if you made no profits.
This is at the root of why we have growth based models nowadays. and why they so far seem to work, more or less. IMHO it’s all one big house of card, a bubble producing machine which makes our economy more unstable, but what do I know? I’m no economist.
Uber is making plenty of money, and recently [did actually turn a profit.](https://www.fool.com/investing/2023/08/02/uber-is-profitable-for-real-this-time/)
So the question is how did it take 14 years to get to this point and why did investors put up with it for so long?
Investors are willing to play the long game. When a startup is … starting up … the first order of business is not to turn a profit, or make more money than you spend. It’s to build up your business so it can make a profit into the future. Uber has been dumping cash into subsidizing rides in new markets so they can secure a dominant market position — they want to be the default ride share company in your city before Lyft gets there. They’re also pouring cash into business expansions like Uber Eats and R&D projects like self-driving cars. Stuff that’s costing a lot to get set up, but will make a lot of money in the future once it’s established.
During this whole time, they’re making a lot of money, they’re just spending more. Once they establish a secure, stable business that’s resistant to competition, they can take their foot off the spending gas and start turning a profit. Which it looks like they have.
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