How does a company like Uber, which at first glance appears to have minimal operating costs, fail to turn a profit year after year?

Question

Let’s break it down.

>Uber takes 25% of the money from each ride on the app.

>It does not pay for any of the costs involved in the actual rides, not fuel, insurance, or vehicle costs, all that is paid by the driver.

>Their customer service is outsourced to India

>Each city they operate in requires a tiny office with very few people, simply to screen drivers

>They maintain mobile apps to operate their service.

Now, based on this, there is no reason why they should not be turning a profit on their $11.27 Billion annual revenue. What causes the $1.8 billion loss?

In: Economics

Answer 1

That 25% is a bit low IMO. As a driver, a trip from my area to a bar a couple miles away nets me around $3. However, when I book my own Uber to said bar, it costs me over $10 for the trip.

Anecdotal, I know, but you’ll find hundreds of stories like this on here.