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
First of all, they don’t really make 25% of the money of each ride, it’s actually a lot less than that. I don’t have the exact figure though, but some are barely breakeven. They keep their prices low to flush the competition out and the biggest gain market share possible.
Secondly, they spend a ton on advertising, R&D and promotions. People saying they just update their app don’t understand the vision Uber has. Imagine the same service in 5-10 years but with driverless electric cars. No drivers to pay, no fuel, only maintenance – which will be a minimum. That takes enormous infrastructure and testing. Investors keep Uber afloat with money because they know this WILL happen soon and at that point the profits will skyrocket.
Lastly, a lot of money is used in stock compensation for early investors that want to get out or higher ups in the company. It was a long time coming for a lot of them so many are cashing out and the company is paying for it.
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