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

Just because they’re not turning profits doesn’t mean they’re not generating cashflow, or people aren’t earning money off of it.

They’re in the red to avoid paying taxes. It’s standard business practice.