Why are service apps like Uber and DoorDash losing so much money despite being so popular? What are they spending all that money on?
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If we are just talking about Door Dash and Uber Eats, think of it like a game where you have two teams that each has a really big bucket of water – like the size of a house. But each bucket has a hole in it!
The goal of the game is to make sure your bucket never runs out of water by having your teammates keep filling the bucket with water.
But the only way teammates can fill their buckets is by running to random houses in the neighborhood and asking the neighbors to fill it up.
If your bucket runs out of water, because you don’t have enough teammates or random neighbors helping, then you lose and a lot of those teammates and neighbors will go and help the other team.
Each of team is simply hoping the other team’s bucket runs out of water before their bucket runs out of water.
Also, there are other people who are gambling on this game and betting their own money that one team will eventually win. So to help their chances, they give money to their team to make sure the teammates keep filling up the bucket, and to get neighbors to help out. Because if their team wins, they will end up getting all of their money back and even more! We call these people investors.
In reality, there are more than two teams trying to outlast each other in the food delivery space, but the game remains the same. And when one team loses and the other teams acquire some of their teammates and neighbors, we call that increasing their share of the market.
Finally, when there are only 1 or 2 teams left, because all the other teams lost, they will have time to fix their bucket’s hole – or basically then they won’t be losing money any longer.
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