Why are service apps like Uber and DoorDash losing so much money despite being so popular? What are they spending all that money on?
In: 523
It’s expensive to exist as a “_____ as a service” / social media / tech company (lumping these together b/c they share corporate similarities).
Consider just the engineering side of things. Hosting and infrastructure costs alone would be in the tens if not hundreds of millions of dollars per year. A highly available platform like Uber or DoorDash that probably sustains hundreds of thousands of QPS and moves and stores exabytes of data (read Uber’s [engineering blog](https://www.uber.com/blog/engineering/data) to get an idea of the scale of data they move / store) and all the supporting services behind the scenes that makes it all work is not cheap. At this scale, just storage and network ingress / egress costs alone (even if we assume they’ve optimized networking via VPC peering / Transit Gateway arrangements + a service mesh architecture so inter-service traffic doesn’t need to go out to the internet, which few companies have done well) probably would put them in the red, and that’s not even getting into compute costs and AWS support tiers.
Unless you’re Google and have dedicated teams and SWE and SRE headcount for in-house software, you’re gonna need services like GitHub enterprise for code, Splunk for observability, PagerDuty for on-call, GSuite for user management, IAM, and communication and collaboration, Jira for PM, and on and on it goes.
Then you have hundreds if not thousands of SWEs and SREs responsible for product development, engineering, and support, who are supremely expensive if you want to attract and retain good talent. For every product team there are like 10 teams owning the internal services that make it all work: internal dev platform, build & deployment, identity, data platform, compute, service platform, service mesh, API gateway, data lake, observability / monitoring / logging, security, privacy, data governance & compliance—these are just the engineering teams and internal products. We haven’t even covered the other functions and roles that make a company tick. But a company does not just consist of engineering roles. You need PMs, IT, HR, marketing, finance, legal, leadership, all of which command serious comp if you want them to stick around and do their best job.
Note this is common to all tech startups—it doesn’t even get into whether their business model is profitable or not.
It’s not at all surprising tech startups like Uber aren’t profitable. Many tech startups fail and never become profitable, though they provide a great service to the people and a great UX for their users who use them to death, because everything involved in running a tech company is going to be insanely expensive.
Latest Answers