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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The lifecycle of services like this is to initially lose money *in order to become* popular. DoorDash hooks customers with coupons or fees that don’t reflect how much it actually costs to run the app. They hook drivers by padding their pay relative to what they’re actually bringing in from users. Most importantly, they hook restaurants by getting them to refashion their businesses around app-based delivery, possibly abandoning the old system where each restaurant maintained its own delivery driver(s).
Then once you have lots of customers who open DoorDash whenever they feel hungry, a bunch of drivers who are financially dependent on the app, and a bunch of restaurants with no other way of delivering food, you can drop the mask and reveal to everyone how much it *really* costs (or, more likely, how much you think you can get away with charging). Those “real” prices may well have been too high to entice people to habituate themselves to the app initially, but now that this has already happened, you’re hoping that enough will stick around to generate a good return on your initial investment into their habits and goodwill.
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