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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In an effort to grow, such services need to quickly build up a concentration of both drivers and users… that means spending money on lots of incentives to entice enough drivers to sign onto the service, and it means discounts, offers, etc. to get users used to using the service. For example, I get “free” access to GrubHub+ because of Amazon Prime and because of my bank, so I get various delivery fees waived. Well, that money would have gone somewhere to fund something, but they’re just eating that cost. Uber was long subsidizing rates on rides to get people used to using the service regularly. The services also pay sign-on bonuses and other bonuses to drivers to keep them driving.
The services also have lots of start-up costs. Uber/Lyft, expecially, had to spend a TON of money on litigation, lobbying to be able to operate legally when most cities had strict rules governing taxi services. GrubHub, DoorDash, etc. have to spend money getting restaurants to sign on with them, to help restaurants get set up with equipment to accept orders and provide support for setting up menus and such.
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