Uber’s cash burn dilemma /by @Wharton
Uber’s cash burn dilemma
/by @Wharton
* " Revenues have continued to grow quickly for the eight-year-old Silicon Valley company, but the bottom line isn’t pretty: Uber was on track to lose about $3B in 2016 on net revenue of $5.5B ... has raised more than $11B with scant capital costs ... valued at more than $60B.
" other substantial costs: In helping to create an innovative new market — the sharing economy — Uber spent a fortune training, recruiting and subsidizing drivers, giving away free rides so consumers would get hooked on the service, setting up a global system of local and regional offices as well as hiring lawyers to deal with lawsuits and regulators.
" Uber operates in a classic “two-sided market” where Uber is the “market maker” between the driver and rider by providing a platform for them to connect. As such, he adds, there is a “strong network effect” taking place.
" for companies to reach critical mass under these circumstances, they need to subsidize both sides of the market — pay them to join the system.
" Uber’s playing a very long game.
" It needs the public on its side and it needs ridesharing to be a significant portion of the economy so that regulators have an incentive not to kill it
* " Uber’s tactic of lowering prices to get more riders ... would count on its dominance of the market after all significant incumbent taxi businesses exit
/#predatory pricing
" Uber has launched UberEATS, a food delivery service, UberCHOPPER for requesting a helicopter and UberFreight for long-haul trucking, among others. But these could be distractions.
" in many markets, there will be an oligopoly composed of Uber and perhaps one or two local startups — not more. “The barriers to entry [have risen.] You need a brand, you need cash,”
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