Uber Is Losing Money Faster Than Any Tech Company
Uber is losing money faster than any technology company ever and it is large because of an essential component to the company’s operations, the drivers.
In the first half of this year, Bloomberg reports Uber lost $1.27 billion that is unprecedented even for a tech company. If you compare, during its biggest loss ever Amazon reported losses of $1.4 billion in 2000. Jeff Bezos, Amazon CEO fired 15 percent of his workforce as a result.
Uber clearly plays by the same and the edict of Silicon Valley is “grow first, make money later.” So, even if the company’s costs have increased it should be no surprise. As its operations expand into new cities. What is surprising? Nevertheless, is that the highest cost to the company is the fee it pays out to drivers. driver subsidies account for a majority of losses in the first half of 2016, according to the Bloomberg report.
That is the same fact shown in leaked documents published by the Information earlier this year. In the first half of 2015, the leaked documents showed Uber paying out $2.72 billion to drivers. Uber lost only $72 million to promotions and price cuts during the same period by the comparison.
Uber has been quietly and desperately trying to mitigate its losses to drivers. After lowering fares across North America for attracting new customers. Uber began taking a greater percentage of driver’s fares that is up to 30 percent now. Uber instituted temporary hourly wage guarantees in few cities. On concord as Buzzfeed recently reported, Uber still takes about one-third of their driver’s meager wages in the cities across the country.
A recent Forbes report notes that gross bookings fares charged to the app before customers and drivers get their cut were way up in 2015. This fact is being touted as one of the biggest indicators that Uber’s business is doing good. So how can Uber make money if its always losing so much to its drivers?
Finally, Uber gets rid of the drivers and turn for a large profit. Earlier this month, Uber announced it would start allowing customers in downtown Pittsburgh to summon self-driving cars from their mobiles that indicate at least part of the company’s long-term business plan. Uber also acquired self-driving car company Otto for $300 million that shows its anxiety to advance its driverless car technology.
Uber said “It’s the case of business 101,” in a statement to Business Insider in the last year after its private finances were leaked. “You raise money, you invest money, hopefully, you grow, you make a profit and that generates a return for investors.”
Uber omits is how it will earn a profit is a critical part. If it continues to lose most of its money to drivers. Just get rid of them is the answer that seems pretty obvious to me.
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