<story><title>Uber’s Losses Widen as SoftBank Launches Bid to Buy Shares</title><url>https://www.bloomberg.com/news/articles/2017-11-29/uber-s-third-quarter-loss-is-said-to-widen-to-1-46-billion</url></story><parent_chain><item><author>wpietri</author><text>Even if they manage to kill their competition -- and I&amp;#x27;m not expecting they will -- I don&amp;#x27;t understand what their endgame is. I don&amp;#x27;t see what their moat is. Ridesharing companies are not hard or expensive to start. They&amp;#x27;ll have a hard time extracting monopoly rents, and there isn&amp;#x27;t much of an economy of scale they can reap.&lt;p&gt;And once autonomous cars become part of the picture, I think they&amp;#x27;re in an even worse position. Suddenly they&amp;#x27;re not competing just against would-be moguls. Now they&amp;#x27;re up against the car companies, who have strong brands, deep pockets, and the ability to make cars at cost. Imagine, for example, BMW extending their leasing business to on-demand car use. We also have existing car rental companies that will be eager to get in on the action. And that&amp;#x27;s not counting the zillion other outfits with strong brands and a taste for expansion. Apple, for example. Virgin. Amazon.&lt;p&gt;I just don&amp;#x27;t see how this ends well for them. At best, I think 10 years from now they&amp;#x27;ll be the next Groupon: the hot startup everybody everybody loved but now nobody talks much about and is trading at a fraction of their peak valuation.</text></item><item><author>ihsw2</author><text>The idea is to drag the entire ride hailing industry underwater long enough to drown out competitors, and the trick is to do this without drowning themselves in the process.&lt;p&gt;This is the nature of &amp;quot;predatory&amp;quot; pricing.&lt;p&gt;There is something to be said for volume and if a couple competitors die in the process then Uber&amp;#x27;s volume can only go up. Unfortunately their competitors have found a variety of ways to keep from being dragged down (eg: regulatory support of municipal taxi orgs) or ways to keep oxygen expenditure stable (eg: controlled expenditures through higher pricing and &amp;quot;friendlier&amp;quot; demeanor).</text></item><item><author>BinaryIdiot</author><text>Yeah I am really perplexed with Uber&amp;#x27;s business model. They can&amp;#x27;t survive much longer and they can&amp;#x27;t keep getting injections of cash to stay alive, can they? It&amp;#x27;s rumored they&amp;#x27;ll IPO in 2019, if I remember correctly, which means they have to somehow survive until then to at least reach that stage.&lt;p&gt;Are they planning to raise prices? Cut employees? What are they planning on doing here?</text></item><item><author>JumpCrisscross</author><text>Uber had $6.6bn on hand at the end of June [1]. That means they are down to $5.1bn.&lt;p&gt;Absent cost-cutting, that implies a 9 to 12 month runway. Even if SoftBank injects $1bn, that could only mean a few months’ runway. A large fine in the Waymo case [2] could literally bankrupt them.&lt;p&gt;[1] &lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;venturebeat.com&amp;#x2F;2017&amp;#x2F;08&amp;#x2F;23&amp;#x2F;uber-is-still-burning-cash-at-a-rate-of-2-billion-a-year&amp;#x2F;&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;venturebeat.com&amp;#x2F;2017&amp;#x2F;08&amp;#x2F;23&amp;#x2F;uber-is-still-burning-cas...&lt;/a&gt;&lt;p&gt;[2] &lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;mobile.nytimes.com&amp;#x2F;2017&amp;#x2F;11&amp;#x2F;29&amp;#x2F;business&amp;#x2F;waymo-uber-trial.html?referer=https:&amp;#x2F;&amp;#x2F;news.ycombinator.com&amp;#x2F;&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;mobile.nytimes.com&amp;#x2F;2017&amp;#x2F;11&amp;#x2F;29&amp;#x2F;business&amp;#x2F;waymo-uber-tr...&lt;/a&gt;</text></item></parent_chain><comment><author>xbzbanna</author><text>Offerings like Uber Pool and Lyft Line are the future of the business and depend entirely on economies of scale. Putting multiple paying passengers in the car at once and reducing driver downtime completely changes the economics, but only if there is a high density of riders and drivers.&lt;p&gt;Edit:&lt;p&gt;There are two possible stories here about Uber and Lyft&amp;#x27;s losses, and we can&amp;#x27;t tell which is right from the outside.&lt;p&gt;1. Uber and Lyft are in a price war death spiral, heavily subsidizing all rides to compete. Their only hope is for all competitors to die, so they can take over the whole market and raise prices. Then vague hopes of  lowering costs with self-driving tech and take the surplus as profit. The plan doesn&amp;#x27;t seem viable, since they have no moat and they can&amp;#x27;t outspend GM and other self-driving players.&lt;p&gt;2. Uber and Lyft can actually make a profit in mature markets, but choose to subsidize rides in growing markets, on the theory that growing the market size increases the long term profit opportunity. The data we need to evaluate this idea isn&amp;#x27;t public, however Uber did a &amp;quot;prove it&amp;quot; quarter in 2016 where they turned the spigots to be profitable in the US. They are now pursuing growth in the US again, expanding to a larger territory and expanding Pool and other offerings like flat-rate passes in mature cities. Under this model, Uber could at any time decide to become profitable, but the revenue growth would stop, placing a cap on the valuation. Notably, there is no &amp;quot;predatory pricing&amp;quot; here.&lt;p&gt;With internal finances, we could easily tell whether option 2 is valid. You can bet Uber is constantly doing experiments on price elasticity of demand and knows exactly where the truth is. You can bet Softbank has seen numbers we have not. If Uber wants to IPO, I would expect them to provide additional public info, possibly pivoting to profitability again in the US. But doing a pivot like that permanently reduces the size of the opportunity, allowing Lyft to capture that new market instead, so they may be reluctant to do it large scale.</text></comment>
<story><title>Uber’s Losses Widen as SoftBank Launches Bid to Buy Shares</title><url>https://www.bloomberg.com/news/articles/2017-11-29/uber-s-third-quarter-loss-is-said-to-widen-to-1-46-billion</url></story><parent_chain><item><author>wpietri</author><text>Even if they manage to kill their competition -- and I&amp;#x27;m not expecting they will -- I don&amp;#x27;t understand what their endgame is. I don&amp;#x27;t see what their moat is. Ridesharing companies are not hard or expensive to start. They&amp;#x27;ll have a hard time extracting monopoly rents, and there isn&amp;#x27;t much of an economy of scale they can reap.&lt;p&gt;And once autonomous cars become part of the picture, I think they&amp;#x27;re in an even worse position. Suddenly they&amp;#x27;re not competing just against would-be moguls. Now they&amp;#x27;re up against the car companies, who have strong brands, deep pockets, and the ability to make cars at cost. Imagine, for example, BMW extending their leasing business to on-demand car use. We also have existing car rental companies that will be eager to get in on the action. And that&amp;#x27;s not counting the zillion other outfits with strong brands and a taste for expansion. Apple, for example. Virgin. Amazon.&lt;p&gt;I just don&amp;#x27;t see how this ends well for them. At best, I think 10 years from now they&amp;#x27;ll be the next Groupon: the hot startup everybody everybody loved but now nobody talks much about and is trading at a fraction of their peak valuation.</text></item><item><author>ihsw2</author><text>The idea is to drag the entire ride hailing industry underwater long enough to drown out competitors, and the trick is to do this without drowning themselves in the process.&lt;p&gt;This is the nature of &amp;quot;predatory&amp;quot; pricing.&lt;p&gt;There is something to be said for volume and if a couple competitors die in the process then Uber&amp;#x27;s volume can only go up. Unfortunately their competitors have found a variety of ways to keep from being dragged down (eg: regulatory support of municipal taxi orgs) or ways to keep oxygen expenditure stable (eg: controlled expenditures through higher pricing and &amp;quot;friendlier&amp;quot; demeanor).</text></item><item><author>BinaryIdiot</author><text>Yeah I am really perplexed with Uber&amp;#x27;s business model. They can&amp;#x27;t survive much longer and they can&amp;#x27;t keep getting injections of cash to stay alive, can they? It&amp;#x27;s rumored they&amp;#x27;ll IPO in 2019, if I remember correctly, which means they have to somehow survive until then to at least reach that stage.&lt;p&gt;Are they planning to raise prices? Cut employees? What are they planning on doing here?</text></item><item><author>JumpCrisscross</author><text>Uber had $6.6bn on hand at the end of June [1]. That means they are down to $5.1bn.&lt;p&gt;Absent cost-cutting, that implies a 9 to 12 month runway. Even if SoftBank injects $1bn, that could only mean a few months’ runway. A large fine in the Waymo case [2] could literally bankrupt them.&lt;p&gt;[1] &lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;venturebeat.com&amp;#x2F;2017&amp;#x2F;08&amp;#x2F;23&amp;#x2F;uber-is-still-burning-cash-at-a-rate-of-2-billion-a-year&amp;#x2F;&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;venturebeat.com&amp;#x2F;2017&amp;#x2F;08&amp;#x2F;23&amp;#x2F;uber-is-still-burning-cas...&lt;/a&gt;&lt;p&gt;[2] &lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;mobile.nytimes.com&amp;#x2F;2017&amp;#x2F;11&amp;#x2F;29&amp;#x2F;business&amp;#x2F;waymo-uber-trial.html?referer=https:&amp;#x2F;&amp;#x2F;news.ycombinator.com&amp;#x2F;&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;mobile.nytimes.com&amp;#x2F;2017&amp;#x2F;11&amp;#x2F;29&amp;#x2F;business&amp;#x2F;waymo-uber-tr...&lt;/a&gt;</text></item></parent_chain><comment><author>lsiq</author><text>They do have a small moat in the short term; the network of drivers, brand recognition they&amp;#x27;ve built up (even w&amp;#x2F; the bad press), the large codebase they have by now, and the amount of capital to start such a business from scratch is not insignificant.&lt;p&gt;However, you are right to bring up autonomous cars. I always thought it amusing that Kalanick et al were so anxious to bet the house on autonomous cars, when in fact, they are the company&amp;#x27;s greatest existential threat long-term. Once those cars are readily available and street-legal, there&amp;#x27;s nothing stopping Enterprise or Avis or the automakers themselves from becoming overnight competitors.&lt;p&gt;And once drivers are taken out of the picture, ride prices will plummet. Margins will also thin because of the likely extreme competitiveness of this market. I would not want to be an Uber investor that&amp;#x27;s for sure. In theory, the &amp;quot;winner&amp;quot; will be whoever scales the most (i.e. has the most capital to put into their fleet) and has the most effective marketing. In practice, prices may be close enough that people will rent car X because they like brand&amp;#x2F;model Y better.&lt;p&gt;If I were on Uber&amp;#x27;s board, I would advise against trying to win that war which they will lose once&amp;#x2F;if the automakers get in on it, and instead get creative about how to conquer the market in a more niche way.&lt;p&gt;Someone is going to have to program self-driving ambulances :)</text></comment>