I really liked the video but I have a question: Why is the conversation regarding these kind of companies hyper focused on the earnings side but very little on the overhead side. Uber sells 100s of millions of rides a year (this is good). Uber has a take rate on those rides of ~20% (20% is a lot higher than a lot of companies' margins). Uber's overhead cost is so high that the company burns 100s of millions of dollars. It doesn't take a McKinstry consultant to determine that if Uber was able to trim down their overhead they could be profitable. IMO the issue to that with investors is that Uber then becomes a very large taxi service and they were sold on the idea that Uber would 'conquer the world'.
For the Financial Deception segment, what should have these illiquid ownership stakes have been recognized as if not income? curious to know what your take is. isn't income supposed to be the recognized the day of, like a sale; even though the cash flow will be in the future?
Hey Modern MBA, you're a smart guy, you understand supply and demand much better than I ever will. Still, even I can tell that is MasterWorks was in such high demand so as to require putting people on waitlists, they wouldn't be advertising so heavily through influencers. I mean, how stupid does MasterWorks think we are?
@@michaelcarvalho3131 It's a commodity and it's speculative in nature. That cut of the profits however is really steep and kills individual gains. Should be put front and center.
@@michaelcarvalho3131 the 1.5/20 fees you outlined are just slightly below the standard 2/20 that actively managed hedge funds charge for their services. Effectively, they're saying that they're a art-focused hedge fund. The non-productivity of art that's being criticized is similar to gold & other commodities, where there's no inherent dividend when holding these assets.
My dude you gotta stop with the masterworks ads, I would expect you to be the one explaining the ins and outs of their scam not propping them up as a usual financial investment.
I can relate to this strategy, as a consumer, I completely stopped ordering through Uber eats even with a good income, because paying a 8€ macdonalds menu 25€ after all the hidden fees is just not acceptable to me, I'd rather order a pizza through a phone call like we did 10 years ago
yes, this is also what drove me off food ordering apps since each has basically the same model. The moment I had to pay 15 dollars for a 40 dollar order from a place that was 3 miles away and waited 2 hours I was like, that's it, this is stupid
Yeah I've found the same thing with the likes of Airbnb. I used to be very impressed at what I could get for the price, but now it usually seems to work out as more than just paying a fully staffed and serviced hotel once you add on fees. I assume this used to be subsidised and now it isn't.
Ironic, after he just called Uber a pump and dump, he is promoting MasterWorks 😂 Also, the video ends showing how Uber is taking massive commissions of up to 40%, but fails to explain how they’re still not profitable. I don’t get it. Where is the money going? Lots of unnecessary desk workers?
@@lukethompson5558 not so many desk workers, but they do spend quite a big chunk on woke ads, legal, payment gateways and lobbying. They are quite inefficient in certain markets.
@@katsdraws It’s not that “woke” ads costs more for Uber, but that Uber spends a quite significant proportion of it’s marketing expenditure in woke ads. It’s less focus on the qualities and virtues of it’s product, but instead conveying that they’re aligned with “the message”.
I did a nightmare Uber grocery delivery the other day. Should have known not to take it. 90+ minutes of shopping for an order, 2 shopping carts full of goods. At checkout Uber dropped the ball, wouldn’t release the funds and they cancelled the order on me after I called for support. I had to complain up the support chain to get fair compensation for my time. How can one company manage to fail the customer, the store and the delivery driver all at once?
Man I stopped doing grocery orders when I had to wait for an hour at Walmart for my order to not come out. Now if an order isn't ready when I get to a store, I set a ten minute timer and once it goes off, I leave and call customer service. I also refuse to take low paying orders now, because im not driving anywhere for 30min for less than the cost of a gallon of gas in my area. Uber has a way of sneaking these $2 trips in there when I'm trying to take a photo and I'll cancel them every time. Time is money!
Thats actually horrible, the worst I've ever had for a grocery was like 13 items from Meijer, where the in store wifi doesn't work, cell phone data doesn't work, they were out of like half the shopping list and after 30 minutes from time of asking the customer never responded to if a substitution was acceptable or not. I canceled and have only accepted 1 trip to any Meijer after that.
Doordash has something that can fix these clear problems with grocery delivery, which is having their own grocery store operating in a warehouse area just for delivery orders. Its called Dashmart and its amazing. There are employees working at the Dashmart warehouse and when an order comes in, someone bags the order immediately, the driver comes to pick it up like any other order and delivers it to you. I never do grocery orders on Uber after learning how terrible the system is. I open doordash and order via Dashmart
I remember an article from Cracked back in 2014 talking about how Uber was basically going through the exact same motions that taxi companies went through in the early 1900s and would inevitably end up being in the same spot. We clearly see this happening now firsthand with Uber. These silicon valley app companies that have tried disrupting their respective industries are only treading the same ground that other corporations have been through decades before.
Yep, a lot of subscription services are now starting to look more and more like cable tv. I could've sworn that I saw an app that bundles all of your tv subscriptions into one app... absolutely ridiculous! It's like Animal Farm in real life.
Another example is finance tech companies and crypto “investing” going through the same issues, like trust and stability, that conventional banks had 100 ago, which led to regulations
I don't understand why people think Uber, Lyft, DoorDash, or AirBnB are tech companies. They don't sell software or hardware, they sell taxi, food delivery, and hotel services. It doesn't make any sense to think of them as tech companies.
@@cogentorange5252 People think of them as tech companies because they market themselves as tech companies. Because "Our app makes the difference!!!" even though everything has an app now. Technically, they don;t even sell those things. They're just a middle man to those services since everything is subcontracted out. The whole set up is the worst form of retail...
"The on-demand online to offline platform business is a modern fairytale spun by silicon valley. Value creation as a product of unsustainable subsidies and artificial discounting is not disruption - it's fraud." This is so spot on and what a mic drop.
I remember seeing Buffet joke at a Berkshire meeting that people would talk about what they manufacture and say "we lose money on each unit but we'll make up for it on volume" as a joke He basically described blitz scaling a few years/decades early and I've never known how it seemed viable
I always think of that quote when I hear people who think that somehow they've invented a new way to make money. I think Buffet had a quote about "new sex" Either you make money or you don't.
@@HrHaakon Amazon's business model understood what parts of the business would scale efficiently as the company grew, though. And keep in mind, the online store for Amazon runs on razor thin margins. Amazon Web Services is the part of the company that prints money for new expansions and acquisitions. Companies like Uber seem to be aping the exterior appearance, and thus success, or amazon, but can't actually point to why it will work for them.
I can remember working in a fast-paced restaurant towards then end of the 2010's; if we were busy we'd just turn Uber Eats off as it was more profitable to serve the customers in-store.
I am a heavy user of Lyft, mostly with black cars and full size SUVs, and my trips are now regularly $70 - $150 (inc. tips), depending on the time and city. Because I use the service for corporate work, these are all expensed, so I am not so sensitive to price, and neither are my colleagues. I like the service, and it solves real issues for me. These businesses could have a nice profitable niche in the corporate black car world if they optimized for that, rather than pitch themselves as being the solution to all the world's logistics problems
i agree, or they become a B2B software company by license the ´tech´or they can become an taxi valet type of thing that caters to business men and frequntly travellers, they are not price sensitive.
Yep, I think they'd do well to just focus on large cities and not try to be every where in the country. We normally get rental cars at my company but when going to places like Chicago we save a fortune on parking, as well as our sanity, by just getting Ubers.
@@TheSuperBoyProject Spoken like someone who doesn't understand software or distributed systems. They could make it, but would it be reliable, good, cheap, etc?
Honestly though Uber and other cab-booking services *do* provide utility, especially in cities where taxi drivers refuse to go by the meter. In such cases Uber has a fixed cost which drastically reduces price gouging. I would continue using it even if it were a bit more expensive for this reason.
I know business customers also like Uber for this reason... maybe the app can keep existing as an expensive business-oriented taxi service that occasionally does private rides.
I remember there was a time in 2014 where Uber positioned itself as a luxury car booking app - UberX was meant to be fancy cars. Perhaps it's too late to go back to that value proposition.
Uber does not go by meter. Allegery, it's based on supply and demand which I find it very predatory towards customers and drivers. This company shouldn't exist because their business practices aren't making any profit after 13 years.
safety and to stop price gouging is why I still use it. Safety because unlike a regular local tuk driver, we get a random driver and all his details are stored along with safety features built in the app. Also when you travel somewhere unfamiliar or another country.
As a recently retired Uber Eats driver, I would like to thank you for validating my experience with hard data. Since I started driving, the app was full of weird bugs; i.e, saying a ride was over two miles shorter than it actually was, automatically shutting off my "avoid tolls" setting in Google Maps, and almost always giving me the slightly wrong addresses. More germane to the video, over the course of my 8 months of driving, I noticed a pretty steep decline in offers and payouts in my area. By the end, I was waiting for 40+ minutes during peak hours for a single ride, receiving noticeably less than I used to. My pay went from ~$30/hr (while heavily gaming the system and speeding/running constantly) to less than $18/hr in a matter of weeks. Also, Uber's "benefits" are a joke, even for people working 40+ hours and destroying their cars for said business. I cannot recommend NOT working for this company enough.
Would have liked a bit more info on the competitor landscape: Lyft, Bolt, Yandex, Didi, Ola, Gojek in various markets around the world. One angle that isn't fully explored in this video is how unscaleable Uber actually is. Every new city is an entire new business from scratch, with its own market entry and competition. The software platform is the least amount of work required, it's the boots on the ground that matters. And that cannot scale like a tech company. Also, the fact that they simply haven't been able to monopolize their way into market dominance. Local equivalents have popped up to challenge them in every market they've been in, keeping competition up and limiting their ability to raise prices.
Even in tiny Singapore Grab can't hold it's market share - once Grab tried to increase profitability Gojek (and a whole host of competitors) came in to try to take the market.
Being disruptive and being profitable are two different things. I think Uber was very disruptive. Especially in New York where I’m from. For one, the city definitely has less yellow cabs than it did a decade ago, according to the NY Post the city has a little more that half of the taxis than it did in 2010. Second, I see this anecdotally in my life, in my home town just outside the city the local taxi company is out of business. In place of the taxis most people just use Ubers, I think most kids who grew up in the smartphone era in this generation may not even know that a Taxi service used to exist in the town. When I was in school there used to be Taxis lined up ready to shuttle people home from the train station. I used to take these cabs home if I ever missed the bus or if my parents couldn’t pick me up. Today they’re all pretty much gone.
@@stereomachine it’s less about who ran the ad and what the ad was. In a video where it’s gist is “3 mega companies, are not and will not be profitable here’s why” “Put your money in here instead, look how much money other people have made here” It just seems disingenuous. Again, both could be valid. It’s just iffy.
@@Heynmffc Its probably more due to alignment. This is a finance/business channel, so investment ads will be pushed. There's a solid audience match and the product is fairly straight-forward. The company pays for investment grade art, then it creates shares for ownership of the asset (or entitlement to its revenue) and sells when profitable. Not zero risk, but you should have a solid idea of what you're getting into.
@@AwesomeTea for the love of god… for the 2nd time. It’s not about who ran the ad or what the ad was. Is the disingenuous tactic that I’m worried about. Think of someone like Alex Jones. He sells problems and Solutions in the same breath. Same format. And the business angles gonna be the same for any ad on any RUclips video. So yeah. Not saying either the video is wrong. Or the ad is a scam. But this is textbook fear mongering for monetary gain. And that is iffy.
@@m.o.n.d.e.g.r.e.e.n The Wendover video was informative but kind of misses the point. The things that Wendover correctly identifies as being "wrong" about the art market is not a bug, it's a feature!
37:00 I have similar story with Grab in particular ( No Uber in my country ). Driver would persuade customer to pay outside of the app in order to avoid Grab's fee and cut. That way, the Driver would get more money since there's no middle man' cut and the Customer pay less for their ride due to not paying the service' fee and cut. In a way, we're reverting to the old system where people just stop taxi/ service for a ride and negotiate the price for the ride lol
if someone would just make an actual market place for taxi's with a minimal take rate of like 1% just for running of the app you would expect to get all the benefits with non of the problems, I am always confused what these companies actually spend all this money on that they need this massive take rate to make money. It almost feels like a government service where the problem of excessive non sustainable overhead doesn't get fixed and instead they try to leverage market power to lower the wages of the workers and up the prices of the consumers.
@@alberts9781 lol literally just an app to connect you with drivers in your area would cut out the headaches for drivers and passengers. I wanna be able to negotiate a 20$ car ride and not pay an additional 22.75 in fees and “peak hour” charges
Why are Ubers costs so high though? The business model is "our only cost is software and thats easy to do were just a platform". Uber functionality seems pretty much the same over the last 5 years. Ive always wondered what does anyone that works at Uber actually do? Isnt the path to profit just cut 80% of employees and stop doing a bunch of new stuff and just focus on maintaining the app in existing markets?
In the case of Uber, it's the price wars they engage in, and in the case of almost every large tech company, it's the fact that they want to pay all their engineers the same as Microsoft and Google, yet not all of them need world class engineering talent to get their services to work
I agree, it's strange that Uber insists on having such high overhead. I would've thought their profitable take rate would be somewhere between 5-10%, but as the video goes over, it's more like 40%. I guess they just have a really bloated software headcount. Like, there shouldn't need to be all that many highly paid engineers to make this business work.
If you want to run a global business there is a ton of overhead shit that needs to get done in order for that to work. The fact that your business is "just an app" doesn't remove the need for multiple marketing teams to provide relevant advertising to the very different cultural landscapes that exist around the globe. Many legal teams to deal with the very different legal structures and issues found around the world. Many different lobbying teams to deal with the unique regulatory pressures faced from all the different governments. All of these functions then require other support functions such as HR and IT. You also have to understand that Uber's business model isn't "just an app" It is a cab service like every other cab service but instead of paying their drivers a wage and operating a fleet of cars they are "outsourcing" that piece of the business to gig workers. They still have to grapple with those costs even if they don't show up on their balance sheet directly. If people willing to drive a cab are having to foot all of their own fuel, car payments, maintenance, etc. they are going to ultimately need to be paid for that or they will end up finding work at a cab company where they get a better deal. They get paid for that through Uber getting a smaller cut of each fair which is basically the same thing as what a cab company does but aren't able to take advantage of economy of scale benefits on car purchases, maintenance, insurance, etc. People also need to realize that cabs were not a monopoly with hugely inflated prices. Cabs were already businesses that operated on relatively small margins in a competitive market. Beating them in price isn't as easy as people assume it is. People have this false idea that "old school" businesses are all run by out of touch geezers that don't understand the business they are running and refuse to ever change or that all of the struggles a business faces can be solved by some new kid with a software trick. The reality is that the people running cab businesses probably know a lot more about this business concept than anyone at Uber could hope to learn in their lifetime and as soon as Uber showed up cab companies started implementing similar apps to capture at least a large portion of the new convenience offered by Uber. Ultimately the entire concept of these tech bro "disruptions" follow a similar set of false assumptions. The largest being that software is a magic bullet that can wipe out the real world costs of doing business or allow you to "cheat reality". That assumption is simply wrong but since you don't see things like driver fuel cost directly on Uber's balance sheet people are willing to pretend it isn't being paid.
When you drive uber, you are on their insurance, there is local taxes, the software people, the lawyers, and then there is the payout if there are bad apples (like if the driver ate the food, wrong order, no-show, etc). So just cutting employees doesn't solve everything cause at global scale, it shouldn't be a huge percentage but the per unit cost (insurance, taxes, etc). The other thing is since drivers aren't employees, they are a constant churn, so you have to keep onboarding new drivers, pay incentives, etc
I feel like with these "disruptive" tech companies what it so often boils down to is trying to get enough investment into your company that you can monopolize the market - after which you get to make a profit. But then the idea is so appealing that competitors, backed by different investors, pop up overnight. Then it fundamentally becomes about which investors have the deepest pockets to invest as there is no profit to be had before you monopolize. It's a very weird situation.
Perfect point the monopoly never formalizes due to the fact the traditional institutions that these gig companies are attempting to disrupt with more sustainable models never really go away. If Uber is charging me $10+ dollars on a ride compared to a cab I'm going to take a cab. In my city the cabs now also have their own app. Another thing that is worth mentioning is that these brands have developed no customer loyalty which I think is important. The consumer isn't getting a uber for any other reason then it's cheaper and convenient. If somebody come with a better offer consumers will use that option.
I think one of the issues that isn’t really discussed here, and I believe is Uber’s long term plan, is that frankly engineers and developers end up being so expensive. Ubers/Airbnb’s metric for profitability is basically “if we remove R/D this is what we’d make!”. The hope being that once the company is done growing they can just cut all of these expensive engineers and be costing on their monopoly. That’s where the second issue comes into play: these tech companies have had so much money pumped into them, and have such lofty evaluations that they still need to grow to reach these expectations. You can’t expect to grow without engineers to make new products, and improve old ones. Like in this case Uber could probably become profitable (for real not just on paper) if they use existing infrastructure, and cut management/ engineers significantly. But a company earning 1 billion in profit on 10billion in revenue isn’t worth the 60 billion it’s worth today.
I thought the same thing and was a bit confused because with 17 billion in revenue it should be possible to make 4 billion in profit (13 billion for marketing, research, development... should be doable and normal evaluation 15x profit = 60 billion). So I checked their financial statement and found this gold nugget... Their revenue number is completly bullshit! If you check their statements they say they make 17 billion (what people pay - what they pay drivers) and spend 21 billion. However of their 21 billion in costs, over 9 billion are vague "costs of revenue" which seems to be mostly money they pay to drivers to actually drive (+ credit card fees, chargebacks... which cannot be reduced really...)! So in reality their revenue is more likely around 11 billion (17-6 billion that is currently inflated income via costs of revenue) and their costs are more like 15 billion which gives your their actual operating loss. And this is why they cannot stop trying to grow... they can maybe cut a few billion in cost but most likely not 8 billion (which they would need to do for 4 billion profit) without losing revenue. Most of the cost is not development or growth (costs that can be cut), it is mainly fees, marketing, operations, minimal app development and administration (costs that cannot be cut). For them to be actually as profitable as they need to be with a 60 billion dollar evaluation they probably need somewhere between 20-30 billions in real profit (and not fake revenue - "costs of revenue"). So TLDR: Uber isn't making 17 billion and spending 21 billion on growth and tech, it is making 11 billion and spending maybe 3-4 billion on growth and tech while it has a operating expenses of around 14 billion
They shot themselves in the foot by selling their investors a story that is too good to be true, it’s amazing how many people continue to eat it up. You’re absolutely right as well, Uber came up many times during my degree (as did AirBnB) talking about the ability of new technology to completely disrupt an industry.
it doesnt have to be true. investors buy stock, inflate the value, sell stock. there is no requirement for a business to function because uber isnt the business, trading is the business.
Coming back to this almost two years later, how do you view the development of the business into a profitable company (albeit with relatively small margins)? The results they've achieved are impressive, with the company printing both net income and free cash flow especially when taking into account what people thought back in January of 2023.
I live in Manila, one of the places which has the worst public transportation in the world. Uber sold themselves out for Grab here. However, Grab is still failing to make any significant improvement in the state of transportation despite having the market all for themselves. If there's anything, ridership is falling because of rising prices. Moreover, booking rides from these apps is becoming a different nuisance i.e., it's now faster to walk to a bus stop nearby than to successfully find a driver who will accept your booking. The fact that it's now more attractive to buy your own car instead of using a ride sharing app regularly just makes these value proposition of these platforms less lucrative.
BGC even at 8pm where it's semi past rush hour, no fucking driver will accept your booking. You nailed it on walking to a bus stop will get you to your place faster (an achievement considering our abysmal public transport system already). Grab sucks.
@@TheMasterofComment Pay is definitely not an issue. A lot of drivers earn a lot more now than a typical office job. The problem is not only the supply but also drivers now having too much bargaining power. No one wants to accepts your rides especially when your destination is too far or during peak hours. This artificially inflates fares further rendering these platforms unreliable. There's no incentive for them to keep the fare competitive since Grab technically has a monopoly here.
The Silicon Valley business model sounds oddly similar to Standard Oil's. Offer low prices to crush competition, then jack up prices once you have a monopoly.
But with oil that may make sense. It is very hard and costly to get new Oil drill, while "copying Uber" would be much more easier. So is Uber will raise prices when monopoly, new app could emerge
This is the most detailed, non biased, and best research video journal I've ever seen, and I've watched a lot.. I never commented before, but this was probably one if not the best video I've seen on RUclips. Please keep creating exceptional video research journals like these man, they're great! Much love.
Uber most probably would have been profitable, if they had just partnered with existing taxi companies instead of trying to put them out of business. If Uber would have just focused on creating dispatch and hailing software that these taxi companies would use, Uber would be a company with strong fundamentals.
Damn, I see LaunderWork- I mean Masterworks has gotten to you too lol. Ah well, gotta pay the bills I guess. 🤷♂️ Still love your quality content though.
Great video. I'm always suspicious when companies choose to publish "adjusted EBITDA" which when you think about it translates to "earnings after adjustments for Interest, Tax, Depreciation, and Amortization along with some further adjustments". My conspiracy theory as to why they are allowed to exist is that the end goal is not profitability but the complete annihilation of public transport options, similar to what automakers conspire to rid cities of streetcars in the US. I remember reading that some cities give elderly residents free Uber credits as a cheaper alternative to funding a bus service. Of course, anything can be made cheaper with enough subsidy.
Uber, grub hub, air b&b, and soo many others are trying to take industries that have existed for years substantially (food delivery, taxi's, hotels) and use tech to redefine them. The consistent problem with all of them is that they're applying it in places where it just isn't profitable or sustainable. There's a reason that before uber eats/door dash/ grub hub only pizza places would even offer delivery. It just wasn't profitable for almost any other restaurant. The tech companies haven't changed that, they've just operated at a loss and used investors/fuzzy accounting to hide it. Same thing with taxi's and uber. The real problem now is how many cities and people depend on uber for things. When uber has to make massive changes it's gonna be rough for a lot of folks.
Uber is a solution to a problem that already had a better solution. Public transportation. Uber will never work if this becomes everyone with their own chauffer, especially at current prices. Drivers are underpaid as well as rides are underpriced and that presents a huge problem on their way to profitability. The reason public transportation like buses and trains are what most people used over taxis is because you have access to scale where it matters most, in taking as many riders for a route, that way the cost is distributed among many riders and the unit economics work out properly. I think in the end of the day, Uber will just end up another Taxi company. Overpriced, and only used for special occasions. That's the only way this whole operation becomes profitable. But at that point, they'll find that people end up using their services as infrequently as any taxi service.
With public transport, there is still the issue of getting to and from the station/stop, or the "last mile" as it is known as. For many, in areas that have frequency dependent on time of day, or distant station spacing this is where Uber comes in as a valuable service. An example, in my city there is an airport train that costs $17, it's comfy and quick. To get to that station I prefer to take an Uber as there isn't a direct transit transfer.
@@namo5961 Still, public transportation needs to be leveraged more in bigger cities. Cars need to become more of a secondary form of transportation in cities since the population density is so high that it makes sense to take advantage of public transportation more often. I agree with you that Uber can help fill in the gaps. Honestly those electric scooters though looked cool and seemed like a better solution for that imo, especially if you own yours.
@@diodora2381 many cities only have pockets of adequate density where transit matches sufficiently, In the USA there are 3-5 cites at best and even then there are still gaps within service areas. The ability to live within 5-10 mins from reliable and rapid transit is not common for many in North American cities. Uber has its best use case for these gap, last mile style trips. Uber had something going with the Uber pool when you could make these trips quickly and a decent price but the pandemic and Uber's dash towards trying to make a profit took that away. My overall point is that Uber has taught us many good lessons and there is still value to the service it offers. There is no future reality where public transport becomes there silver bullet to fix our traffic and mobility issues, because the funding and planning that goes towards public transport will never focus and direct dollars to where it makes actual sense to do so. With the continued piecemeal approach the gaps will always exist and that last mile trip will always need to be accounted for.
@@kennythelenny6819 Probably, but that's kind of the issue. Special interest takes priority over actually solving issues. Lobbying is cancerous. We need to remove the cronyism and corruption that's involved in politics.
But uber also just makes transport worse. It's been shown that getting an uber driver adds more cars to the system than people driving individually because of the additional distance. Busses can hold many people so they reduce congestion. Uber makes cars drive for longer so they add to congestion.
There are drivers pushing to become employees. My response is. ‘If Uber treats you this badly as an independent contractor, imagine how they’ll treat you as an employee.’ 30 minute lunch break at a time they set, (9 a.m. good for you?).
I think Uber significantly disrupts the taxi industry, public transport and to an extent car ownership (especially second car ownership in a family). Especially in the age of wfh, car ownership is a marginal proposition for anyone living in an urban area.
It 'disrupted' the taxi industry only in places with terrible public transport, and its survival is dependent on that remaining true - i.e. insuring public transport never works. It also really didn't disrupt the taxi industry because they simply removed protections and made drivers take on most of the liabilities and costs. This is why in places like Germany where they were required to insure drivers' cars, contribute to their healthcare, pension etc, the cost of an Uber became the same as that of the taxis, showing that taxis had already figured out the market price without exploitation of the drivers. Add subsidies die to investor money and you realise that Uber disrupted nothing. Good public transportation solved the 'marginal car ownership proposition problem' more than a century ago.
@@animaaura indeed correct. I can only speak from personal experience that in places without access to public transport, the convenience of Uber and other ride hailing platforms makes foregoing a car even viable in the first place. Dealing with roadside hailing or call center ordering metered taxis like in the old days put it out of the equation completely. Even more so in countries without either good public transport or a strong metered taxi network.
@ithira kana Sadly here in America, we probably won't ever have good alternatives other than a car. We won't get trains, bikes, walkable areas outside a few cities. In my area for example which is pretty normal and I see it's like elsewhere, everything is made for the car. You could never make anything walkable without demolishing everything and forcing folks to live closer together. All the buildings would have to be forced closer same with houses. You would have to demolish every aspect of our current infrastructure to accomplish this. You can't build a bus stop or train station outside every neighborhood. That would never work. You can't just make a bus stop or train station somewhere either because most people have no way to walk there in a reasonable manner. You can't build bike paths here because the rolling hills, distances, and humid weather would be unbearable in work attire. Then, culturally, many Americans like having their own house and yard. Some less, some more. You would have to change people's minds on what is desirable, and people can be very stubborn. Even if they do like what you say, they still probably like having their huge yard away from the suburbs. So yeah, we ain't getting any alternatives for a very long time.
@@animaaura In America, Public transportation is the politically correct way to say Human Zoo. There is no where in the country that you arent risking your life taking it but given most people riding public transportation do so for free by stealing it, its going to be difficult for Uber to transition that whole market
Great video but I feel you missed out on mentioning how unprofitable some of their other services are, they ended up discontinuing Uber Rewards in November of 2022 and Uber Pass for $24.99 went down to $9.99 and got renamed to Uber One
It’s not that those memberships were unprofitable - Uber Rewards was nothing more than a testing ground and lead generation for the company to experiment with retention / rewards (which all eventually became paywalled features). Once Uber got enough data around loyalty, usage patterns, and customer incentives, they shut down Uber Rewards to funnel those same users as leads to a paid membership offering. Uber Pass was the same thing except experimenting specifically on whales (who else would spend $25 a month). Uber One is just the latest iteration of all these subscription experiments that the company believes will drive the highest engagement at the most affordable price point. The reason why Pass and Rewards were shut down was to push users to one consolidated paid membership - not because the programs themselves were unprofitable. You’re more likely to buy Uber One if you’re no longer getting any rewards / savings from any other program.
I'm reminded of that Always Sunny episode where Mac and Dennis start printing Paddy's Dollars and giving them out for free, hoping to get regular customers. "I don't know how a self-sustaining economy works. I don't even know how the US economy works, let alone a self-sustaining one." 😂
My experince with Uber is just the worst. App said 30 euro the moment I step in the car the dude wanted 50 euro in cash. Contacted Ubers customer support and they where just: Not our problem, but between you and the driver. 40min walk + a train ride was how i got home instead. The only reason i wanted the uber was cause i already travelled the whole day by train, but i rather drag my suitecase trough the middle of nowhere at the middle of the night then getting scammed.
@@lumberjackdreamer6267 contractor means they agree to the price paid in the contract. I am a contract worker (not independent) but I cannot just demand they pay me more; that’s on my company to negotiate when the contract goes through. If they want to use the app and its access to customers, they cannot dictate the terms of pay.
@@ms.sysbit5511 If the driver had asked 30 euro cash and sticked it in his pocket i would have been fine with that (like i agreed on 30 and if he keeps all instead of sharing it with big corpo fine with me), but the 50 euro was completly unreasonable the distance was around 10km. I guess het tought a female at 23:00 not gonna walk in the dark.
I gotta wonder, what's their overhead and why do they need to take such a large chunk just to keep the lights on? It's an app with GPS functionality that handles transactions. How many employees do they have maintaining this app? Even with consistent R&D they shouldn't need more than 20 engineers, and maybe 100 staff to maintain an app like this. What are they spending all that money on?
I hold no special knowledge of Uber inner workings but here is my semi educated guess on what the money gets spent on. Marketing: It likely isn't a huge chunk of money but the budget here is not reduced by the nature of them being a tech company. Legal: I assume this is a fairly legit sum of money considering the need to stave off regulation, get the app patented/certified in different countries, and deal with all the kind of mundane legal issues any company deals with. Research: I am sure things like FSD were a huge money sink and i would be surprised if there still isnt a fairly significant R&D budget. Business to Business relations: All of the eats, grocery, alcohol, etc. portions of the app require relationships to get built and formalized. This requires accountants, lawyers, salespeople, customer support and associated travel and meeting expenses needed to build and maintain those relationships. Executive Pay: I have no doubt several hundred million $, maybe up to a billion, is spent paying the C suite and lower VPs and such in spite of the businesses inability to turn a profit. Lobbying: Regulatory evasion requires lobbying efforts worldwide and I'm sure it is reasonably pricey. Company Programs: The driver and customer rewards programs have a baseline cost related to whatever perks they are paying out but they also require staff to develop, improve upon, evaluate, and maintain etc. Basically for any business that is that is trying to operate globally there is going to be a pretty significant amount of overhead labor that either needs to be staffed in house or paid for as a service. The coders and such are probably a very small portion of the overall labor pool needed by the company to maintain operations around the world.
There’s algorithms they write to match drivers to rides and deliveries, and they typically wouldn’t be using Google maps navigation but rather their own path finding algo, plus maintaining the apps isn’t easy either
@@joshuabaker6452 Your guess couldn't be further from the truth, one quick google search shows uber has 30k employees worldwide. A quick linkedin search shows 8k software engineers working at Uber so not counting other technology roles engineers make up almost a third of the entire workforce which is likely still an underestimate. Engineers are also the highest paid out of all the possible roles, so spend on technology headcount probably accounts for atleast half of overall operating costs. You also completely missed the cost of the compute infrastructure that runs the application which would be enormous for Uber's size. Data doesn't just get magically processed for free out of thin air, someone has to pay for it.
@@yohji4309 This comment wasn't meant to be an exhaustive list. The person i replied to was asking what could be the source of such huge operating costs and I listed off a bunch of things that definitely make up a significant portion of a companies budget when they are a large global corporation. For some perspective about your thoughts on the engineers. Lets pretend that 50% of the workforce are these highly paid engineers and that after you add up thier salary, benefits, etc they each cost Uber $500,000 per year, which is an extremely generous assumption. That means the cost for engineering is $7.5 Billion dollars. Uber posted a revenue of just over $29 Billion for 2022. Add in another 75 million to obtain 30,000 computers and another 100 million in server hardware or cloud fees and you still have to account for 2/3 of the spent revenue. Where did the other $21.5Billion go? It went to things like what I listed. As well as a myriad of other expenses i didn't list.
As with AirBNB, I've stopped using Uber and Lyft, except when absolutely necessary. I found taxi cabs are now cheaper and far more convenient. Especially when leaving from an airport four major hotel.
I would almost never get a taxi, depends where you live, taxi rig their meters, stood there not opening the trunk waiting for a $20 tips. The worst experience I had with Uber is driver no-show, waiting for me to cancel, and dirty Priuses. Oh, and someone drive around with my food for an hour and ate it. The other thing is, if I get murdered by a taxi driver, I probably get nothing. If I get murdered by Uber driver, I think I can get something, or at least someone else knew where I went. So pick your poison, but overall, I think the added intermediatory for consumer protection is worth it. It's like you don't have to use a credit card, and pay cash, but using it you can do charge back, dispute and refunds.
Before Rona as a business traveler, one ride from hotel to airport and vice versa, it’s easier to rent a nice car and not have to wait 40 minutes for a ride
Uber may be out of Malaysia but I greatly appreciated the convenience of ride hailing and food deliveries that Uber popularized. Since the rise of ride hailing, only once I took an old-school taxi because my phone service provider was having outage. Food wise, it's great that we have much wider alternative when we don't feel like cooking or going out to eat.
Hey Modern MBA! Video request here: Remote work vs office work. A lot of heat generating between remote workers and company’s, more specifically, banks.
Some of Uber or Lyft's competition comes from their own drivers. My son took a Lyft to the airport a 25 mile trip and the driver have him a business card and told my son that he would give him a better deal. I am sure that people who are driven to and from work set up side deals with drivers cutting out the middleman.
Uber has recently altered the app to remove all information regarding what the customer paid and Uber collected on each trip. They have this fantasy that if drivers don't know that they're charging customers more while giving the drivers the same amount or less that drivers won't notice. This information was always difficult to get to with intentionally awkward steps in the app to get to that portion but veteran drivers could find it.
I had to drive for Uber because I graduated during the pandemic. I have always had 6 figure and over jobs. I want to thank uber for motivated me to work so hard to never have to work for those idiots again. Minimum wage in Los Angeles is $15 per hour. Driving for Uber and Lyft I made $10 per hour! I've thought about burning all of the rideshare companies to the ground every day. I've never been the type of person to just put up with injustice.
During my brief stint as an Uber driver, I knew this Indian driver who used three phones: one for Uber, one for Lyft, and a third to coordinate with other drivers. He was kind of a ring leader, especially during surge. When he accepted a ride, he would then call and ask people their destination and cancel if he thought the ride was too short.😂
I was a bit confused by the over 20 billion expenses that uber seems to have and the obvious implication, that if they just cut costs they would be profitable. However you have to remember that their expenses and revenue are not what you would normally consider expenses and revenue. Their largest expense seem to be incentives paid to drivers and payment fees. So basically they act like they take 15-30% of what you pay and record that as revenue, but to actually keep drivers driving they have to actually pay them more which should just be record as less revenue but isn't. To give you the scale in 2021 they made 17 billion in "revenue" and 21 "billion" in "expenses" of that 21 billion in expenses over 9 billion seem to be incentives to drivers and fees. So in actuality their revenue is much lower and so are their expenses.
One thing I’d be interested in learning, which was not discussed here, is why their costs are so high, and whether they can reduce costs to get to profitability sooner.
Here in the UK the majority of Ubers in the country are basically just a platform for existing taxi services - which I think is honestly much better than what they've done in the states
I think you didn't attack the most fundamental flaw at all. There has never been a succesful case of maintaining a monopoly, with exorbitant prices, without having a government edict protect your monopoly. Standard Oil is the typical example of a bad free market monopoly, but at no point did anyone ever argue that Standard Oil was bad for consumers, the argument was always that they were too good at what they did and that their comptetition needed protection. No free market monopoly has been able to extract extortionate prices, without immediatly being disrupted by new competition. The idea that the monopolist would reduce prices to squeeze them out, does not happen, because the supply of new competitors is infinite. As soon as monopoly prices would resume, a new comptetitor would enter.
someone needs to audit UberEats for their tipping model. as a customer, I have double and triple checked their math many times. The percentages they give customers to choose from are labeled falsely. The actual dollar amounts add up to higher percentages, so a 17% tip is actually like 25%. why are they lying, and where is our money going?
It’s because if you have uber one or are using some type of discount it doesn’t factor that into the percentage of the tip, so if you get $25 worth of food for $11 on a 1st time user promo they would do the %10 tip on the food before the discount so $2.50 instead of $1.10
@@milotheminer8176 this is not true, it happens with or without the discount. tips are supposed to be calculated on the pre-tax amount. they include all their ridiculous fees in the tip i think, but even then i have checked their math and it's way off.
What a piece! You hit it out of the park with this on! Thank you for explaining the mysterious profitable year! The question is, given this information, why do VCs continue to pour billions into the company? Sunk cost?
Great video as always, would love to hear more about non-GAAP balance sheets in the future. I see it a lot in my company’s reports and aren’t always sure how to interpret it.
Uber crashed taxi medallion prices in almost every major city. I know in New York City and philadelphia, taxi medallions today are worth a small fraction of what they used to be.
What consumers got from Uber was unpredictable pricing, lower quality drivers, antagonistic customer support, and a bait and switch that is ultimately leading to higher prices than before. What their drivers got was low pay, added expenses, no benefits, no job security, fickle customers with high demands who control the rating that affects your access to them, and a bait and switch that is ultimately leading them to burning out with nothing to show for their efforts. Oh and what their investors got was a promise they were revolutionizing personal transportation and delivery, while in reality they were posting revenue gains that were divorced from the costs they were incurring and inevitably plummeted their stock value. Another bait and switch. Distribution ftw.
I do door dash and Uber eats, so here's a thought. There are a LOT of small businesses that don't have the business to support their own, in house, delivery person, but HAVE come to depend on the sporadic deliveries from delivery services. What happens to the job market if Uber Eats and Door Dash go belly up?
I deliver food on doordash, and I've seen the number of orders from small independent restaurants over the last one or two years. It looks like the restaurants that have the list online marketable branding are being subverted All Brands like McDonald's Jack in the box and some American classic restaurants are getting overwhelmingly most of the orders
As a consumer, I have no sympathy for the service providers, both Uber itself and the drivers. No one is forcing them into being a driver. Driving is a commoditized skill and should not be treated as some skilled labor needing protecting. This industry needs to die out and give way to public transport. The fact that markets price uber rides as worth it only with subsidies indicates that the unit economics will not support driving as a marketable skill without some sort of monopolistic ride selling/monopsonistic labor buying power. This is true with taxi cab cartels too. Similar to why public transit is such a money losing affair, transport is an example of market failure and requires external subsidies to make work. In the absence of such subsidies, the opportunity cost of efficient transport is inefficient transport built into your body (legs to walk, hands to drive yourself) and is ultimately and unavoidably the cheapest option. The only way out for this industry I see is autonomous driving. Depending on what AD costs, it may remove as much as 30% of the cost of a fare, allowing the take rate to shoot way up and stimulate more volume from the market. Sadly and like OP mentioned in the video, it is many years and billions away.
Their strategy only makes sense if the end goal is a monopoly where they screw over everyone with a 50% take rate and no discounts, possibly even elevated ones. But even that doesn’t make sense because their services aren’t price-inelastic, they aren’t essential. That’s not even to bring up governments wanting to force Uber to break up its monopoly or even force them to leave the country
There are a few things that are misleading in this video: 1. You mentioned the net profits were from adjustments relating to inflated investment valuations from Uber's holdings in other companies, however you did not recognize that part of the huge losses were also attributable to adjustments of losses in holding valuations, and for the year Uber IPO'd, the stock distributed in all the years Uber was a private company due to special accounting requirements for an IPO. 2. Showing the stock price of companies like Grab and Zomato doesn't present a full picture without the context of number of shares outstanding, which shows Grab is valued at $14B and Zomato at $5B. Berkshire Hathaway stock is $470,000 a share, Apple stock is $145 a share. Does that mean Berkshire Hathaway is much more valuable than Apple? No because of the number of shares outstanding. 3. 2019 includes all the stock compensation from the last 10 years Uber was private in net losses due to IPO accounting regulations. A more accurate number to use for the total expenses would have extrapolated that based on 2020 stock compensation.
What do you think about the laundry delivery service business. Rinse laundry makes around $93 million a year with only having a very little percentage market share (SMB have most market share). Do you think it has potential?
By me they do pickups. It’s a heavily Mexican area, and culturally everyone goes there and uses them, so lots of pickups and deliveries. It would never work for others by me because they have own machines inside, and it probably won’t work as well if at all.
What are the costs of operating Uber ? I can't believe running an app that's "just" connecting drivers to clients costs billions, so how are they losing money ?
Love how the video's all "Dont fall for Uber or Doordash but invest in these arbitrary fine arts pieces with this 9 minute ad for a bank". Btw, Uber's announced a profitable quarter 💀
Uber still pays the same as they did in 2019. Same $3 trips across town. If anything we make less now because quests went down from $110 to $45 for 70 rides. Trip radar forces us to compete for good rides and decline all of the $3 rides.
This is probably my favourite channel at the moment (other than EmpLemon). So informative and well structured. Even your thumbnails are great. Amazing work! 😄👍🏽
Controversial opinion: if you continually fail to make profit despite squeezing every drop out of the people you hire (regardless of whether you call them contract or full time) and hiking prices as much as possible, maybe your business model is trash and provides insufficient value, and you should just dismantle the business
I'm 25. I have never booked a taxi or hotel in my life. All I have ever known how to use is uber and airbnb. Demand will always be there, if prices are at least similar.
What I would really want to see is how the money is spent exactly, even if you exclude driver compensation they spend several billions every year... on what exactly? Why do they have so many employees? Obviously they spend a lot on lobbying and a little bit on maintaining the app infrastructure but I feel it still doesn't add up, they make 9 billions AFTER driver compensation and still lose money even though their product is digital and the marginal cost of each additional transaction is very small (not null, though, you need to scale customer support and server capacity for instance)
Thank you for this interesting episode. Since the thesis that the business model is unsustainable is based on the idea that their costs are higher than potential profit, i would have love to hear more of a deep dive into the costs, which are in theory low for a platform system, revealing why they are instead structurally higher than potential profit (if this is not rather a mismanagement issue)
While I do love yoru informative videos, I always come to your videos to explain why these businesses fail or are not able to recognize the consequences of why they're losing money or failing with investors in the first place. This way I know as a person that may go into business someday, at least I'll be able to avoid the pitfalls the other companies went through in the first place.
It's finding a situation that can be improved - and improving it. Some situation just don't need improving. Uber is making money but is reinvesting it in growth. Like Amazon did for a long time.
The reality is that they still have to pay the same costs as any other cab company but "differently". If you notice the video comments on driver incentives, scholarship programs, etc which are basically the same kind of things any regular company would do as part of their compensation scheme but people will pretend like Uber drivers aren't employees of Uber which is a linguistic nuance that is technically true in a legal sense but not in a reality sense. They also still need lawyers, accountants, marketers, IT, HR, lobbyists, etc. They even end up paying for driver fuel in a roundabout way through "discounts" rather than just paying it. Imagine if someone had told you the Yellow Cab company was releasing an app to hail cabs and that they were firing all of their drivers and hiring "independent contractors" instead. Would you consider this choice a "market disruption" or just a company adding a bit of new tech to their model and going with a well understood scummy hiring practice that has been tried many times before? That is all Uber is. They are a cab company with an app that classifies their drivers as contractors instead of employees to try and avoid/hide employment costs off their balance sheet.
It actually doesn’t even matter. I watched a Masterclass from the founder of Starbucks and he said himself you don’t need to disrupt to be successful. I personally do think Uber is a disrupter btw
Uber’s ‘upfront prices’ are a total lie, their website literally says: If your trip exceeds the thresholds of upfront pricing due to significant changes of route, destination, duration or due to extra stops since the initial booking, the upfront price will not apply. In these cases, the actual duration and distance of the trip will be used to calculate the trip payment instead. You can find more information about pricing on this blog page. So if there’s too much traffic or whatever they can just charge more than the price they quoted.
Personally, that's never happened to me. I'd parse the text as trying to prevent customers making custom requests like "Oh, could we stop at this coffee drive-thru?" Maybe Uber really has ripped off some customers in this fashion, but it has never happened to me.
Great content. One suggestion is to use another term other than "subsidies" as this relates to a government providing payments to industries, products, or tax cuts. Uber is not a government, they're foregoing profits or taking losses to increase market shares, etc.
Uber is better than taxis in every way。Maybe DiDi doesn’t disrupt anything in China cause taxis are pretty good there but Uber has made an unbearable industry good in the US
Ride sharing services do provide utility in my humble opinion and are useful (at least to me), but I see myself taking Uber less and less due to the increasing price - at some point they'll just price me out and I'll have to find alternatives. I think the solution is for a localized version of Uber to exist in every market individually and independently. The business model could somewhat work in a micro-scale v.s. a macro-scale (provided limited operational costs). Imagine if each city has its own ride sharing app which is priced and positioned right for its local market, in theory it might work (when the app no longer requires more engineering and is just cookie cutter / copy pasted). Think of it like white-labeled forum software ... now a days anyone can buy a copy and make it their own.
@@PedroKing19 you're absolutely right, but I am talking about the convenience of the app, the scheduling, the cash-less payment, the rating system, and so on. Taxis tend to have none of that and the experience is fairly crappy most of the time.
In India, the competitor to Uber is Ola, which is just Uber but includes auto-rickshaws into their ecosystem as well, and probably a bit cheaper(though haven't used Uber in ages, so not sure).
I know every corporation would love to have a monopoly in their market, but it's unreal to see companies that actually hinge their strategy on people being forced to use them. Maybe it would work if you have deep government connections, or are providing essential services, but a monopoly on a convenience service? It's just straight up magical thinking. In what world would the average person pay for convenience if it wasn't so cheap you'd barely notice the cost.
0:00 Why Uber Matters
8:49 Financial Deception
15:20 Manifest Destiny
22:27 Scale or Die
28:51 The Super App
33:15 Inevitable Economics
I really liked the video but I have a question: Why is the conversation regarding these kind of companies hyper focused on the earnings side but very little on the overhead side. Uber sells 100s of millions of rides a year (this is good). Uber has a take rate on those rides of ~20% (20% is a lot higher than a lot of companies' margins). Uber's overhead cost is so high that the company burns 100s of millions of dollars. It doesn't take a McKinstry consultant to determine that if Uber was able to trim down their overhead they could be profitable. IMO the issue to that with investors is that Uber then becomes a very large taxi service and they were sold on the idea that Uber would 'conquer the world'.
Scummy sponsor. Nice.
Hell nah, another masterwork ad on a financial and business channel.
That's like selling crack to a police convention.
You're asking for it...
Would be amazing if you listed sources next time :3
For the Financial Deception segment, what should have these illiquid ownership stakes have been recognized as if not income? curious to know what your take is. isn't income supposed to be the recognized the day of, like a sale; even though the cash flow will be in the future?
Hey Modern MBA, you're a smart guy, you understand supply and demand much better than I ever will. Still, even I can tell that is MasterWorks was in such high demand so as to require putting people on waitlists, they wouldn't be advertising so heavily through influencers. I mean, how stupid does MasterWorks think we are?
He's going to delete this comment soon
Thank you for this
@@michaelcarvalho3131 It's a commodity and it's speculative in nature. That cut of the profits however is really steep and kills individual gains. Should be put front and center.
@@smittywerbenjagermanjensen1051 still up
@@michaelcarvalho3131 the 1.5/20 fees you outlined are just slightly below the standard 2/20 that actively managed hedge funds charge for their services. Effectively, they're saying that they're a art-focused hedge fund.
The non-productivity of art that's being criticized is similar to gold & other commodities, where there's no inherent dividend when holding these assets.
My dude you gotta stop with the masterworks ads, I would expect you to be the one explaining the ins and outs of their scam not propping them up as a usual financial investment.
I can relate to this strategy, as a consumer, I completely stopped ordering through Uber eats even with a good income, because paying a 8€ macdonalds menu 25€ after all the hidden fees is just not acceptable to me, I'd rather order a pizza through a phone call like we did 10 years ago
Right. One Starbucks coffee turns into $22 bucks without tip to the driver. It's insane.
yes, this is also what drove me off food ordering apps since each has basically the same model. The moment I had to pay 15 dollars for a 40 dollar order from a place that was 3 miles away and waited 2 hours I was like, that's it, this is stupid
Yeah I've found the same thing with the likes of Airbnb. I used to be very impressed at what I could get for the price, but now it usually seems to work out as more than just paying a fully staffed and serviced hotel once you add on fees. I assume this used to be subsidised and now it isn't.
I have literally never bought a meal from Uber Eats without a discount code, specifically because of what you mentioned
dOmInOeS iS a TeCH comPaNy lIke UBer
Explain how Masterworks isn’t a pump-and-dump for art?
Ironic, after he just called Uber a pump and dump, he is promoting MasterWorks 😂 Also, the video ends showing how Uber is taking massive commissions of up to 40%, but fails to explain how they’re still not profitable. I don’t get it. Where is the money going? Lots of unnecessary desk workers?
@@lukethompson5558 not so many desk workers, but they do spend quite a big chunk on woke ads, legal, payment gateways and lobbying.
They are quite inefficient in certain markets.
@@kaarlowsdoes an ad cost more if it’s “woke”?
@@katsdraws It’s not that “woke” ads costs more for Uber, but that Uber spends a quite significant proportion of it’s marketing expenditure in woke ads.
It’s less focus on the qualities and virtues of it’s product, but instead conveying that they’re aligned with “the message”.
@@kaarlows the messaging being that they don’t hate gay people?
I did a nightmare Uber grocery delivery the other day. Should have known not to take it. 90+ minutes of shopping for an order, 2 shopping carts full of goods. At checkout Uber dropped the ball, wouldn’t release the funds and they cancelled the order on me after I called for support. I had to complain up the support chain to get fair compensation for my time. How can one company manage to fail the customer, the store and the delivery driver all at once?
Man I stopped doing grocery orders when I had to wait for an hour at Walmart for my order to not come out. Now if an order isn't ready when I get to a store, I set a ten minute timer and once it goes off, I leave and call customer service. I also refuse to take low paying orders now, because im not driving anywhere for 30min for less than the cost of a gallon of gas in my area. Uber has a way of sneaking these $2 trips in there when I'm trying to take a photo and I'll cancel them every time. Time is money!
Thats actually horrible, the worst I've ever had for a grocery was like 13 items from Meijer, where the in store wifi doesn't work, cell phone data doesn't work, they were out of like half the shopping list and after 30 minutes from time of asking the customer never responded to if a substitution was acceptable or not. I canceled and have only accepted 1 trip to any Meijer after that.
grocery orders are just too unpredictable to be worth bothering with
Doordash has something that can fix these clear problems with grocery delivery, which is having their own grocery store operating in a warehouse area just for delivery orders. Its called Dashmart and its amazing. There are employees working at the Dashmart warehouse and when an order comes in, someone bags the order immediately, the driver comes to pick it up like any other order and delivers it to you.
I never do grocery orders on Uber after learning how terrible the system is. I open doordash and order via Dashmart
F@cking absolutely everybody is a core component of Uber's business model
I remember an article from Cracked back in 2014 talking about how Uber was basically going through the exact same motions that taxi companies went through in the early 1900s and would inevitably end up being in the same spot. We clearly see this happening now firsthand with Uber. These silicon valley app companies that have tried disrupting their respective industries are only treading the same ground that other corporations have been through decades before.
Yep, a lot of subscription services are now starting to look more and more like cable tv. I could've sworn that I saw an app that bundles all of your tv subscriptions into one app... absolutely ridiculous! It's like Animal Farm in real life.
Another example is finance tech companies and crypto “investing” going through the same issues, like trust and stability, that conventional banks had 100 ago, which led to regulations
It's just a speed run of the past 100 years of an industry condensed into 10.
I don't understand why people think Uber, Lyft, DoorDash, or AirBnB are tech companies. They don't sell software or hardware, they sell taxi, food delivery, and hotel services. It doesn't make any sense to think of them as tech companies.
@@cogentorange5252 People think of them as tech companies because they market themselves as tech companies. Because "Our app makes the difference!!!" even though everything has an app now.
Technically, they don;t even sell those things. They're just a middle man to those services since everything is subcontracted out. The whole set up is the worst form of retail...
"The on-demand online to offline platform business is a modern fairytale spun by silicon valley. Value creation as a product of unsustainable subsidies and artificial discounting is not disruption - it's fraud."
This is so spot on and what a mic drop.
So is the artificially inflated stock values of these companies
I remember seeing Buffet joke at a Berkshire meeting that people would talk about what they manufacture and say "we lose money on each unit but we'll make up for it on volume" as a joke
He basically described blitz scaling a few years/decades early and I've never known how it seemed viable
it was also covered on Flight Of The Conchords, a comedy about a useless indie band
I always think of that quote when I hear people who think that somehow they've invented a new way to make money. I think Buffet had a quote about "new sex"
Either you make money or you don't.
I mean, Amazon did it too.
So it's not completely new, they did it when the internet started.
The entire business model of Silicon Valley is to sell investors that your idea is "the future" so they'll willingly let you set their money on fire.
@@HrHaakon Amazon's business model understood what parts of the business would scale efficiently as the company grew, though. And keep in mind, the online store for Amazon runs on razor thin margins. Amazon Web Services is the part of the company that prints money for new expansions and acquisitions. Companies like Uber seem to be aping the exterior appearance, and thus success, or amazon, but can't actually point to why it will work for them.
I can remember working in a fast-paced restaurant towards then end of the 2010's; if we were busy we'd just turn Uber Eats off as it was more profitable to serve the customers in-store.
I am a heavy user of Lyft, mostly with black cars and full size SUVs, and my trips are now regularly $70 - $150 (inc. tips), depending on the time and city. Because I use the service for corporate work, these are all expensed, so I am not so sensitive to price, and neither are my colleagues. I like the service, and it solves real issues for me. These businesses could have a nice profitable niche in the corporate black car world if they optimized for that, rather than pitch themselves as being the solution to all the world's logistics problems
i agree, or they become a B2B software company by license the ´tech´or they can become an taxi valet type of thing that caters to business men and frequntly travellers, they are not price sensitive.
Yep, I think they'd do well to just focus on large cities and not try to be every where in the country. We normally get rental cars at my company but when going to places like Chicago we save a fortune on parking, as well as our sanity, by just getting Ubers.
That’s literally what Uber started as lmao, it just wasn’t a scalable business that justified the engineering costs
@@evlee1295 there's no cost. A compsci student could make it in a few months time.
@@TheSuperBoyProject Spoken like someone who doesn't understand software or distributed systems. They could make it, but would it be reliable, good, cheap, etc?
Honestly though Uber and other cab-booking services *do* provide utility, especially in cities where taxi drivers refuse to go by the meter. In such cases Uber has a fixed cost which drastically reduces price gouging. I would continue using it even if it were a bit more expensive for this reason.
I know business customers also like Uber for this reason... maybe the app can keep existing as an expensive business-oriented taxi service that occasionally does private rides.
I remember there was a time in 2014 where Uber positioned itself as a luxury car booking app - UberX was meant to be fancy cars. Perhaps it's too late to go back to that value proposition.
@Martin Wagoner If you travel to Turkey you'll understand how crucial this is.
Uber does not go by meter. Allegery, it's based on supply and demand which I find it very predatory towards customers and drivers. This company shouldn't exist because their business practices aren't making any profit after 13 years.
safety and to stop price gouging is why I still use it. Safety because unlike a regular local tuk driver, we get a random driver and all his details are stored along with safety features built in the app. Also when you travel somewhere unfamiliar or another country.
As a recently retired Uber Eats driver, I would like to thank you for validating my experience with hard data. Since I started driving, the app was full of weird bugs; i.e, saying a ride was over two miles shorter than it actually was, automatically shutting off my "avoid tolls" setting in Google Maps, and almost always giving me the slightly wrong addresses. More germane to the video, over the course of my 8 months of driving, I noticed a pretty steep decline in offers and payouts in my area. By the end, I was waiting for 40+ minutes during peak hours for a single ride, receiving noticeably less than I used to. My pay went from ~$30/hr (while heavily gaming the system and speeding/running constantly) to less than $18/hr in a matter of weeks. Also, Uber's "benefits" are a joke, even for people working 40+ hours and destroying their cars for said business. I cannot recommend NOT working for this company enough.
Would have liked a bit more info on the competitor landscape: Lyft, Bolt, Yandex, Didi, Ola, Gojek in various markets around the world.
One angle that isn't fully explored in this video is how unscaleable Uber actually is. Every new city is an entire new business from scratch, with its own market entry and competition. The software platform is the least amount of work required, it's the boots on the ground that matters. And that cannot scale like a tech company.
Also, the fact that they simply haven't been able to monopolize their way into market dominance. Local equivalents have popped up to challenge them in every market they've been in, keeping competition up and limiting their ability to raise prices.
their model is basically the same further highlighting the narrowness of their "vision" .everyone needs to scale to be profitable
Even in tiny Singapore Grab can't hold it's market share - once Grab tried to increase profitability Gojek (and a whole host of competitors) came in to try to take the market.
i also had similar thoughts: if you make this available first in NYC and then in Chicago - how do you possibly expect economics of scale?!
and really any tech company can come in with an app and hire all of its competitors drivers
Their selling point was also their weakness: the app, the technology: Barrier to entry was not high enough.
Being disruptive and being profitable are two different things. I think Uber was very disruptive. Especially in New York where I’m from. For one, the city definitely has less yellow cabs than it did a decade ago, according to the NY Post the city has a little more that half of the taxis than it did in 2010. Second, I see this anecdotally in my life, in my home town just outside the city the local taxi company is out of business. In place of the taxis most people just use Ubers, I think most kids who grew up in the smartphone era in this generation may not even know that a Taxi service used to exist in the town. When I was in school there used to be Taxis lined up ready to shuttle people home from the train station. I used to take these cabs home if I ever missed the bus or if my parents couldn’t pick me up. Today they’re all pretty much gone.
Good. To hell with taxi drivers
uber is frad
Damn Masterworks must have huge payouts for ads.
This, kinda makes you rethink the motive.
He’s selling a problem
And a solution.
Both could be valid, just iffy.
@@stereomachine it’s less about who ran the ad and what the ad was.
In a video where it’s gist is “3 mega companies, are not and will not be profitable here’s why”
“Put your money in here instead, look how much money other people have made here”
It just seems disingenuous.
Again, both could be valid. It’s just iffy.
@@stereomachine I believe that you are confusing "Masterworks" with "Masterclass"
@@Heynmffc Its probably more due to alignment. This is a finance/business channel, so investment ads will be pushed. There's a solid audience match and the product is fairly straight-forward. The company pays for investment grade art, then it creates shares for ownership of the asset (or entitlement to its revenue) and sells when profitable. Not zero risk, but you should have a solid idea of what you're getting into.
@@AwesomeTea for the love of god… for the 2nd time.
It’s not about who ran the ad or what the ad was.
Is the disingenuous tactic that I’m worried about.
Think of someone like Alex Jones. He sells problems and Solutions in the same breath. Same format.
And the business angles gonna be the same for any ad on any RUclips video. So yeah.
Not saying either the video is wrong. Or the ad is a scam. But this is textbook fear mongering for monetary gain. And that is iffy.
I'd like to see a modern MBA video on masterworks or the art market in general...
theres a good one on Wendover's channel
@@m.o.n.d.e.g.r.e.e.n The Wendover video was informative but kind of misses the point. The things that Wendover correctly identifies as being "wrong" about the art market is not a bug, it's a feature!
37:00 I have similar story with Grab in particular ( No Uber in my country ). Driver would persuade customer to pay outside of the app in order to avoid Grab's fee and cut. That way, the Driver would get more money since there's no middle man' cut and the Customer pay less for their ride due to not paying the service' fee and cut.
In a way, we're reverting to the old system where people just stop taxi/ service for a ride and negotiate the price for the ride lol
if someone would just make an actual market place for taxi's with a minimal take rate of like 1% just for running of the app you would expect to get all the benefits with non of the problems, I am always confused what these companies actually spend all this money on that they need this massive take rate to make money. It almost feels like a government service where the problem of excessive non sustainable overhead doesn't get fixed and instead they try to leverage market power to lower the wages of the workers and up the prices of the consumers.
It's more like Tinder than a functional business.
All they do is match people together.
@@alberts9781 lol literally just an app to connect you with drivers in your area would cut out the headaches for drivers and passengers. I wanna be able to negotiate a 20$ car ride and not pay an additional 22.75 in fees and “peak hour” charges
@@alberts9781 just make it a government ran thing, have it be done by the local governments so that bureaucracy isn't too crazy.
But you have to use grabpay right? Unless you're telling me you're cancelling the ride once you get it
Why are Ubers costs so high though? The business model is "our only cost is software and thats easy to do were just a platform". Uber functionality seems pretty much the same over the last 5 years. Ive always wondered what does anyone that works at Uber actually do? Isnt the path to profit just cut 80% of employees and stop doing a bunch of new stuff and just focus on maintaining the app in existing markets?
In the case of Uber, it's the price wars they engage in, and in the case of almost every large tech company, it's the fact that they want to pay all their engineers the same as Microsoft and Google, yet not all of them need world class engineering talent to get their services to work
I agree, it's strange that Uber insists on having such high overhead. I would've thought their profitable take rate would be somewhere between 5-10%, but as the video goes over, it's more like 40%. I guess they just have a really bloated software headcount. Like, there shouldn't need to be all that many highly paid engineers to make this business work.
If you want to run a global business there is a ton of overhead shit that needs to get done in order for that to work. The fact that your business is "just an app" doesn't remove the need for multiple marketing teams to provide relevant advertising to the very different cultural landscapes that exist around the globe. Many legal teams to deal with the very different legal structures and issues found around the world. Many different lobbying teams to deal with the unique regulatory pressures faced from all the different governments. All of these functions then require other support functions such as HR and IT.
You also have to understand that Uber's business model isn't "just an app" It is a cab service like every other cab service but instead of paying their drivers a wage and operating a fleet of cars they are "outsourcing" that piece of the business to gig workers. They still have to grapple with those costs even if they don't show up on their balance sheet directly. If people willing to drive a cab are having to foot all of their own fuel, car payments, maintenance, etc. they are going to ultimately need to be paid for that or they will end up finding work at a cab company where they get a better deal. They get paid for that through Uber getting a smaller cut of each fair which is basically the same thing as what a cab company does but aren't able to take advantage of economy of scale benefits on car purchases, maintenance, insurance, etc.
People also need to realize that cabs were not a monopoly with hugely inflated prices. Cabs were already businesses that operated on relatively small margins in a competitive market. Beating them in price isn't as easy as people assume it is. People have this false idea that "old school" businesses are all run by out of touch geezers that don't understand the business they are running and refuse to ever change or that all of the struggles a business faces can be solved by some new kid with a software trick. The reality is that the people running cab businesses probably know a lot more about this business concept than anyone at Uber could hope to learn in their lifetime and as soon as Uber showed up cab companies started implementing similar apps to capture at least a large portion of the new convenience offered by Uber.
Ultimately the entire concept of these tech bro "disruptions" follow a similar set of false assumptions. The largest being that software is a magic bullet that can wipe out the real world costs of doing business or allow you to "cheat reality". That assumption is simply wrong but since you don't see things like driver fuel cost directly on Uber's balance sheet people are willing to pretend it isn't being paid.
those US senators are not gonna get payed themselves.
(also, no tangible legislation was done to benefit Uber... faildudes)
When you drive uber, you are on their insurance, there is local taxes, the software people, the lawyers, and then there is the payout if there are bad apples (like if the driver ate the food, wrong order, no-show, etc). So just cutting employees doesn't solve everything cause at global scale, it shouldn't be a huge percentage but the per unit cost (insurance, taxes, etc). The other thing is since drivers aren't employees, they are a constant churn, so you have to keep onboarding new drivers, pay incentives, etc
That masterworks ad just cracks me up. Lol
I feel like with these "disruptive" tech companies what it so often boils down to is trying to get enough investment into your company that you can monopolize the market - after which you get to make a profit. But then the idea is so appealing that competitors, backed by different investors, pop up overnight. Then it fundamentally becomes about which investors have the deepest pockets to invest as there is no profit to be had before you monopolize. It's a very weird situation.
Perfect point the monopoly never formalizes due to the fact the traditional institutions that these gig companies are attempting to disrupt with more sustainable models never really go away. If Uber is charging me $10+ dollars on a ride compared to a cab I'm going to take a cab. In my city the cabs now also have their own app. Another thing that is worth mentioning is that these brands have developed no customer loyalty which I think is important. The consumer isn't getting a uber for any other reason then it's cheaper and convenient. If somebody come with a better offer consumers will use that option.
The strategy is called "blitzscaling".
Fiat motivations summed up very nicely. Imagine if we had a monetary system that appreciated in value? 😂
... and even then - it fails.
Very perceptive observation!
I think one of the issues that isn’t really discussed here, and I believe is Uber’s long term plan, is that frankly engineers and developers end up being so expensive.
Ubers/Airbnb’s metric for profitability is basically “if we remove R/D this is what we’d make!”. The hope being that once the company is done growing they can just cut all of these expensive engineers and be costing on their monopoly.
That’s where the second issue comes into play: these tech companies have had so much money pumped into them, and have such lofty evaluations that they still need to grow to reach these expectations. You can’t expect to grow without engineers to make new products, and improve old ones.
Like in this case Uber could probably become profitable (for real not just on paper) if they use existing infrastructure, and cut management/ engineers significantly. But a company earning 1 billion in profit on 10billion in revenue isn’t worth the 60 billion it’s worth today.
I believe you are overestimating the cost with software developers
I thought the same thing and was a bit confused because with 17 billion in revenue it should be possible to make 4 billion in profit (13 billion for marketing, research, development... should be doable and normal evaluation 15x profit = 60 billion). So I checked their financial statement and found this gold nugget... Their revenue number is completly bullshit!
If you check their statements they say they make 17 billion (what people pay - what they pay drivers) and spend 21 billion. However of their 21 billion in costs, over 9 billion are vague "costs of revenue" which seems to be mostly money they pay to drivers to actually drive (+ credit card fees, chargebacks... which cannot be reduced really...)!
So in reality their revenue is more likely around 11 billion (17-6 billion that is currently inflated income via costs of revenue) and their costs are more like 15 billion which gives your their actual operating loss. And this is why they cannot stop trying to grow... they can maybe cut a few billion in cost but most likely not 8 billion (which they would need to do for 4 billion profit) without losing revenue. Most of the cost is not development or growth (costs that can be cut), it is mainly fees, marketing, operations, minimal app development and administration (costs that cannot be cut). For them to be actually as profitable as they need to be with a 60 billion dollar evaluation they probably need somewhere between 20-30 billions in real profit (and not fake revenue - "costs of revenue").
So TLDR: Uber isn't making 17 billion and spending 21 billion on growth and tech, it is making 11 billion and spending maybe 3-4 billion on growth and tech while it has a operating expenses of around 14 billion
actually, look at the "13 skipped expensed" for their adjusted bs metric. r/d does not have that big of a share there.
Uber’s plan to profit was to eliminate drivers, not engineers. Take away the driver’s cut of each ride and it’s suddenly profitable.
@@crimsonlightbinder software developers are the biggest cost centre for any technology business
They shot themselves in the foot by selling their investors a story that is too good to be true, it’s amazing how many people continue to eat it up. You’re absolutely right as well, Uber came up many times during my degree (as did AirBnB) talking about the ability of new technology to completely disrupt an industry.
it doesnt have to be true. investors buy stock, inflate the value, sell stock. there is no requirement for a business to function because uber isnt the business, trading is the business.
That's how they get investments
Coming back to this almost two years later, how do you view the development of the business into a profitable company (albeit with relatively small margins)? The results they've achieved are impressive, with the company printing both net income and free cash flow especially when taking into account what people thought back in January of 2023.
I live in Manila, one of the places which has the worst public transportation in the world. Uber sold themselves out for Grab here. However, Grab is still failing to make any significant improvement in the state of transportation despite having the market all for themselves. If there's anything, ridership is falling because of rising prices. Moreover, booking rides from these apps is becoming a different nuisance i.e., it's now faster to walk to a bus stop nearby than to successfully find a driver who will accept your booking. The fact that it's now more attractive to buy your own car instead of using a ride sharing app regularly just makes these value proposition of these platforms less lucrative.
BGC even at 8pm where it's semi past rush hour, no fucking driver will accept your booking. You nailed it on walking to a bus stop will get you to your place faster (an achievement considering our abysmal public transport system already). Grab sucks.
Not enough drivers in Manila? Or too low pay
@@TheMasterofComment Pay is definitely not an issue. A lot of drivers earn a lot more now than a typical office job. The problem is not only the supply but also drivers now having too much bargaining power.
No one wants to accepts your rides especially when your destination is too far or during peak hours. This artificially inflates fares further rendering these platforms unreliable. There's no incentive for them to keep the fare competitive since Grab technically has a monopoly here.
I’d say the major issue in Manila is the traffic. Grab drivers don’t want to be stuck in 2 hours of traffic.
Regarding Masterworks sponsorship........don't accept sponsorships from companies that may end up as topics of future episodes......😕
I seriously love the depth of your breakdowns man. Haven’t watched a video yet where I didn’t walk away with a new perspective
Nice video, but that ad was lowkey outta pocket for the subject tho.
The Silicon Valley business model sounds oddly similar to Standard Oil's. Offer low prices to crush competition, then jack up prices once you have a monopoly.
dont forget Enron with Uber going creatif with the accountants.
But with oil that may make sense. It is very hard and costly to get new Oil drill, while "copying Uber" would be much more easier.
So is Uber will raise prices when monopoly, new app could emerge
This is the most detailed, non biased, and best research video journal I've ever seen, and I've watched a lot.. I never commented before, but this was probably one if not the best video I've seen on RUclips. Please keep creating exceptional video research journals like these man, they're great! Much love.
Uber most probably would have been profitable, if they had just partnered with existing taxi companies instead of trying to put them out of business. If Uber would have just focused on creating dispatch and hailing software that these taxi companies would use, Uber would be a company with strong fundamentals.
Isn't masterwork a scam?
Damn, I see LaunderWork- I mean Masterworks has gotten to you too lol. Ah well, gotta pay the bills I guess. 🤷♂️ Still love your quality content though.
Great video. I'm always suspicious when companies choose to publish "adjusted EBITDA" which when you think about it translates to "earnings after adjustments for Interest, Tax, Depreciation, and Amortization along with some further adjustments".
My conspiracy theory as to why they are allowed to exist is that the end goal is not profitability but the complete annihilation of public transport options, similar to what automakers conspire to rid cities of streetcars in the US. I remember reading that some cities give elderly residents free Uber credits as a cheaper alternative to funding a bus service. Of course, anything can be made cheaper with enough subsidy.
Uber, grub hub, air b&b, and soo many others are trying to take industries that have existed for years substantially (food delivery, taxi's, hotels) and use tech to redefine them. The consistent problem with all of them is that they're applying it in places where it just isn't profitable or sustainable. There's a reason that before uber eats/door dash/ grub hub only pizza places would even offer delivery. It just wasn't profitable for almost any other restaurant. The tech companies haven't changed that, they've just operated at a loss and used investors/fuzzy accounting to hide it. Same thing with taxi's and uber. The real problem now is how many cities and people depend on uber for things. When uber has to make massive changes it's gonna be rough for a lot of folks.
masterworks seems really shady man i dont know about them as a sponsor it really degrades ur credability
I love these videos on the shitty economics of blitzscaling
Uber is a solution to a problem that already had a better solution. Public transportation. Uber will never work if this becomes everyone with their own chauffer, especially at current prices. Drivers are underpaid as well as rides are underpriced and that presents a huge problem on their way to profitability. The reason public transportation like buses and trains are what most people used over taxis is because you have access to scale where it matters most, in taking as many riders for a route, that way the cost is distributed among many riders and the unit economics work out properly.
I think in the end of the day, Uber will just end up another Taxi company. Overpriced, and only used for special occasions. That's the only way this whole operation becomes profitable. But at that point, they'll find that people end up using their services as infrequently as any taxi service.
With public transport, there is still the issue of getting to and from the station/stop, or the "last mile" as it is known as. For many, in areas that have frequency dependent on time of day, or distant station spacing this is where Uber comes in as a valuable service. An example, in my city there is an airport train that costs $17, it's comfy and quick. To get to that station I prefer to take an Uber as there isn't a direct transit transfer.
@@namo5961 Still, public transportation needs to be leveraged more in bigger cities. Cars need to become more of a secondary form of transportation in cities since the population density is so high that it makes sense to take advantage of public transportation more often. I agree with you that Uber can help fill in the gaps. Honestly those electric scooters though looked cool and seemed like a better solution for that imo, especially if you own yours.
@@diodora2381 many cities only have pockets of adequate density where transit matches sufficiently, In the USA there are 3-5 cites at best and even then there are still gaps within service areas. The ability to live within 5-10 mins from reliable and rapid transit is not common for many in North American cities. Uber has its best use case for these gap, last mile style trips. Uber had something going with the Uber pool when you could make these trips quickly and a decent price but the pandemic and Uber's dash towards trying to make a profit took that away. My overall point is that Uber has taught us many good lessons and there is still value to the service it offers. There is no future reality where public transport becomes there silver bullet to fix our traffic and mobility issues, because the funding and planning that goes towards public transport will never focus and direct dollars to where it makes actual sense to do so. With the continued piecemeal approach the gaps will always exist and that last mile trip will always need to be accounted for.
@@diodora2381 Wouldn't car companies lobby hard against this?
@@kennythelenny6819 Probably, but that's kind of the issue. Special interest takes priority over actually solving issues. Lobbying is cancerous. We need to remove the cronyism and corruption that's involved in politics.
"Don't believe the pump-n-dump hype ... but first a message from our sponsor pump-n-dump art"
But uber also just makes transport worse. It's been shown that getting an uber driver adds more cars to the system than people driving individually because of the additional distance. Busses can hold many people so they reduce congestion. Uber makes cars drive for longer so they add to congestion.
This is so good. I drove from 2018-2020 and the manipulation was intense.
There are drivers pushing to become employees. My response is. ‘If Uber treats you this badly as an independent contractor, imagine how they’ll treat you as an employee.’ 30 minute lunch break at a time they set, (9 a.m. good for you?).
I think Uber significantly disrupts the taxi industry, public transport and to an extent car ownership (especially second car ownership in a family). Especially in the age of wfh, car ownership is a marginal proposition for anyone living in an urban area.
It 'disrupted' the taxi industry only in places with terrible public transport, and its survival is dependent on that remaining true - i.e. insuring public transport never works. It also really didn't disrupt the taxi industry because they simply removed protections and made drivers take on most of the liabilities and costs. This is why in places like Germany where they were required to insure drivers' cars, contribute to their healthcare, pension etc, the cost of an Uber became the same as that of the taxis, showing that taxis had already figured out the market price without exploitation of the drivers. Add subsidies die to investor money and you realise that Uber disrupted nothing.
Good public transportation solved the 'marginal car ownership proposition problem' more than a century ago.
@@animaaura indeed correct. I can only speak from personal experience that in places without access to public transport, the convenience of Uber and other ride hailing platforms makes foregoing a car even viable in the first place. Dealing with roadside hailing or call center ordering metered taxis like in the old days put it out of the equation completely. Even more so in countries without either good public transport or a strong metered taxi network.
@@animaaura if you’re in the US that’s everywhere. I’m in a US city with “good public transportation” and they were still very successful.
@ithira kana Sadly here in America, we probably won't ever have good alternatives other than a car. We won't get trains, bikes, walkable areas outside a few cities. In my area for example which is pretty normal and I see it's like elsewhere, everything is made for the car. You could never make anything walkable without demolishing everything and forcing folks to live closer together. All the buildings would have to be forced closer same with houses. You would have to demolish every aspect of our current infrastructure to accomplish this. You can't build a bus stop or train station outside every neighborhood. That would never work. You can't just make a bus stop or train station somewhere either because most people have no way to walk there in a reasonable manner. You can't build bike paths here because the rolling hills, distances, and humid weather would be unbearable in work attire.
Then, culturally, many Americans like having their own house and yard. Some less, some more. You would have to change people's minds on what is desirable, and people can be very stubborn. Even if they do like what you say, they still probably like having their huge yard away from the suburbs.
So yeah, we ain't getting any alternatives for a very long time.
@@animaaura In America, Public transportation is the politically correct way to say Human Zoo. There is no where in the country that you arent risking your life taking it but given most people riding public transportation do so for free by stealing it, its going to be difficult for Uber to transition that whole market
Great video but I feel you missed out on mentioning how unprofitable some of their other services are, they ended up discontinuing Uber Rewards in November of 2022 and Uber Pass for $24.99 went down to $9.99 and got renamed to Uber One
It’s not that those memberships were unprofitable - Uber Rewards was nothing more than a testing ground and lead generation for the company to experiment with retention / rewards (which all eventually became paywalled features).
Once Uber got enough data around loyalty, usage patterns, and customer incentives, they shut down Uber Rewards to funnel those same users as leads to a paid membership offering. Uber Pass was the same thing except experimenting specifically on whales (who else would spend $25 a month). Uber One is just the latest iteration of all these subscription experiments that the company believes will drive the highest engagement at the most affordable price point.
The reason why Pass and Rewards were shut down was to push users to one consolidated paid membership - not because the programs themselves were unprofitable. You’re more likely to buy Uber One if you’re no longer getting any rewards / savings from any other program.
I'm reminded of that Always Sunny episode where Mac and Dennis start printing Paddy's Dollars and giving them out for free, hoping to get regular customers.
"I don't know how a self-sustaining economy works. I don't even know how the US economy works, let alone a self-sustaining one." 😂
My experince with Uber is just the worst. App said 30 euro the moment I step in the car the dude wanted 50 euro in cash. Contacted Ubers customer support and they where just: Not our problem, but between you and the driver.
40min walk + a train ride was how i got home instead. The only reason i wanted the uber was cause i already travelled the whole day by train, but i rather drag my suitecase trough the middle of nowhere at the middle of the night then getting scammed.
@@lumberjackdreamer6267 contractor means they agree to the price paid in the contract. I am a contract worker (not independent) but I cannot just demand they pay me more; that’s on my company to negotiate when the contract goes through. If they want to use the app and its access to customers, they cannot dictate the terms of pay.
@@ms.sysbit5511 If the driver had asked 30 euro cash and sticked it in his pocket i would have been fine with that (like i agreed on 30 and if he keeps all instead of sharing it with big corpo fine with me), but the 50 euro was completly unreasonable the distance was around 10km.
I guess het tought a female at 23:00 not gonna walk in the dark.
Sounds like Uber is becoming what their competition was years ago, taxi companies that had some stretchy drivers and hidden expenses
I've invested in Masterworks and now I'm on the Grand Cayman islands living the dream.
Appreciate your videos, could you cover the subject of Electric Vehicles on the next one?
Try driving one in the dead of winter in Canada
@@imooumoo4check chinese cars, they are leaders in EV but cannot be imported to NA.
I gotta wonder, what's their overhead and why do they need to take such a large chunk just to keep the lights on? It's an app with GPS functionality that handles transactions. How many employees do they have maintaining this app? Even with consistent R&D they shouldn't need more than 20 engineers, and maybe 100 staff to maintain an app like this. What are they spending all that money on?
I hold no special knowledge of Uber inner workings but here is my semi educated guess on what the money gets spent on.
Marketing: It likely isn't a huge chunk of money but the budget here is not reduced by the nature of them being a tech company.
Legal: I assume this is a fairly legit sum of money considering the need to stave off regulation, get the app patented/certified in different countries, and deal with all the kind of mundane legal issues any company deals with.
Research: I am sure things like FSD were a huge money sink and i would be surprised if there still isnt a fairly significant R&D budget.
Business to Business relations: All of the eats, grocery, alcohol, etc. portions of the app require relationships to get built and formalized. This requires accountants, lawyers, salespeople, customer support and associated travel and meeting expenses needed to build and maintain those relationships.
Executive Pay: I have no doubt several hundred million $, maybe up to a billion, is spent paying the C suite and lower VPs and such in spite of the businesses inability to turn a profit.
Lobbying: Regulatory evasion requires lobbying efforts worldwide and I'm sure it is reasonably pricey.
Company Programs: The driver and customer rewards programs have a baseline cost related to whatever perks they are paying out but they also require staff to develop, improve upon, evaluate, and maintain etc.
Basically for any business that is that is trying to operate globally there is going to be a pretty significant amount of overhead labor that either needs to be staffed in house or paid for as a service. The coders and such are probably a very small portion of the overall labor pool needed by the company to maintain operations around the world.
There’s algorithms they write to match drivers to rides and deliveries, and they typically wouldn’t be using Google maps navigation but rather their own path finding algo, plus maintaining the apps isn’t easy either
You have no clue what your talking about, an App of Uber's scale would definitely take more than a mere 20 engineers to maintain at its current state
@@joshuabaker6452 Your guess couldn't be further from the truth, one quick google search shows uber has 30k employees worldwide. A quick linkedin search shows 8k software engineers working at Uber so not counting other technology roles engineers make up almost a third of the entire workforce which is likely still an underestimate. Engineers are also the highest paid out of all the possible roles, so spend on technology headcount probably accounts for atleast half of overall operating costs. You also completely missed the cost of the compute infrastructure that runs the application which would be enormous for Uber's size. Data doesn't just get magically processed for free out of thin air, someone has to pay for it.
@@yohji4309 This comment wasn't meant to be an exhaustive list. The person i replied to was asking what could be the source of such huge operating costs and I listed off a bunch of things that definitely make up a significant portion of a companies budget when they are a large global corporation.
For some perspective about your thoughts on the engineers. Lets pretend that 50% of the workforce are these highly paid engineers and that after you add up thier salary, benefits, etc they each cost Uber $500,000 per year, which is an extremely generous assumption. That means the cost for engineering is $7.5 Billion dollars. Uber posted a revenue of just over $29 Billion for 2022. Add in another 75 million to obtain 30,000 computers and another 100 million in server hardware or cloud fees and you still have to account for 2/3 of the spent revenue. Where did the other $21.5Billion go? It went to things like what I listed. As well as a myriad of other expenses i didn't list.
As with AirBNB, I've stopped using Uber and Lyft, except when absolutely necessary. I found taxi cabs are now cheaper and far more convenient. Especially when leaving from an airport four major hotel.
I would almost never get a taxi, depends where you live, taxi rig their meters, stood there not opening the trunk waiting for a $20 tips. The worst experience I had with Uber is driver no-show, waiting for me to cancel, and dirty Priuses. Oh, and someone drive around with my food for an hour and ate it. The other thing is, if I get murdered by a taxi driver, I probably get nothing. If I get murdered by Uber driver, I think I can get something, or at least someone else knew where I went. So pick your poison, but overall, I think the added intermediatory for consumer protection is worth it. It's like you don't have to use a credit card, and pay cash, but using it you can do charge back, dispute and refunds.
Before Rona as a business traveler, one ride from hotel to airport and vice versa, it’s easier to rent a nice car and not have to wait 40 minutes for a ride
Uber may be out of Malaysia but I greatly appreciated the convenience of ride hailing and food deliveries that Uber popularized. Since the rise of ride hailing, only once I took an old-school taxi because my phone service provider was having outage. Food wise, it's great that we have much wider alternative when we don't feel like cooking or going out to eat.
Hey Modern MBA! Video request here: Remote work vs office work. A lot of heat generating between remote workers and company’s, more specifically, banks.
Some of Uber or Lyft's competition comes from their own drivers. My son took a Lyft to the airport a 25 mile trip and the driver have him a business card and told my son that he would give him a better deal. I am sure that people who are driven to and from work set up side deals with drivers cutting out the middleman.
Uber has recently altered the app to remove all information regarding what the customer paid and Uber collected on each trip.
They have this fantasy that if drivers don't know that they're charging customers more while giving the drivers the same amount or less that drivers won't notice.
This information was always difficult to get to with intentionally awkward steps in the app to get to that portion but veteran drivers could find it.
Yup! They key is customer awareness if they know that they are being upcharged then it EMPOWERS them
I had to drive for Uber because I graduated during the pandemic. I have always had 6 figure and over jobs. I want to thank uber for motivated me to work so hard to never have to work for those idiots again. Minimum wage in Los Angeles is $15 per hour. Driving for Uber and Lyft I made $10 per hour! I've thought about burning all of the rideshare companies to the ground every day. I've never been the type of person to just put up with injustice.
During my brief stint as an Uber driver, I knew this Indian driver who used three phones: one for Uber, one for Lyft, and a third to coordinate with other drivers. He was kind of a ring leader, especially during surge. When he accepted a ride, he would then call and ask people their destination and cancel if he thought the ride was too short.😂
That take rate is such a lie. The ride will cost $40 and the driver will get $8 WITH THE TIP
I was a bit confused by the over 20 billion expenses that uber seems to have and the obvious implication, that if they just cut costs they would be profitable. However you have to remember that their expenses and revenue are not what you would normally consider expenses and revenue. Their largest expense seem to be incentives paid to drivers and payment fees. So basically they act like they take 15-30% of what you pay and record that as revenue, but to actually keep drivers driving they have to actually pay them more which should just be record as less revenue but isn't. To give you the scale in 2021 they made 17 billion in "revenue" and 21 "billion" in "expenses" of that 21 billion in expenses over 9 billion seem to be incentives to drivers and fees. So in actuality their revenue is much lower and so are their expenses.
One thing I’d be interested in learning, which was not discussed here, is why their costs are so high, and whether they can reduce costs to get to profitability sooner.
Charlie Munger referred to EBITDA as "Bullshit Earnings". On those lines, should we call Uber's adjusted EBIDTA "Bullshit Earnings, Squared"?
Here in the UK the majority of Ubers in the country are basically just a platform for existing taxi services - which I think is honestly much better than what they've done in the states
Let me tell you something. Your quality of content is unmatched and I really look forward to your videos.
I think you didn't attack the most fundamental flaw at all. There has never been a succesful case of maintaining a monopoly, with exorbitant prices, without having a government edict protect your monopoly. Standard Oil is the typical example of a bad free market monopoly, but at no point did anyone ever argue that Standard Oil was bad for consumers, the argument was always that they were too good at what they did and that their comptetition needed protection. No free market monopoly has been able to extract extortionate prices, without immediatly being disrupted by new competition. The idea that the monopolist would reduce prices to squeeze them out, does not happen, because the supply of new competitors is infinite. As soon as monopoly prices would resume, a new comptetitor would enter.
someone needs to audit UberEats for their tipping model. as a customer, I have double and triple checked their math many times. The percentages they give customers to choose from are labeled falsely. The actual dollar amounts add up to higher percentages, so a 17% tip is actually like 25%. why are they lying, and where is our money going?
It’s because if you have uber one or are using some type of discount it doesn’t factor that into the percentage of the tip, so if you get $25 worth of food for $11 on a 1st time user promo they would do the %10 tip on the food before the discount so $2.50 instead of $1.10
@@milotheminer8176 this is not true, it happens with or without the discount. tips are supposed to be calculated on the pre-tax amount. they include all their ridiculous fees in the tip i think, but even then i have checked their math and it's way off.
Heads up, I have all notifications turned on for your channel and still don’t get notified when you upload
Same
What a piece! You hit it out of the park with this on! Thank you for explaining the mysterious profitable year! The question is, given this information, why do VCs continue to pour billions into the company? Sunk cost?
oh my gosh that sponsorship completely blindsided me. I thought you were using fine art to make a point about Uber
Great video as always, would love to hear more about non-GAAP balance sheets in the future. I see it a lot in my company’s reports and aren’t always sure how to interpret it.
Uber crashed taxi medallion prices in almost every major city. I know in New York City and philadelphia, taxi medallions today are worth a small fraction of what they used to be.
What consumers got from Uber was unpredictable pricing, lower quality drivers, antagonistic customer support, and a bait and switch that is ultimately leading to higher prices than before.
What their drivers got was low pay, added expenses, no benefits, no job security, fickle customers with high demands who control the rating that affects your access to them, and a bait and switch that is ultimately leading them to burning out with nothing to show for their efforts.
Oh and what their investors got was a promise they were revolutionizing personal transportation and delivery, while in reality they were posting revenue gains that were divorced from the costs they were incurring and inevitably plummeted their stock value. Another bait and switch.
Distribution ftw.
I do door dash and Uber eats, so here's a thought. There are a LOT of small businesses that don't have the business to support their own, in house, delivery person, but HAVE come to depend on the sporadic deliveries from delivery services. What happens to the job market if Uber Eats and Door Dash go belly up?
I hope Uber's competitors survive, Lyft is always $5 cheaper than Uber in the Northeast
I would've expected better than a sponsor from Masterworks on a channel that knows its stuff in the business world given how MW is practically a scam.
I deliver food on doordash, and I've seen the number of orders from small independent restaurants over the last one or two years. It looks like the restaurants that have the list online marketable branding are being subverted All Brands like McDonald's Jack in the box and some American classic restaurants are getting overwhelmingly most of the orders
As a consumer, I have no sympathy for the service providers, both Uber itself and the drivers. No one is forcing them into being a driver. Driving is a commoditized skill and should not be treated as some skilled labor needing protecting. This industry needs to die out and give way to public transport. The fact that markets price uber rides as worth it only with subsidies indicates that the unit economics will not support driving as a marketable skill without some sort of monopolistic ride selling/monopsonistic labor buying power. This is true with taxi cab cartels too. Similar to why public transit is such a money losing affair, transport is an example of market failure and requires external subsidies to make work. In the absence of such subsidies, the opportunity cost of efficient transport is inefficient transport built into your body (legs to walk, hands to drive yourself) and is ultimately and unavoidably the cheapest option.
The only way out for this industry I see is autonomous driving. Depending on what AD costs, it may remove as much as 30% of the cost of a fare, allowing the take rate to shoot way up and stimulate more volume from the market. Sadly and like OP mentioned in the video, it is many years and billions away.
Their strategy only makes sense if the end goal is a monopoly where they screw over everyone with a 50% take rate and no discounts, possibly even elevated ones. But even that doesn’t make sense because their services aren’t price-inelastic, they aren’t essential. That’s not even to bring up governments wanting to force Uber to break up its monopoly or even force them to leave the country
Literally, any company can say they need to grow more to be profitable.
There are a few things that are misleading in this video:
1. You mentioned the net profits were from adjustments relating to inflated investment valuations from Uber's holdings in other companies, however you did not recognize that part of the huge losses were also attributable to adjustments of losses in holding valuations, and for the year Uber IPO'd, the stock distributed in all the years Uber was a private company due to special accounting requirements for an IPO.
2. Showing the stock price of companies like Grab and Zomato doesn't present a full picture without the context of number of shares outstanding, which shows Grab is valued at $14B and Zomato at $5B. Berkshire Hathaway stock is $470,000 a share, Apple stock is $145 a share. Does that mean Berkshire Hathaway is much more valuable than Apple? No because of the number of shares outstanding.
3. 2019 includes all the stock compensation from the last 10 years Uber was private in net losses due to IPO accounting regulations. A more accurate number to use for the total expenses would have extrapolated that based on 2020 stock compensation.
What do you think about the laundry delivery service business. Rinse laundry makes around $93 million a year with only having a very little percentage market share (SMB have most market share). Do you think it has potential?
By me they do pickups. It’s a heavily Mexican area, and culturally everyone goes there and uses them, so lots of pickups and deliveries. It would never work for others by me because they have own machines inside, and it probably won’t work as well if at all.
Find you a good low income area and you’ll be alright. It’s not a cash cow but it’s healthy living.
What are the costs of operating Uber ? I can't believe running an app that's "just" connecting drivers to clients costs billions, so how are they losing money ?
Great video, Uber is not nearly as disruptive as it pitches itself
Love how the video's all "Dont fall for Uber or Doordash but invest in these arbitrary fine arts pieces with this 9 minute ad for a bank". Btw, Uber's announced a profitable quarter 💀
Uber still pays the same as they did in 2019. Same $3 trips across town. If anything we make less now because quests went down from $110 to $45 for 70 rides. Trip radar forces us to compete for good rides and decline all of the $3 rides.
This is probably my favourite channel at the moment (other than EmpLemon). So informative and well structured. Even your thumbnails are great. Amazing work! 😄👍🏽
Fun fact: uber couldnt stay in business in hungary. Not because the their service was bad, but because the taxi mafia didnt let them. Yes, taxi mafia
Controversial opinion: if you continually fail to make profit despite squeezing every drop out of the people you hire (regardless of whether you call them contract or full time) and hiking prices as much as possible, maybe your business model is trash and provides insufficient value, and you should just dismantle the business
Controversialer Opinion: This statement shouldn't be controversial lol
I'm 25. I have never booked a taxi or hotel in my life. All I have ever known how to use is uber and airbnb. Demand will always be there, if prices are at least similar.
What I would really want to see is how the money is spent exactly, even if you exclude driver compensation they spend several billions every year... on what exactly? Why do they have so many employees? Obviously they spend a lot on lobbying and a little bit on maintaining the app infrastructure but I feel it still doesn't add up, they make 9 billions AFTER driver compensation and still lose money even though their product is digital and the marginal cost of each additional transaction is very small (not null, though, you need to scale customer support and server capacity for instance)
Thank you for this interesting episode. Since the thesis that the business model is unsustainable is based on the idea that their costs are higher than potential profit, i would have love to hear more of a deep dive into the costs, which are in theory low for a platform system, revealing why they are instead structurally higher than potential profit (if this is not rather a mismanagement issue)
While I do love yoru informative videos, I always come to your videos to explain why these businesses fail or are not able to recognize the consequences of why they're losing money or failing with investors in the first place. This way I know as a person that may go into business someday, at least I'll be able to avoid the pitfalls the other companies went through in the first place.
It's finding a situation that can be improved - and improving it.
Some situation just don't need improving.
Uber is making money but is reinvesting it in growth.
Like Amazon did for a long time.
What are uber costs? I just don’t understand what about their service costs so much
The reality is that they still have to pay the same costs as any other cab company but "differently". If you notice the video comments on driver incentives, scholarship programs, etc which are basically the same kind of things any regular company would do as part of their compensation scheme but people will pretend like Uber drivers aren't employees of Uber which is a linguistic nuance that is technically true in a legal sense but not in a reality sense. They also still need lawyers, accountants, marketers, IT, HR, lobbyists, etc. They even end up paying for driver fuel in a roundabout way through "discounts" rather than just paying it.
Imagine if someone had told you the Yellow Cab company was releasing an app to hail cabs and that they were firing all of their drivers and hiring "independent contractors" instead. Would you consider this choice a "market disruption" or just a company adding a bit of new tech to their model and going with a well understood scummy hiring practice that has been tried many times before? That is all Uber is. They are a cab company with an app that classifies their drivers as contractors instead of employees to try and avoid/hide employment costs off their balance sheet.
Wow, I wasn't expecting that transition to an NFT scam.
It actually doesn’t even matter. I watched a Masterclass from the founder of Starbucks and he said himself you don’t need to disrupt to be successful. I personally do think Uber is a disrupter btw
Uber’s ‘upfront prices’ are a total lie, their website literally says:
If your trip exceeds the thresholds of upfront pricing due to significant changes of route, destination, duration or due to extra stops since the initial booking, the upfront price will not apply. In these cases, the actual duration and distance of the trip will be used to calculate the trip payment instead. You can find more information about pricing on this blog page.
So if there’s too much traffic or whatever they can just charge more than the price they quoted.
Personally, that's never happened to me.
I'd parse the text as trying to prevent customers making custom requests like "Oh, could we stop at this coffee drive-thru?"
Maybe Uber really has ripped off some customers in this fashion, but it has never happened to me.
Great content. One suggestion is to use another term other than "subsidies" as this relates to a government providing payments to industries, products, or tax cuts. Uber is not a government, they're foregoing profits or taking losses to increase market shares, etc.
Uber is better than taxis in every way。Maybe DiDi doesn’t disrupt anything in China cause taxis are pretty good there but Uber has made an unbearable industry good in the US
Ride sharing services do provide utility in my humble opinion and are useful (at least to me), but I see myself taking Uber less and less due to the increasing price - at some point they'll just price me out and I'll have to find alternatives. I think the solution is for a localized version of Uber to exist in every market individually and independently. The business model could somewhat work in a micro-scale v.s. a macro-scale (provided limited operational costs). Imagine if each city has its own ride sharing app which is priced and positioned right for its local market, in theory it might work (when the app no longer requires more engineering and is just cookie cutter / copy pasted). Think of it like white-labeled forum software ... now a days anyone can buy a copy and make it their own.
Wait... kind of like a taxi service then? 🤔
@@PedroKing19 you're absolutely right, but I am talking about the convenience of the app, the scheduling, the cash-less payment, the rating system, and so on. Taxis tend to have none of that and the experience is fairly crappy most of the time.
In India, the competitor to Uber is Ola, which is just Uber but includes auto-rickshaws into their ecosystem as well, and probably a bit cheaper(though haven't used Uber in ages, so not sure).
I know every corporation would love to have a monopoly in their market, but it's unreal to see companies that actually hinge their strategy on people being forced to use them. Maybe it would work if you have deep government connections, or are providing essential services, but a monopoly on a convenience service? It's just straight up magical thinking. In what world would the average person pay for convenience if it wasn't so cheap you'd barely notice the cost.
MASTERWORKS IS A SCAM?
I’m happy to live in a city with decent public transport, I sometimes use Uber, but when it goes belly up I won’t miss it much