Uber is a Money-Loser

Forget the Hype, Uber is Still Losing $$

Uber is a Money-Loser
September 2, 2015

Whether you love or hate Uber — and there are certainly plenty of people on both sides of that argument — it is undeniable that the popular app has struck a chord with Americans by providing a transportation service that was lacking. However, like many startups, Uber is still losing significant money. Can they make it in the long run even with a novel business model, or will that model be their eventual downfall?

As a private company, Uber holds its financial information close to the vest. Bloomberg recently reported that Uber lost $470 million on $415 million in revenue in an unspecified time frame, according to information that is being used to attract investors. Similarly, information leaked to Gawker reported a $56 million loss on $104 million in revenue in 2013 and $160 million losses on $101 million in revenue during the first half of 2014.

Revenue estimates for 2015 are mostly speculation, but Business Insider has suggested that the value may be as high as $2 billion in net revenue from their 20% share of $10 billion in bookings. Numbers recently obtained by Reuters shows 2016 expectations at around $5.2 billion on over $26 billion in worldwide bookings. If these projections come to pass, in just four years Uber income will have grown by a factor of 38.

Can Uber's losses possibly keep pace and surpass revenue as they have for years? In a word, yes.

Uber is aggressively expanding, both geographically and in the served market. They have publicly announced intentions of spending $1 billion each in China and India to grow their business. Uber has at least some operations in 60 countries and is available in over 150 cities within the U.S. In some places, Uber is effectively subsidizing drivers to gain a market share. Meanwhile, Uber has also launched a delivery business and has made noises about entering other markets that fit their infrastructure, such as rental cars.

As a final drain on resources, Uber is involved in multiple lawsuits and regulatory battles, with perhaps the most important one being a class action hearing on whether Uber drivers should be classified as employees instead of independent contractors. An unfavorable ruling could make Uber one of the world's largest employers and saddle them with unfathomable costs in benefits and other obligations.

Certainly, Uber is well capitalized. Investors continue to pour money into the company despite its current unprofitability, driving its value to $51 billion. Uber reached the same heights as Facebook, taking over the record for capitalization by a private company (and in less time than Facebook). However, at the same point in its life, Facebook was a profitable entity.

The better comparison may be Amazon. It took Amazon nine years to establish any profit, and they continue to frustrate investors by plowing income back into the business for expansion. Yet few people would argue that Amazon is in trouble long term. It remains to be seen if Uber can reach the inflection point of being profitable if it chose to do so.

Meanwhile, the Wall Street Journal has reported that Uber has allegedly sold convertible debt with attachment to a future IPO value and negotiated a $2 billion line of credit, leading to speculation that Uber will go public. With Uber's fundraising acumen, why go public? At some point, the meteoric rise has to end.

In a way, Uber is similar to Donald Trump — brash, unapologetic, and eager to defy the status quo. As of this writing, Trump and Uber are riding high in both popularity and unpopularity. We will find out soon how it works out for Donald Trump. It may take years to discover Uber's viability, unless the courts decide it for them through regulatory restraints.

Photo ©iStock.com/Jason Doiy

  Conversation   |   28 Comments

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Meredith L | 09.02.15 @ 13:41
One of my friends is an Uber driver and she loves it. Looking at the company though - in my experience, when it grows too quickly, there is a lot of turmoil, a learning curve, losses, and sometimes they get into big trouble and shut down. I certainly hope they have a solid business plan for this expansion into the world market.
Chrisitna | 09.02.15 @ 13:49
Having been involved with a company in the past that was found to be treating independent contractors as employees and was ordered to compensate them for that, I'm following the legal battles with interest. I wonder how that's going to turn out for them.
Erin | 09.02.15 @ 13:50
It sounds like they have their work cut out for them. That's a lot of money to be losing, but in the long run, it's probably a drop in the bucket compared to what they can be bringing in.
Steffanie | 09.02.15 @ 13:53
Interesting. Hope they can turn things around.
trish | 09.02.15 @ 13:54
My husband is using Uber right now, while away for work. He has mixed feelings about it. I think that it is a great concept, but need to see if they can figure out how to make it safer and keep themselves out of the news for bad incidents. It will be interesting to watch.
Britt | 09.02.15 @ 14:09
I hope that they are able to turn things around and get their heads above water. I have a friend who works for the company and it would be really sad to see them go under.
Sarah | 09.02.15 @ 14:10
I've only vaguely heard of Uber. I live in a small town, so it's not something we have here. It's going to be interesting to see if they can get it going and making money. It does seem like a good idea.
Debbie | 09.02.15 @ 14:10
As a woman I would never ever get into a personal car with someone I don't know, so would never use a service like Uber.
Carla | 09.02.15 @ 14:16
This is a great service if you live in a big city. I hope they can dig themselves out of the hole they are in.
Elaine | 09.02.15 @ 14:27
They are just now bringing this to my area, so I don't know that much about it. I hope they can make a go at it.
Crystal | 09.02.15 @ 14:32
I'd rather support the little guy.
Victor | 09.02.15 @ 14:35
There is a big amount of people now working for Uber. I guess as mentioned, before the rapid growth that has been experienced, it's not letting them to learn fast enough from their mistakes.
Alec | 09.02.15 @ 14:51
I personally avoid Uber due to some horror stories I've heard about unannounced price jacking during holiday and peak times. If the company is expanding and giving more people jobs though, I can't argue against it. Uber seems like a company that will tough out hard times and possibly generate even more jobs for drivers and other roles.
Jackie | 09.02.15 @ 14:52
It sounds like a good idea but they seem to be having lots of problems that create bad press. If they can turn that around I think they have a chance. I hate using taxis.
Christina | 09.02.15 @ 15:15
It might work out well for people living in big cities if they can fix all the problems.
Daniel | 09.02.15 @ 15:27
I think this is a great idea, active in Europe for a while before it came to the U.S. When used right it is a great earning chance for some and needed rides for others. Win/Win.
Nancy | 09.02.15 @ 15:31
I knew that Uber was big but didn't realize just how big. $1B in both China and India? That's big. And a bigger risk.
Rychana | 09.02.15 @ 15:46
I have never used Uber. I'm curious to see if they last with all the lawsuits out there.
irene | 09.02.15 @ 16:12
How can they even stay in business if they are losing that much money?
Zanna | 09.02.15 @ 16:12
I am following this story with interest. If they can overcome their legal issues, and some safety concerns about the quality driver they've hired in the past, I think they stand to grow and become profitable in the long-term.
gracie | 09.02.15 @ 16:14
I have friends that drive for the company and all in all they enjoy it. I am curious how some of the growing pains are going to work out and shape the company.
Kamie | 09.02.15 @ 16:45
I have never used Uber, or even researched much about them. But, from what I am reading, it seems like they will end up in debt and shut down. Or boom out. I guess it just depends on how safe people feel with using them.
Heather | 09.02.15 @ 17:21
Losing that kind of money I can't see how a company can stay afloat for long.
Angie | 09.02.15 @ 18:27
I'm not sure what effect they will have on the actual taxi companies. Will the taxi companies lower their prices? And, if they do, will Uber be as attractive?
Bobbie | 09.02.15 @ 19:09
Just saw a news report that Uber is officially allowed at our local airport. I think they will make it and eventually turn a profit. There seems to be a very high demand for it.
Jane | 09.02.15 @ 19:26
I've never used Uber, don't plan to. I'm not familiar with how people are tested, the people who drive for Uber. Do they have to have spotless driving records? Specific sight minimums? Just wondering... Uber is under-cutting the cab service business, but in places where cab service isn't much of an option, I can see how Uber could be a real help.
Jo | 09.02.15 @ 19:47
I am not surprised that they are having issues.
Chelsey | 09.02.15 @ 20:16
I think Uber is a company that will survive and flourish after a while. Once their legal battles are through I think they will thrive.
$commenter.renderDisplayableName() | 01.28.21 @ 12:17