Originally Posted By: HTSS_TR
Originally Posted By: jimbrewer
They are losing money because they are spending so much to expand. No mystery there.
I think UBER is acting as middle man like eBay.
UBER's drivers works hard to service UBER's clients(riders), and UBER just take 20-25% whatever driver's make, just like eBay make some profit from their sellers and eBay didn't sell anything, didn't worry about shipping either.
UBER didn't spend any money for buying any car, no maintenance, no fuel cost, no insurance , virtually nothing. What expend did UBER absorb in expansion ? Did they build garage to maintain their fleet ? All they spent money on is processing power to take in calls and to forward those calls to drivers.
Amazon is different, for many years Amazon expanded like crazy. They keep building more and more distributors, hiring more workers, buying more everything ... this expanding took all the profit they made many years. It was almost impossible to not have a profit with $10+ billion in revenue, but they did because they spent more than they took in.
They give bonuses to drivers; as well as promos to attract new riders. Again the subsidies are not everywhere, it's only in areas where they are targetting, often globally.
Here are examples of subsidies from this link.
https://www.washingtonpost.com/news/the-...ly-defeat-lyft/
Quote:
Pick up a certain number of rides each week in certain cities, and Uber will throw as much as $500 a driver’s way on top of the money he or she make in fares. Drivers in other cities are eligible for the “Precious Metal” program, which guarantees them surge pricing on every ride they accept.
For its part, Lyft has offered drivers and recruits $750 in certain cities when a new driver signs up with the app.
It's basically trying to bootstrap a chicken/egg business problem. Without enough drivers there won't be users, and if there are no users there won't be drivers. So they can't just "expand" into an area by word of mouth.
So they spend this money to try to bootstrap an area and get everyone trying to use it for free or cheaply for awhile, once there's enough drivers and users in an area to reach a network effect, then they can cut off the subsidies and people will use it paying the regular rate.