“Uber Will Not Help The Scale Effect”: Why Service To Order Travel Will Never Be Profitable

“Ive been carrying this material for six months. I dont believe that Uber can turn into a truly successful business,” writes the author of the material. According to him, despite the fact that the company is actively growing — in the US, and international markets — it is a huge loss. In this case the losses are not only reduced, but also continue to grow.

Uber — non-public company, but the press regularly publishes information on the financial indicators of a startup. Thus, according to the Bloomberg sources, the companys losses in the first two quarters of 2016 was $1.3 billion, and in the last quarter — $800 million. According to the newspaper, the total loss of the startup for 2016 exceeds $3 billion, while in 2015 the losses amounted to about $2 billion. Enz also pay attention to the pricing policy Uber. Trip using the service are much cheaper than taxi.

“Its long been rumored that Uber pays drivers for the trip. Judge for yourself. Rare Uber ride in San Francisco costs me more than $6. Kogad I was in Buenos Aires, a trip to the city cost about $2–$3, while to call a taxi would cost $6–$7”. According to the author, such a policy not only increases the companys costs, but also pose the threat of audience loss.

“A lot of people use Uber because its cheaper than a taxi. If a startup will raise prices in the companys growth will slow down considerably”. In addition, according to Ence, many drivers dissatisfied with Uber — they overestimate their income, as they do not consider that they will have to pay taxes on the amount received, to take out insurance and to monitor the condition of your car. Such problems can complicate the search for Uber new drivers in the future.

Well, exactly because startups work, right. They suffer losses, but grow quickly. As soon as they become huge, then go into profit by saving on a large volume of transactions or market monopolization. Uber, says the author of the material, in this respect differs from other companies. “Startup will not help the economies of scale.

The unit Uber — trip has a fixed cost, and relatively high. And its distribution price is unlikely to change much. Network effects do not play a role — Yes, many Uber drivers, but this is its advantage over competitors. In almost any city, you can call regular taxi”.

“Global distribution service also does not give Uber advantage — the majority of users travel to any one city, and they with pleasure will go to a competitor with lower prices — even if it means that while traveling they will have to use another service,” he continues. To build a transportation monopoly, according to its Sources, Uber is also unlikely to be released. The competition is too high, and moreover, in almost every country there is a public transport system that is funded by the government. “Even if a startup will be able to squeeze its competitors out of the market due to price policy as soon as the company will raise the cost of the trip, they will appear again on the market. And indeed it is unlikely that Uber will be able to find investors who agree to Fund it”.

With the introduction of self-driving cars, says Enz, Uber hopes to get rid of drivers, and together with them — from a substantial part of the costs. “Lets assume that in the near future we will see driving around in self-driving cars — which in itself is unlikely. But even if that happens, I doubt that Uber will get a monopoly on such vehicle.”. Other companies are also working in this direction, some of them have been developing for tens of years — and they include such industry giants as Google. Some of them — for example, Uber, is planning to sell its technology.

“Unmanned vehicles will become a commodity like planes. Any company will be able to buy them. Do not see a way for Uber to become profitable in this scenario. The market will be able to enter any competitor of the project and set lower prices.”.

According to the author of the material, the only hope for success for Uber remains business on shared rides. “Start a large network of drivers and passengers — and he can build a system in which joint visits will be cheap enough and will bring the company profit. But I dont think the investors like it if Uber decides to focus on ridesharing”. Uber is in the same situation as Twitter the company could offer a better service, if not overestimated and ambitions of leadership. “If Uber is not working on new products, of which she is not telling and that will help to radically change the direction of the business, Im afraid the company will spend all funds will remain in history,” concludes Enz.

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