Why the media is wrong about Uber’s losses

First of all I would like to credit Patrick Yang from Highland Capital Partners for the inspiration for this article.

Last month articles popped up all over the internet citing Uber’s huge losses – with many headlines stating that this highlighted the end of the road for ridesharing as we know it, but this is just the start of the journey. In a meeting with Patrick and in later individual research – I realized that these numbers weren’t actually a bad sign, they were only natural given Uber’s current market status.

With $9 billion worth of funding to date, should we be worried? The answer is no. With a $2.1 billion raise in December and increased stocks of cash from $1.96 billion in 2014 to $4.15 billion in mid 2015 – Uber has a plan, grow big.

What the media didn’t cover is that bookings growth is expected to increase almost 141% this year to almost $26 billion dollars. That’s 38x growth in four years. Uber also knows that China and India are vital moves in the game and is estimated to have committed a billion to each country in additional acquisition costs.

Moreover, if we look at Uber’s model it is easy to see where their costs are being eaten up. Acquisition both of riders and drivers is hitting the bottom line and then net revenue is impacted grossly by payments to drivers which accounted for around about 75% of all gross bookings. But there is one of the budget which is extremely important and neglected by almost all of the mainstream media – the almost $100 million spent in 2015 on research and development by Uber to investigate technology solutions to improve their future model.

In search of clicks and readers with negative headlines – the media hasn’t properly highlighted the intelligence of Uber’s holy grail – driverless cars (a project which was birthed inside this R&D budget). Why would current burn on driver costs be an issue when – in only a few years, Uber can start to replace its cost intensive, non-dependable, non-predictable human drivers with self-driving cars that are programmed to take the most efficient routes, with the lowest fuel costs and in the shortest amount of time.

The move is genius – this cash is simply propping up the model until the inevitable occurs and when it does – our roads nor our concept of existence will ever be the same again.

About The Author

Dailius Wilson

Dailius Wilson is the 24 year old founder of WolfofYorkStreet.com – helping the world's top SaaS companies to optimise their sales and marketing efforts. Dailius is currently a Director at TrustRadius and a digital blogger at increasemyonlinebusiness.com. Dailius was named as one of the Top 30 Entrepreneurs in Australia for 2015 by Anthill Online and was ranked in the Top 100 SEO Experts in the World. Dailius has also been a guest on the Ellen Degeneres Show and has over 10,000,000 views on Youtube