…To fill the company’s void on future guidance, this column addresses the first of four questions Uber should have answered prior to its broken IPO.
- What are the root causes of the Uber’s deep losses to date?
- Are there quick fixes to improve Uber’s profitability?
- What can Uber do in the short- to medium-term to reverse its steep losses?
- How and when can Uber deliver the transformative, profitable future that its CEO has promised?
…And Uber is not alone. For the similar reasons, none of the other major rideshare providers around the world are profitable either, including Lyft in North America, Didi Chuxing in China, Ola in India, or Grab in Southeast Asia.
Many of the structural weaknesses undermining ridesharing profitability apply to Uber’s adjacent businesses as well, including local package delivery (UberRush, which the company recently discontinued), its Xchange auto leasing program (which the company sold off last year) and its UberEats restaurant delivery business, which is currently engaged in a fierce food fight amongst unprofitable but well-capitalized competitors around the world.
Indicative of the growing severity of Uber’s market and competitive challenges, the company’s growth and profitability weakened considerably over the last twelve months, contributing to its broken IPO. Investors have also been dismayed by Uber’s lack of transparency on key operating metrics (e.g. driver churn, unit economics, financials by geography and business segment), and to its frustrating lack of detail on profit improvement strategies (beyond vague references to leveraging its superior scale or becoming the “Amazon of transportation”).
Until and unless Uber can find ways to overcome the numerous weaknesses in its business model, the company will never be profitable. The second article in this series will explore whether there are any quick fixes to improve Uber’s financial performance (spoiler alert: no).