Mixed news from ridesharing behemoth Uber this week does not bode well for investors in the venture. With a pile of lawsuits, and losses expected to exceed $3 billion for the year, some experts fear no profitability in the near future.
A TechCrunch article by Lora Kolodny (@lorakolodny) frames Uber in the light as a frivolous venture these days, a 360 degree shift from its former famous startup self. The brass tacks of the TC piece boils down to Uber spending $1.55 for every dollar it makes. When The Wall Street Journal reported that privately held Uber lost at least $800 million in the third quarter of 2016, the tech blogosphere’s ears were tweeked. The fact these loses did not include taxes and that Uber recently sold its China business, did not help either. Relatively new companies losing billions, regardless how successful they are, do not usually have fairytale endings.
Though it seems unfathomable that a company with so much marketing and popularity going for it, the reality Uber may be dropped off at the curb by investors soon is poignant. What’s more, Uber’s attitude toward transparency does not help either. MarketWatch tech expert Therese Poletti what may be the company’s core problem though. :
“A company that prefers to characterize itself as a crusader against regulations that can stifle technological innovation than a company looking to operate in the dark while facing big deficits and testing potentially dangerous technology.”
Ongoing legal battles, the company announcing spending hundreds of millions building a fleet of self-driving cars, and more millions launching Teslas in Madrid sounds more like teenage behavior than responsible business to most people. The self-driving cars failing miserably in San Francisco did not prompt Uber to rethink the program. Instead, the San Francisco-based company is spending its $8.3 billion in funding, along with its estimated $5 billion plus in revenue in what appears to be a perpetual self-destruct mode. Driverless cars for a company that empowers human drivers? Uber’s strategies seem like the proverbial dog chasing its own tail. If revenue news were not bad enough, an Uber employee filing a lawsuit accusing the company of misleading employees about their equity compensation.
If revenue news were not bad enough, an Uber employee filing a lawsuit accusing the company of misleading employees about their equity compensation makes Uber’s brand hurt even more. Then there’s India, an expansion Uber does not want to turn out the way China did. Unfortunately the news there will probably also be bad as the company relies on a wing-and-a-prayer in trying to build an army of 1.4 million drivers in a country where only 5% of people own cars. The list of negative news for Uber goes on and on really, but the high hopes of investors is the real rub.
Uber today seems like a business idea transported out of sync in time. A skyrocket success where startups go, Uber has had unprecedented financial backing only to engage in strategies out of touch with reality. Self-driving cars may be an eventuality, but not for a 2017 company dependent on core human workers and on safety. India and China are certainly emerging markets any international company must intersect in, but on-the-ground realities in those markets must be keenly addressed too. Big plans, big dreams, and big PR can lead to massive successes. Look at Facebook, why it’s not even an innovation but it is massively profitable now. In my view Uber has too much going against it now, and this is not because the startup was a bad idea. Competitors are cathing up, players in these new markets are not stupid, and throwing good money after bad is not going to make things better.
Look for Uber to scale way back and grow up, or hit the TechCrunch deadpool like cannonball starting in 2017. Either this, or the company will make some desperate IPO move to follow Google into the stock game. It may well turn out that Gawker’s Sam Biddle’s assessment of Uber last year was spot on.
