Corner of Berkshire & Fairfax Message Board

General Category => Investment Ideas => Topic started by: ajc on May 13, 2019, 02:28:29 PM

Title: UBER - Uber Technologies
Post by: ajc on May 13, 2019, 02:28:29 PM

Made this a decent-sized position today. Still at 40% cash in my portfolio and I think tech IPO valuations remain largely bubblicious (https://twitter.com/tonyjclayton/status/1118205158721249280), but Uber's valuation seems reasonable here.
Might make it a larger position if it goes lower. Also, I might be earlyish. Usually I wait six months until the lock-up expires, but this sell-off looked like a good entry-point.
BTW, apologies for another unicorn thread. If the recent ones on Jumia, Pinterest, - and now Uber - don't concern you, nothing will.


Rough math & quick take

For a $63b market cap company, their total debt is relatively small. After the IPO, they now have $14b in cash. Their 15.4% stake in Didi is worth $12b and their 23.2% stake in Grab is worth $3b. Depending on how you frame it, you're paying 3x to 4x sales for the world's dominant Transport-as-a-Service (TaaS) business.

So far as competitive advantages go, I think scale matters on both the driver and rider side. For drivers, it's the most reliable and convenient go-to for a little extra income or employment. For riders, it has the greatest ubiquity and fastest pick-up times. This is true in the US and almost everywhere else.
I think size also gives Uber a very strong hand to deal with any future autonomous vehicle (AV) threat, since they are well positioned to use their equity for acquisitions and this will only be more true the bigger they get.

Basically, Uber has become synonymous with ride-hailing globally. New CEO Dara Khosrowshahi has also started to genuinely rehabilitate their image during his first 18 months on the job. They're not perfect (US driver protests, etc), but I think it's fair to say decent progress has been made. It's also worth noting that 75% of Uber's trips happen outside of the US. In the developing world anyway (India, South Africa, etc), working for Uber is still a very well-paying gig (https://www.bloomberg.com/amp/opinion/articles/2019-05-02/what-uber-left-behind-in-asia).

This ex-US strength and scale is also useful for Uber in a few ways. First, the AV threat is not really real there. Even if Waymo or Tesla hit their uber-aggressive (sorry, couldn't resist) goals for widescale AV deployment in the next few years, that would only be a story for the major urban environments in the US and to a certain extent Canada and Europe. Uber's huge markets across India, South America, and Africa, would basically be untouched since drivers in those places can't afford the AV cars in question.

And, that's not even addressing the issue of practical constraints given that total global production is only 70 million cars annually. Even if every car produced on Earth in 2020 were magically to become fully-autonomous from day one, those vehicles would still take a while to put a dent in the estimated 1b+ passenger cars in use worldwide today. So, I like that as a defensive aspect to Uber's business where even if the absolute worst AV case played out over the next 5 years for them in the developed world, they'd still have the time and scale to adjust and fight back by relying on their non-AV business.
Personally, I think the threat posed by Waymo and Tesla over the next 5 years is somewhat overstated but it's good to have a strong insurance policy to work with.

Another potential benefit I see for Uber in the developing world, is that if they run their US and European operations well that could also mean they'd have extra cash flow to pay drivers more and charge riders less in the developing world. Because companies like Ola in India or 99 in Brazil don't have a presence in the wealthiest global markets, that could end up giving Uber the deep pockets and financial firepower they need to make their platform more attractive to drivers and riders than their poorer, local rivals across those countries. In this way, Uber could well use its US and European businesses to cement its global dominance.

On the topic of cutting their losses substantially and becoming a profitable company, that question was addressed generally by management on Friday (see 4mins 15secs https://www.youtube.com/watch?v=538rXsLnsYc). The interviewer noted that Lyft sees 2019 as their peak spending year and while not committing to 2019 being the same for Uber, Khosrowshahi did state that getting to profitability and ending any and all reliance on capital markets was now a key priority for Uber.

A few more remarks on why it's perhaps better to own the largest player in the space globally, how Uber can solidify their position, and what future growth opportunities they have....

UberEats is the obvious one. It's already a bigger business than Lyft. Expanding that in every territory gives riders more reason to stick with what they know and does the same for drivers. It also allows Uber to create a grand Amazon Prime-like subscription package where you get better rates for doing all your TaaS business through them (like Ride Pass and their Eats subscription combined). Offering family packages, like you get for your cellphone contracts would help retain users and drivers. Loyalty points redeemable across the platform are another option. Discounts for Uber users when riding in international markets would be another incentive that could help shut out Lyft.

Another bunch of options is based mostly on how Gojek operates in SE Asia. With Gojek, you can order groceries, a masseuse, nail technician, house cleaner, and various other things or folks to your door. With its rating system for quality control and its speed and omnipresence, Uber is in some ways the perfect platform for new gig-economy businesses to be built on top of. Of course, Uber would be able to take a reasonable cut.
Josh Constine has also written recently about how Uber has some legitimate potential as an ad-platform, starting first with their Eats business (https://techcrunch.com/2018/12/10/uber-ads/) and the promotion of restaurants on it.

Finally, I think electric vehicles (EVs) are more likely to become widespread before AVs do. Studies have shown (https://www.greentechmedia.com/articles/read/electric-cars-could-save-uber-and-lyft-drivers-5200-a-year) that EVs can save drivers more than $5000 per year in fuel (charging is cheaper) and upkeep costs (EVs have fewer moving and breakable parts). This could help alleviate tensions between drivers and Uber over the next decade in markets such as the US and EU, since it would mean more money to go around.

Overall even with a number of current drivers striking and a few concerns around slowing growth, I still think Uber is almost uniquely placed to build a substantial TaaS business globally around its core ride-sharing proposition as well as its Eats business. You also get its Freight business and self-driving unit thrown in, and I think their current Didi, Grab, and Yandex stakes could easily be worth far more 5 years from now. Grab especially, given that it's still growing revenue at 100% per year.
Essentially, I think this is a reasonable price to buy the stock at for a long-term investor.


Economics & the business model

The write-ups and threads that probably most informed my view on Uber's economics and financial model, were:

This by CB Insights -
https://www.cbinsights.com/research/report/how-uber-makes-money/

These three threads by @Valuetrap13 on the financials of their main US rival, Lyft -
https://twitter.com/Valuetrap13/status/1111695360467062784
https://twitter.com/Valuetrap13/status/1112047689183698945
https://twitter.com/Valuetrap13/status/1112870126616002561

This in-depth take by @TurnerNovak covering Uber and their opportunity set -
https://twitter.com/TurnerNovak/status/1120539665512189957


Title: Re: UBER - Uber Technologies
Post by: johnny on May 13, 2019, 03:33:42 PM
I don't feel comfortable with the scale/network-effects argument that I think Uber is promoting here.

The network effects in this industry are hyper-local. Uber's 10,000 active drivers in LA don't give it any real advantage in Phoenix--except perhaps when LA-natives are landing in PHX. But I'm not sure much enduring pricing power is to be gained from having the highest ride-sharing Q score. International travelers are already used to a process of figuring out what the best ridesharing app is for a specific country--I could see this becoming a more common routine for intra-national travel as well.

Better OS-level intermediation could make this even easier. I don't mean Apple/Google operating their own fleets, but simply going further in baking ride-sharing ordering (and price/ETA comparison) into their native maps apps. This already exists in a very hobbled form. Apple has the feature somewhat buried in the app, and it requires that you have already downloaded and registered in each app, in addition to explicitly opting-in for each service. So, as currently designed, it doesn't really serve the purpose at all. But I think it does illustrate the risk quite well.

The current limitations of the Maps-integrations might have a lot to do with the fact that the current ride-sharing providers understand that, since they have no ownership or control over the vehicles, and are quite literally sharing driver-partners, their only differentiation in the user-experience is on the app experience side. That is not a stable equilibrium though, because I can think of a few potential competitors who might have the exact inverse assessment: manufacturers.

How much does Uber's global scale help them when Ford decides to dump 1,000 Navigators, 3,000 Flexes, and 6,000 Fiestas into, say, Houston? For an industry that occasionally finds it has ten or twenty thousand extra vehicles just lying around it should be a somewhat disconcerting prospect. And if, upon landing in Houston, my Maps app is able to present and price the Ford network to me without forcing me to go through the Identify/Download/Register/Order app-flow, shouldn't we expect commodity pricing to become the order of the day in that market?

And if it can happen in one market, can't it happen in all?
Title: Re: UBER - Uber Technologies
Post by: Spekulatius on May 13, 2019, 03:38:56 PM
One of my concerns would be that both Uber and Lyft spent the cash from the IPOs on a turf war of driver incentives and rider discounts.
Title: Re: UBER - Uber Technologies
Post by: Jurgis on May 13, 2019, 08:31:18 PM
I'm still getting Uber discount offers although they are somewhat restricted and localized.

I think there is some stickiness to the app even if there's local competition. As a user you know the interface, you have the account set up, you know what to expect. Why would you install some other app unless it was radically cheaper? There's some segment that might install additional apps for 10% discount. It's unclear how big that segment is.

Internationally, Uber has some countries where it's the only choice. Local taxis still provide the rate ceiling though. I used Uber in Lithuania a lot. It's very cheap - but taxis are cheap too, so Uber can't really charge US or Western European prices.

Predictable and low wait times would be a benefit. Unfortunately, unlike dense urban areas in suburbs these predictions are rather imprecise. I'd be happy to choose Lyft vs. Uber if I really knew that Lyft will take 6 minutes to pickup vs 12 minutes for Uber. But in reality predictions are not true until you request a ride and may vary quite a lot from estimates. Boston suburb is not boonies, but I've had a situation where there was a single driver (!) within 15 minute radius on a perfectly normal day and time... I'm not sure that coverage without running up prices is a simple problem to solve though.

Edit: BTW in Lithuania pretty much all taxis and Uber's are Priuses. Gas prices being 2x US price does that.
Title: Re: UBER - Uber Technologies
Post by: ajc on May 14, 2019, 01:01:00 PM

@johnny

I think the job of the GM, F, and FCAU bosses is obviously to sell more cars, so it sounds unrealistic to say they're going to stick 10 000 spare vehicles in Houston so they can be used for ride-sharing. By flooding the market with that service you're 100% encouraging people there to no longer buy their own vehicles. By the end of the year, overall dealership sales in Houston drop from 50 000 vehicles to 25 000 for that manufacturer. The next step is expanding that strategy across Texas and the rest of NAFTA. They'd destroy their entire North American business. I think a Detroit CEO who tries that would be fired almost instantly and will never work for a traditional auto major again, anywhere.

That's not to mention the dealerships and their owners who are a crucial partner for GM, F, and FCAU, and have invested lots of time and money into their businesses. Imagine you recently bought a dealership in Houston with all the associated upfront costs and then 6 months later HQ decides they're going to flood your local market with vehicles for ride-sharing, making it impossible for you to sell the cars in your lot and recoup your investment? If any of the Detroit 3 wanted a bunch of apoplectic dealers, that's the best way to do it.

Tesla could theoretically do this since they're still small enough to not cannibalize their existing sales, they have a flexible start-up mentality and perhaps business model, and they don't rely on a dealer network. Then again, they lack cash so they need to sell cars not dump them, they can't afford right now to look like buyer demand is falling off a cliff, and if a play like this flopped completely because of poor execution it would invite even more difficult questions about Musk at a time when he's on thin ice.

On top of that, there are going on a million Uber drivers in the US at the moment so even if all the stars did align just perfectly and Tesla successfully deployed a certain amount of their annual production in this way with none of their usual, basic execution problems, it would still take 5 or 10 years for them to outmatch Uber scale-wise in the US alone, given current production rates.

Your point on network effects is fair. My bad for over-emphasizing that aspect when I wrote my pitch. In Uber's defense I don't think they're the ones pushing that argument hard, that was more me being an idiot. If I was guesstimating though I'd say maybe 10% of Uber users and drivers are in a situation where they do actually do enough travelling for work or fun for that effect to be meaningful. Maybe if you include kids who've gone off to college elsewhere considering they probably use Uber the most, then perhaps that number actually goes up to 15%. That's a total thumbsuck admittedly.

Also, I'd say users who move across national or international geographies aren't actually that interested in looking for real ride-sharing alternatives outside of the major providers. The image below shows only 2% of US rides are not handled by Uber or Lyft and this has been steady for years. Maybe investors like us who prefer to compare every stock to every other one are likely to overestimate that shopping-around diligence in regular people. I'd say Jurgis makes a good point too, about how you get familiar with the app and don't want to keep filling in your data on other ones if you've already got two downloaded. At any rate, the graph shows around 98% of American riders only want to do one comparison then ride.

I should've emphasized switching costs at the local level and how I think Uber will just incentivize users more and more over time to use their app pretty much exclusively. I don't think Amazon has particularly strong network effects either, but with a very wide selection, reasonable prices, super fast shipping, plus extras like movies, shows, music, etc, all wrapped up in an affordable Prime subscription, it can incentivize a lot of regular (even practically exclusive) use and loyalty.

In a similar way, I think it's sensible to say Uber emphasizes availability and speed wherever you go, together with a relatively safe and uniform experience - and usually delivers on those variables better than anyone else - plus through Rewards (https://www.uber.com/za/en/u/rewards/), Jump bikes and scooters (https://techcrunch.com/2019/02/08/ubers-jump-bikes-are-seeing-high-utilization-rates/), integrating with train and bus services (https://techcrunch.com/2019/04/30/assimilate/), etc, it seems clear they're solidly ahead of everyone in making a seamless, across-the-board solution for all your transport needs.

My thinking is that this all leads to a future where Uber bundles this stuff together for a monthly subscription fee and then gives riders and drivers all sorts of loyalty points (like you can currently earn) that can be redeemed for Uber Cash, priority pick-ups at airports, free Eats delivery, and maybe air miles if they do a deal with a few airlines (they have a great CEO for that). So, I see that solution for all your mobility needs in a monthly subscription package with some sweet loyalty point rewards going a long way towards entrenching Uber's position and driving most user behavior in their direction.

I think all that kind of eventually leaves disintermediation of the app by Google or Apple as less likely than might be assumed. I mean how good are Google or Apple at stopping you from using your Prime subscription if you want to shop online or watch a movie? Not very. Not even close.
People might price compare in Google Maps exclusively some day, but if they already have their Uber monthly subscription/family plan, and they know they earn loyalty points, air miles, and free Eats deliveries the more they use it, then how likely are they to switch even in the improbable event that ACME ride-sharing corporation can offer you a car for 50 cents cheaper though you'll just have to trust their driver supply is large and vetted enough to arrive at you sooner and safer than Uber.

On the topic of how their 10 000 drivers in LA help them in Phoenix, I'm with you that there's not much network effect but I would argue the economies of scale they have can potentially help them defend their overall dominance. I mean, if a person agrees that Uber's model can lead them to becoming solidly cash flow positive then the amount of cash flow that would produce would allow Uber to see off any competitors who decided to go after any specific metro market. Take Phoenix for example...

ACME ridesharing corporation thinks it's a great idea to start a competing ridesharing business there in the year 2025 when Uber is generating some real cash flow.
So, ACME raises a bunch of money and undercuts Uber by 50 cents per ride.
Well in that situation, Uber could simply drop their prices by 1 dollar per ride in that market for the next 24 months and bleed ACME to death.
In other words, now that Uber has reached scale, they are in a position where having a nicely cash flow positive business allow them to really defend their business from anyone who wanted to attack without really being hurt too much in the process. So yeah, it's not a network effect but it's still great to have those 10 000 drivers in LA and another 15 000 in New York, etc, bringing cash through the door so that if you have to fight a price battle in Phoenix then you'll have the means to do it.

Anyway, I should've emphasized the way Uber will likely incentivize users to almost exclusively stick with their app though I do think there are some network effects for a certain percentage of users and with potential future airline deals and increased personal travel that effect might grow a little stronger.
Also, I think the scale Uber has - in the event they get cash flow positive sooner rather than later - will allow them to starve any smaller competitors who try to come after them by discounting their offerings in specific markets. I think that gives them a pretty nice defensible position once they stop losing money.


@Spekulatius

Lyft has already said this year will be their biggest for spending and they'll bring it down going forward (see the video I linked to in my original post).
That means fewer subsidies and price cuts in future.
Also, Uber has better economies of scale and already pays their drivers way better (https://www.thestreet.com/personal-finance/education/how-much-do-uber-lyft-drivers-make-14804869) so it's probably preferable to bet on Uber since they'd have more competitive leverage.


Title: Re: UBER - Uber Technologies
Post by: wabuffo on May 14, 2019, 01:22:23 PM
Ajc - have you studied the actual earnings of Uber drivers and what the effects will be as Uber tries to end driver subsidies and/or take a greater portion of the fare?  It seems to me that there is a very limited number of drivers willing to accept bottom-10 percentile wages (before even accounting for vehicle expenses).  I've seen some serious academic studies that seem to indicate that Uber is taking advantage of informational assymetries initially about true costs per mile but that drivers are becoming more aware of how little they are making.

You add that to the large subsidies to riders, and the high overhead costs of Uber vs local cab companies - its hard to see a path to ever getting to acceptable returns to shareholders. 

wabuffo
Title: Re: UBER - Uber Technologies
Post by: Spekulatius on May 15, 2019, 04:02:37 AM
AJC and wabuffo, thanks dort he pro and con discussion, itís quite helpful. It seems to me that from the business models presented here, itís one of the tougher and higher risk ones. Compared to for example SPOT, I find it much easier to construct and investment case with the latter. Both have their challenges as marketplaces (content generators, vs drivers, lower gross margins ), but SPOT really doesnít have the cash burn that Uber and Lyft have.. I donít own either one, but I think I would rather bet on SPOT than the ride hailers at this point.
Title: Re: UBER - Uber Technologies
Post by: ajc on May 15, 2019, 05:04:27 AM


Ajc - have you studied the actual earnings of Uber drivers and what the effects will be as Uber tries to end driver subsidies and/or take a greater portion of the fare?  It seems to me that there is a very limited number of drivers willing to accept bottom-10 percentile wages (before even accounting for vehicle expenses).  I've seen some serious academic studies that seem to indicate that Uber is taking advantage of informational assymetries initially about true costs per mile but that drivers are becoming more aware of how little they are making.

You add that to the large subsidies to riders, and the high overhead costs of Uber vs local cab companies - its hard to see a path to ever getting to acceptable returns to shareholders. 

wabuffo



wabuffo, I tend to use data from folks like the Ridesharing Guy and Ridester (https://www.ridester.com/uber-lyft-driver-costs-and-expenses/) more because then you also get to hear what drivers are saying about their experiences but I'm aware of the studies you mentioned.
Uber earnings definitely differ based on location globally. The same is true of places in the US. If you go through this really excellent ridesharing report - http://www.businessofapps.com/data/uber-statistics/ - there's a line that states "based on (a) survey of 1,200 drivers conducted in early 2018 by The Rideshare Guy show median Uber earnings of $15-19.99 before expenses. The same report found that drivers believed they should be earning 31% more."

Also, if you look at that same report you'll see it's actually less than 10% of drivers who are strongly dissatisfied with their experience working for Uber and that percentage is dropping. You can also see that around 75% of Uber drivers are either neutral, somewhat satisfied, or strongly satisfied with their experience driving for Uber.
Further, while 55% of drivers say pay matters most to them, there are also 35% of drivers who say flexible work hours matter most.

Anyway, I'll stop going on about the report (http://www.businessofapps.com/data/uber-statistics/) though I do think it's super insightful, full of useful data, and everyone should read it.
Either way, while I think it's worth noting that there are definitely drivers who earn very little and feel like they're getting ripped off, they tend to be a vocal minority and the reality is that the vast majority of Uber drivers seem to be okay with the platform.

It's also true (see image below) that outside the US, Uber drivers get paid multiples of whatever their local minimum wage is. Anywhere between 3x to 8x that number really.
This great thread (https://twitter.com/modestproposal1/status/1118250501320204290) about Uber's financials more generally, tries to breakdown the overall business into smaller pieces.
One thing I'd note is that if drivers internationally (which is where 53% of Uber's revenues already come from) are being paid such high multiples of their local minimum wages, then once those markets get closer to maturity it seems theoretically possible that Uber could make substantial cuts there to drive profitability.
Also, given that the developing world is growing GDP faster and is far less aggressive about setting the minimum wage bar high because they prioritize job creation, I think this makes well more than half of Uber's business going forward very different from their US or European markets.

Back to those 10% of US drivers who are very unhappy since I think Uber's developing world business has much less to worry about on the future profitability front.
I'd say that pushing EVs is a big part of the solution.
As I noted in my original post, an EV can save a ridesharing driver over $5000 per year in expenses (https://www.greentechmedia.com/articles/read/electric-cars-could-save-uber-and-lyft-drivers-5200-a-year#gs.c1mqyy).
Fortunately, US drivers who are unhappy about their pay will be some of the best positioned to take advantage of this fact because North America will likely receive a significant share of new EV production over the next 5 to 10 years.
If you just use incredibly rough numbers, Uber has around 1 million US drivers. The 10% of truly dissatisfied ones account for about 100 000 people.
Tesla's Model 3 production this year alone will probably be around 400 000 vehicles.
Further, VW is due to go into EV production in Zwickau by the end of 2019 at a plant that will produce over 300 000 EVs per year (https://www.bloomberg.com/news/articles/2019-05-14/vw-cranks-up-electric-car-plants-to-overtake-tesla-s-capacity).
Tesla has recently opened a leasing program for Model 3's in the US that starts at $399 per month (https://electrek.co/2019/05/03/tesla-model-3-monthly-lease-payment-399/). I wouldn't be surprised if VW did something similar starting in 2020.
In other words, the opportunity for US Uber drivers to cut their costs by thousands of dollars each year is already basically here and the company is attempting to push more drivers into owning an EV (https://www.latimes.com/business/technology/la-fi-tn-uber-electric-vehicles-20180619-story.html).

One other way Uber is trying to assist and add value for drivers while at the same time making them more loyal to the platform, is via their new Driver Rewards Program which gives you cash back, free roadside assistance, and 100% tuition coverage, among other things (see 2nd image below). I'm not sure what the dollar value of that stuff is, but I like how Uber is using its scale to negotiate benefits for its drivers.

Finally, maybe the best thread I've seen so far on the Uber business model is the one Turner Novak did (https://twitter.com/TurnerNovak/status/1120539665512189957). If you scroll down through it, you'll see the Uber Jump electric bike and scooter opportunity is potentially very big since in the US most urban trips are actually less than 3 miles long.
The economics of bike/scooter trips have far higher margins because you don't have to pay a driver.
If Uber can figure that business out, like it seems they're starting to (https://techcrunch.com/2019/02/08/ubers-jump-bikes-are-seeing-high-utilization-rates/), then that can make their US business look far better.

Overall, I think Uber does have issues in the US for some drivers but there are technologies arriving that can address this on both the EV and electric bike/scooter side.
Also, I think international will become an ever bigger part of their revenues and they seemingly have a good amount of room to cut there in order to become profitable.


Title: Re: UBER - Uber Technologies
Post by: DTEJD1997 on May 15, 2019, 07:48:27 AM
AJC:

I don't think UBER has anywhere near the capacity to cut wages INTERNATIONALLY than you think.  The "high" foreign wages have a component of depreciation & wear & tear on the vehicle.  Those international drivers are getting "higher" wages because they are supplying a vehicle to drive with.

There is also NO WAY that only about 10% of Uber drivers in USA are upset with wages.  I know several attorneys that drive Uber, and they are either upset OR neutral on pay.  Several of them pretty much only drive at peak times to increase their income.

If Uber & Lift stop their incentives to start driving ($500 for 100 rides), then they are going to have very few new drivers, maybe not even enough to replace those that leave.

I also don't think that USA drivers are suddenly going to start making $$$ by switching over to EV.  I am going to guess that the average value of a vehicle being driven in USA is $10k to $15k.  That is much less capital outlay than $35k+ for an EV.  EV may also have recharging problems?  Range on TSLA cars is about 250 miles?  Is that sufficient for a 8-10-12 hour driving shift?  Maybe?  Maybe not?

We will see, but I am going to hazard a guess that UBER is going to have start serious inroads towards profitability in the next 12 months or so.
Title: Re: UBER - Uber Technologies
Post by: ajc on May 15, 2019, 10:31:59 AM

DTEJD1997, I live in South Africa. Uber here pays 5x the minimum wage on average. In Brazil it's 3x and in India 8x (see image below). I can tell you from personal experience that they almost certainly can make substantial cuts here to what they pay and it would still be a very good gig for locals.

Down the road from me there's a Shoprite, which is sort of our version of a Walmart (US) or Tesco (United Kingdom). They pay their cashiers and shelf-stackers R3500 (US$250) per month, which is a little over minimum wage here. Uber drivers on the other hand can pull down R15000 per month, without too much hassle, if they work full-time. This checks out from the experiences I've had using the service and seeing what was paid, how it was split, etc. Here's a recent Mail & Guardian article (https://mg.co.za/article/2018-06-18-11-uber-taxify-drivers-v-corporate) also, which is sort of our version of Britain's Guardian newspaper, saying "drivers make about R16 000 a month". The same article claims fuel and insurance cost are about R5000 per month in total.

To give you an idea of what that means, the average salary for an attorney in Cape Town is R17000 and the average for a software engineer is R24000 even though this city is home to one of Africa's most well-paying legal communities and our startup ecosystem is perhaps the most important and robust on the entire continent. In other words, Uber drivers here get paid as much or nearly as much as some of the best jobs across the country. All this, and you don't even need a college degree to do it.

Not that Uber would, but even if they did pay drivers here R8000 instead of R16000 per month, those drivers would still be earning just less than minimum wage after paying for fuel and insurance. That's in a country where the national unemployment rate is 27% by the way, so this is still undoubtedly a place where any job is better than none. For perspective, today you'd have no problem buying an Uber-ready 2016 model used car here in good condition for around R75000 (just over US$5000). Drivers here making R16000 per month wouldn't seem to have nearly the issues with depreciation versus earnings that you're theorizing.

By the way, India is an even bigger market and at 8x the minimum wage as their Uber pay average, they potentially have even more room for cuts. I'm not saying drivers in SA or India would like it, in fact it'd piss them off incredibly, but if Uber is smart and increases pay at only 3% a year when inflation often runs at 6% or more in fast-growing, developing economies, they could increase their margins over time while still paying a very good wage to drivers here over the long-term.

The 8% strongly dissatisfied figure was from a survey by The Rideshare Guy (see here https://therideshareguy.com/2018-uber-and-lyft-driver-survey-results-the-rideshare-guy/) which came from the excellent Business of Apps report (http://www.businessofapps.com/data/uber-statistics/). That number was down from the previous year. There were also 17% somewhat dissatisfied drivers. 75% of drivers were either neutral or satisfied. The survey had over 1000 respondents and The Rideshare Guy blog is perhaps the best and most popular online blog for Uber, Lyft, and Doordash drivers who want to learn about which service is best, how to make more money, etc.

That survey could well be skewed since that blog is visited by people who prefer to find ways to save money and increase earnings rather than sit around complaining, but then again there will always be those who do.
I don't mean to say Uber shouldn't try improve things for their US drivers because some of the problems you mention are clearly real and deserve proper attention, but it's worth noting that with 1 million US drivers and 250 000 of them in the dissatisfied bucket you are naturally going to hear a lot of vocal people on social media and elsewhere making a lot of loud criticisms. Again, I think it's best for Uber to try address them as effectively as possible, but I also think no matter what you do there will always be those who are unhappy.
I think this will remain the case while ICE vehicles are so heavily used on Uber, since I'm not sure their economics sometimes make sense. Best for those folks, I believe, to switch to EVs as soon as possible.

The article I posted about the Tesla Model 3 leasing (https://electrek.co/2019/05/03/tesla-model-3-monthly-lease-payment-399/) says you need $4500 cash down and then the lease payments are $399 monthly. There's no need to pay the $35000 upfront. Just over time. The average range of Uber earnings in the US seems to be $15 to $25 per hour before expenses (https://www.ridester.com/how-much-do-uber-drivers-make/). At $15/hour on the very low end, if you drive 40 hours per week you make $600 per week and $2600 per month.
Charging a Tesla at home during off-peak hours will give you a full charge for the whole of the next day and it'll cost you $13 for the charge (https://www.solarreviews.com/blog/how-much-does-it-cost-to-charge-a-tesla-is-it-the-same-as-the-cost-to-charge-other-electric-vehicles). That represents a car charging bill of just under $400 per month. A full Model 3 charge lasts 220 miles for the standard range model and 310 miles for the long range model. Working 40 hours per week for Uber likely means daily miles driven of around 150 (https://ride.guru/lounge/p/how-many-miles-do-uber-and-lyft-drivers-put-on-their-cars), so no need for any interim charging expenses.

At this point, after paying your lease of $400, and your charging costs of $400, you're left with $1800 from your monthly Uber earnings to pay insurance ($1300 annually according to Ridester) and license, registration, plus vehicle taxes ($500 annually according to Ridester - https://www.ridester.com/uber-lyft-driver-costs-and-expenses/). Those charges come to a total of $150 monthly then. That leaves $1650 from your $2600, and you'll need let's say $150 per month for tires and maintenance (even though EVs have fewer moving parts and require far less maintenance than gas guzzlers).
In other words, after all expenses it looks like 40 hours per week will clear an Uber driver using an EV option intelligently, somewhere around $1500 per month after costs at the very low end of the driver pay range. Those numbers look noticeably above the US minimum wage of $7.25 per hour or $290.00 per week for a 40 hour week. Glad to have those assumptions corrected by yourself or other forum members if I managed to screw them up.


Title: Re: UBER - Uber Technologies
Post by: merkhet on May 15, 2019, 10:57:44 AM
ajc, you may have overlooked the 10,000 mile annual limit for the Tesla lease at that price.
Title: Re: UBER - Uber Technologies
Post by: ajc on May 15, 2019, 11:25:43 AM

ajc, you may have overlooked the 10,000 mile annual limit for the Tesla lease at that price.



My bad, thanks for pointing that out. Here's one via The Rideshare Guy with a Chevy Bolt EV though, which does 200 to 250 miles on a single charge. Unlike the $35000 Tesla it can be got for below $25000 with incentives and rebates (https://therideshareguy.com/driving-a-chevy-bolt-ev-for-rideshare/).

It's not the $10k to $15k per vehicle that DTEJD1997 was talking about, but maybe if a person stretched and saved and put in some extra ridesharing hours with their existing ICE vehicle then after a year the $25k EV is within reach. Further, with VW likely entering the US market next year to compete (https://www.bloomberg.com/news/articles/2019-05-14/vw-cranks-up-electric-car-plants-to-overtake-tesla-s-capacity) we might see some generous introductory prices or incentives by folks like GM who still want to remain in the fight.

Maybe there are strict limits on all EV leasing programs like that Tesla Model 3 has, I'm not sure. However, Uber's EV leasing program in Portland from 2017 suggests there might be some car companies that are willing to lease to full-time ridesharing drivers for around $100 per week (see https://www.citylab.com/transportation/2017/04/uber-electric-vehicles-leasing-program-portland-oregon/522759/) so I'm not sure my thinking here is a million miles off. Others might disagree.


Title: Re: UBER - Uber Technologies
Post by: ajc on May 15, 2019, 12:14:23 PM

Here's a Chinese EV coming to the US in 2019 (https://cleantechnica.com/2019/02/22/us-approves-chinese-electric-cars-imported-from-kandi/).
Their K22 model will sell for below $20 000 before rebates.
It has a range of 125 miles which is almost enough for a whole day rideshare driver today. If you drove home for lunch and charged it for an hour, it'd be fine.
As their batteries become more efficient, I think it's fair to say it'll be enough for full-time Uber use.
It's not a $10 000 to $15 000 car like DTEJD1997 mentioned, but after subsidies it's darn close.


Title: Re: UBER - Uber Technologies
Post by: wabuffo on May 15, 2019, 12:24:39 PM
Ajc - thanks for posting all of that info.   Very interesting reads.

Question -- if EVs become ubiquitous due to cost their advantages over gasoline/diesel powered vehicles, why won't the "fuel savings" be competed away?   If its a good deal, cab companies and other ride-sharing competitors will come out with EV fleets and everyone (including the driver and UBER) is back to square one.   

Its like Buffett's textile mills, the capex might look like it has great returns, but if competitors also do it, then no one has an advantage.   Its like watching a parade, the first person to rise onto their tippy-toes gets a momentary better view, until the entire crowd stands on its toes.

wabuffo

Title: Re: UBER - Uber Technologies
Post by: Jurgis on May 15, 2019, 12:47:06 PM
As a cheapskate customer, I think Uber/Lyft have space to increase prices without forcing me to take cabs. There are definitely trips that I would not take if prices increased ("Uber-vs-drive-myself-and-pay-for-parking", "Uber-vs-complicated-public-transport"), but there are trips that I would still have to take and probably take up to the taxi prices ("Go to airport"). They can also probably have more "partial surge" pricing, which might be tough to avoid. So from customer point of view, I'm afraid Uber/Lyft will start pushing prices up. Whether that's enough to justify investor point of view to invest into the stock, I'm not sure.

I'm not sure how it's in US, but in Lithuania wait charges can be annoying. The price of a ride is so low that couple minutes of driver waiting can up the price of the trip 10-20%. I understand that this is a nice way for drivers and Uber to get extra revenue, but the customer does not get a discount if the driver is late...

Which brings me to the anecdotal observation that it seems like a large percentage of Lithuanian Uber drivers casually hang out at home with app running. The scenario plays out as follows: I order Uber, it shows 6 minute arrival time, and then... the car on the map does not move at all for 2-4 minutes. Pretty sure the driver was just at home and then went to their car after accepting the trip. I'm not against this on principle, but it adds waiting time for customer. And it's asymmetric with customer being charged for waiting the moment driver hits the pick up spot.

Electric scooters for rent seem to be a big thing right now in Lithuania. I did not try it, since you have to get an app and I'm not sure if the app would accept my US credentials. So maybe if they were offered by Uber, I would have tried them. Not sure. Most of the time I'd either choose to walk or to take a car (Uber) rather than taking a scooter. Might change my mind if I lived/worked/etc in more urban area. And in Lithuania there's tons of scooters in city center, but you can't really get one if you're even just outside the center. So it seems the convenience/availability is mostly for trips from center to suburbs, but not really in the other direction.
Title: Re: UBER - Uber Technologies
Post by: SHDL on May 15, 2019, 01:16:12 PM
Not much to say about this beyond what was discussed in the pre-IPO thread:

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/uber-filing-for-ipo/

I'm still pretty skeptical about this but I do enjoy reading the counterarguments. 
Title: Re: UBER - Uber Technologies
Post by: DTEJD1997 on May 15, 2019, 08:19:40 PM

Here's a Chinese EV coming to the US in 2019 (https://cleantechnica.com/2019/02/22/us-approves-chinese-electric-cars-imported-from-kandi/).
Their K22 model will sell for below $20 000 before rebates.
It has a range of 125 miles which is almost enough for a whole day rideshare driver today. If you drove home for lunch and charged it for an hour, it'd be fine.
As their batteries become more efficient, I think it's fair to say it'll be enough for full-time Uber use.
It's not a $10 000 to $15 000 car like DTEJD1997 mentioned, but after subsidies it's darn close.
AJC:

I think that UBER drivers in foreign countries make MORE than their home countries minimum wage largely because they are SUPPLYING the vehicle.  Let us say that UBER lowers the wage of the driver to minimum wage or close to it...what driver would drive for them?  I can't think too many would do that!  A car in most foreign countries takes more hours of labor to earn than it does in the USA.  I would think is especially the case in Africa and India...thus UBER drivers make substantially more than minimum wage in those places.  Could UBER lower the wages of drivers in those places?  Maybe? Probably?  but I think there is less slack than what you are initially thinking.

The successful UBER drivers that I know in the USA follow demand pricing AND they also have LYFT.  They run both apps simultaneously to get fares AND to get the highest paying ones.  The drivers ALSO have researched their car selection VERY carefully.  They are getting heavily depreciated cars that are still reasonably dependable and cheap to drive.  The most flash for the cash.  Think $10k or a bit less.  Drive them for a 1-2 years and then sell & replace.  You've got to own these vehicles, you can't lease them.  I am not sure that a brand new $35k+ Tesla would work.  A $20k electric vehicle?  Hmmm...maybe?  I wonder how reliable it will be though?

In different countries and different areas of the USA, electric cars may work.  I am not so sure that they will work in all USA cities.  For example, for me to get to the main Detroit airport, it is about a 30 mile drive.  When I had a job it was about a 35 mile commute EACH WAY.  Many residents live at least 10-15 miles from the city center.  So if you were doing an 8 hour shift AND you had to go the airport (lucrative run), you would have to recharge, maybe recharge twice even?  You would have to be EXTREMELY careful not to run out of electricity while out on a run.  So maybe once you get to about 10%, you've got to recharge?

So I'm not sure that EV will solve UBER's problems.
Title: Re: UBER - Uber Technologies
Post by: ajc on May 18, 2019, 08:35:21 AM


Ajc - thanks for posting all of that info.   Very interesting reads.

Question -- if EVs become ubiquitous due to cost their advantages over gasoline/diesel powered vehicles, why won't the "fuel savings" be competed away?   If its a good deal, cab companies and other ride-sharing competitors will come out with EV fleets and everyone (including the driver and UBER) is back to square one.   

Its like Buffett's textile mills, the capex might look like it has great returns, but if competitors also do it, then no one has an advantage.   Its like watching a parade, the first person to rise onto their tippy-toes gets a momentary better view, until the entire crowd stands on its toes.

wabuffo




No problem. I don't think the textile mill example applies. Those have no real barriers to entry. There were likely dozens or more textile mills in the US then, and vastly more overseas. That makes for a race to the bottom.

I can't think of a large scale duopoly that didn't have either key competitive advantages as a result of their scale, or at least a few major barriers to entry.
By definition, a duopoly almost can't develop if the barriers to entry are negligible, so the fact that ridesharing has moved from 100's of competitors globally since 2011 to only two majors in each region, is strong evidence that ridesharing has formidable barriers to entry.
If anything it's our understanding of them and how they work that's likely non-existent, rather than the barriers to entry themselves.


EVs and their impact on the economics of ridesharing

To give some general ridesharing context, I think the importance of an EV revolution shouldn't be understated. The average price of gas/gallon has gone from $1.00 in 1998 to $2.50 as of 2019 (https://www.energy.gov/eere/vehicles/fact-915-march-7-2016-average-historical-annual-gasoline-pump-price-1929-2015). Same with oil production where exploration, capital, operating, and tax costs, have risen at essentially the same rate (https://www.bbc.com/news/business-15462923).
The price of your average new ICE car in the US was $17 000 in 1990, but by 2013 it was over $30 000 (http://www.thepeoplehistory.com/70yearsofpricechange.html). ICE vehicles have far more moving and breakable parts than EVs, so each year you spend more money on maintenance and repair costs too.
Essentially for ICE vehicles, the cost of everything (including the car itself) increases on average over time. Uber wants to lower prices for riders, but drivers want more money so they can cover rising expenses. The incentives are competely at odds with each other.

On the other hand, in 2010 your two EV choices were basically a Tesla Roadster for $100 000 with a 200 mile range or a Nissan Leaf for $33 000 before rebates with a 100 mile range. Today EVs are far cheaper.
A Model 3 starts at $35 000 with a 250 mile range and a Kandi K22 costs $20 000 before rebates with a 125 mile range. This is possible because battery efficiency has improved and costs have fallen from $1160/kWh in 2010 to less than $200/kWh today. Current forecasts are that prices will drop to $94/kWh by 2024 and $62/kWh by 2030 (https://about.bnef.com/blog/behind-scenes-take-lithium-ion-battery-prices/).

What does this drop in battery prices mean for EV prices and range over the next decade? A $15 000 Hawtai EV, will theoretically have a 190 mile range by 2030 up from 96 miles today (https://cleantechnica.com/2018/11/03/china-has-record-electric-car-sales-month-china-electric-car-sales-report/).
If Renault can upgrade the $8 000 Twizy (https://en.wikipedia.org/wiki/Renault_Twizy) to be a little more like a Smart ForTwo or Smart ForFour car, then the 62 mile range you get today would translate to a 176 mile range by 2030. Maybe you'd need to pay $10 000 instead of $8 000 for the slightly larger body and chassis, but it would still be incredibly affordable.

Residential solar has gone from 52 cents per kWh in 2010, to 10 cents today, and the US government goal for 2030 is 5 cents (https://www.energy.gov/eere/solar/sunshot-2030). If this efficiency carries over, the current $400 monthly cost for charging your EV overnight during off-peak hours would fall to $200 per month.
Basically, by 2030 it's not absurd that a full-time Uber driver could buy a $10 000 EV with a 170 mile range that costs $200 to charge fully each month. The only other running costs would be new tires and insurance, vehicle tax, etc, since EVs have close to no maintenance fees.

If you depreciate that theoretical $10 000 EV over a decade, add $200 per month for insurance, license, registration, plus vehicle taxes (https://www.ridester.com/uber-lyft-driver-costs-and-expenses/), $200 per month for charging costs, and $400 for a new set of tires each year, you end up with monthly running costs of just over $500 overall by 2030.
Today's Uber drivers earn $15 to $20 per hour before subtracting depreciation, operating costs, etc (https://www.ridester.com/how-much-do-uber-drivers-make/). That means $600 per week at the low end. If you minus the $120 theoretical weekly all-in operating cost of a 2030 Twizy-like EV, that leaves the driver with $480 per week net at the bottom end of today's Uber pay scale.

Assuming the current minimum US weekly wage of $290 goes up to $350 or even $400 by 2030, that still means by 2030 even the lowest paid Uber drivers today will be earning far more than the minimum wage even after accounting for all expenses. In other words, EVs do change the dynamics completely and will allow Uber drivers to earn much fairer net salaries over the next decade.
It also means as cheaper and longer range EVs become more mainstream and widely available, so the pay tensions between Uber and their driver community will become less of an issue. In fact with the projected battery and EV improvements by 2030, Uber wouldn't need to even increase driver pay for the next decade in order for Uber drivers to earn radically more.


Potential barriers to entry across the ridesharing industry

We can see Uber and Lyft still account for 97% of all ridesharing trips in the US after many years (https://secondmeasure.com/datapoints/ubers-not-as-bad-off-as-you-think/), so something's going on. I think one key thing is driver down time and miles unpaid versus miles paid. Part of what keeps drivers using Uber and stops ACME ridesharing from gaining share is the miles unpaid to miles paid ratio. ACME rideshare will have no option but to have a very high starting ratio, so they'd need to pay drivers a lot more per ride.
The finance self-help guy, Mr Money Mustache, did a test and found a miles unpaid to miles paid ratio of roughly 1:1 for his Uber drives (http://www.mrmoneymustache.com/2017/11/22/mr-money-mustache-uber-driver/).

Say an Uber driver needs to ride 4 miles to pick up a fare who travels for 4 miles in the car and they get paid $8 total. Uber is then paying them $1 per mile driven. ACME would have far fewer drivers and riders for the first few years or more. If the average ACME driver had to ride 8 miles (because of lower driver and rider density) to reach their fare, and their rider also took a 4 mile trip, then that driver moved 12 miles instead of the 8 the Uber one did.
ACME would have to pay their driver $12 for that same 4 mile paid ride to make sure their driver got the right amount per total miles driven. Expenses and depreciation obviously only care about total miles driven, nothing else.

That would be an impossible trick for ACME to pull off. In 2018, Uber did over 140 million trips (400 000 per day) in New York (https://www.nytimes.com/2018/06/17/nyregion/uber-taxi-drivers-struggle.html).
If ACME rideshare wanted to take over NYC, they'd need to start paying their drivers maybe 50% more than Uber per ride in order to make the economics work on a total miles driven basis. I think the average Uber trip costs $15 or so. You can do some rough math yourself. It's ugly.
In my view, this is a big part of the reason why Uber and Lyft control 97% of the US market. Astronomical amounts of money would be needed just for another company to have the chance to properly compete.

Then you have to consider Uber's backing from Saudi Arabia and the Softbank Vision Fund. Saudi Arabia's PIF owns a $3.5b stake directly and the Vision Fund (which has strong Saudi state participation) owns an $11b stake. Let's say like Juno did in 2016, someone wants to try take share in New York after raising $80m (https://www.reuters.com/article/us-juno-fundraising-idUSKCN1232A5).
Why would the Saudi's or Softbank not lend Uber another $100m or $200m just to crush the competition? That doesn't seem like a lot to spend in order to protect a multi-billion dollar investment that could be worth far more a decade from now. I think almost every small startup or VC is well aware of how deep Uber's pockets might be.

Johnny mentioned Google or Apple could potentially build price comparison into their apps and disintermediate Uber and Lyft. If enough drivers switched over to use that as their primary dashboard, it might take care of the miles unpaid problem since they'd be piggybacking off the Uber and Lyft driver/rider bases.
It's a fair point but I think the thing is Uber and Lyft don't have to offer Google or Apple, visibility into their specific ride pricing. As long as Uber and Lyft benefit from it as an extra customer acquisition channel, that's fine.
If they saw their share eroding though, they'd simply pull their data. If anything, Google or Apple would likely take the bigger hit since their apps would have far less functional value in the future on-demand world of 2025 or 2030.

Plus, there's also an already sizeable and growing dissatisfaction with the FAANGs from a market dominance perspective. In a theoretical case where Alphabet tried essentially subsuming two other tech companies worth a combined $100b through their own platform, would Alphabet be perceived as less monopolistic or more?
Also, Alphabet owns Waze Carpool and Waymo. Is it market abuse for them to use their platform to degrade Uber or Lyft's market share, when there's a clear conflict of interest?
I think the FAANG companies are in a tough spot and it's getting tougher. They're going to be scrutinized far more heavily going forward. Growing numbers of important Dems and GOPers are becoming more vocal with their criticisms. While I don't think Uber is an angel, it does really help that they're still far smaller than the FAANGs and at least part of an obvious duopoly.

Other potential barriers to entry are insurance as well as regulatory burden. There's a subscription-only article I don't have access to (https://seekingalpha.com/article/4249415-lyft-insurance-path-profitability) which likely argues that the sizable insurance operations required by Uber and Lyft, together with the reluctance of insurance companies to do business with ridesharing companies (https://www.buzzfeednews.com/article/williamalden/meet-the-guy-who-solved-ubers-insurance-problem), constitutes a significant barrier to entry.
Furthermore, ridesharing these days requires working very closely with local and federal governments on a ton of issues. Uber and Lyft have a lot of compliance experience by now and the cost of this might be prohibitive for some small potential challengers.

Finally, it's worth making a few quick comparisons with Amazon. Amazon had no real network effects and instead focused on having greater selection in books and then all other categories, shipping faster, and pricing affordably. Uber is in many ways the same, since it focused on maximizing geographic coverage, having the quickest pick up times, and the most affordable pricing. There's a very good piece (https://hackernoon.com/the-network-effects-of-ubers-master-plan-or-why-travis-kalanick-is-captain-nemo-46d521a03b2d) with numerous links on the similarities between Amazon and Uber by Whitney Zimmerman. I'd say it's 100% recommended reading.
In it, he addresses what Uber Prime would look like and how it would create some very strong incentives for users to make Uber their default app for many things logistics-related.

I think this makes sense. We're already seeing Ride Pass and family plans offering a kind of early-stage bundled subscription option. This is logical when you consider that Uber's JUMP bikes for short, inner-city trips are already available, and how Uber Eats is currently driving incremental users onto their ridesharing platform (https://twitter.com/BluegrassCap/status/1128322898857476096).
Uber's Rewards program for drivers and riders also already offers discounts on other related products and the opportunity to earn points that can be used for other services across Uber.
To me, a subscription option from Uber with rewards attached, is the obvious move for them over the next 5 years and once Uber can deliver anything to you or take you wherever you want to go, it really becomes difficult to see why you wouldn't want to pay one low, monthly fee for that kind of option.

In the end, I think one or two of the things I've listed above wouldn't really represent a super strong barrier to entry. When you put them together though, and realize all the incentives are pushing people on both the driver and user side to ever-increasing engagement with the Uber platform, I think folks have a lot of reasons to stick around and use Uber more and more heavily as each year goes by.


Title: Re: UBER - Uber Technologies
Post by: muscleman on May 18, 2019, 08:44:09 AM
ajc, I disregard any such EV economics analysis without taking into account the depreciation of the battery itself, which is the bulk part of a Tesla price.
I heard some claim that batteries can last 200k miles and still have 80% capacity, but some others say the battery dies after 8 years. It seems to me that gasoline car makers want to say the latter and EV makers want to say the former. I haven't seen any objective study on the battery yet.
Title: Re: UBER - Uber Technologies
Post by: wabuffo on May 18, 2019, 09:11:48 AM
Quote
The finance self-help guy, Mr Money Mustache, did a test and found a miles unpaid to miles paid ratio of roughly 1:1 for his Uber drives

Yes - and he also found that his net pay was just $7/hr. That jives with another more exhaustive study I've seen that pegged the net hourly rate at $9/hr - but they miscalculated car expense because they did not include an estimate for dead-heading miles like Mr Mustache did.  I think this is a problem especially since Uber is trying to raise its percentage of the gross fare vs its drivers during its run-up to the IPO in order to make its financials look better.

Quote
Amazon had no real network effects

This is simply not true.  Amazon was able to bypass building physical stores to sell books.  This was a huge advantage in both selection and cost.  Amazon was also cash-flow positive by year three (cash flow from operation - capex) and stayed that way despite GAAP accounting losses.   Uber has had nothing but cash flow losses for 10 years.  What's worse - it seems as they get bigger, so do their cash flow losses.

We'll see, I guess.

wabuffo
Title: Re: UBER - Uber Technologies
Post by: Spekulatius on May 18, 2019, 10:17:24 AM
I donít think the claim they EV will have lower repair costs than ICE cars holds true. Engines on I E cars nowadays are very reliable and will last a long time. Maintenance is tires, brakes and one has way more often issue with the electronics than the mechanics.

Self driving cars will be another can of worms. All these electronics, sensors , computers, software. my guess is they car mechanics will be become electronic technicians and will have a very bright future.
Title: Re: UBER - Uber Technologies
Post by: alpha on May 18, 2019, 11:20:14 AM
I donít think the claim they EV will have lower repair costs than ICE cars holds true. Engines on I E cars nowadays are very reliable and will last a long time. Maintenance is tires, brakes and one has way more often issue with the electronics than the mechanics.

Self driving cars will be another can of worms. All these electronics, sensors , computers, software. my guess is they car mechanics will be become electronic technicians and will have a very bright future.

The regenerative braking in EV's drastically reduces the wear on the braking system.
Title: Re: UBER - Uber Technologies
Post by: SharperDingaan on May 18, 2019, 12:49:57 PM
Uber also includes Uber Eats. See the below CBC marketplace video ...
ttps://www.cbc.ca/news/marketplace/battle-of-the-food-apps-testing-the-delivery-of-uber-eats-foodora-and-skipthedishes-1.4908223

The customer pays MORE per meal PLUS delivery charge. Total cost roughly 50% more than just going to the restaurant.
Restaurants LOSE money, only use it to stay competitive, and mark up to try & minimize the loss.
Restaurant/Uber reputational exposure to poor courier treatment/road fatalities.
Restaurant pays 30% fee to deliver via Uber Eats.

What do you think happens when the restaurants refuse to play anymore?
Collectively, progressively take a little longer to deliver your order, via a different service; & let eaters 'discover' that its quicker/cheaper to just go to the restaurant. Uber Eats goes obsolete overnight? Uber stock goes into free-fall?

SD



 
Title: Re: UBER - Uber Technologies
Post by: Castanza on May 18, 2019, 04:15:58 PM
I donít think the claim they EV will have lower repair costs than ICE cars holds true. Engines on I E cars nowadays are very reliable and will last a long time. Maintenance is tires, brakes and one has way more often issue with the electronics than the mechanics.

Self driving cars will be another can of worms. All these electronics, sensors , computers, software. my guess is they car mechanics will be become electronic technicians and will have a very bright future.

The regenerative braking in EV's drastically reduces the wear on the braking system.

So does engine braking in gasoline and diesel engines. Most trucks and SUV's have this feature nowadays. I'm not saying EV's won't be reliable, but you know damn well they will be way more expensive to repair until the supply and demand of qualified techs can catch up. I mean have you ever had a sensor or a computer chip go out in regular cars today? Crazy expensive, and everything is modular nowadays. SO you generally have to get a whole "unit" replaced instead of a specific part.
Title: Re: UBER - Uber Technologies
Post by: ajc on May 25, 2019, 03:33:41 AM

Amazon network effects and Uber driver pay

Ha. Not sure about that Amazon take. Their original expansion into Europe was done via acquisition, they defeated Quidsi via a vicious price war and buyout plus did the same to Zappo's. If you have to grow into new territories and verticals that way, by definition you don't really have serious network effects. Maybe Amazon today does, but in the Dotcom era it was eBay that had them and Bezos was simply competing on cost and operational efficiency as well as convenience.

I don't see the current net pay issue as that big of a deal. Perhaps I'm mistaken. The Money Mustache link was just to make the unpaid versus paid mile point as far as it relates to providing a barrier to entry in Uber's favor. For more accurate numbers than his 4 total rides, I'd go with Ridester where 1000's of Uber drivers submitted their pay details for FY2018 and the number came out to roughly between $15 and $20 before expenses were deducted (https://www.ridester.com/2018-survey/).

I'd highlight that unlike the IRS which pegs total driving costs at 55 cents/mile for 2018, the AAA has them at 37 cents/mile for small sedans, so there's reasonable debate about what expenses really are. Add the fact that as driver/rider numbers increase in any city, the number of unpaid miles shrinks because of greater density, so drivers will get paid more on a total miles driven basis simply as a result of Uber's increasing popularity. Given that minimum wage is still $7.25 in most states and Uber effective pay is still comfortably above that, I'm unconcerned as of now about the overall math not working out.

My guess is more of the unhappiness is because it was a nice paying gig before and has become closer to a minimum wage one over the years. As I noted, between growing driver/rider density in cities meaning higher pay per total miles driven and the way in which EVs will make driver costs fall, there are vital trends starting to work in favor of increasing driver pay over the coming decade. Given how the Uber CEO has signalled substantially cutting losses going forward, I think they've more than enough cash to see them until 2025 by which time the density and EV trends will have taken hold.


Battery life and maintenance costs

The Twizy already has a replaceable battery. If batteries account for 30% of an EV's cost by 2025 and 20% by 2030 (according to Statista), then that's only a couple thousand bucks for a new one. It still means the numbers work, just that pay is somewhat closer to minimum wage instead of comfortably above it based on the numbers from my previous posts. 50 000 miles per year is what full-time drivers average, so battery life isn't an issue. Also, my arguments are factoring in the current known trajectory for battery improvements. With the amount of money being thrown at battery research at an all-time high, a noteworthy breakthrough in the next decade means even better economics.

Maintenance costs for EVs, even ones like Telsa which have had more reliability problems than most, have already been shown to be super low (https://bgr.com/2017/09/03/tesla-model-s-maintenance-costs-300k-miles-whoa/). If you go ahead and just take scheduled costs out of those numbers in the link, they're even less expensive. Pitifully so. It's not hard to imagine how much better that'd be once you start getting EVs manufactured by Japanese, Korean, or European manufacturers with far higher build quality reputations.

As far as sensor suites, advanced electronics, etc, go, I don't think that'll be an issue for the EVs I'm describing. Bottom of the price range products, like long-lasting Nokia 1300 phones, are built for durability and extended use. They are not fitted with all the latest innovations and they break less often. As ride-sharing, food/package delivery, and so on, become an ever bigger part of daily life, my estimation is a few auto manufacturers will develop EVs for this function and in this price range. They won't be fancy, but they'll be small, affordable, effective, and long-lasting. The Twizy is already in this ballpark and if you look around Asia you see multiple petrol-powered vehicles already fitting this description.
There's already a switchable battery $10 000 EV being released next year by a US company, that gives people an idea of where we're headed in this space (https://www.micromobility.com/nano/).


Uber Eats

The idea that people are going back to sit-in meals at restaurants in large numbers versus ordering in via take out, is not supported by the data. I saw a chart (from Quartz I think) a few years back when take out orders surpassed eat in orders for the first time and we're never going back. Here's restaurants versus grocery stores (https://twitter.com/mitchnolen/status/1130539088962973696) and you can see since Grubhub, Uber Eats, and Doordash, really became popular, so the balance shifted. Fact is in most major developed world cities today, not knowing how to cook isn't a problem. As little as 50 years ago, that thought was totally impossible. The more cloud kitchens bring down the cost of take out food and increase selection, and the more EVs bring down delivery costs, so food-on-demand trends will grow.

Furthermore, restaurants that are well-run from a cost standpoint can benefit a lot from Uber Eats and other services (see the answers from Fintwit's Ray Hanson here, who is involved in restaurant ownership - https://twitter.com/QuisitiveInvest/status/1129820477344690176)
Also, in many small cities (I lived in Belfast for a few years) Uber Eats delivery drivers use bicycles instead of cars. That obviously makes their running costs far lower and largely deals with the effective hourly rate issue.
Finally, we know that Uber Eats use increases the likelihood that customers will take a ride in an Uber (https://twitter.com/BluegrassCap/status/1128322898857476096), so it makes sense for now that Uber is building out the business fast.


Title: Re: UBER - Uber Technologies
Post by: SharperDingaan on May 25, 2019, 04:36:45 AM
Re Uber Eats.
It's not popularity (of course delivery is popular); it's cost versus just walking down the street, and can the diner pay for it.
Using an Uber to get to the restaurant also earns a lot less than the 30% of the total food bill.
Take out students, & those with kids/mortgage, & who's left? with ability to pay?

I put it to you that this is really just a 'cool' tech solution, aimed at other techs, looking for a market.
And that it can't compete against existing delivery options; pizza delivery, grocery delivery, food trucks down the street.

Not a problem, so long as Uber applies the industry's agile project management approach.
Try it, and kill it, as soon as it's no longer fit for purpose.

SD

Title: Re: UBER - Uber Technologies
Post by: DTEJD1997 on May 25, 2019, 09:18:27 AM
hey all:

Here in my area, Uber Eats and DoorDash are making big marketing efforts.

The crazy thing is this...they are HEAVILY promoting Wendy's, Taco Bell and other low cost eateries. 

Who the $#%@% is going to order 3 Tacos and a nachos from Taco Bell to be delivered?  Somebody too stoned/drunk to walk/drive?  Who would want Taco Bell delivered?  NOT ME!  On the rare circumstance when I wish to eat Taco Bell, I want it NOW.  I will eat in my car or the dining room of the restaurant.  A hard shelled taco from Taco Bell has a half-life of a few minutes.  After that, the grease has soaked the shell and it goes from hard shelled to soft shell and is thus ruined.

Wendy's and other burger joints are not quite as bad...you can bring those back home or to the office, but your still working with minutes before the fries get too cold.

Where is the $$$$ though?  We are talking about $5 to $10 meals here.

I also thought that a cloud kitchen is a really cool idea.  It really depends on the area that you are in.  I know a restaurant owner and was discussing this with him.  He said that for most of his location, rent is not really an issue.  His best location pays it's rent bill with just over 1 day of sales.  How much would he save by moving to a lower priced cloud kitchen? 

I suppose you might make it work with 5+ different concepts going out of one kitchen....but I think the cloud kitchen might really only work in NYC, SF, or other very high rent areas?  Here in the Detroit area, real estate is cheap, and we've got PLENTY of it.
Title: Re: UBER - Uber Technologies
Post by: Deepdive on May 25, 2019, 11:37:43 AM
You think you're under estimating the craving for Taco Bell when you're stoned
Title: Re: UBER - Uber Technologies
Post by: SharperDingaan on May 25, 2019, 02:10:42 PM
You think you're under estimating the craving for Taco Bell when you're stoned

The Toronto experience is that it's a lot smarter to just hire a delivery driver (same as a Domino's), and call it 'Stoner Eats'!
Grocery stores will even pack your groceries; and deliver to your condo, or door, by a pre-set time (Friday Night); at the same price as in the store, plus $5-$10 for delivery.

Gives an indication as to just how out of touch some of the Uber business actually is.
For which you paid a multiple of how much?

SD
Title: Re: UBER - Uber Technologies
Post by: ajc on May 26, 2019, 04:13:36 AM


Re Uber Eats.
It's not popularity (of course delivery is popular); it's cost versus just walking down the street, and can the diner pay for it.
Using an Uber to get to the restaurant also earns a lot less than the 30% of the total food bill.
Take out students, & those with kids/mortgage, & who's left? with ability to pay?

I put it to you that this is really just a 'cool' tech solution, aimed at other techs, looking for a market.
And that it can't compete against existing delivery options; pizza delivery, grocery delivery, food trucks down the street.

Not a problem, so long as Uber applies the industry's agile project management approach.
Try it, and kill it, as soon as it's no longer fit for purpose.

SD



Time will tell, I'm clearly on the other side of that bet. Faasos has already made the cloud kitchen business model work and gained share in India for over a decade (see this Financial Times article on the topic - https://www.ft.com/content/5c104e5e-7aea-11e9-8b5c-33d0560f039c).
The developed world tends to have higher delivery costs. In rich cities though, working out of a warehouse/factory district can bring rent down a whole lot. Second, mechanizing your line can end up being cheaper than paying staff wages year after year after year. Also, you produce far more food and do it quicker. Serving 10 000 meals per night instead of 500 means you can bring down the price of the meal and make it up on volume.
Plus, working with so much food means you're able to secure discounts with your suppliers because of how much you buy. Platforms like Uber Eats also give far more insight into demand on every level, so intelligent use of that can reduce spoilage and increase savings.

When you factor in the idea that most Americans in important, growing cities probably don't like being limited to the 10 or 20 restaurants within a five minute walk and instead prefer to have access to 1000's of them from anywhere in the urban environment, then there's still a very big role for Uber Eats, Doordash, etc, to play in consumer's lives.
Also, with the introduction of electric bicycles it means couriers can travel faster and deliver more at even lower cost so delivery fees can effectively fall.
Then there are innovations like what Starship Technologies is working on where delivery robots on wheels keep your meal at the perfect temperature and you don't need to pay a human courier a wage (https://venturebeat.com/2019/03/25/starship-technologies-rolls-out-delivery-robots-to-northern-arizona-universitys-flagstaff-campus/). Drone delivery may play some kind of small role too, eventually.

Overall with the various economies of scale and cost savings outlined above I don't think it's unimaginable that, in a few years as cloud kitchen technology and efficiency management improve, a situation develops where even with delivery you're only paying an extra 3 or 4 bucks for your meal.
In return for that small fee you get selection from across the whole city and can carry on sitting in your beanbag chair eating Cheetos while it's brought to you.
My guess is most urbanites will see that as a reasonable trade-off, if not all the time, then at least for a good part of it.
For the curious, this slightly longer, more in-depth read on cloud kitchen's from 2017 was an interesting one - https://www.ft.com/content/d23c44fe-4b0b-11e7-919a-1e14ce4af89b.


Title: Re: UBER - Uber Technologies
Post by: SharperDingaan on May 26, 2019, 06:12:56 AM


Re Uber Eats.
It's not popularity (of course delivery is popular); it's cost versus just walking down the street, and can the diner pay for it.
Using an Uber to get to the restaurant also earns a lot less than the 30% of the total food bill.
Take out students, & those with kids/mortgage, & who's left? with ability to pay?

I put it to you that this is really just a 'cool' tech solution, aimed at other techs, looking for a market.
And that it can't compete against existing delivery options; pizza delivery, grocery delivery, food trucks down the street.

Not a problem, so long as Uber applies the industry's agile project management approach.
Try it, and kill it, as soon as it's no longer fit for purpose.

SD



Time will tell, I'm clearly on the other side of that bet. Faasos has already made the cloud kitchen business model work and gained share in India for over a decade (see this Financial Times article on the topic - https://www.ft.com/content/5c104e5e-7aea-11e9-8b5c-33d0560f039c).
The developed world tends to have higher delivery costs. In rich cities though, working out of a warehouse/factory district can bring rent down a whole lot. Second, mechanizing your line can end up being cheaper than paying staff wages year after year after year. Also, you produce far more food and do it quicker. Serving 10 000 meals per night instead of 500 means you can bring down the price of the meal and make it up on volume.
Plus, working with so much food means you're able to secure discounts with your suppliers because of how much you buy. Platforms like Uber Eats also give far more insight into demand on every level, so intelligent use of that can reduce spoilage and increase savings.

When you factor in the idea that most Americans in important, growing cities probably don't like being limited to the 10 or 20 restaurants within a five minute walk and instead prefer to have access to 1000's of them from anywhere in the urban environment, then there's still a very big role for Uber Eats, Doordash, etc, to play in consumer's lives.
Also, with the introduction of electric bicycles it means couriers can travel faster and deliver more at even lower cost so delivery fees can effectively fall.
Then there are innovations like what Starship Technologies is working on where delivery robots on wheels keep your meal at the perfect temperature and you don't need to pay a human courier a wage (https://venturebeat.com/2019/03/25/starship-technologies-rolls-out-delivery-robots-to-northern-arizona-universitys-flagstaff-campus/). Drone delivery may play some kind of small role too, eventually.

Overall with the various economies of scale and cost savings outlined above I don't think it's unimaginable that, in a few years as cloud kitchen technology and efficiency management improve, a situation develops where even with delivery you're only paying an extra 3 or 4 bucks for your meal.
In return for that small fee you get selection from across the whole city and can carry on sitting in your beanbag chair eating Cheetos while it's brought to you.
My guess is most urbanites will see that as a reasonable trade-off, if not all the time, then at least for a good part of it.
For the curious, this slightly longer, more in-depth read on cloud kitchen's from 2017 was an interesting one - https://www.ft.com/content/d23c44fe-4b0b-11e7-919a-1e14ce4af89b.

I hear the story, but there are a lot of holes

Were the Indian experience representative of the BRICS we would see similar results in the other BRICS, yet we don't.
What we see is that it is very situational, and largely contained to very specific markets/demographics.

Food isn't widgets.
Nobody cooks meals on speculation, the product has a very short shelf-life, if you're not selling you're not buying (no discounts), mechanization just drives up your break-even, and if you're selling well in particular areas - it's only until the street vendors move their carts there. No business; no couriers, no drones, no robots, no future years of improvement.

Add new markets faster than problems show up, & it looks like a great business.
Until you run out of new markets ....

I would suggest that in most bigger cities there actually IS a small market for this, of which Uber Eats may capture a small %.
Hence Uber Eats is essentially a diversifed taxi dispatcher with high operating leverage, that is paid by variable fee; indeed worth something, but nowhere near the current multiples.
 
SD

Title: Re: UBER - Uber Technologies
Post by: gfp on May 26, 2019, 06:17:11 AM
Tourists order UberEats quite a bit when they stay at our AirBnBs in New Orleans.  If you are from out of town, you don't know how to navigate the traditional delivery options and most of these folks don't rent a car.  Hell, some of them don't even know the address or the neighborhood name of where they are staying.  But the blue dot on their phone does.  And they can have fried seafood, burgers, whatever they want at the door at 2am without wandering the mean streets of Nola in the dark.  Its very popular.

My son blew through a $200 UberEats gift card that Grandma gave him for graduation in like 4 days with his friends. (granted, they are students and stoners, a well documented use case).

So these tourists go everywhere in ride shares (several per day), get their late night meals delivered by UberEats, ride around on Uber-owned bike share 'blue bikes' and stay in AirBnBs.  And some of them book "airbnb experiences," which are like uber for part time tour guides.
Title: Re: UBER - Uber Technologies
Post by: ajc on May 26, 2019, 09:50:38 AM

@SharperDingaan

I see it a little differently, for sure. As I calculated in my original post at the very top of this thread, I don't think the multiple being paid right now for Uber, Eats, Jump, Freight, and their overseas stakes in Didi, Grab, and Yandex, is demanding.
Rebel Foods (owner of Faasos cloud kitchens, the successful Indian business mentioned in that article) are now expanding that concept to Dubai and Indonesia, and thereafter the rest of ASEAN (https://www.livemint.com/companies/start-ups/coatue-may-lead-120-mn-funding-in-faasos-parent-1558288535110.html). They will also be mechanizing their production lines in order to lower labor costs and speed up output. Furthermore, Rappi which is South America's fastest growing bicycle/moped courier service built on food delivery mainly, has recently hired Sebastian Solanilla (https://www.linkedin.com/in/sebassolanilla?originalSubdomain=co) to work on building over 100 cloud kitchens around Latin America.

In China, on-demand food-delivery led by Meituan and Ele.me is already a more than $40b market (https://techwireasia.com/2017/07/technology-demand-food-delivery-platforms-can-drive-chinas-thriving-dining-culture/). Both of those companies are using cloud kitchens more and more (see this excellent article from the Economic Times - https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/indias-online-food-aggregators-are-taking-lessons-from-china/articleshow/63740650.cms?from=mdr).

Some reasons I think Faasos got their first-ish was because India has very high urban population density, cheap and economical-to-run mopeds everywhere, a cultural history of delivery (https://en.wikipedia.org/wiki/Dabbawala), and increasingly low data costs because of what Jio has done in telecoms. Also, I noticed in Delhi when I was there that property costs in busy areas with lots of shops, restaurants, etc, were very high compared to less built-up places only a few miles away. Plus, Faasos kind of tripped into the situation through failing at the restaurant business so luck smiled on them.
In other words, I think India had an almost perfect confluence of factors that favored the Faasos model there but it's true that China, ASEAN, and places like South Asia, West Africa, and other urban environments globally have many of these same variables at play. This probably explains why we're seeing expansion into those geographies.

Anyway, reasonable people can clearly agree to disagree. I do see this taking longer to play out in the US than in India or China, but my sense after watching this space for a while is that this is happening and won't be stopped. My perspective is that in the same way McDonalds essentially industrialized the 1960's restaurant business through limited products made quickly on a production line system in a scientifically-rigorous way with extreme focus on cost and operational efficiency (for curious readers, Behind The Arches is a book that explains this well and in great detail - https://www.amazon.com/McDonalds-Behind-John-F-Love/dp/0553347594), so fully-mechanized cloud kitchens and urban on-demand delivery will eventually revolutionize today's restaurant market. We're still very early on technology-wise so right now the innovations are still on the low-hanging fruit-picking side, but give it between 5 to 10 years and I think we'll likely see this taking a big chunk of share away from cooking at home or eating out. My two cents.


@gfp

Great points. I think it was Bill Gurley that described the modern cell phone as a remote control for your life. Press a button, and you can watch what you like, speak to who you like, order a ride, food, whatever. To my mind, this is still something most folks probably haven't wrapped their heads around. I think a fair amount of it is simply generational change.

People under 35, and numerous ones over, are at this point almost hard-wired to expect certain things on-demand. Millenials especially. The idea that they would have to manually get stuff is basically crazy. Take Uber in the US for example... 37% of users are in the 16 to 24 age group and another 28% are aged 25 to 34. Essentially, two thirds of their users come from this demographic. I don't have the numbers in front of me, but my guess is Uber Eats, Airbnb, Netflix, etc, all skew similarly.

I think this generation has also done more backpacking around Asia/Europe/South America, or flying to national or international sports fixtures, concerts, etc, now that the budget flying revolution (Jet Blue, Air Asia, Ryan Air, Norwegian, and so on) has taken place over the past decade. They're also more likely to have gone to college and done so in another state, where they met friends who they now visit from all over. Said differently, there has never been another generation that has had access to so much cheap and frequent global and nationwide travel, and I think that dovetails very well with the point you made about people not understanding other cities but understanding very well what their phone and apps are capable of.

I think the cases you mentioned all just reinforce that between using the phone as a remote control for their daily lives and having the GPS right in there for location-specific services, there's kind of a new paradigm emerging (where clearly it's still very important for value investors to only pay reasonable multiples) which is upending old ways of navigating the world and chances are there will at least be a handful of companies in a number of these spaces that end up being solid long-term investments. Obviously I happen to think for now that Uber may well end up being one of them.


Title: Re: UBER - Uber Technologies
Post by: LongTermView on May 26, 2019, 10:35:55 AM
I'm long uber but some of these numbers are confusing.

So this is what we say about car expenses in the context of net driver pay:


I'd highlight that unlike the IRS which pegs total driving costs at 55 cents/mile for 2018, the AAA has them at 37 cents/mile for small sedans, so there's reasonable debate about what expenses really are.


But in the Personal Mobility section of the S-1 part of the story is that the addressable market is large because using Uber can make more sense than car ownership. The Cost per mile section on page 173 says the following:
Quote
The American Automobile Association estimates the average cost of owning and operating an automobile in the United States in 2018 at 75 cents per mile.

I guess there is some justification for using different numbers in different spots if a guy takes uber rides in a prius as opposed to owning a big truck. Where does AAA break things out such that we see 37 cents for small sedans and 75 cents for other vehicles?
Title: Re: UBER - Uber Technologies
Post by: ajc on May 26, 2019, 10:50:01 AM


I'm long uber but some of these numbers are confusing.

I guess there is some justification for using different numbers in different spots if a guy takes uber rides in a prius as opposed to owning a big truck. Where does AAA break things out such that we see 37 cents for small sedans and 75 cents for other vehicles?



I don't see 75 cents in the breakdown below, but there's a difference between small sedans (37 cents) and medium SUVs here (55 cents). Perhaps large SUVs and trucks are closer to the 75 cent mark. I'm not sure.

https://www.ridester.com/uber-lyft-driver-costs-and-expenses/


Title: Re: UBER - Uber Technologies
Post by: ajc on May 26, 2019, 11:11:46 AM



I'm long uber but some of these numbers are confusing.

I guess there is some justification for using different numbers in different spots if a guy takes uber rides in a prius as opposed to owning a big truck. Where does AAA break things out such that we see 37 cents for small sedans and 75 cents for other vehicles?



I don't see 75 cents in the breakdown below, but there's a difference between small sedans (37 cents) and medium SUVs here (55 cents). Perhaps large SUVs and trucks are closer to the 75 cent mark. I'm not sure.

https://www.ridester.com/uber-lyft-driver-costs-and-expenses/



Okay, I figured it out. If you click that link but look at the 10 000 total miles per year category then you get in the 75 cents range. Once you go to the 20 000 total miles per year and over category, you get far lower costs.
Individual car owners clearly drive far fewer miles per day on average than full-time Uber drivers.


Title: Re: UBER - Uber Technologies
Post by: LongTermView on May 26, 2019, 11:39:38 AM

Okay, I figured it out. If you click that link but look at the 10 000 total miles per year category then you get in the 75 cents range. Once you go to the 20 000 total miles per year and over category, you get far lower costs.


Right, that makes sense.
Title: Re: UBER - Uber Technologies
Post by: ajc on May 31, 2019, 05:25:36 AM

Earnings slides - https://s23.q4cdn.com/407969754/files/doc_financials/2019/Q1/Q1-2019-supplemental-slides.pdf

Earnings call - https://investor.uber.com/news-events/default.aspx

The call was roughly in line with what I was expecting. Uber has said from now they expect to decrease incentives and discounts going forward. Eats growth was impressive, my thinking is it'll eventually be the second player in the US food-delivery market after Doordash and this will reinforce driver and rider loyalty to the platform because of the increased optionality it offers.

Related to that, the emphasis placed in the beginning of the call and the Q&A on loyalty programs for both drivers and riders makes it seem like the thesis I outlined before in this thread is starting to play out. Looks like they are strongly focusing on rewards, subscription, and cross-selling to keep people using the Uber platform over any alternatives and this sounds like it is already increasing loyalty and purchases in their early US tests. What was said about Eats take rates improving from now on was good to hear, and it's great how they're able to use their huge cash reserves to help give them an advantage in growing their India Eats business at a rate that gives them a real chance of being a top two food-delivery player there. Uber Cash is another interesting notable, given that there's a small chance it could potentially lead them down the WePay or AliPay route, to at least a minor extent over time.

Still seems they have more than enough cash to last for a long time provided they stick to their previously mentioned goal of reducing losses, becoming cash flow self-sustaining and then finally reaching profitability. I did lighten my position a little when it went up into the 40's for a quick 10% gain. I'm still pretty bearish about the overall environment based on this new wave of tech IPO valuations, as I wrote about before (https://twitter.com/tonyjclayton/status/1118205158721249280), so I don't want this to be too big of a position right now and have been maintaining a very large cash holding in my portfolio for the past month and a half. Overall, I still think Uber is a pretty good long-term value at these prices though and worth having some kind of toehold stake in, even if I can easily imagine this entire hot, new IPO sector falling sooner rather than later and offering improved buying opportunities.


Title: Re: UBER - Uber Technologies
Post by: DTEJD1997 on May 31, 2019, 09:20:35 AM
hey all:

UBER trading where it does should be a CLEAR indication that we are AT or nearing a market top.  That there is not more discussion of do they even HAVE a viable business model is yet another.

They have about 8BB of cash in the bank.  The company can't run on a zero balance, so they might need $1BB, perhaps $2BB maybe for regular operating purposes?  So maybe a cushion of $6BB?  At this burn rate, they've got a bit over a year, maybe 1.5 years to into a position of profitability?

Can they cut expenses a bit?  No doubt they can.  Can they cut expenses enough to get to profitability? They've got to make up at least $4BB a year to simply break even.  I have my doubts.

I would also be very interested to see the churn of drivers.

My DAD was/is considering driver for UBER!  They sent him an email for a $1,000 bonus if he completed a certain number of trips.  So he is thinking, "why not?  drive the required number of trips and collect the bonus, and then bye-bye!"

How many drivers are simply driving for the crazy bonuses that have been offered? 

After the bonuses are paid out, how many of those drivers do more than 1-2 trips per week?

UBER has also been around for several years, and is doing over $11BB a year in revenue, they aren't exactly a startup at this point.  In my circle of family/friends/associates, those who are interested in using/driving UBER are doing so for the most part at this point.

I think there is real danger here of losing on your investment.
Title: Re: UBER - Uber Technologies
Post by: ajc on May 31, 2019, 02:05:38 PM


They have about 8BB of cash in the bank.  The company can't run on a zero balance, so they might need $1BB, perhaps $2BB maybe for regular operating purposes?  So maybe a cushion of $6BB?  At this burn rate, they've got a bit over a year, maybe 1.5 years to into a position of profitability?



When $8B cash from their IPO proceeds will be showing up on the balance sheet next quarter, together with $1B for a stake in their self-driving unit from Toyota and others.
And reducing incentives like they said they would on the call, may mean they need to invest less than $500m per quarter in growth before long.
And their stakes in Didi and Grab are worth a combined $15B and could probably be sold back for a discount while still netting around $10B in cash.
Plus, their reasonable debt load gives them another avenue to raise money.
But your "research" and "due diligence" says Uber only has two years to get to profitability.


Title: Re: UBER - Uber Technologies
Post by: Spekulatius on May 31, 2019, 05:49:02 PM

Earnings slides - https://s23.q4cdn.com/407969754/files/doc_financials/2019/Q1/Q1-2019-supplemental-slides.pdf

Earnings call - https://investor.uber.com/news-events/default.aspx

The call was roughly in line with what I was expecting. Uber has said from now they expect to decrease incentives and discounts going forward. Eats growth was impressive, my thinking is it'll eventually be the second player in the US food-delivery market after Doordash and this will reinforce driver and rider loyalty to the platform because of the increased optionality it offers.

Related to that, the emphasis placed in the beginning of the call and the Q&A on loyalty programs for both drivers and riders makes it seem like the thesis I outlined before in this thread is starting to play out. Looks like they are strongly focusing on rewards, subscription, and cross-selling to keep people using the Uber platform over any alternatives and this sounds like it is already increasing loyalty and purchases in their early US tests. What was said about Eats take rates improving from now on was good to hear, and it's great how they're able to use their huge cash reserves to help give them an advantage in growing their India Eats business at a rate that gives them a real chance of being a top two food-delivery player there. Uber Cash is another interesting notable, given that there's a small chance it could potentially lead them down the WePay or AliPay route, to at least a minor extent over time.

Still seems they have more than enough cash to last for a long time provided they stick to their previously mentioned goal of reducing losses, becoming cash flow self-sustaining and then finally reaching profitability. I did lighten my position a little when it went up into the 40's for a quick 10% gain. I'm still pretty bearish about the overall environment based on this new wave of tech IPO valuations, as I wrote about before (https://twitter.com/tonyjclayton/status/1118205158721249280), so I don't want this to be too big of a position right now and have been maintaining a very large cash holding in my portfolio for the past month and a half. Overall, I still think Uber is a pretty good long-term value at these prices though and worth having some kind of toehold stake in, even if I can easily imagine this entire hot, new IPO sector falling sooner rather than later and offering improved buying opportunities.
Ubers core platform grew 10% YoY, so it looks like we are plateauing here. I guess Uber eats is needed to keep the growth story alive, because otherwise, nobody is going to pay much for a platform that grows 10% YoY and loses 33% of their revenues.  Core platform is still losing a lot of Money and now they are starting new business that is bound to loose a growing amount of money. The whole thing looks pretty desperate to me.
Title: Re: UBER - Uber Technologies
Post by: Gregmal on May 31, 2019, 06:14:30 PM
My spider senses in terms of where we are in the market cycle only start tingling more when we try to make value proportions out of companies like Uber
Title: Re: UBER - Uber Technologies
Post by: RuleNumberOne on May 31, 2019, 07:13:17 PM
The Uber IPO is a great success for some, it was at a valuation of $3 billion earlier this decade. To the retail investor, the Uber and Lyft IPOs appear to be flops, but it has created billions for VCs.

The game is to identify something that customers are already doing and offer to do it well below cost on AWS. Make sure you lose money. Your valuation will skyrocket very quickly.

The lose money and get rich idea is not restricted to consumer companies alone. It has been employed in the enterprise space as well. There is now a growing list of such private companies. After the Uber/Lyft IPOs, the number of loss-making unicorns has started exploding.

Low Fed rates have resulted in deflation by creating this "sell-below-cost" and get-rich bubble. Low Fed rates are thus not inflationary. If the market were to suddenly get fed up with loss-making companies, we would see a lot of price hikes.
Title: Re: UBER - Uber Technologies
Post by: SharperDingaan on June 01, 2019, 07:57:03 AM
Not to piss on the party but look at the accounting; capitalized costs versus expensed.
Granted it's a judgement call at this point, based on limited experience. But as that experience develops, it is pretty hard to see how there are not going to be some inopportune 'write-offs'.

Who made money here (VC's), who has it now (Uber), and who paid to play?
Maybe the recent IPO was because Uber had reached its optimum value/risk; it's still possible to make a buck, but now it's a lot more risky and the odds are biased against you? Ubers current sea of liquidity can hide a lot of swimming naked, for quite some time; and drivers only love you while you're paying (Fleetwood Mac).

There's little doubt Uber has some runway here, but maybe the real money now is going to made on it's way down.

SD
   
Title: Re: UBER - Uber Technologies
Post by: Spekulatius on June 01, 2019, 08:14:49 AM
Not to piss on the party but look at the accounting; capitalized costs versus expensed.
Granted it's a judgement call at this point, based on limited experience. But as that experience develops, it is pretty hard to see how there are not going to be some inopportune 'write-offs'.

Who made money here (VC's), who has it now (Uber), and who paid to play?
Maybe the recent IPO was because Uber had reached its optimum value/risk; it's still possible to make a buck, but now it's a lot more risky and the odds are biased against you? Ubers current sea of liquidity can hide a lot of swimming naked, for quite some time; and drivers only love you while you're paying (Fleetwood Mac).

There's little doubt Uber has some runway here, but maybe the real money now is going to made on it's way down.

SD
 

Itís a new game that VC wait until the valuations creep into the ten billion $ range before the IPO. With an $80B valuation, it is just not possible any more to get 10 bagger, so the upside probability is gone. What is somewhat surprising is that they even get turds like Uber and Lyft IPoĎd at this valuation. Some folks at home ask me about this new breed of IPOĎs and I typically tell them to just by Google instead and pay ~20x earnings ex cash.
But then on the other hand, itís good to keep an open mind. I have missed tech stocks before. i owned Microsoft when it was in the mid twenties, but sold when it hit 40Ďs and wasnít deep value any more so,I lost out on quite a few gains. Maybe UberĎs business model will work out, but my guess is that one one has a chance to get in at a way risk reward than what is currently available.
Title: Re: UBER - Uber Technologies
Post by: ajc on June 06, 2019, 06:45:48 AM

In response to some recent thread comments, I'm the most bullish Uber holder here it seems but I also think the stock price could drop before the lock-up expires or because the tech IPO market is currently bubbly. That's a reasonable perspective. I made sure to highlight those risks in my opening post and my Uber stake is not a huge position. I'm also holding more cash than I have for a long time, and am overall relatively bearish on tech and growth stocks right now.

The counterpoints to this argument are that we've not seen an insane blow-off top in the NASDAQ, Uber was supposed to IPO at $120B as recently as March (https://www.moneyweb.co.za/news/companies-and-deals/uber-is-said-to-pick-new-york-stock-exchange-for-2019-mega-ipo/) so a fair amount of euphoria has been taken out at today's price, and after backing out cash plus the Didi/Grab stakes it trades at around 3x sales. The vast majority of commentary in the public and investing sphere is also convinced the company is nothing but a plague on society, with an unworkable business model, that will soon go bankrupt. There is essentially no cheery consensus around Uber.

That all said, I'm also deeply skeptical that posters who discuss 100's of different stocks per year on COBF have the right approach for delivering much valuable insight about Uber. A diverse basket investment methodology can do well, but almost by definition will miss opportunities that require scratching far beneath the surface. This is even more true when talking about any that might have 10-bagger potential. It verges on the delusional to expect opportunities like that to reveal themselves easily. So I think a number of the comments being made here sound ignorant, and indicate an unwillingness by some to do the work required to genuinely understand the variables that will likely influence Uber's economics going forward.

We will see. It is of course also possible, that I could be completely wrong about Uber and its prospects.


Title: Re: UBER - Uber Technologies
Post by: DTEJD1997 on June 06, 2019, 07:40:13 AM

In response to some recent thread comments, I'm the most bullish Uber holder here it seems but I also think the stock price could drop before the lock-up expires or because the tech IPO market is currently bubbly. That's a reasonable perspective. I made sure to highlight those risks in my opening post and my Uber stake is not a huge position. I'm also holding more cash than I have for a long time, and am overall relatively bearish on tech and growth stocks right now.

That all said, I'm also deeply skeptical that posters who discuss 100's of different stocks per year on COBF have the right approach for delivering much valuable insight about Uber. A diverse basket investment methodology can do well, but almost by definition will miss opportunities that require scratching far beneath the surface. This is even more true when talking about any that might have 10-bagger potential. It verges on the delusional to expect opportunities like that to reveal themselves easily. So I think a number of the comments being made here sound ignorant, and indicate an unwillingness by some to do the work required to genuinely understand the variables that will likely influence Uber's economics going forward.

We will see. It is of course also possible, that I could be completely wrong about Uber and its prospects.

AJC, you really think that at this point UBER has the potential to be a 10 bagger in the next 3, 5, 10 years?  At any point?  That UBER is eventually going to be a $750BB or $800BB company? 

What will their future earnings have to be at that point to justify that valuation?

What level of sales/revenue will they have to have to produce those earnings?

They are losing money now.  They are going to be losing money in the near & intermediate future.  You think if they can go from a $1BB loss per quarter to only $500mm that is a "win"?

I've seen this before, happened during the internet boom.  Almost every analyst was talking about "eyeballs & mindshare".  Profitability didn't matter, it is the internet!  It is different this time! 

Finally, you are skeptical about the quality of due diligence & analysis of other posters on the board? You are posting pictures of cats?  I'm calling you out.  Keep that #$@#%$ on the Yahoo discussion boards. 
Title: Re: UBER - Uber Technologies
Post by: DTEJD1997 on June 09, 2019, 11:04:49 AM
Hey all:

Has this been happening to anyone else?

For the first time ever, I've noticed that Groupon is bombarding me with offers/coupons for UBER service.  Everyday for the past 3-4 days, I've gotten offers.  I've never seen UBER partnering with Groupon, and almost all previous offers I've gotten from UBER has been to be a driver.

Now they are partnering with Groupon for riders.

Title: Re: UBER - Uber Technologies
Post by: SharperDingaan on June 10, 2019, 05:32:33 AM
There is nothing wrong with being bullish.
We just have to recognize that the things we think are going to happen, may not happen in the time we're thinking of. How many times have we been into something too early? or too late? We were bang on in our assessment, but way off on our timing?

At at IPO, most folks are buying to flip -  not holding on for a 10 bagger.
It's only after the stock has been in the gutter for a while, that the 10 bagger investors come out. We call them 'value' investors; many others call them 'garbage collectors'. It just reflects different strategies, and different POVs.

Is Uber likely to live up to its hype? Unlikely
Is there an actual business there? Yes, but it may well not be the one you thought.
Outcome? Downward volatility, until the market eventually finds its 'level'

SD
Title: Re: UBER - Uber Technologies
Post by: ajc on June 12, 2019, 10:54:07 AM


AJC, you really think that at this point UBER has the potential to be a 10 bagger in the next 3, 5, 10 years?  At any point?  That UBER is eventually going to be a $750BB or $800BB company? 

What will their future earnings have to be at that point to justify that valuation?

What level of sales/revenue will they have to have to produce those earnings?

They are losing money now.  They are going to be losing money in the near & intermediate future.  You think if they can go from a $1BB loss per quarter to only $500mm that is a "win"?

I've seen this before, happened during the internet boom.  Almost every analyst was talking about "eyeballs & mindshare".  Profitability didn't matter, it is the internet!  It is different this time! 

Finally, you are skeptical about the quality of due diligence & analysis of other posters on the board? You are posting pictures of cats?  I'm calling you out.  Keep that #$@#%$ on the Yahoo discussion boards.



Uber has 110 million users already in 2019 and is growing its user base at 20%+ annually. They should reach 400 million to 500 million users by 2030. Assuming far slower 10% annual user growth for the sake of argument, they would still get to roughly 300 million riders. We already know car owners in the US spend $6000 per year on a vehicle at today's prices, so with ubiquitous coverage Uber could offer a $500 per month transport subscription by 2030. Consumers probably also spend another $2000 per year on takeout and restaurants, which Uber Eats can supply. Using the conservative 300 million user number and assuming 150 million of them live in the developed world, then Uber's gross sales for those countries would be 150M x $8000, or $1.2T annually. Their 20% take rate by 2030, would result in net developed world revenues of $240B per year.

The other 150 million users who live in the developing world might only spend $2000 annually on Uber and Uber Eats combined by 2030. That results in gross sales of $300B, which is $60B of additional net revenue. Uber would have total global net revenue of $300B. Using companies like eBay or Cisco as comps, you get 20%+ operating margins. Uber generates operating income of $60B+ in that scenario. eBay currently trades at 3.3x sales, Cisco at 5x sales, and Alphabet (similar operating margins) trades at 5.5x sales. eBay is 24 years old, Cisco 34, and Alphabet 21. Uber will be 21 years old by 2030. Assuming a 4x sales multiple, it will have a $1.2T market cap as opposed to the current $70B+ one.

They also own 15% of Didi (the Uber of China) and 23% of Grab (the Uber of ASEAN). Those could well become trillion dollar companies by 2030, given their current trajectories. These stakes mean another potential $300B+ in market cap to add to Uber's $1.2T. That's a potential 20-bagger in total and is all calculated on the basis of an Uber growth path that is dramatically lower than what they're currently achieving. It also values their Freight business at zero, even though it's already a leader in a $600B industry (https://www.joc.com/technology/convoy-and-uber-freight-take-us-truck-brokerage_20180208.html), and includes their autonomous vehicle program plus digital wallet and fintech businesses as free options (https://www.cnbc.com/2019/06/10/uber-is-making-a-push-in-financial-products-with-new-york-hiring-spree.html).

Your characterization of my '$500M' comment is more a reflection of your willingness to comprehend, rather than anything else. I've shown on this thread how starting from next year you will get EVs that are built for ride-sharing (eg. the Bolt Nano for $10000) and that the cost and economics will begin to make a lot more sense for drivers. I've also explained there will likely be more than enough EV options on price and battery range by 2025, so both Uber and its drivers can operate profitably without any fee changes. My use of the $500M and lower numbers was to show that Uber only needs to have cash until 2025, or sooner, for the economics to be working well for all stakeholders based on what we already know today.

Your knowledge of consumer tech and the internet seems extremely superficial. It also sounds like you have very little understanding about how the mobile internet allows for this generation of tech companies to be far bigger than those of the Dotcom era. I've seen your negative comments on the Amazon, eBay, and Facebook threads over the years. Your bearish sentiments have been wrong on all three businesses, and unfortunately seem like nothing more than mixing up personal gripes with a genuinely objective investment perspective. Your entire angle on these companies seems to be that because you or your friends had a few bad experiences or hold some cynical opinions on the business, therefore they're not worth betting on.

That comparison of yours to the Dotcom era lacks nuance. I also lived through that mania and saw what went on. The vast majority of internet stocks then had no revenue model. Online advertising wasn't even a proven approach at the time. Uber, Airbnb, and others, are on the other hand, selling something which people are already used to paying lots of money for. In that sense, the era's have vital differences. On top of that, the average company IPOed at 3 or 4 years old back then. Today, that's closer to 10 years old. While that does mean you miss out on the exponential early growth years, it also means the private markets are where many of the crappy companies now end up dying so they never make it out the IPO gate.

In other words, it's the surviving companies that are now going public and on average they have far better business models and more reliable unit economics than 1999/2000. Yes, P/S multiples are definitely bubbly currently in the tech IPO market (as I've noted numerous times in this thread), but there are key differences at the fundamental level that make many of the companies qualitatively better businesses than those of the Dotcom era (even though there are undoubtedly also still plenty of culty and faddish unicorns around today too). I think people should be pretty defensively positioned in this sector right now, but to say that Uber should be lumped in with a bunch of "eyeballs & mindshare" companies is gobbledygook.

When VCs realized a person spends $6000 per year on a vehicle, they were willing to use billions in cash to win regional ridesharing markets. This is not early Google where the advertising model was still in question, and where even today their ARPU is only $256 annually in the US and $137 globally. When you clearly see ARPU for Uber and Eats in the US could be $1600 annually and $400 in the developing world, then you go big in order to dominate that market. So the idea that Uber is just burning cash and after that they'll go bankrupt, doesn't scratch beneath the surface. What's more likely happening is they're spending incentives of $50 or so per user and $1000 per driver in order to get people habituated while EVs and micromobility take over as their primary mobility preference, and while they bundle their services (https://techcrunch.com/2019/06/04/uber-eats-uber-eats/) and create a subscription offering that gives rewards to those who use the service the most frequently and loyally.

20 000 Jump bikes, like they were willing to put into Chicago, is also $10M at $500 a pop. If you're expanding e-bikes to 50 cities a year, that adds up. Incentive spending adds up too, if you're offering millions of people in new cities $50 each. Setting up Uber Eats in new geographies is also not free, but you can see the results in their revenue growth for that vertical. On the other hand, if developed world users have an ARPU of $1600 and rest of world users $400, then it could well make total sense to get them habituated if it only costs you $50 or so per user to bring on many regulars. All things being equal, it's about the CAC/LTV working out and being sensible, not the absolute number you're currently investing in growth. In other words, given that $1 spent by Uber now via incentives might add up to $30 or more in annual revenue, somewhere not far down the road, it's not crazy that they're currently spending billions of dollars per year in order to reach even more users and cities so they can cement the regional dominance of their product offerings.

Finally, stylistically I've attached one meme image on average for every two hundred and fifty of my posts on this board. You've WRITTEN the majority of your 1500+ posts CAPITALIZING random words for emphasis like an ATTENTION-SEEKING pamphleteer, and in the PROCESS shown the forum how LITTLE you respect standard internet ETIQUETTE norms yourself. As a result, your career obtuse posting numbers leave us all in the dust and mean you're in no position to be throwing criticisms around. Feel free to save your hypocrisy and lack of introspection for someone who thinks your opinions on the topic are worth something. Alternatively, you could always focus that energy on actually reading the S-1 and doing some basic research on Uber and the ridesharing industry.


Title: Re: UBER - Uber Technologies
Post by: DTEJD1997 on June 12, 2019, 07:04:23 PM


AJC, you really think that at this point UBER has the potential to be a 10 bagger in the next 3, 5, 10 years?  At any point?  That UBER is eventually going to be a $750BB or $800BB company? 

What will their future earnings have to be at that point to justify that valuation?

What level of sales/revenue will they have to have to produce those earnings?

They are losing money now.  They are going to be losing money in the near & intermediate future.  You think if they can go from a $1BB loss per quarter to only $500mm that is a "win"?

I've seen this before, happened during the internet boom.  Almost every analyst was talking about "eyeballs & mindshare".  Profitability didn't matter, it is the internet!  It is different this time! 

Finally, you are skeptical about the quality of due diligence & analysis of other posters on the board? You are posting pictures of cats?  I'm calling you out.  Keep that #$@#%$ on the Yahoo discussion boards.



Uber has 110 million users already in 2019 and is growing its user base at 20%+ annually. They should reach 400 million to 500 million users by 2030. Assuming far slower 10% annual user growth for the sake of argument, they would still get to roughly 300 million riders. We already know car owners in the US spend $6000 per year on a vehicle at today's prices, so with ubiquitous coverage Uber could offer a $500 per month transport subscription by 2030. Consumers probably also spend another $2000 per year on takeout and restaurants, which Uber Eats can supply. Using the conservative 300 million user number and assuming 150 million of them live in the developed world, then Uber's gross sales for those countries would be 150M x $8000, or $1.2T annually. Their 20% take rate by 2030, would result in net developed world revenues of $240B per year.

The other 150 million users who live in the developing world might only spend $2000 annually on Uber and Uber Eats combined by 2030. That results in gross sales of $300B, which is $60B of additional net revenue. Uber would have total global net revenue of $300B. Using companies like eBay or Cisco as comps, you get 20%+ operating margins. Uber generates operating income of $60B+ in that scenario. eBay currently trades at 3.3x sales, Cisco at 5x sales, and Alphabet (similar operating margins) trades at 5.5x sales. eBay is 24 years old, Cisco 34, and Alphabet 21. Uber will be 21 years old by 2030. Assuming a 4x sales multiple, it will have a $1.2T market cap as opposed to the current $70B+ one.

They also own 15% of Didi (the Uber of China) and 23% of Grab (the Uber of ASEAN). Those could well become trillion dollar companies by 2030, given their current trajectories. These stakes mean another potential $300B+ in market cap to add to Uber's $1.2T. That's a potential 20-bagger in total and is all calculated on the basis of an Uber growth path that is dramatically lower than what they're currently achieving. It also values their Freight business at zero, even though it's already a leader in a $600B industry (https://www.joc.com/technology/convoy-and-uber-freight-take-us-truck-brokerage_20180208.html), and includes their autonomous vehicle program plus digital wallet and fintech businesses as free options (https://www.cnbc.com/2019/06/10/uber-is-making-a-push-in-financial-products-with-new-york-hiring-spree.html).

Your characterization of my '$500M' comment is more a reflection of your willingness to comprehend, rather than anything else. I've shown on this thread how starting from next year you will get EVs that are built for ride-sharing (eg. the Bolt Nano for $10000) and that the cost and economics will begin to make a lot more sense for drivers. I've also explained there will likely be more than enough EV options on price and battery range by 2025, so both Uber and its drivers can operate profitably without any fee changes. My use of the $500M and lower numbers was to show that Uber only needs to have cash until 2025, or sooner, for the economics to be working well for all stakeholders based on what we already know today.

Your knowledge of consumer tech and the internet seems extremely superficial. It also sounds like you have very little understanding about how the mobile internet allows for this generation of tech companies to be far bigger than those of the Dotcom era. I've seen your negative comments on the Amazon, eBay, and Facebook threads over the years. Your bearish sentiments have been wrong on all three businesses, and unfortunately seem like nothing more than mixing up personal gripes with a genuinely objective investment perspective. Your entire angle on these companies seems to be that because you or your friends had a few bad experiences or hold some cynical opinions on the business, therefore they're not worth betting on.

That comparison of yours to the Dotcom era lacks nuance. I also lived through that mania and saw what went on. The vast majority of internet stocks then had no revenue model. Online advertising wasn't even a proven approach at the time. Uber, Airbnb, and others, are on the other hand, selling something which people are already used to paying lots of money for. In that sense, the era's have vital differences. On top of that, the average company IPOed at 3 or 4 years old back then. Today, that's closer to 10 years old. While that does mean you miss out on the exponential early growth years, it also means the private markets are where many of the crappy companies now end up dying so they never make it out the IPO gate.

In other words, it's the surviving companies that are now going public and on average they have far better business models and more reliable unit economics than 1999/2000. Yes, P/S multiples are definitely bubbly currently in the tech IPO market (as I've noted numerous times in this thread), but there are key differences at the fundamental level that make many of the companies qualitatively better businesses than those of the Dotcom era (even though there are undoubtedly also still plenty of culty and faddish unicorns around today too). I think people should be pretty defensively positioned in this sector right now, but to say that Uber should be lumped in with a bunch of "eyeballs & mindshare" companies is gobbledygook.

When VCs realized a person spends $6000 per year on a vehicle, they were willing to use billions in cash to win regional ridesharing markets. This is not early Google where the advertising model was still in question, and where even today their ARPU is only $256 annually in the US and $137 globally. When you clearly see ARPU for Uber and Eats in the US could be $1600 annually and $400 in the developing world, then you go big in order to dominate that market. So the idea that Uber is just burning cash and after that they'll go bankrupt, doesn't scratch beneath the surface. What's more likely happening is they're spending incentives of $50 or so per user and $1000 per driver in order to get people habituated while EVs and micromobility take over as their primary mobility preference, and while they bundle their services (https://techcrunch.com/2019/06/04/uber-eats-uber-eats/) and create a subscription offering that gives rewards to those who use the service the most frequently and loyally.

20 000 Jump bikes, like they were willing to put into Chicago, is also $10M at $500 a pop. If you're expanding e-bikes to 50 cities a year, that adds up. Incentive spending adds up too, if you're offering millions of people in new cities $50 each. Setting up Uber Eats in new geographies is also not free, but you can see the results in their revenue growth for that vertical. On the other hand, if developed world users have an ARPU of $1600 and rest of world users $400, then it could well make total sense to get them habituated if it only costs you $50 or so per user to bring on many regulars. All things being equal, it's about the CAC/LTV working out and being sensible, not the absolute number you're currently investing in growth. In other words, given that $1 spent by Uber now via incentives might add up to $30 or more in annual revenue, somewhere not far down the road, it's not crazy that they're currently spending billions of dollars per year in order to reach even more users and cities so they can cement the regional dominance of their product offerings.

Finally, stylistically I've attached one meme image on average for every two hundred and fifty of my posts on this board. You've WRITTEN the majority of your 1500+ posts CAPITALIZING random words for emphasis like an ATTENTION-SEEKING pamphleteer, and in the PROCESS shown the forum how LITTLE you respect standard internet ETIQUETTE norms yourself. As a result, your career obtuse posting numbers leave us all in the dust and mean you're in no position to be throwing criticisms around. Feel free to save your hypocrisy and lack of introspection for someone who thinks your opinions on the topic are worth something. Alternatively, you could always focus that energy on actually reading the S-1 and doing some basic research on Uber and the ridesharing industry.
AJC:

OK, I'll guess we'll just have to disagree.  Maybe you are right and Uber is going to be making tons of cash in the future!
 
One final thing...When you are at the poker table, you should be able to figure out who the mark(s) is/are within an hour or so.  Can't do so?  Then you are the mark.
Title: Re: UBER - Uber Technologies
Post by: peterHK on June 14, 2019, 06:14:31 AM
All I ever hear about Uber is TAM TAM TAM.

1) How much of that TAM is actually addressable with ROIC > WACC?

2) If they can't make money at the current scale they're at, when are they going to make it AND how much are they really going to make? It's not like they've got 90% gross margins to invest behind, they're at 35%.

Title: Re: UBER - Uber Technologies
Post by: ajc on June 19, 2019, 09:49:11 AM


AJC:

OK, I'll guess we'll just have to disagree.  Maybe you are right and Uber is going to be making tons of cash in the future!
 
One final thing...When you are at the poker table, you should be able to figure out who the mark(s) is/are within an hour or so.  Can't do so?  Then you are the mark.



I think you don't have an informed-enough understanding of Uber's specific business and market potential at all, from an investment perspective. However, I generally agree that most recent tech IPOs are now trading at crazy valuations and within 12 (or a maximum of 18) months, we'll probably see a huge correction or complete crash in their prices. Uber shares would be impacted by that, like all the other stocks in the sector.

I've already sold 1/3rd of my Uber stake (bought at $38 per share), when it went up to $44. I will perhaps sell another 1/3rd or likely the whole of my position, sometime over the next year (hopefully at somewhere closer to $50+ per share). After that, I'll wait to buy in cheaper while this whole current tech IPO euphoria has had time to become significantly deflated.

Title: Re: UBER - Uber Technologies
Post by: NBL0303 on June 19, 2019, 09:59:51 AM

I generally agree that most recent tech IPOs are now trading at crazy valuations and within 12 (or a maximum of 18) months, we'll probably see a huge correction or complete crash in their prices.


AJC - good thoughts. Just curious, why a maximum of 18 months? Why can't it go on longer than that? Also, are you worried the tech crash you are talking about will happen in 3 months or 6 months and hit your Uber position before you have a chance to sell the other 2/3rds of it? I'm just interested in hearing your thoughts on the specifics of the timing issues.
Title: Re: UBER - Uber Technologies
Post by: ajc on June 19, 2019, 12:09:40 PM


AJC - good thoughts. Just curious, why a maximum of 18 months? Why can't it go on longer than that? Also, are you worried the tech crash you are talking about will happen in 3 months or 6 months and hit your Uber position before you have a chance to sell the other 2/3rds of it? I'm just interested in hearing your thoughts on the specifics of the timing issues.



NBL0303, the 'sometime over the next year' line was my way of trying to indicate a flexible approach towards the issues you're raising. My current thinking is there are many signs of things getting truly bubbly. 18 months to my mind is a very optimistic scenario. I wrote a few months ago about how things were really overvalued in the tech IPO sector (https://twitter.com/tonyjclayton/status/1118205158721249280), and things have only gotten worse since. Over the last two months, it has basically become standard for any hot new issue to get at least a 50% first day pop. The only other time where tech IPO valuations and first day returns were this high and this widespread was 1998 and 1999. In other words, my working thesis is we're somewhere in that area.

If we're earlyish in 1998, then we could potentially get another 18 months of this stuff to the point where the IPO market doesn't just look euphoric, but feels that way to every participant inside and out. Then you'll see news stories being run each week about the new millionaire who quit his/her job after only 6 months in the market. About the couple who sold their home to trade hot tech stocks and are now up 1000%. When everyone gets swept up in the mania (including the TV networks) and buys fully into the hype, that's when the collapse is only moments away. One thing that makes me think this could be worse than the Dotcom boom, is that today interest rates are far lower so stock multiples could theoretically get even more stratospheric.

My sense is we're either starting to see this final phase of insanity unfold, or we're somewhere in the middle of it. Where M&A activity starts to genuinely rip and massive industry-changing deals happen every few weeks, where hot IPOs (Beyond Meat, Zoom, Pagerduty) start to go on big runs, and where the business quality of listings (WeWork, Peloton, etc) starts to become a hell of a lot more questionable even by modern Silicon Valley standards. The reason I think for now that there's maybe up to 12 months left, is usually unemployment ticks up before a downturn and after yield curve inversions you also tend to have some time (see the recent tweets by https://twitter.com/saxena_puru on this). I think there are also a few tech IPOs that are potentially bigger than Uber which still badly need to get to market (Bytedance, Didi, Airbnb), so that could keep the craziness getting even more crazy as well.

I've posted some charts below that help explain why I'm between very and extremely cautious going forward. So yes, I'd undoubtedly be willing to exit my position in the next 3 to 6 months (or next week), if I saw strong indications or new information that said things had deteriorated way quicker than I was expecting. I'm holding much more cash currently than at any time since 2010. For now though, my guesstimate is we could see one final and genuinely insane move upward. That is merely my personal suspicion as of today though, and I might well change my mind tomorrow. Either way, I'm on full alert.

Title: Re: UBER - Uber Technologies
Post by: ajc on June 23, 2019, 05:03:25 AM

I sold most of my Uber holdings and have consciously uncoupled from the stock (in a loving way, of course). I ask that my privacy be respected during this extremely difficult and emotional time.
Reasoning here - https://twitter.com/tonyjclayton/status/1142741798554624000

PS. I still like the business, but the current tech IPO market is a little cray cray.

Title: Re: UBER - Uber Technologies
Post by: NBL0303 on June 23, 2019, 05:52:18 PM
Thank you ajc - I always learn from your thoughtful and interesting posts.
Title: Re: UBER - Uber Technologies
Post by: ajc on June 24, 2019, 06:57:47 AM


Thank you ajc - I always learn from your thoughtful and interesting posts.



Sure thing. Likewise.