Rahul. B
Roll no:158908
UBER BLEEDING MONEY
Uber Technologies Inc. is an American multinational online transportation network company headquartered in San Francisco, California. It develops, markets and operates the Uber mobile "app", which allows consumers with smartphones to submit a trip request, which the software program then automatically sends to the Uber driver nearest to the consumer, alerting the driver to the location of the customer. Uber drivers use their own personal cars. As of August 2016, the service was available in over 66 countries and 507 cities worldwide. The Uber app automatically calculates the fare and transfers the payment to the driver. Since Uber's launch, several other companies have replicated its business model, a trend that has come to be referred to as "Uberification". The legality of Uber has been challenged by governments and taxi companies, who allege that its use of drivers who are not licensed to drive taxicabs is unsafe and illegal; some taxi driver unions have called Uber drivers "pirate taxis". Five years ago, a company called Uber Cab made a splash in San Francisco by letting you hail a car with your smartphone. Since then the company, now known as Uber, has spread like wildfire through the globe. Uber currently operates in 58 countries and is valued at over $50 billion. But the road hasn't been easy. Uber has fought rivals and regulators as it has transformed from a black car service into a sprawling logistics company gunning for a future of self-driving cars. It has confronted threats from the taxi industry and even its own drivers. But its valuation has continued to climb, and it has attracted more and more investors. As Uber bolsters its war chest for a huge push into China, we look back at how the company got to where it is today. See the insane and successful journey of Uber and its CEO, Travis Kalanick, as it has moved from an idea into a worldwide phenomenon. Uber is the most valuable private tech company in the world right now. In July, Uber closed a $1 billion round of funding from Microsoft and Indian media company Bennett Coleman & Co.'s investment subsidiary. The new funding valued the company at $50 billion, making Uber the most valuable private tech company in the world. Since it was founded five years ago, Uber has raised an astounding $8.2 billion in funding. Uber's $50 billion valuation also means that Facebook is no longer the only company to have a valuation of that level before going public.
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Roll no:158908
But Uber isn't infallible. The company has competitors, it's working through regulatory battles, and it relies on independent contractors. So we decided to look at some of the nightmare scenarios Uber could potentially find itself facing in the future. Uber relies heavily on a team of drivers, independent contractors who work for the company. Groups of these drivers across the country have protested the company in the past year. They're upset with Uber's competitive pricing, which affects drivers' incomes. Some have said they're barely making minimum wage. They don't understand why Uber hasn't integrated a feature to let them accept tips from customers. They're terrified of Uber's five-star rating system, and say that even one bad rating could be enough to knock them out of Uber's driving system and prevent them from driving for the service in the future. Uber's drivers are volatile. They aren't required to work for Uber; they can stop and start whenever they want. They know they have options — there are alternatives for them within the same space, like driving for Lyft or Gett. Some could get out of the black-car driving game altogether. If Uber's drivers were, as a group, to suddenly up and stop driving for the company, Uber might feel it. Bloomberg has reported that Google is "going to war" with Uber. According to Bloomberg, Google is actively seeking its own car-hailing technology. Google is also, famously, researching self-driving cars. Bloomberg's report indicated that this could topple Uber, bringing self-driving cars-on-demand to roads before Uber ever has a chance to get into autonomous cars. Aswath Damodaran, a professor of finance at Stern School of Business at New York University, told the Mercury News: "By raising this amount of money, they are setting themselves up to be the next Facebook. Does Uber have the potential to be the next Facebook? Absolutely. But keep in mind the first big disrupter might not always be the winner." For comparison's sake, not only has Uber reached a $50 billion valuation in an impressive five years since it launched — it did so much faster than Facebook. According to BI Intelligence, it took three years for the social media giant to get to a billion-dollar "unicorn" valuation, and it was "only" worth $15 billion by its fifth year. It took almost 8 years for Facebook to get to the $50 billion threshold, before hitting its massive $100 billion IPO in 2012. Facebook is now worth around $225 billion. The reason this is happening is Uber provides something of value: It gets you anywhere you need to go at a reasonable price. It sounds like a simple concept, but Uber was the first to perfect this process. You just tap a couple of buttons on your phone and
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Roll no:158908
you can see your car and driver on a map, heading your way. The driver won’t pick up anyone else, so you don’t need to fight people off the street to get a ride. Uber's December fund raising round — in which Uber raised a massive $1.2 billion — was intended to allow Uber to "make significant investments, particularly in the Asia Pacific region. "However, a global car-hailing startup alliance could cripple Uber's efforts there. Didi Kuaidi — Uber's biggest competitor in China — and Lyft, Uber's biggest US rival, recently announced the two companies were teaming up to take on Uber. The strategic partnership will let the companies share technology, product development, and local resources, and when US users of Lyft go to China (or when Didi users come visit the US), they'll be able to pay in their native currency on each app. But this global alliance against Uber could extend beyond just the US and China, ostensibly giving Uber a run for its money. According to The Wall Street Journal, Lyft and Didi are in talks to expand their alliance with other Asian ride-hailing companies: India's Ola and Singapore's Grab Taxi. This isn't entirely unexpected. Earlier this year, Buzz Feed News reported that Softbank Capital, which has funded on-demand ride-hailing startups Grab Taxi and Ola, was behind a global alliance to take on Uber. Executives at both Grab Taxi and Ola, which are Asiabased companies that use taxis instead of private drivers, told Buzz Feed News they were working on "forming a global alliance of regional players.” Though Uber operates in a number of Asian markets, including Beijing, Bangkok, and Tokyo, Uber has faced obstacles in Asia. South Korea has vowed to shut down Uber's operations in the country. As TechCrunch notes, "Korean law doesn’t allow technology companies to store payment data as part of their purchase workflow, but instead requires consumers to retype their information with every purchase, ostensibly for security reasons. By providing a similar service that is familiar with local laws and cooperates with local governments, this alliance could kneecap Uber in Asia, a huge potential market that relies heavily on taxi services. Current scenario, Uber is losing money faster than any technology company ever, and it’s largely because of an essential component to the company’s operations: the drivers. Bloomberg reports Uber lost $1.27 billion in the first half of this year, which is unprecedented, even for a tech company. By comparison, Amazon reported losses of $1.4 billion in 2000 during its biggest loss ever. Amazon CEO Jeff Bezos fired 15 percent of his workforce as a result. Uber is clearly playing by the same “grow first, make money later” edict of Silicon Valley, so it should
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Roll no:158908
be no surprise the company’s costs have increased as its operations expand into new cities. What is surprising, however, is that the biggest cost to the company is the fee it pays out to drivers. According to the Bloomberg report, driver subsidies account for a majority of losses in the first half of 2016. That’s the same fact shown in leaked documents published by The Information earlier this year. The leaked documents showed Uber paying out $2.72 billion to drivers in the first half of 2015. By comparison, Uber lost only $72 million to promotions and price cuts during the same period. Uber has been desperately (and quietly) trying to mitigate its losses to drivers. After lowering fares across North America to attract new customers, Uber began taking a greater percentage of driver’s fares (up to 30 percent now). Uber has instituted temporary hourly wage guarantees in some cities, but as Buzz feed recently reported, Uber is still taking about one-third of their driver’s meager wages in cities across the country. A recent Forbes report notes that gross bookings (fares charged to the app before drivers and customers get their cut) were way up in 2015. This fact is being touted as one of the biggest indicators that Uber’s business is doing well. So how can Uber make money if it’s always losing so much to its drivers? Eventually, Uber will get rid of the drivers and turn a huge profit. Earlier this month, Uber announced it would begin allowing customers in downtown Pittsburgh to summon self-driving cars from their phones, indicating at least part of the company’s long-term business plan. Uber also acquired self-driving car company Otto for $300 million, showing its eagerness to advance its driverless car technology. “It’s the case of business 101,” said Uber in a statement to Business Insider last year after its private finances were leaked. “You raise money, you invest money, you grow (hopefully), you make a profit and that generates a return for investors.” The critical part that Uber omits is how it will earn a profit if it continues to lose most of its money to drivers. The answer is seeming pretty obvious to me: just get rid of them. REFERENCES: Gizmodo website. https://www.uber.com/ https://www.wikipedia.org/
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Roll no:158908
https://newsroom.uber.com/ https://www.braintreepayments.com/learn/braintree-merchants/uber http://www.businessinsider.in/Ubers-nightmare-scenario-How-everything-could-go-wrong-forthe-worlds-hottest-new-company/articleshow/49077921.cms https://www.buzzfeed.com/