You don’t a build a global tech start-up (if we can call it that anymore) the size of Uber in just a few years without losing a lot of money. That’s why the taxi app has had to raise more than $9bn (£6.4bn) of venture capital and private equity cash in its nine short years of existence. But there are the signs that the company’s expensive expansion is starting to pay off.
According to Bloomberg, Uber is now making a profit (at least on an EBITDA basis) on each ride it provides in the US. After deducting marketing costs, transaction fees and web development costs from the 25% cut it takes from each trip, Uber is left with a less-than-uber 19 cents per ride. That’s not including money spent on interest, taxes or its employee incentive equity scheme so it’s not real profit, but it’s still an important milestone for the start-up to have passed.
If nothing else it proves there’s some viability to the on-demand business model of hundreds more loss-making start-ups that have followed in Uber’s wake. The collapse of one of those, food delivery start-up Spoonrocket, last month led several commentators to question whether we were seeing the beginning of the end of a venture-fuelled bubble – Techcrunch even dubbed it the ‘on-demand apocalypse’.
While Uber has found semi-success in its home market, the international picture is a lot more complicated. It’s currently chucking $1bn a year into China, where it faces its toughest competitor in the form of Didi Chuxing (formerly Didi Kuaidi), which is ringing up a whopping 10 million taxi orders per day. Uber boss Travis Kalanick says he is aiming for profitability there within two years. That seems a little over-ambitious but given how quickly Uber moves MT wouldn’t rule it out.
Europe has been tricky too. A combination of militant taxi drivers and over-eager regulators have thrown obstacles in its way so while it has made massive inroads, it’s not all been plain sailing. In Germany it has been forced to pull out of three cities because of a ban on unlicenced drivers and in France it has faced fierce protests from taxi drivers.
In London it faces a renewed threat in the form of black cab drivers, who now seem serious about embracing the changes technology has brought to the taxi market. Last week the LTDA and the London Taxi Company unveiled a campaign to boost cabbies’ use of contactless payments, apps and wifi.
On its own that kind of thing will only have marginal impacts on Uber’s performance but competition in markets across the world (and continued investment in new services like UberEATS) will likely prevent Uber from making profits on a global scale for some time to come.