Uber – On a Growth Spree or Piling on Losses?

Uber is often like the mysterious and secretive rich neighbor who you have always wondered about and are dying to know as to what is going on inside his/her home. Uber, an app for driver service, has always managed to beat around the bush and give vague answers to questions concerning its financial position.

Even during a stage of stern opposition from other parties and various cases against its safety, security and employment policies, Uber has managed to magically come out shining and crushing anyone who poses a threat to its success. It is an undeniable fact that Uber is a global force undergoing an exceptional increase in its operations and functions every passing day. With transactions worth billions on a regular basis, it is a force to be reckoned with and a dominant player in the commutation market.

Uber – an app for driver service is not even six years old, but still has managed to be extraordinarily advanced with its operations. It captured the taxi market by a storm when it gave the customers a premium service as compared to the local yellow cabs and this innovative feature is what helped it to gain a major market share. With its mature and professional approach, both the drivers and riders trust it completely. Looking up to it, we can see a huge rise of Uber like app development by rising entrepreneurs. They are studying Uber’s every move closely and working on its deficiencies and adopting its strengths.

Uber’s Financials

According to recently leaked reports, Uber’s financial data shows huge growth as well as significant losses. Estimates would put the company’s earnings at roughly 2 billion dollars.

  • According to reports Uber had a gross booking worth 3.63 billion dollars in the first half of 2015 as against 2.93 billion dollars in the previous year. It would be safe to say that its overall ride-hailing service is going strong and going with the trend it might have very well increased its bookings in the current year i.e. 2016.
  • Now let us focus on the net revenue. Net revenue is different from gross revenue. That is the amount Uber app for driver service actually receives before it deducts its costs from the revenue earned but after it pays drivers their share and incentives, etc. it came in at 663.2 million dollars in the first half of 2015 as compared to 495.3 million dollars in the year 2014.
  • The additional incentives to encourage riders as well as drivers are having an adverse impact on the company’s revenue. The money invested in offering promotional fares to riders and incentives to the drivers is on the larger side.
  • Operating expenses are also on the rise. The general and administrative expenses shown in the documents are also quite high.
  • Marketing and research costs, one of the major expense category registered a whopping 295 million dollars as expenditure in the year 2015.
  • Stock-based compensation also occupies a large part of the expenditure structure of the company. The losses could be estimated up to 987.2 million dollars for the year 2015.

Such kind of expenses would have the power to put most of the start-ups out of business, but not Uber. Uber being the world’s largest private venture-backed startup has a lot more ability to be able to cope up with such kind of setbacks.

Road to the Future for Uber

There are various opportunities that Uber has not even yet brought into the light. It is the belief of many experts that Uber can even beat Google at providing Grade-A technology. It has been heard that the company may very well be on its way to going for providing ancillary services such as pickup and delivery of physical goods, swift transportation of workers and providing various incentives for the commutation of employees of different business firms.

All of this will happen because of Uber’s taxi driver app service dominant core service where it provides for the benefits of its customer base. This service provides them with adequate cash flow to invest in different products or markets. Uber still has plenty of reasons to go for additional funding because of its high potential, despite the fact that its profit margins are not quite clear.

Uber has to reduce its spending. There were further talks that Uber had been thinking of going public within 18 to 24 months and this is what got the market players unsettled. We will have to wait it out to see how it plays.

Uber’s Aggressive Tactics

The operations of Uber are widespread. It operates in more than 60 countries in the world. In India, It has become the dominant force in the taxi industry. Even in the western countries, there is no denying the hold that it has on the people over there. In China as well, it has entered into a very profitable deal with Didi Chucking which is another major player that dominates the Chinese market.

Uber spends big on lawyers, publicity, marketing, and promotion, etc. to fight any form of opposition so that it can gain a dominant foothold in the market where it operates, and it is exactly what it has been able to accomplish. It is very aggressive in its approach. It has announced that it will invest a billion dollars more in the Indian as well as the Chinese market. There is no stopping it when it comes to expansion.

Again, Uber is facing flak when it comes to its treatment of workers where a proper status of an ’employee’ is not given to them, and insurance facilities are on the low. In countries like Europe and South Korea, it is going through allegations of not carrying the required permits of carrying out the service that it provides. Even though there are many roadblocks, there is also an emergence of numerous Uber app clone which are imitating its model in hopes of replicating its immense popularity and the working principles that it follows.

It won’t be an exaggeration to say that Uber is here to dominate the traveling industry with no rival in sight, as of now. However how long does it manage to ward off rising costs while staying sustainable? That’s something we will have to wait and watch out for.