Amazon is definitely misleading: they became profitable within specific business areas (e.g. books & music first) but invested that money in new businesses. The analogy would be if, say, Uber was profitable in San Francisco and Los Angeles but still bootstrapping Phoenix and Denver.

I haven’t read anything which suggests they aren’t subsidizing rides in their most established markets just like everywhere else, and both their drivers and customers can switch to competitors so easily that it’s not obvious how they can change that.

I believe they are, by some fairly loose accounting definition (i.e., not counting back office expenses, capital expenses, etc), profitable on non-pool rides in core US cities.

I believe that is considered being "contribution margin positive"

> Also comparing Uber to Facebook is quite silly too. Facebook had a lot more users than Uber but they are also different types of users.

The main difference seems to me that Facebook enjoys a network effect: you can move to a different social network, but who will you find there? While you can download as many taxi service apps as you want and use one or the other, the one that has the cheapest offer. If an Uber competitor comes up with autonomous driving first and offers ride for half of Uber's price, people will switch instantly.

That's a very good point too which I missed. People don't care about whether their friends are using Uber or some other app. They care about whether the ride is cheaper. It's a bottom of the barrel pricing game in ride sharing apps.

They also care about wait times. And drivers care about utilization.

"Taxi apps" definitely have network effects from the two sided market, though not as strong as a social network.

From what I have found personally, the wait times on Uber and Lyft are the exact same in my area in Canada. Every driver which is on Uber is also on Lyft. So I don't think the network effect is helping them much as riders aren't really getting anything different in terms of wait times. Also this is even after Lyft barely being about 1 year old in my city while Uber has been around for many years.

Uber pool gives it a very strong network effect. You need enough riders going in the same direction as you at the same time. When I do my morning commute, I can't take Lyft because there isn't a critical mass and there isn't room for two ride sharing networks. Uber is consistently cheaper and has shorter wait times.

Well said! Given that UBER actually follows a model that looks like: Don't own the equipment, rent people who own their own equipment, be the middleman. It's quite reminiscent of Truck Driving or some sort of specialty guildswork, like carpentry or other professions there are Guilds for. UBER is a replicable model for any guildswork, taxi [guild] service conveniently benefitting from GPS and mapping. However, since UBER owns not the equipment, and only rents the laborers (without a strong "come in to the office" type of contract) it's hard to see where the value of this company actually lies. Of course, due to their brand monopoly, or duopoly, they are able to keep strength for a while. But, eventually, guildsworks in general will probably be delegated to some other motherlode app. If they need help growing or figuring out how to actually make a profitable company, they need to stop thinking about how to be a taxi service, and how to be a transportation provider.

> Also advertisement has huge margins with not much cost from Facebook's pov but ride sharing logistics is completely different with very little margin where the driver needs to get paid

Why is this? In both cases it seems the cost is paying a bunch of servers and engineers to run a website. So why is Facebook seemingly more efficient?

Nope. Market share and pricing power in digital advertising comes from user base and targeting capability. As an advertiser, I can reach most of the population in many country through FB/IG and YouTube. Their targeting data is also pretty good. So they claim a lion's share of the market. Also inventory expands as userbase expands and the userbase doesn't really have other options with similar network effects.

Uber on the other hand has plenty of competition. Their total cost to user has to be competitive vs. not just taxis but possibly owning a car. There's only so much they can charge for a ride and they pay a ton of incentives to get drivers to drive for them in many markets. So the available space for profitability is constrained.

So basically advertising is less constrained on the upside than transportation. The whole bit about 'they have to pay their drivers' is a red herring - the real constraint is that the price the riders are willing to pay is more constrained / lower than what advertisers are per user.

That's part of it. The other part of it is that digital advertising business models turn out to be close to zero cost. There's very little "product cost" when you amortize tech cost over billions of ad impressions - the "cost" really comes from "reduction in addressable market" - ie. what portion of the audience will stop watching the platform due to ads. At least for Google and Facebook, the answer seems to be negligible proportion and in China at least, publishers are finding that many of such people are willing to pay for an ad free experience if you have killer content.

Taxi service is a much more constrained business - you have to pay out product cost plus some incentive to generate supply but you have a strict price ceiling on scaled demand and a lot of competition. The answer for the previous generation of entrepreneurs in this space was to execute regulatory capture and institute a system of restricted supply to boost prices (ie. Medallions, permits etc). So it's going to be interesting to see how these businesses evolve.

Mostly because Uber needs to pay the drivers and they can't really take more than 20-25% cut. Drivers are already complaining that Uber should take less as they are barely making much money especially as there are now a lot of drivers.

Uber also has drivers to pay. Facebook doesn't. Thus, the margin.

Don't you have to adjust Amazon's 2.8 billion for inflation?

Should we though? Technology was far inferior back then and it would be much cheaper for amazon to achieve the same thing as they back in the day if they had today's technology. Amazon also has a lot more gears moving around in their logistics as compared to Uber.

Does Uber even want to encourage people to take more rides if each single one is at a loss? It's hard to envision the strategy going forward.

Yes, they want to eat up the whole market until all the competitors die. Then they can raise prices.

Main competitor here is traditional taxi (can be hailed, paid and tracked through app, has dozens of competing operators, has nice cars). If Uber would raise prices their only appeal would vanish.

If I take an Uber instead of a taxi it’s solely because Uber investors sponsor my ride. The taxi experience is 100% the same thing. I don’t think this is a great business model.

And then new competitors will spring up who can undermine those prices. There is absolutely nothing unique about what Uber does to keep people as customers.

A dominant two-sided market has strong network effects, since new suppliers want to be where the buyers already are and vice versa.

If the drivers are contractors, then they can install both apps.

If they are employees, Uber is thoroughly fucked.

With that strategy, Uber might run out of cash before the competition is crushed.

They are way into debt financing and have a $25B bottom line, this is a "when you owe the bank a million dollars..." situation now, nobody involved is going to let it run out of money and throw the whole house of cards away.

Correct me if I'm wrong, but that sounds like sunk cost fallacy.

I'm not surprised.

> Uber might run out of cash before the competition is crushed.

True, but time scales matter. Given their current position, it might take 20 years for that to happen. By then, who knows where they or the market will be.

Sure but there are quite significant competitors around. Lyft is a major one in the US. But countries like India and China, Uber can't even survive as the competition is beating them to it.