What does an Uber ride actually cost? That simple question is often lost among the many controversies facing Uber, but it is surely one of the most important question of all when it comes to determining the value of Uber which has built its business on massive subsidies to both riders and drivers, producing huge losses in the process, and has yet to show that it can maintain growth without them.
Although a private company dos not need to release its financial data, Uber has started releasing limited financial data, and in May reported a loss of $708 million for the first quarter, down from $991 million in the fourth quarter. While their upcoming financial report may show further improvement on margins, Uber continues to spend heavily on subsidized rides.
The question vexing everyone is what the company is worth. Truthfully, I really don't care. Not just because I am anti-Uber but because their entire business model is based upon explanation of persons and creating the myth of providing jobs when their true intent is to totally divest itself, in due course, of all drivers. How drivers do not see this and continue to driver for them is beyond me. Maybe I am wrong in my forecast or perhaps I just simply do not like illegal monopolies.
Uber’s losses stem from its drive to win global market share at almost any cost. That strategy was built on the assumption that Uber could achieve a dominant position in many big cities quickly and eventually raise prices. Kalanick himself said low fares were temporary. But eight years in, the strategy is now in doubt as competition in many markets continues to intensify. Uber must solve the problem of how to eliminate subsidies without losing customers and thereby undercutting its valuation.
At some point in time, Uber will have its day of reckoning as they will eventually have to raise prices and get rid of driver subsidies. And we all know what happens when you raise prices - demand goes down. And when you give up driver subsidies - supply of drivers goes down.
Regardless of their Valuation, in my humble opinion, Uber has become an illegal monopoly. I have conducted my fair share of research on the Sherman Act and its progeny since the late 1800's when certain monopolies were declared illegal. Monopolies are bad for the public, bad for the economy and bad for competition. Uber will eventually raise its prices and do away with driver subsidies...and then the riding public will see Uber for what it truly is. Not an aid to the Salvation Army, but a money hungry technological monopoly that is built on a house of cards. When one of the cards start to fall, the others shall follow. Then I hope to see Kalanick himself driving around in his own vehicle with the stupid "U" in the front window.