While it is de rigueur among observers of Silicon Valley’s Game of Thrones to dismiss questions of profitability as short-sighted hand-wringing, the detailed documents obtained by Gawker demonstrate conclusively for the first time that Uber has been financing its astronomic growth by taking staggering losses.
This unaudited revenue and expense breakdown for 2013 and 2014 shows that, though Uber’s net revenue has grown substantially, the company lost more than $56 million in 2013. By the first half of 2014 alone, that number had leapt to more than $160 million.
Another document, laying out quarterly profits and losses in 2012 and part of 2013, shows the same dynamic: healthy growth in revenue coupled with steadily deepening losses. In 2012, Uber’s losses totaled $20.4 million; from the first quarter of 2012 until mid-2013, quarterly losses more than doubled from $3.5 million to $8.1 million.
Juicy get by Gawker on Uber's financials, but the financial analysis is about the quality you'd expect. The original version of the article included this line:
“Net revenue” typically refers to the money you have left after the cost of doing business—profit.
Yikes. I give lots of tech journalists grief for not knowing the subjects they're covering, but I'd venture to say most anyone with the a basic finance or econ course under their belts knows the difference between net revenue and profit. This hilariously defiant correction was later added:
Correction: Although net revenue is sometimes used as a synonym for profit, in accounting terms it means simply gross revenue minus the cost of sales. Two sentences that confused this meaning have been removed.
If I were an investor, I think I'd be ecstatic to see these internal financials. In a commodity market where the last company standing will be incredibly valuable, Uber is subsidizing a price war that favors the company with the scale advantage (i.e., Uber). Try calling an Uber Pool and compare it to calling a Lyft Line and you'll get a sense of how much thicker the Uber market is, on both the driver and rider side.
The subsidized pricing in a variety of cities are a worthwhile customer acquisition cost for what might be a lifetime rider. The last time I was in Los Angeles, riding Uber all over town was so cheap it fell into the category of no-brainer, and I contemplated not renting a car next time in town. I was in New York City recently and whereas a year ago a lot of Manhattanites still took cabs most of the time, now most of them are Uber converts. Once the introductory rates and subsidies go away, I suspect most of them will still be customers. That's when the profits come.
And yes, someday one of Uber's chief costs, the drivers, may be replaced by driverless cars, adding to their gross margins, and also their profits.
No moral judgments here, just some impressed gawking at Uber's flawless execution. That wouldn't have made for a Gawker-worthy story, but that should've been the headline.