Image source: BusinessKorea
Uber might be the darling of tech investors, but the fact is that the company has yet to make a dime.
According to leaked internal documents, the company has been making losses for the past three years. According to reports, Uber lost over US$20 million in 2012; US$56 million in 2013; and over US$160 million in the first half of 2014. What's more worrying perhaps is that there are no signs to indicate that losses will be stemmed.
A representative from Uber said, "Shock, horror, Uber makes a loss. This is hardly news and old news at that. The case of business 101: You raise money, you invest money, you grow (hopefully), you make a profit and that generates a return for investors.”
The fortunate thing about Uber is that it is pretty flush with cash. Most recently, Microsoft invested a cool US$100 million with Uber, which puts the company's valuation at around US$50 billion.
Additionally, it is not surprising for startups to lose money as they invest heavily to break into new markets. Uber is spending a lot of driver incentives to attract drivers to use their app, and also paying to subsidize rides for passengers.
As an analyst from RBC Capital Markets said, "Of course they’ll lose money if they’re investing aggressively to build out in China or new markets like Albuquerque. What really matters is: What’s their profitability in some of their oldest markets?"
Indeed, the numbers from the leaked documents do not indicate how individual markets are doing. Still, with losses looking set to pile up, it will be interesting to see how and if Uber will turn this around.
The company is under increasing scrutiny from governments around the world. In June last year, thousands of taxi drivers in Europe across major cities such as Milan, Paris and London protested against Uber for unfair practices. On the other hand, Seoul has banned Uber outright as it plans its own taxi app.
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