Uber keeps losing money but not momentum
According to a report from The Information, Uber's losses in 2016 are projected to increase to $3 billion this year, up from last year's total loss of $2.2 billion. In the third quarter alone, Uber lost $800 million.
If these numbers were from any other startup, let alone major corporation, investors might be panicking. But that sentiment isn't there with Uber. At least not yet.
Why is Uber losing money?
According to TechCrunch, there are a few reasons for Uber's huge losses, starting first in China. While the company tried to gain a foothold, it wasn't gaining traction in the country. Uber decided to sell its China business to the world's largest ride-hailing service, Didi Chuxing. Fortune stated Uber spent nearly $2 billion trying to (unsuccessfully) capture the Chinese market.
Uber also spends a lot on driver promotions. TechCrunch reported drivers are, and will remain a big cost for the startup. Uber relies on advertising, promotions, bonuses and incentives to keep drivers coming back. For every dollar the company makes, it spends $1.55. While this might seem like a high cost, Uber's main competition, Lyft, is rumored to spend about 50 percent more per trip.
In an interview with Bloomberg, New York University business professor Aswath Damodaran said that while Uber's ability to raise such large amounts of capital is unprecedented, he remains skeptical about the startup's valuation.
"You won't find too many technology companies that could lose this much money, this quickly," said Damodaran.
Despite losing billions, Uber managed to pass $5.5 billion in net revenue in 2016, a sizable increase over its $2 billion in revenue last year.
What else is Uber spending money on?
Uber is spending a lot of money on other business ventures such as its food delivery service, UberEATS.
Recently, Uber has made a series of moves that signal its commitment to autonomous transportation. It purchased Otto, a self-driving truck startup in August for an undisclosed amount, though Bloomberg said the deal was reportedly worth 1 percent of Uber's most recent valuation - $680 million.
And after it purchased the secretive artificial intelligence startup Geometric Intelligence, it's clear Uber is banking on a future centering around running a driverless fleet. Investors are likely going to be OK with Uber spending money now to likely cut costs in the near-future.
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