What could have contributed to Uber’s loss of $800m in the third quarter of 2016?
DESPITE being one of the highest-valued startups in the world, Bloomberg has reported that Uber lost US$800 million out of US$1.7 billion in net revenue in the third quarter of this year – and these numbers don’t even include what it lost in China.
One might speculate that it has to do with Uber’s missteps in China, but the ride-hailing company’s sale of its Chinese unit does not seem to be a key dampener on its revenue. In fact, Uber’s net revenue reached US$3.76 billion in the first nine months of 2016 and should surpass US$5.5 billion by year’s end, said an unnamed source familiar with the matter.
Its bookings, which is the total value of fares that riders are paying, reached US$5.4 billion by the third quarter of 2016 which is up from US$5 billion in the previous quarter. In 2016’s first quarter, bookings were at US$3.8 billion – which means that a big chunk of Uber’s net revenue change is coming from its users.
So if revenue is up after its China exit and total fares is still growing, then what is weighing Uber down? After all, Uber reportedly lost US$2 billion last year and is set to reach US$3 billion of losses this year.
Is Uber getting too vital to fail? In US cities it is replacing public services & investments. But Uber makes a loss https://t.co/O41PgSUKuD
— Patrick Dunleavy (@PJDunleavy) December 10, 2016
It might have something to do with all the regulatory drama it’s been embroiled in. As reported by ARS Technica, Uber has been busy settling lawsuits. Just this year alone, the company settled lawsuits with drivers in Massachusetts and California, a second from customers reporting sexual assault perpetrated by their drivers and a third over “misleading claims” in driver background checks. It has also lost a UK legal battle by preventing its drivers from being considered employees and was fined by courts in France for operating “an illegal taxi service.”
Settlements are not cheap, so Uber’s losses might have to do with the legal fine line that it’s been treading along. As it has yet go to public, details about Uber’s financial performance has generally been under wraps although its valuation has reportedly reached US$69 billion, which according to Bloomberg, makes “it more valuable on paper than General Motors and Twitter combined”.