Following Major Economical and Internal Social Issues—Is Uber’s Business Model Sustainable?
Updated: Jan 21, 2020
Ride-sharing service Uber has reported a net loss of $1.16 billion for the third quarter, as of November 4, 2019. During the 2018 year, the transportation giant lost $986 million loss during the same quarter. That occurred after Uber reported more than $5 billion in losses associated with the failure of its IPO, competition from other rivals and other divisions of the business.
Uber was one of the most highly anticipated IPOs of 2019, but has been a major flop to its investors. The stock price steeply staggered after going public. Uber flouts its great plan of making the “operating system for your everyday life,” while investors are getting anxious over experiencing profits from the company. With the emergence of Uber Eats, a new job-matching startup for part-time food deliveries, it appears that Uber is desperate in diversifying its business in an attempt to make a profit.
Uber faces a multitude of challenges, however raising money hasn’t been one of them. The company was initially funded due to its meteoric growth. Now, as the company is older and more mature, investors are concerned about the reality of tough competition from rivals companies like Lyft. Every Uber ride you take is basically a money-losing transaction for the company.
The company has also faced public backlash in the past, largely due to its company atmosphere with its driving force. A movement has formed to fairly treat drivers and others working as employees. If this happens, Uber’s business model may be destroyed. The company will have to afford to occupy the drivers with all of the benefits that are attended with being an employee; these costs could seriously impact the company’s financial situation.
Uber and similar corporations are deploying lobbyists and spending vast amounts of money to swerve these measures or gain an exemption from such rules.
Even though the company is growing exponentially, Uber is still burning through money. It’s been 10 years now and the company has yet to turn a profit. CEO Dana Khosrowshahi claims that the ride-hailing service will be profitable by 2021. A vital question persists towards their future: will Uber have sufficient funds to last long enough to earn substantial profits and will investors keep supplying the company with capital only to burn as time progresses?