[ModernMech]

> It doesn’t make sense. It’s like saying that the concept of dispatching taxis with a computer is not capable of being profitable.

If that’s all you are doing, then yeah, that’s probably not profitable because competition would just eat your margins. You’re essentially a broker matching drivers with passengers, and they can use any service they want. They will choose the one with the lowest cost to use and that pays the most to serve i.e. they will use the one that leaves the least amount of profit for the broker.

Therefore Uber has to have some other value add, which will eat into profits (unclear what that could be, I think they were hoping it could be robotaxis); or, they have to spend massively in advertising to maintain mindshare, which will also eat into profits.

This is why they spend so much on advertising and expansion. They want to be the first player in town because when there are more players, it’s a race to the bottom. You can’t take out the advertising and expansion dollars and say they would be profitable without them, because those dollars are staving off competitors for as long as Uber can. Imagine a future where you have an “Expedia” of taxi services, that search dozens of providers and gives you the lowest one. That’s Uber’s future if they stop their spending.

The question of profitability then becomes: how can Uber justify its existence while staving off competitors, and can they manage this before going under? Maybe given an infinite time horizon and infinite VC cash, Uber could be profitable one day, but for now I don’t think it’s clear they are or will be soon.

[supperburg]

> If that’s all you are doing, then yeah, that’s probably not profitable because competition would just eat your margins.

So markets don’t exist? Businesses can’t exist in a market? This is economics 101. No wonder everyone is so off

[ModernMech]

No, that's not what I said. My point is explicitly that markets do exist, and that markets are the mechanism by which Uber will find itself unprofitable, because they aren't adding enough value to the equation. Having the app and the scheduling algorithm was a game changer a decade ago, but now that part of the business has been effectively commoditized.

But Uber doesn't want to be 1 of 1000 taxi players in a crowded market with no margins. They want to be taxi king of the world. How do they stay on top when every local municipality can hire some college kids to make a close facsimile to what Uber does? Sure maybe it's not as good as the Uber offering, but they don't have to support a global taxi empire, so they can offer their service for a lot less than Uber can. If that app takes hold in city X, why are people going to use Uber when they come to town 30% more expensive than your small town provider?