Following Uber’s earnings release Thursday, company leadership gave a loud and clear signal. “We expect to deploy fewer consumer promotions in Q2 of 2019.” Translation: lower subsidies for riders. More from columnist hiltzikm:
Chai’s promise and the trading pattern show that public investors will be taking a much harsher view of Uber’s marketing expenditures than did the private venture investors who have been providing the company with its capital up to now. This new reality applies to other ride-sharing companies, including Lyft, which went public a few weeks before Uber.
The harvest came in the form of unrelenting losses reaching more than $3 billion in 2018 alone. Investors were willing to swallow that red ink on the expectation that it would give the company a dominant position in its markets, allowing it eventually to set fares high enough to generate profits. They assumed that any losses they incurred would be made up in the IPO down the line.
The extent of Uber’s fare subsidy has been the topic of debate for years. Transportation industry expert Hubert Horan,, calculated that riders were paying only 41% of the cost of their trips. He asked how Uber would keep their business if fares had to more than double to allow the company to break even.
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