Uber is losing money at an unprecedented rate with reports indicating a $1.2 billion loss in the first half of the year.
Interestingly, much of the costs are going out to the drivers, reports Bloomberg. In fact, leaked documents show that Uber has shelled $2.72 billion on drivers in the first half of 2015. That’s a significantly higher number than their other expenses like promotions and price cuts, which amount to only $72 million.
Uber’s losses are unparalleled to what big companies have lost in the past.
To put it in perspective, Webvan and Kozmo.com, two companies that delivered products directly to customers, lost a little over $1 billion after both going bankrupt in 2001. Amazon, one of the biggest e-commerce companies today, lost $1.4 billion in 2000, its worst year in its history.
Uber exceeded that number 2015 and now analysts are beginning to predict that it will exceed that number once again this year. Already, in its sever year history, Uber has lost a total of $4 billion.
Yet Uber continues to command a high valuation because of its increasing market share. The most recent valuation has been estimated at $69 billion.
The company has also stated that it believes it has between 84 percent and 87 percent of the market in the US.
In fact, gross bookings grew from the first quarter this year to the second, surging from $3.8 billion to more than $5 billion. Net revenue grew about 18 per cent, from approximately $960 million in the first quarter to $1.1 billion in the second.
Uber has been losing money and growing revenue simultaneously as it continues to expand its market across the globe. Just recently, Uber struck a deal with what was once considered to be its biggest rival, Didi Chuxing.
Didi offered Uber 17.5 per cent stake in Uber with a $1 billion investment. It came after Uber struggled to make gains in the Asian market. According to Bloomberg, Uber lost $2 billion in two years in China.
While Uber has continued to offer large subsidies to its drivers, it’s long-term plan suggests that in the near future it will begin experimenting with self-driving cars. The company has already acquired self-driving car company Otto for $300 million.
“It’s the case of business 101,” said Uber in a statement to Business Insider. “You raise money, you invest money, you grow (hopefully), you make a profit and that generates a return for investors.”
While the company is losing a lot of money, it’s still growing incredibly fast. And despite being a private company, it’s clear that the way Uber is operating, talking about its quarterly finances, it will eventually go public.
The road appears rocky for Uber, but it has only just started.
