This is purely a “ask to see what people think” post.
I can’t help but notice that Uber has been super aggressive in the past few weeks
Free cup cakes
Removing UberBlack for UberSelect
Introduction of ads at the bottom of your screen to encourage you to invite more people
the increased rate of email sending
Going OFFLINE WITH THE ADVERTISING to start distributing fliers.
The last straw for me was relaxing the the requirements for cars that want join UberX fleet (ref: http://techcabal.com/2016/06/20/uber-nigeria-has-lowered-its-vehicle-requirements-for-uberx/)
It all looks like an aggressive attempt to keep the growth numbers up and it sought of makes me raise my eyebrow.
Nigeria is just generally tough for consumer services. That’s from my experience, and what I project to this.You have to do everything, even if it means getting Amadioha involved to get your numbers up. It’s really tough out there.
One reason, I stay off anything consumer. I won’t be shocked to learn they might be having a tough time with adoption, or growing as they imagined. It is not a matter of the business, or the leadership. It’s purely a market thing. That’s my opinion.
These all seem like justifiable marketing tactics to keep growing customers. Uber believes in spending a lot of money at the initial onset to deter any potential competitors and to grow their customer base.
The only losers in their latest strategy are those individuals who see buying a vehicle to add to the Uber fleet as an investment. When you’re in a business where you cannot set prices, compete effectively or deter new entrants (anyone with cash can add their vehicle to Uber), then you’ve got an issue.
UBER is an ambitious monster…but it is actually bleeding itself to death. I read some stuff recently about its latest funding as well as its China nemesis (on TechCrunch)
Actually, bleeding cash with high profile startups is not a problem (WhatsApp was a money loser before Facebook acquisition and even Twitter is still a big money loser) So, let me add to the signs you have spotted (that probably implies there is a cash bleeding going on)
Uber is (almost) too big to be acquired; hence it needs to keep raising if revenue is not matching expenses
Uber is NOT yet profitable in many of the cities it is operating - reason they are considering several revenue models
Uber’s potentially biggest market is CHINA which it cant get because of Didi…but it is still bleeding up to $1B just to get a bite at that market.
Here is one of the internal operations doc for UBER (previous years) that indicate how they fared
But hey, we should all be optimistic for UBER, right?
Not at all. Actually they still had their investment from Sequoia Capital in the bank, untouched. You’d be surprised at how much $1 a year (with a couple of people paying multiple years upfront) even if not from 100% of their userbase can do to a startup that runs a chat platform written in Erlang.
Yes but the operative phrase here is “…at the initial onset”. Its no longer the onset, uber has been in Nigeria for two years now and they seen to be more aggressive than they have ever been. This new found aggression is a very recent occurrence.
People (even VCs who should know better) repeatedly refuse to learn that valuation is not profit (and in business/accounting terms, has little practical use); they also repeatedly get burned and the world keeps turning.
Not really, valuation is not cost price.
To the best of my knowledge, they are not yet profitable anywhere…
Had to be when they seem fixed on burying themselves with venture capital.
Let’s just keep watching the series unfold; at least, we don’t need a Netflix/Hulu/HBO etc subscription for that.
The main problem with Uber in Nigeria is the fact that it is still a luxury service to the average Nigerian or should I say Lagosian. Supply is way more than demand and I don’t think they are working hard enough to increase demand.
I disagree completely! If anything I think there’s more than enough market for two Ubers in Lagos Alone! but like all other tech things in Nigeria it’s had a problem getting the population to use it’s services. There may be other factors, but I don’t think those factors have anything to do with unavailability of “able to pay” customers #MyThoughts
I just had a Uber take me to the office with multiple stops along the road that would make your rickety taxi driver angry and charge N1,200+. My card was charged N800
We have a lot of big boys in Lagos who can afford to throw cash around. So, they can afford to use Uber…even if it’s just to show off (you know Naija people will always take a selfie in the Uber and post it on social media. Well, it’s not a bad thing).
If potential (mid-low income) users perceive Uber as a luxury service, even if it is not, they still have a problem. And I do not have enough data to say whether their aggressive behaviour is an attempt to keep growth numbers up, or if it is more deliberate than that.
I’ll second that! Although a little caveat is to “BEWARE OF SURGE PRICING”. A friend was picked up from Ajah, destination Yaba. She got charged 11,400. True story.
What do we think of Surge Pricing? I happen to believe that Uber needs to do something about it (esp in Nigeria). A lot of customers are not very tech savvy and trust me. Surge pricing would give a lot of Nigerian customers trust issues.
@xolubi if we are on the same page on the term “bleeding cash”, to me it literally means spending more cash than you make each month. And that applied for WhatsApp, Twitter and Uber. This is not usually a big deal if you are VC-backed as long as you are on a path to profitability or massive user scale.
The issue that OP raised about Uber is not limited to their Nigeria operation…but it is global. The burn rate for Uber is high as it was spreading itself thin initially from cities to cities (Imagine allocating $1B for china market). Hence, to ramp up its revenues, it needs to be SUPER Aggressive in sales. This does not mean that UBER is in trouble sooner, but it is in a rabbit hole.
This cash bleeding does not imply UBER will burst, it is only a slow-burn model of sustaining a business and they are not the first to it. Amazon is a remarkable example. With a good playbook, there is a light at the end for them, maybe, just like Amazon ( Benedict Evans wrote an interesting piece on Why Amazon Has No Profits (And Why It Works)
P.S: Thanks to @ukay for breaking down my previous post and establishing that Uber is not profitable at all in any city
P.S.S: UBER has one of the best supply growth guys in the world and you should follow his writings: meet Andrew Chen
We are on the same page and it didn’t apply to WhatsApp is what I’m saying. They were one of the few companies that scaled without hemorrhaging cash, thanks to having very few engineers and a robust platform - hence the reference to Erlang in my last post.
You didn’t need to make this long post to remake your point. I was only correcting the WhatsApp misconception. By all indications, they were default alive.
When Afro launched (let’s say relaunched) with @aniediudo on board as GM, they introduced the price haggling proposition to combat this price surge. Unfortunately, it did not catch on with the market
Summary: Prior Facebook acquisition, WhatsApp revenue for the year was $10M…while it hemorrhaged $138M same year (actually, it was a $40M operational loss)
The rest of the post was largely to contribute to the ongoing conversation…not to make a point against your position
It’s easy to see figures like that and get carried away from reality. Most of that “loss” from from giving out equity as compensation at a discount - not from money actually leaving the bank. I mean, they never had up to 100m in the bank at any point in time so how would they lose more than 138m in cash.
Jim Goetz, a partner at Sequoia Capital practically convinced WhatsApp to take the second round of 50m when they really weren’t interested in extra cash infusion. It was almost as though he could see that a couple of months down the line, they would be acquired and Sequoia would make out like bandits.
