It is believed by some that Uber is overvalued, even factoring in future growth.
Christopher Mims of the Wall Street Journal argues that, despite the company attempting a major corporate overhaul, it’s actually the company’s business model—not its frequent scandals—that limits Uber.
His main argument is that while Uber has a first-mover advantage and the best-known brand, it’s an easy model to copy and, as markets around the world launch similar startups, Uber’s slice of the pie may never justify its lofty $68 billion valuation.
Even when it steers through that thicket of crises, Uber will have to come to grips with a fundamental vulnerability that is increasingly apparent in the company’s business model. Uber may be great at technology, but unlike the businesses of Google, Facebook, Apple or Amazon, technology hasn’t proven to be a significant barrier to new entrants in ride-sharing.
Uber’s counterpoint would be that its advanced technology and data science allows for superior optimization, meaning the lowest cost-per-ride of any on-demand service.
But rivals like Lyft have proven that nothing Uber does is magical; it seems anyone else can mimic the company’s model with some success. And Uber, infamous for its constant missteps, could be one significant mistake away from tarnishing its brand beyond repair, leaving the door open to a swath of hungry competitors.
And all of this goes without saying: aside from a very select few markets, Uber—which “may just be a gigantic taxi company,” according to Mims—is not profitable. Despite revenue in the billions, the company continues to lose hundreds of millions of dollars every quarter.
The saving grace for Uber is that its market is massive and global. Everyone everywhere always needs a ride sometime to somewhere.
Still, $68 billion is a lot of money.