According to the official second quarter earnings for ridesharing company Uber, a total of $5.2 billion was lost within the span of just three months. Fellow ridesharing company Lyft reported losing approximately $644 million during the same amount of time. How are large rideshare companies like this still in business with Lyft and Uber losing money at such drastic rates?

This news comes coupled with Uber’s slow revenue growth from the same quarter. This resulted in the company losing approximately 10% of their total overall shares.

Digital consultant company Publicis Sapient had the following to say regarding the sudden loss of revenue for Uber:

“To say that earnings were disappointing would be an understatement. Uber has turned into the magical money burning machine.”

Throughout the world, Uber continues to face all sorts of competition from markets such as food delivery services and other ridesharing companies, such as the equally popular Lyft. For instance, Lyft reported similar earning results to Uber in the same quarter. Though Lyft’s total losses were significantly less at $644 million, neither is profitable.

Another issue for Uber losing money involves a lack of costs associated with switching between various apps. Stated otherwise, customers don’t incur any costs by switching to another service. In terms of ridesharing, these types of apps are generally the same. More specifically, they operate on the same model and operate on all of the same losses.

Despite all of this, Uber is growing in other ways. Uber drivers completed 1.68 billion rides and delivery trips in a single quarter. This is a slight increase from the 1.65 billion that had been previously predicted by analysts. Furthermore, Uber is also expected to venture into new markets as well, such as e-commerce.

Regardless of the numbers reported by companies such as Uber and Lyft, moving on to newer markets is becoming more important as time goes on. Experts also note that moving to new markets could also create higher switching costs and create brand loyalty. Publicis Sapient has the following to say in regards to this:

“It might be autonomous driving, it might be cargo – it’s probably not things like food delivery. But unless they start owning vehicles or finding a new model, you have to do something to raise the cost of entry, or raise the switching costs. Otherwise, they’re just going to run out of road.”

Uber also recently held an analyst call, in which their chief financial officer stated that the year 2019 “will be an investment year.”

Additionally, Uber’s CEO had the following to say as well:

“In the U.S., if you listen to the Lyft conference call, they talk about competing more on brand and product, and that’s a healthier mode of competition than just throwing money at a challenge.”

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