Instructor: David Schuff, Section 003

Uber’s Unsustainable Business Model May Be Banking on A.I.

Ride sharing apps like Uber and Lyft were so disruptive in nature and changed consumer behavior to such an extent that a new type of “sharing economy” seems to have formed around them and similar applications. The key features of the applications are their affordability and the access provided to this type of “on-demand transportation” that essentially became democratized. Despite the widespread use of these apps, their business models may prove unsustainable. According to the BloombergView, “Eighty percent of [Uber’s] $9.7 billion in quarterly revenue was eaten up by a combination of driver payouts and bonuses, along with discounts to riders. Toss in insurance costs, and you’re up to 90 percent—and that’s before spending on marketing, research and development, overhead and so on”. Without the aid of venture capitalists, Uber will be in huge financial distress in the future. However, the firm does not operate as one that is concerned about future financial uncertainties. In fact, Uber is one of the many firms conducting research on and testing autonomous vehicles. Could this be its long-term strategy that will make its business model viable? Will the firm be able to weather these challenges long enough to see its investments in A.I. pay off?

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One Response to Uber’s Unsustainable Business Model May Be Banking on A.I.

  • I find myself thinking about his a lot, I have always been curious about the future of autonomous cars. Financially this will be a good move for Uber. When autonomous cars eventually come out they will likely be too expensive for the average person to purchase, experts have expected people to get together and buy one to share amongst 3 or 4 people. Personally I think some people will be excited to use Uber if it means they may be picked up my an autonomous cars. Some people think it is risky to invest in. They think the legality of it will never be resolved. My gut says it will, simply because of all the companies investing. These companies have connections and can determine more than regular people the likelihood of autonomous cars in the future. I think That these cars could also be a big threat to Uber. Once they become affordable, and the average person can purchase their own, there will be no need for Uber, except when traveling to new areas. I think a business that will present itself in the future is an AirBnB style of renting your autonomous car to people like an Uber.

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