Instructor: David Schuff, Section 003

business model

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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