With its IPO only a few days away, Uber's sagging growth and profits should raise tough questions about the company's future. To calm nervous investors, the company is promoting a false narrative that it is the “Amazon of transportation.” Uber should be judged on its own merits, not Amazon's.
Which Tech Company Is Uber Most Like? Its Answer May Surprise You.giant on the cusp of an initial public offering, consider itself to beHow about Didi Chuxing, Uber’s equivalent in China? Nah.
Uber’s scale advantage and sophisticated AI algorithms would power a superior service, translating into shorter wait times for passengers and drivers, and improved driver productivity, which in turn will allow Uber to achieve the trifecta of low fares, attractive driver compensation and corporate profitability.
If all of these assumptions turned out to accurately reflect Uber’s business potential, it could easily justify becoming the second highest valued US company IPO in history .Uber’s first five assumptions have already proven demonstratively false, and the last one is highly uncertain, and at best remains to be seen in the distant future.
Amazon has the unusual benefit of operating with negative working capital requirements because it collects money from customers long before it needs to pay suppliers . As such, the more Amazon grows, the more operating cash it generates. We believe that we are just getting started: consumers only traveled approximately 26 billion miles on our platform in 2018, implying a less than 1% penetration rate of our near-term SAM.
Adding in Amazon’s market-leading position in cloud IT services, its fast-growing advertising business and a surprisingly robust business in consumer electronic devices gives the company a realistically huge, unbounded, serviceable addressable market. Amazon's recent growth demonstrates its continued upside potential: Amazon achieved a revenue growth rate of 31% last year on sales of $233 billion. No company has ever achieved as high a sustained growth rate on an operation of this scale.
In theory, network effects and scale effects can be a powerful profit generator, but only if a market leader owns proprietary mission-critical assets that are difficult or expensive to replicate, and/or if customer loyalty and switching costs are high . Uber enjoys neither of these two structural advantages, as its dismal P&L attests.
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