Uber is now worth more than General Motors. Yes, really.
The ridesharing start-up known as Uber is in the midst of another round of fundraising, and if all goes as planned,聽聽that聽the company everyone loves to hate will be valued around $62.5 billion. That's significantly higher than General聽, which clocks in around $55.6 billion.
BACKGROUND
We first reported on Uber in聽. At the time, it was called UberCab, and it wasn't registering individual drivers, only聽. Since few if any of those companies had apps of their own, UberCab would've provided a centralized place for folks in need of a lift to find cabs in their area.
Before long, though, UberCab changed its course -- and its name. It stopped being an ally of taxi companies and became a massively disruptive competitor, allowing individual聽聽owners to join its ad hoc network of drivers.听
This has angered more than a few people.听
Cab companies and longtime taxi drivers聽聽that Uber has taken away their business. City bureaucrats don't know how to deal with Uber and its shadow army of聽聽that aren't painted bright yellow or plastered with logos. (The same people have been paralyzed by Airbnb, too.) Even Uber drivers themselves have voiced聽.
Uber's new business model is also causing plenty of legal headaches. Perhaps the biggest issue that the company has had to confront is the question of whether its drivers are employees or contract workers. This has come to a head several times -- for example, when an Uber driver without a fare聽聽in San Francisco (which led to a refinement of the聽), and also when Uber faced a barrage of lawsuits alleging that drivers had聽.听
Recently, judges have ruled that Uber drivers聽, which is going to diminish profitability going forward -- at least until Elon Musk hands over.听That聽will surely solve all Uber's problems for good, right?
MONEY, MONEY, MONEY: HOW DOES UBER DO IT?
Like Donald Trump, Uber hasn't just weathered the bad press, it's thrived. Over the summer, Uber announced that it had been valued at $50 billion.
In Delaware, the company has filed plans for its latest round of financing, which shows that Uber could soon be valued at $62.5 billion. The sum includes around $2.1 billion in new money from investors and $5 billion in other growth. Some of that $2.1 billion is likely to come from brokerage firm T. Rowe Price, while around $100 million is rumored to come from Microsoft.
How is this possible? How is Uber doing so well?
For starters,聽Uber works. If you've ever used the service, chances are, your experience was smoother and more pleasant than your average cab ride. There's no standing in the middle of the street, hoping for a cabbie stop, no calling and waiting for who-knows-how-long until your taxi shows up. With Uber, you open the app, you hail a ride, and you see a pic of your driver, as well as an estimate of how long it'll be until she arrives.
础濒蝉辞,听the service is seamless. Even now, with so many regular taxis equipped with card readers, you still have to swipe, perhaps enter a PIN, wait for approval, and drop in a tip. With Uber, your card is on file. You get in, you're聽聽to your destination, and you get out. Everything else is handled behind the scenes. Tipping is still a problem, since Uber doesn't make it easy to do, but apart from that, the service just works.
罢丑颈谤诲,听few cab companies have tried to compete with Uber's app. Not only is Uber making life better for passengers, but its competition isn't even really competing anymore.
Perhaps most importantly of all,聽Uber has little in the way of brick-and-mortar costs. It's essentially a social network. It lives on servers. Yes, there are offices and plenty of employees, but they can be spread out as they like to maximize profitability. Compared to many companies that need to be in very specific locations, that's a huge, cost-saving advantage.
And that's why Uber's valuation is soaring: it's got a unique service (though there are competitors like Lyft), it's providing something that people need, and its overhead is relatively low. Those give Uber huge advantages over manufacturers like General聽, which produce millions of complex, physical products using thousands of components and thousands of workers amassed in specific locations around the globe.
Admittedly, the comparison is a bit of apples and oranges right now. However, many analysts believe that ridesharing and car-sharing services -- from Uber to Lyft to Zipcar to RelayRides -- are poised for significant growth in the coming decades. Depending on how far the trend goes, companies like Uber could eat away at the auto industry's business by making聽聽ownership far less attractive.
