Uber, the global ridesharing company, has a massive user base of 91 million monthly platform customers who take 14 million trips every single day. The company has the dominant ridesharing service in the U.S. — ahead of rival Lyft (NASDAQ:LYFT) — and has expanded its business to 65 countries around the globe.
But as the company races toward its initial public offering, investors may be asking themselves, "How does Uber make its money?"
To answer that question, we've put together a video from our YouTube channel.
A full transcript follows the video.
Narrator: It used to be that if you wanted to get around in a city, your two options were public transportation or hailing a taxi.
But then came Uber.
The young company dominates the U.S. ridesharing industry with nearly 60% market share, and has expanded its business into 65 countries around the globe.
Ridesharing is poised to grow into a $133 billion industry by 2023, and Uber is well positioned to benefit.
In this video, we're going to break down exactly how Uber makes its money by getting millions of riders to their destinations every single day.
Uber makes money every time a rider opens the company's app, hails a driver, and pays for a ride — and the company has a lot of riders to make money off of.
Uber's ridesharing business operates in more than 700 cities across six continents, and has 91 million monthly active users on its platform.
In 2018, Uber's bookings — which is the amount the
company collects from riders before it has to pay its drivers, and other fees — totaled $50 billion, which was up 45% from the year before. From those bookings, the company generated $11.3 billion in revenue, a 43% increase from 2017.
But if the company had $50 billion in bookings, but only brought in $11.3 billion in sales, where did all of that money go?
Uber's business couldn't exist without its drivers, who work as independent contractors for the company and complete 14 million trips every day. Uber pays them, along with other expenses, to keep its business running across the globe.
When all of its expenses are totaled up and additional income added in, Uber lost $1.8 billion in 2018.
While Uber isn't profitable right now, the company's loss of $1.8 billion in 2018 is an improvement from its adjusted loss of $2.2 billion in 2017.
Additionally, Uber is looking to other business outside of ridesharing to drive growth. One such business is the company's food-delivery service, Uber Eats, which accounted for 12% of the company's total sales in 2018.
The service is available in 500 cities globally, and Uber says it's the largest meal-delivery platform in the world, outside of China, based on gross bookings. This small business could be an important one for Uber, because it helps the company diversify its revenue, and tap into into the fast-growing food-delivery market.
Uber also runs a business that pairs shippers and truckers together called Uber Freight. The company is still working to expand the business, but it's an early indication that Uber aims to be a transportation platform — and not just a ridesharing company.
Additionally, the company is developing autonomous vehicle technologies and has a small fleet of self-driving vehicles on the road in Pittsburgh. Autonomous vehicles could eventually help Uber lower expenses and increase rides, though the mass rollout of this technology is still years away.
While Uber has built itself into a ridesharing powerhouse, the company still faces stiff competition. Lyft, Uber's rival in the U.S., has about 39% of the market.
And while Uber's entered many international markets, its success abroad is anything but guaranteed.
So rider fees are how Uber makes most of its money. But keep an eye on how the company expands Uber Eats and its other business as well.