Uber valuation

Jun 10, 2014 22:18 UTC

Fancy taxi app Uber just closed a new round of funding that valued the company at $18.2 billion, less than a year after being valued at $3.5 billion. Despite the company “operating in 128 cities in 37 countries around the world with hundreds of thousands of transportation providers and millions of consumers connecting to our platform,” there are a lot of people who don’t think it’s worth that much.

Dan McCrum does some back-of-the-envelope math and figures out that, using some optimistic assumptions, Uber needs 60 million users to justify an $18 billion valuation. That’s not a lot compared to other major smartphone apps, but it is a huge chunk of the global taxi-taking population. “It’s equivalent to the entire populations of San Francisco, Los Angeles, New York, Chicago, London, Washington DC, Paris, Toronto, Tokyo and Hong Kong combined”, he says.

The real problem with Uber, says Christopher Mims, is that it doesn’t inspire any loyalty among its drivers, which means it doesn’t have a great long-term advantage over competitors like Lyft and Flywheel. “Uber’s growth is reminiscent of Groupon, and we know what happened to them”, he says. James Ball agrees. “Uber and all its rivals are dueling one another for taxis – lowering fares and their percentage takes, even offering lunch or $500 bonuses to drivers … it’s hard to see how it’s ever going to turn into reliable monopoly profits to support this kind of valuation”. New York University finance professor Aswath Damodaran crunched some numbers and concludes that Uber is probably worth closer to $6 billion.

Ever the contrarian, Andrew Ross Sorkin thinks Uber’s valuation is too low. “If Uber were to take just half of the taxi market in the United States — and nowhere else — it would generate more than $1 billion in revenue a year”, he says. Michael Yoshikami, on the other hand, says that Uber’s valuation seems reasonable, but not if it remains just a taxi company. Uber’s future, he says, is as a logistics company like UPS or FedEx, and that could be worth a sky-high valuation.

Even if Uber doesn’t end up being the taxi and delivery monopoly it aspires to be, consumers might still benefit from the company’s existence. “What I love most about Uber – besides how well the service works – is how much it’s infuriating the entrenched taxi and limo hierarchy and forcing them to adapt or die. The consumer is the winner here”, says Josh Brown. — Shane Ferro

On to today’s links:

Says Science
Most of the social sciences involving behavior might be totally wrong - Ethan Watters

Data Points
“Empirical evidence suggests ‘British values’ are not to be encouraged” - Chris Dillow

Your Daily Outrage
Slavery appears to be an integral part of the global shrimp supply chain - The Guardian

New Normal
Millennials now officially a lost generation - John Carney and Justin Lahart

Please Update Your Records
If it’s on the internet, it’s not rare - Rex Sorgatz


Feb 6, 2014 23:00 UTC

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If Twitter wants to be the global town square, it needs a few more people than its current 241 million users, Mike Isaac writes. Twitter reported earnings yesterday and while revenue per user is up, growth has slowed to a crawl. Twitter’s stock price fell to $50 from $65 on Thursday, despite the fact that earnings actually beat analysts’ expectations. Matt Lynley has a good overview of the earnings call and Quartz has all the earnings charts.

The problem is the service added 9 million users in the fourth quarter — up a mere 4% from the previous quarter. Only 1 million of those new users came in the US, where most of Twitter’s ad revenue comes from — up a mere 4% from the previous quarter. S&P Capital analyst Scott Kessler told Bloomberg that the slow growth calls into question Twitter’s future value to advertisers. On the earnings call, Twitter CEO Dick Costolo said the company as a growth plan, which mostly includes “making the site easier to use”, including adding richer media to the timeline and beefing up its messaging service.

Currently, Twitter doesn’t have a lot of value for people without a ton of followers, says tech consultant Rakesh Agrawal. In a post explaining why he himself loves Twitter, he explained why most people don’t: “The primary reason people in media love Twitter and splash their Twitter handles everywhere they can is that they get so much value out of it … But their readers and viewers don’t derive the same kind of value”.

While Twitter is figuring out how to grow, Facebook had a great quarter. Last week, the company announced it had revenues of almost $2.6 billion in the fourth quarter, up 63% from the same time last year. For the first time, more than half of Facebook’s revenue came from mobile. Vauhini Vara writes that Facebook’s success is largely because it “now has data that helps it prove to marketers that there is a specific—and significant—return on their investment in news-feed ads” — on desktop and mobile.

Despite Facebook’s trouble keeping teens around, Carnegie Mellon researcher Bruno Ribeiro just released a new model showing Facebook has staying power (so, too, does the service’s annoying emails about what your friends are up to).

Next, Facebook “is on the prowl for the next big smartphone app, whether it comes from inside the building or not”, says John Herrman. Late last year, he writes, the company spent $100 million on a little-known Israeli company, Onavo, which “had developed the only service that could identify, with precision, how many people were using almost any iOS app” — a feature neither Google nor Apple has. — Shane Ferro

On to today’s links:

Bill Gates is having his Steve Jobs moment at Microsoft –  Ben Thompson

The most expensive housing markets in America are (still) its tech hubs – Jed Kolko

Baton Rouge’s rich want to create a new town to keep poor kids out of their public schools – Bloomberg

“More than one in six men ages 25 to 54, prime working years, don’t have jobs” – WSJ
It takes 19 years to dig out of the hole a bout of unemployment creates – Daniel Cooper

“Health insurance is the only good I can think of where you have to be working at a job to get a fair price” – Sarah Kliff

Apple’s growth scorecard – Horace Dediu

EU Mess
Comparing euro area and US unemployment rates – Thomas Klitgaard and Richard Peck

Big Questions
Hey, World: Why so much anarchy? – Robert Kaplan

The Oracle
Buffett’s lead widens in his hedge funds vs. index funds bet – Carol Loomis

The private fixed investment recovery: Not so bad after all – Daniel Carroll
Cities mapped by where people go running – Atlantic Cities

Hackers got into Target’s system through its air conditioning – NYT

The state of digital rights management in 2014 – The Guardian

“It sounds like something Occupy Wall Street would invent if they wanted people to hate bankers even more” – IBT

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After being on Twitter for a while, I think it has another problem. Twitter has a huge amount of garbage. Look up the hashhtag #radiation or #Fukushima for instance. It’s mostly drivel from people who either have no clue what they are talking about or parties who put out deliberately false stories for one reason or other.

For instance, I have traced back the source of most of the outrageous lies about Fukushima radiation to RT.com. And it makes sense that Russian oil companies would do their utmost to scare Japanese and Americans about Fukushima. They are making billions from the shutdown of Japan’s nuclear power plants.

Then, roughly 30% of Twitter has been reported to be bots.

I remember the publicist who introduced me to Twitter saying, “It’s filled with people with nothing better to do than that, god help them.”

Posted by BrPH | Report as abusive

A look at tech heading into CES

Jan 7, 2014 14:28 UTC

While most of the country works its way through a deep freeze (and really – it’s just ridiculous, this cold), it’s a bit more temperate in Las Vegas. That’s where investors and enthusiasts – ok, 150,000 of them – are gathering for the annual Consumer Electronics Show, which features the usual healthy dose of tech bigwigs (Yahoo’s Marissa Mayer, John Chambers of Cisco) and tons of others over the next few days.

One of the more interesting-sounding addresses involves innovation in mobile, where execs from AT&T, Qualcomm and Ericsson will talk up the ongoing growth and changing nature of the mobile markets, a sector that’s bound to keep exploding around the globe.

Headed into the conference, it’s worth noting that investors have remained relatively confident in the technology and telecommunications sectors. Since the Federal Reserve announced plans to reduce its monetary stimulus, software and software services companies are up more than 5 percent, and semiconductor names have gained 3.8 percent, according to Morgan Stanley research.

Telecom has gained 3.3 percent in that time period, a sign of overall strength even though markets in general have dipped a bit in the first couple of days of 2014. Plenty of analysts are banking on more growth in these sectors in the coming year after a solid 2013 but estimates are still a bet to come down.

Meanwhile, a number of these technology names could see a bit of pressure after Samsung’s lousy quarterly profit guidance overnight. The company said one-time charges had something to do with this, but encroachment in its key China market from Apple and weak overall smartphone growth hurts its current prowess in this area.

And analysts overall have been hitting this company hard of late. This quarter’s per-share estimates are down 3.9 percent in the last 30 days, while revenue estimates are down by 1.8 percent as well, according to Thomson Reuters Starmine. The stock has also been under pressure. There’s a question then of spillover based on some reduced demand as a result. It may be that Samsung is succumbing to competition in a key market, the way Apple saw its share eroded by the emergence of the Droid phones, rather than an overall slowdown in world demand.

Payment plans

Ben Walsh
Nov 12, 2013 23:08 UTC

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The world of payments constitutes a big, profitable, sometimes less than competitive industry that has attracted a long list of well-funded startups.

Square, a company whose card reader plugs directly into mobile phones, has talked to Goldman Sachs and Morgan Stanley about going public next year, the WSJ reports. The company has annual net revenues of an estimated $110 million to $165 million, and expects to process $30 billion in purchases next year. That’s a big number in comparison to the $90 billion that mobile payments are expected to reach in 2017, but it’s minuscule compared to the volume MasterCard and Visa do annually: those two companies, which dominate the credit card market, together handle more than $5 trillion in purchases each year.

Square is also adding financial heft to its board in the form of former Goldman Sachs CFO David Viniar, who joined Square’s board of directors last month. Viniar is replacing Starbucks CEO Howard Schultz, who always planned to serve only a single year. Starbucks will remain Square’s largest customer. Schultz, according to market researcher Rick Oglesby, is the “key decision maker” on how and when to more widely roll out Square Wallet, the company’s mobile payment app aimed at consumers.

In June, Clinkle was the hot payments startup, and it raised a $25 million seed round to fund development of an electronic wallet app. But many e-wallets are already out there, and none of them has caught on. Felix dug into the reasons why mobile payments haven’t taken off, including the simple fact that they’re often just harder to use than a card (although Square Cash is making some inroads on this front). The problem, a consultant specializing in payments told Dan Rowinski, is that “the general inertia, and lack of traction in the emerging payments market within North America, is not something that one solves with a better market strategy and a mobile app”.

To address that problem, Dwolla is aiming for a much more radical re-engineering of the financial electronic infrastructure. The Verge’s Ben Popper writes that Dwolla, in the words of former CFPB official Mark Egerman, is trying to build “a whole new set of rails for moving money”. Moving beyond credit card networks and ACH, the system that handles huge volumes of routine payments, however, isn’t easy. The company’s challenge is somewhat analogous to the challenge of building a popular social network. The Dwolla network, Popper writes, “has to reach a large number of merchants and consumers before it’s valuable enough to exist in isolation from the traditional banking and credit system”. PayPal is the only company to do that so far. And no, don’t even mention Bitcoin. - Ben Walsh

On to today’s links:

“It is likely that you will witness another Dow Jones crash of greater than 35% at some time during your life” – Josh Brown

New Normal
The growing US jobs gap: low wage-growth vs hardly any recovery at all – Ben Casselman

Strangely existential
Financial innovation is depressing – Matt Levine

Data Points
The “roving, often stealthy” BLS employees who price-check everything from gas to guns – WaPo

Right On
Why Wal-Mart can afford to give its workers a 50% raise – Stephen Gandel

Climate change’s “likely to be inherently unequal and tilted against many of the world’s poorest regions” – Annie Lowrey
Why even California struggles with climate change – Quartz

David Cameron calls for austerity while wearing white tie, surrounded by gold  - Joe Weisenthal

“Nearly everyone who gets a lucrative offer will leave”, longtime NYT journalist says – Michael Calderone

Growth Industries
The market for paid friends in New York – NYO

The Fed
Confessions of a quantitative easer: Former Fed official says QE was a Wall St bailout – WSJ
That QE apology is total nonsense – Joe Weisenthal

From The Archive
Felix’s 1996 investigation on how the internet was changing banking – Euromoney

The state of gender diversity on corporate boards globally – Harvard Law School

State and local austerity is over – Calculated Risk

“On the whole, therefore, strippers may prefer price inflation” – Tyler Cowen

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