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Uber still isn’t a business built to last

February 7, 2020, 2:04 PM UTC

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Uber lost $8.5 billion last year, and investors still cheered the news not because it is moving closer to making money but rather because, according to CEO Dara Khosrowshahi, it is moving along the “path to profitability.”

A few things from its earnings report that jumped out at me:

  • Despite these stunning losses, Uber still has $11.3 billion in cash, the result of its prodigious fundraising over the years.
  • While Uber’s “adjusted net revenue,” a measurement that subtracts the bounties it pays drivers to drive, grew 41% in the fourth quarter, the “take rate,” or the percentage of Uber’s haul after paying the bounties, dipped slightly from the previous quarter.
  • The more revenue the Eats delivery business collects, the more it loses.
  • Uber’s second-biggest money loser, after Eats, is the unit that houses its self-driving car unit, which consumes about $130 million each quarter. Were Uber to eliminate this business altogether it would be in spitting distance of making money.
  • When Uber talks about getting close to profitability, it means that in a sense that excludes debt payments and some other expenses. That’s all well and good, except that the company has $5.7 billion of long-term debt. That’s down from $6.9 billion at the end of 2018 but still a real concern.

The picture is brighter because Uber continues to grow its top line, continues to dump some business units, and is spending less on a percentage basis to incentivize drivers. But it is a long way from being a business that is built to last.

Adam Lashinsky

Twitter: @adamlashinsky

Email: adam.lashinsky@fortune.com

This edition of Data Sheet was curated by Aaron Pressman.

NEWSWORTHY

Representation without taxation. Don't call it HQ2; it's more like HQ1.01. Amazon said it plans to increase its staff stationed in Bellevue, next door to Seattle, from 2,000 to 15,000 within a few years. The expansion may be a reaction to Seattle's new tax on big companies to provide funds to fight homelessness.

Tempest in a teapot. Now that they've fixed everything that was ailing AT&T, the good folk at activist hedge fund Elliott Management have moved on to attack other targets. Next up: the bloated Japanese telecom and investment giant SoftBank Group. Elliott says it has bought a $2.5 billion stake in Masayoshi Son's creation. Expect a really stern letter addressed to Son arriving any minute.

Starry visions. While we're on the subject of the machinations of tech billionaires, consider the portfolio of Elon Musk. Tesla's stock has been booming and crashing on a daily basis lately. It may have some company soon in the Musk universe. SpaceX is considering selling a stake in its space Internet unit, Starlink, to the public, CNBC reports.

Monetization mambo. I was just thinking about how the world definitely needed one more streaming service when the news hit that ViacomCBS is not content with CBS All Access and its bajillion Star Trek spinoffs. It wants to create another subscription streaming service that will include Showtime. Think of the potential Homeland spinoffs: Better Call Saul at the CIA. All Brody's Ghosts. Please, make it stop. In other ViacomCBS news, the company may sell the CNET website it bought over 10 years ago for $1.8 billion.

Your eyeballs are grateful. OK, yes, there may be too many streaming services. But Netflix did one small thing to make the world nicer. The streaming service said it would let customers turn off autoplay of promotional trailers in its apps.

Hanging chads. According to an annual report by the Federal Communications Commission, about 21 million people lack access to broadband Internet connections. The agency's methodology has frequently been questioned and now a study by market tracking firm BroadbandNow finds the actual number of unconnected at 42 million. Meanwhile, FCC chair Ajit Pai on Thursday announced his plan to pay Intelsat and a few other large satellite operators as much as $15 billion to convince them to quickly move out of a swath of airwave frequencies known as the C-Band, which could be super useful for 5G back on the ground.

FOOD FOR THOUGHT

The Internet created a perfect distribution mechanism for all kinds of specialized information, and multiple ways to monetize it. In his seminal essay "1,000 True Fans," Wired editor Kevin Kelly explained how niche content creators could thrive: Make something great and get 1,000 people to pay $100 a year for it. But why stop there? Li Jin, a partner at Andreessen Horowitz who focuses on the consumer sector, sees room for even greater specialization. How about something that attracts just 100 people to pay $1,000 a year, she writes in a blog post.

Put simply, if you can convince a small number of super-engaged people to pay more, you can also have a general audience that pays less. By segmenting the customer base and offering greater value to top fans—at a higher price point—creators can earn a living with a smaller total audience.

Again, returning to the examples above, this isn’t purely hypothetical. One creator on Teachable who advises artists on how to sell their art made $110,000 last year with only 76 students, at an average of $1,437 per course. Another creator who teaches physiotherapy made $141,000 with only 61 students, at an average price point of $2,314 per course. On Podia, the average revenue per user is increasing, as well. Creators who started out solely selling courses on the platform can now further monetize their audience by expanding into downloads and membership subscriptions. While making a living off the 100 True Fan model is far from commonplace, it’s increasingly possible.

FOR YOUR WEEKEND READING PLEASURE

A few long reads that I came across this week:

Behind Amazon’s HQ2 Fiasco: Jeff Bezos Was Jealous of Elon Musk (Bloomberg Businessweek)
Determined to meet Bezos’s demand for Tesla-size government handouts, the HQ2 team became victims of their own hubris.

When Social Media Is Too Much, Some Teens Tune Out (Wall Street Journal)
While Instagram and the like are key to keeping up with friends, some high-schoolers admit that they often need a break.

Kingdom Comeback: The Chiefs’ Seven-Year Journey to a Super Bowl Title (Sports Illustrated)
The coach arrived in Kansas City grieving the death of a son, tasked with saving a franchise in unfathomable crisis. The loyal GM followed him and found the quarterback who would change everything. And on Sunday, with yet another come-from-behind victory, Andy Reid finally finished what he needed to do—lift the Lombardi Trophy—for everyone but himself.

Eat Pray Roll (Medium)
I needed a vacation from my adult life — from myself, really. I tried new jobs, no job, exercise, meditation, sex, food. Then I tried “molly."

IN CASE YOU MISSED IT

Shadow Inc.: How a company with 120 Facebook likes ended up at the center of the Iowa caucus firestorm By Morgan Enos

Startup uses A.I. to identify molecules that could fight coronavirus By Jeremy Kahn

An SEC commissioner’s plan to make ICOs legal again By Jeff John Roberts

Citadel’s Ken Griffin thinks the trade war with China will cost America its tech crown By Lucinda Shen

Why mobile carriers are bidding billions for more 5G airwaves By Aaron Pressman

Click here to oust the board— Inside the A.I. startup that’s transforming activist investing By Adrian Croft

The 5 top tech skills companies want in new hires right now By Anne Fisher

BEFORE YOU GO

Speaking of too many streaming services, too many sequels, and too much content, the cast of Friends is reportedly about to sign on for a retrospective special reunion of sorts, possibly to be hosted by Ellen DeGeneres. So no one told you life was gonna be this way?

Aaron Pressman

On Twitter: @ampressman

Email: aaron.pressman@fortune.com