Will Wall Street show Uber the same patience it did for Amazon?

In early February, Uber CEO Dara Khosrowshahi spoke about his plans to grow the company. Emphasis on growth, not profits.

“Cars are to us what books are to Amazon,” he told a Goldman Sachs technology conference in San Francisco.

Uber CEO Dara Khosrowshahi
Uber CEO Dara Khosrowshahi

Uber won’t go public until 2019 or 2020 but it seems Khosrowshahi was already telegraphing to Wall Street that he intends to emulate Amazon and focus exclusively on revenue instead of earnings.

The big question is whether Wall Street will give Uber that leeway. After all, it took Amazon, which went public in 1997, 18 years before it turned a profit.

Not going to happen, said Brittain Ladd.

“Amazon is the exception, not the rule,” said Ladd, a former Amazon strategy executive who is now a retail consultant. “Amazon created innovations that allowed it to expand into multiple businesses, create entirely new industries.”

The company pioneered technology and services like robotics, cloud computing, data analytics, Amazon Prime, free shipping, one day delivery, lockers, Kindle, Echo and Alexa.

That’s why Wall Street was willing to wait so long because investors saw the innovation, saw the opportunities, he said.

“I don’t see Wall Street deferring to Uber” the same way, Ladd said. “Where’s the growth going to come from? Amazon wasn’t a one trick pony.”

One trick pony? But what about Uber’s investments into Uber Eats, self driving cars, scooters, and bikes?

Well, are any of those businesses real yet? Ladd said.

Ladd makes an interesting point. After spending $10.7 billion in venture capital in less than a decade, what exactly did Uber get for this money? The company has generated unprecedented revenue growth but all of that revenue has come from its core ride hailing business.

Meanwhile, Uber has racked up astronomical losses to the tune of $4.5 billion.

Amazon faced plenty of skeptics since it went public in 1997. The company lost $1.4 billion alone in 2000. When Amazon did generate profits, CEO Jeff Bezos invested all of them back into the business.

Jeff Bezos
Amazon founder and CEO Jeff Bezos

But Amazon had two big things going for it. The first is that Amazon had a pretty clear field to itself in retail.

E-commerce was still very much an infant in the late 1990s and the early 2000s. Brick and mortar retailers have been slow to respond to the threat, allowing Amazon to expand into nearly every retail category: books, music, film, consumer electronics, clothing, pharmaceuticals, and food. The company is now operating physical stores in prime real estate locations, thanks to its nearly $14 billion acquisition of Whole Foods Market.

The Internet was well established when Uber launched in 2009. As a result, the company already faces plenty of competition in Lyft, Amazon, Google, and every automaker trying to develop autonomous vehicles.

But the one thing that has really helped Amazon is Amazon Web Services (AWS), a business that has nothing to do with consumer e-commerce.

Launched in 2002, just 5 years after Amazon went public, AWS has been an unqualified success. The unit, which essentially rents excess computing power to companies to store and manage data, allowed Amazon to absorb large operating losses from its core e-commerce business. More importantly, the profits from AWS shielded Amazon from Wall Street pressure and gave it time to make online retail profitable.

The same thing needs to happen for Uber. The company needs to develop an unexpected application from its core business that quickly and cheaply generates revenues and profits from the get go. Uber needs to find its AWS.

In many ways, Amazon has made things easier for Uber. Eighteen years is a long time to generate profits but Amazon eventually (and handsomely) rewarded investors for their patience.

Amazon forged a path. Now all Uber has to do is walk on it.


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