Ride-hailing giant Uber, which has recently reported its largest-ever quarterly loss, has an “absolutely sustainable” business model, according to the company’s CEO, Dara Khosrowshahi.
In an interview with CNN, he defended the company’s business model, which involves investing heavily in promotions to attract customers to its on-demand ride and meal-delivery offerings.
“The model is absolutely sustainable,” Khosrowshahi said. “The business, for example, is still growing 30-plus percent on a global basis. And anytime you have a business that has the kind of market size of trillions of dollars in terms of transportation and food and global commerce, it makes sense for a company to invest.”
Meanwhile, billionaire entrepreneur and Oracle co-founder Larry Ellison trashed Uber’s business model, describing the company as “almost worthless.”
Talking to a group of entrepreneurs last week, he reportedly said: “They have nothing. No technology and no loyalty.”
Ellison explained that the company didn’t own cars or control its drivers and had an “app my cat could have written.”
Uber lost $5.2 billion in the three months ending June. The company said the majority of losses were a result of stock-based compensation expenses for employees following its May initial public offering. Stock compensation aside, it still lost $1.3 billion, which was 50 percent higher than the year before.
The company faces other challenges to its business, such as California legislation that would make it more difficult to classify workers as independent contractors instead of employees. The law could increase driver costs for Uber.
It would also require businesses like Uber to prove its contract workers are free from company control.
“We do think that the nature of independent work should change,” Khosrowshahi said. “We do believe that they should get health care. We do believe that they should have minimum earnings.”
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