Uber, the ride-hailing startup turned tech conglomerate, burned through more than $1 million a week in San Francisco to compensate for money lost through its discounted Pool feature, according to a BuzzFeed report Wednesday.
UberPool, which allows people to share rides with complete strangers for a reduced price, reportedly cost the company a ton of money, but leadership apparently thought it was worth the return for a larger share of the market.
“We were bleeding cash subsidizing rides and we didn’t have a plan for tomorrow,” a former unidentified Uber employee told BuzzFeed News. “Everybody was just trying to put a Band-Aid on this problem.”
Uber at one point stopped the heavy markdowns, but subsequently experienced a dip in ridership. Customers were switching to Lyft, the ride-sharing little brother to Uber, specifically for its service equivalent to UberPool called Lyft Line.
Internal files revealed to BuzzFeed News allegedly show that the company was worried about Lyft since it was hemorrhaging business in San Francisco, the city in which Uber is headquartered.
Uber and Lyft engaged in a price war, each lowering rates for its rides, and giving out incredibly cheap deals, especially in comparison to the large majority of the taxi industry.
“The justification in their mind is if you make that investment now … the investment will pay off. And the person who’s the leader when that happens is going to be sitting on a multi-hundred-billion-dollar market,” Arun Sundararajan, a professor at New York University and author of the book The Sharing Economy, told BuzzFeed News. “This is why they raised so much money, and why they’re spending it the way they are.”
Uber has suffered so many ordeals in recent months and years that it’s hard to keep track. One in particular, though, in which Uber CEO and co-founder Travis Kalanick got in a heated argument with a driver named Fawzi Kamel, aptly stands out.
Kamel argued that because Kalanick (technically his employer) made prices so low to undercut competition, drivers disproportionately took the hit.
“You’re raising the standards, and you’re dropping the prices,” Kamel asserted.
“We have to; we have competitors. Otherwise, we’d go out of business,” Kalanick replied.
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