More Quarterly Losses From Uber, Lyft Suggest the Current Ride-Hailing Model Just Doesn't Work

The business premise seems sound enough, at least on the surface. The problem: Owning a vehicle is more trouble than it's worth, but taxi cabs are costly and so yesterday. The solution: Just use a mobile app to summon a contracted driver who will ferry you from one place to another at a more efficient (i.e. cheaper) price. Everyone wins.

Except not everyone is winning with this modern-day business model. Shareholders of ride-hailing powerhouses Lyft (NASDAQ: LYFT) and Uber Technologies (NYSE: UBER) just saw another quarter of steep losses.

Both companies fared better than expected, mind you, at least on the earnings front. But both companies' losses continue to scale up in step with revenue growth rather than decline, as their two biggest expenses are directly tethered to sales. Those expenses are the cost of revenue -- what Uber and Lyft are paying their drivers -- and marketing expenses.

Source Fool.com