The web doesn’t justify bad business models

QUICK READ: Uber’s business model loses money on every transaction while investors in Blue Apron have lost 80% of their investment. A good business model can lead to record profits but a poor understanding of what consumers want and are willing to pay for can lead to a lot of money flushed down the toilet.

Uber’s revenue in the most recent quarter jumped 37%. That would be a good thing if they had a legitimate business model. But because they lose money on every ride, their losses increased 20% to $1.1 billion in the quarter. For the entire year, Uber lost over $8.5 billion, according to Cnet

After losing another $23.7 million in the last three months of 2019, Blue Apron is laying off 240 workers and shutting down the shop at its Arlington, Texas warehouse location. Blue Apron will keep, for now, its California and New York assembly-and-distribution shops, while leaders ponder peddling what’s left at a paltry $50 million price tag. Meanwhile, customers continue to desert Blue Apron, down to 351,000 in the last quarter of 2019, from 557,000 the year before. Those who bought in when Blue Apron went public at $11 a share have lost more than 80% on their investment.

I really thought the Internet start-up bubble had burst but there are too many people who are willing to throw away money on business models that don’t make sense.

What Blue Apron failed to learn was that people, too often, just don’t have the time to cook at home. With meal delivery services it’s easier to order a meal and have it delivered ready to eat. In addition, people who do cook like to pick out their own ingredients and portion sizes rather than have it come in a box.

The Internet cannot compensate for a bad business model. You would think VCs would know this but they don’t want to be the ones passing on the next Amazon or Facebook. I should also point out that it took Amazon more than 14 years to make, cumulatively, as much profit as it produced in the latest quarter alone. Keep in mind that Amazon consistently lost money for its first several years as a public company. The difference was that Amazon had a great business model while companies like Uber and Blue Apron do not.

About richmeyer

Rich is a passionate marketer who is able to quickly understand what turns a prospect into a customer. He challenges the status quo and always asks "what can we do better"? He knows how to take analytics and turn them into opportunities and he is a great communicator.

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