Uber Plans to Master Delivery? It Hasn't Yet Mastered Its Core Business.

The $50 billion implied valuation of Uber must have everyone scrambling to come up with a new twist on the story while putting their brains on the sideline. 

According to the Wall Street Journal, " Investors are counting on Uber to upend the delivery business much as it has for taxis.." 

The first problem is that Amazon, a public investor darling which has actually proven that it can upend and dominate traditional businesses, starting with books, has targeted rapid delivery with drones. Amazon, unlike Uber, has figured out that it's not worth using a service like this to deliver burritos.  As an investor, I wouldn't feel comfortable putting in capital to take on Amazon.

The next problem is again a limiting factor in Uber's phantasmagorical world of network effects: curb space.  In cities, like San Francisco or New York, there is no curb space, period.  Now, the Uber driver has to leave his car to pick up the burrito, during which time it may be ticketed or worse, and then do the same thing at the destination end to bring the merchandise to the customer. Spoilage and dissatisfaction, including cancelled orders, are another headache, cited in the article.

Assume that Uber wakes up and realizes there is no value-added in delivering low tickets.  Doing this kind of work isn't additive to the core business of driving customers, rather it detracts from it and really raises the stress levels and lowers the returns for its already taxed drivers.  

Even early investor, relentless cheerleader and company director Bill Gurley has trouble choking out this story.  Witness this quote, "Bill Gurley, a partner at venture-capital firm Benchmark in San Francisco and director at Uber, says he has never seen a financial projection for Uber which includes revenue from deliveries. “This company is growing faster than any company I think there’s ever been in Silicon Valley, and that’s on the core product offering,” Mr. Gurley says.

In other words, if this puffery turns out to be nothing, we don't need it to justify the valuation; never mind that other early investors are being mouthpieces now.  Signs of a market top?