There is literally no way for a mass-market taxi service to make money unless they have a monopoly, or some unexpected disruptive technology comes along that gives one company an unassailable advantage in lowering costs.
The Uber app was the original innovation, but it's not particularly innovative anymore. Besides Lyft, traditional taxi companies have similar apps in some markets.
Skirting regulation and good labor practices were also supposed to help, but that can't last once you become competitive with the establishment.
Self-driving cars were supposed to lower labor costs, but that's not going to be a thing for decades if it ever works. But even if it does, it won't be an exclusive technology. They won't be able to make any more profit from it. If their costs go down, so will everyone else's and they won't be able to undercut the competition without continuing to lose money.
But in a way, that's the beauty of disruptive use of technology. Without the innovation of the Uber app, the traditional taxi cartels would have no incentive to improve their services and the fact that they have been forced to do so in order to compete benefits the consumer. They're not quite there yet, and are still catching up. The next logical step is a lift aggregation service that creates a marketplace.
Call me a snob, but Uber's criteria for what qualifies as an acceptable car has dramatically declined to the point where even Taxis are sometimes "nicer". Combine that with the fact that the drivers often don't know the neighborhood and rely exclusively on GPS (so tend to be worse drivers than a taxi).
I'm left feeling like the fare - strictly from the perspective of a consumer - is actually too high.
> drivers often don't know the neighborhood and rely exclusively on GPS
I drove for Uber about 3 years ago for a couple of months when getting my consultancy off the ground, which led to my current gig.
If I had a way to tell Uber "Don't give me rides that require me to leave a given geofence--we'll all have a bad time." Then I'd have been much, much happier. Everyone wanted a ride from my suburban town to the metro area that I know nothing about. Every now and then I'd get one where start point and endpoint were both my own town.
I'd have happily taken less fares in order to drive more familiar streets, and the people who rode with me would have enjoyed it more.
1) Many drivers from your town would likely geofence themselves to your town, reducing the supply of drivers that will drive to the metro area, increasing wait times and driving up prices, making riders unhappy.
2) Drivers would use this feature to avoid driving to "bad" parts of town, making transportation discriminatory. (In ways that are illegal for traditional taxi companies, so Uber would eventually run afoul of the same regulations.)
It's a shame because there are reasonable use cases for a geofencing feature (you seem to certainly be one of them), but it can be easily abused and can hurt the rider experience depending on locale. (Not saying the rider experience is inherently more important, but certainly Uber/Lyft would see it that way.)
For #1, it seems the market would adjust. We already see complaints about drivers not knowing the area they're driving in. Would it reassure riders to know that their driver spends 99% of driving time in an area they're riding?
For #2, sincere problem for which I am not aware of a good solution.
Not if there aren't enough drivers there, period. I'd much rather a driver unfamiliar with my city who needs Google Maps to get me to my destination if the alternative is I have to wait 20 minutes for a car.
Solution is to repeal the laws that make driving non-discriminatory. It'd be painful in the short run but ultimately a place being so bad cabbies won't drive there is a signal there is a serious need for other forms of intervention, probably by policing changes. Wallpapering over the symptoms may relieve short term pressure but is no long term solution.
Yes, this is how supply and demand works in a healthy market. Riders should pay higher prices for tasks that drivers are less willing to do, and concomitantly drivers should get paid more for those tasks.
That's a "healthy" market in the sense of a liquid market with high levels of information communication. That's not necessarily the same thing as a "healthy" market in the sense of good public policy. For instance, very few people would say that a "healthy" labor market has no minimum wage or discrimination protections, trusting supply and demand to solve those adequately. Similarly, letting the market price trips to "bad" neighborhoods higher is probably undesirable, even if that's what a free market would do.
It also may not be the same thing as a market customers understand and feel comfortable participating in. It's true that there's more demand for unblemished produce priced the same as misshapen ones, but I'd be very unlikely to patronize a grocery store that ran an auction for each individual vegetable. So it might be in Uber's interest to not expose a variable-pricing mechanism. (Indeed, customers already seem not thrilled with surge pricing, even though it arguably gets them the service they want more efficiently.)
> very few people would say that a "healthy" labor market has no minimum wage or discrimination protections ...
Unfortunately, you're talking to one of those few people. I'm against government mandating minimum wages or mandatory maternity/paternity leave. If you want those things, you can try to negotiate for it.
> customers already seem not thrilled with surge pricing
This is a true statement, but I wonder about these people. I don't share their view.
Negotiating for everything is not the most efficient way of conducting business for society as a whole. Negotiating offers the benefit of price discovery, but it also consumes resources in the form of opportunity cost with other things that could have been done with that time and effort.
Yes, we can expose the reality that most people aren't economically worth enough right now to demand parental leave or living conditions, but what is the benefit of exposing that?
It's not like figuring out the true price of a product is low because it's low quality, so if people stop buying it then the producer will stop making it. The people that aren't worth enough, whether it be because they are lazy, stupid, came across an illness, born into a poor family and never had the opportunity and mentors to teach them, should we just let them rot away?
> Yes, we can expose the reality that most people aren't economically worth enough right now to demand parental leave or living conditions, but what is the benefit of exposing that?
The benefit would be discouraging people from having kids they can't afford and not forcing employers to pay employees who aren't working.
If you want to get paid for work you're not doing, you should at least have a conversation with your employer about it.
You bring up an interesting point about efficiency, and regarding most other things, I would agree with you, but your employment is one of the most important things in your life, so it's worthwhile to do the work to understand your contract.
If biological entities whose entire purpose is to have kids can't afford to have kids, that's an indictment of the system that charges so much to have kids, not of the organisms fulfilling their biological imperative.
The benefit would be discouraging people from having kids they can't afford
Perhaps you haven't noticed, but all the evidence would suggest that that isn't working. You can't just not pay people and they magically stop fucking.
Rather, the framework is broken. When we hyper-individualise everything, we end up with a world people can come to frame thoughts like the one you've expressed.
A world where everyone must own one of everything, and a spare, in order to survive. Where betterment is defined as having more and better things to throw in the garbage heap.
So that future archeologists may dig up our society and find the last of the great cetaceans, beached, with their bellies full of custom gift cards with your face printed on it.
And that is a sad state of affairs.
The more educated people are the fewer children they have. And we continue to price more and more people out of education because they lost the birth lottery.
Here are a couple of replies: 1. As a society, we don’t allow people to discriminate against protected classes in commerce. Most of those “bad” neighborhoods are actually not bad, they are just populated by people of different race or social status. 2. Unregulated auctions work well when there is symmetry of information and negotiating power. That is not the case when I’m standing on a street corner trying to get home.
It's way too much to ask a driver to risk driving in some gang land area or pick up riders that in way too many cases are violent criminals.
If you pick up random strangers in "bad" neighborhoods as a private person you are insane. Somehow taxi drivers are bad persons when they don't.
Do these things full time you will sooner or later get in trouble.
Going after drivers is going for the symptoms rather than the cause and quite selfish. If I wouldn't do it myself I don't want anyone else being forced because they have lower income than me.
Yes, but the criminal always has first draw, first action. Unless the criminal is a bad shot or otherwise unlucky, you just escalate a situation in which you are already on the losing end of a stick.
Just explain to me the game theory plus of a main-street battle, where the bad guy already holds you at gun point- and you have the chance to accelerate towards the bitter end?
It all depends on what the situation is. Some people get mugged by people without weapons or who only have a knife or are bluffing about having a gun. But yeah I wouldnt have it somewhere I couldnt reach for the gun immediately.
What how does that work logically or in reality ? Good guy has no gun, bad guy does, 100% good guy gets robbed, raped, kidnapped, or killed. Good guy has gun, bad guy runs away most of time or sometimes gets killed or captured or otherwise stopped some of time, or sometimes robs, rapes, or kills good guy despite good guy gun some of time. 100% of time I like the second scenario.
"Studies that directly assessed the effect of actual defensive uses of guns (i.e., incidents in which a gun was 'used' by the crime victim in the sense of attacking or threatening an offender) have found consistently lower injury rates among gun-using crime victims compared with victims who used other self-protective strategies. ... Almost all national survey estimates indicate that defensive gun uses by victims are at least as common as offensive uses by criminals, with estimates of annual uses ranging from about 500,000 to more than 3 million per year, in the context of about 300,000 violent crimes involving firearms in 2008."cdc see https://www.investors.com/politics/columnists/how-many-lives...
I'm going to guess that if someone in a bad part of town is pulling a gun or even a knife on your brother, they're not going to just lazily stand there staring at him as he fumbles to find a gun under his seat to defend himself.
> I'm left feeling like the fare - strictly from the perspective of a consumer - is actually too high.
Not to mention personal risk if you consider how dangerous some Uber drivers are.
However if you consider the cost of car maintenance, annual depreciation on a taxi-like vehicle, and petrol the fares are actually very low. I would be willing to bet that a lot of Uber drivers are wavering around breaking even on the long run. Maybe that's why a lot of drivers' cars aren't as well-groomed as they used to be.
Now, I get that "from a consumer perspective" this is irrelevant, but it does mean that a cheaper service is simply not possible without sacrificing something.
The beauty of the uber model is that drivers don't even need to break even. Very few I speak to are doing it full time to make money.
Most are doing it as a side hustle for a little extra cash before or after work. Or they're using the money to justify spending more on their dream car.
They don't need to break even, they needed the car anyway, it would depreciate roughly the same amount anyway. Or at least the extra uber usage is going to be negligible compared to the time based depreciation.
A lot of drivers are acting irrationally (in the economic sense). The number of miles you put on driving for a car service will almost certainly be consequential to your car’s service life, if you are making any money at it. But, new drivers see cash in their bank account every week, and it’s hard to link that to having to splash out $25k for a new car down the road. I expect a lot of these drivers will bow out when their current cars become too old or damaged to keep driving for hire, since they won’t actually have saved enough money for a replacement.
Having people who don’t understand how to calculate their costs in the market drives down wages for everyone.
Not exactly. This theory applies steady state analysis to a transient problem. Those drivers need money now. And are willing to trade off miles for money, in some sense. They are able to leverage their time and mileage to get income, which they might not otherwise have. They may already have invested in buying the car so that is a sunk cost. In some sense they are just extracting the value of the car combined with their time and some minor profit which is their opportunity cost. The theory also fails to account for the extra utility they drive from earning the cash, which may offset any costs incurred by spiraling downwards mood from financial stress, unemployment, or even the regret of buying a car which they are having trouble paying off. Also they get to still use the car in the meantime, offsetting transportation costs and most importantly, saving them time and extending their ability to acquire other jobs or new opportunity such as education, driving to visit friends and family, etc.
What exactly are you disagreeing with? The comment you're replying to basically says: "it is unsustainable in the long term" and your response is basically: "it is sustainable in the short term" which is effectively equivalent.
> Very few I speak to are doing it full time to make money.
Interesting. Anecdotally, in Sydney it seems almost all Uber drivers I meet are doing it full-time now. A few years ago, it was just a side-gig for most but I think the demographics have shifted quite a lot.
> They don't need to break even, they needed the car anyway, it would depreciate roughly the same amount anyway.
Not if you're driving it 10x more than you normally would. Mileage affects the resale value and increases the likelihood of additional maintenance work (especially if you're doing city driving which is substantially more stressful on cars).
Yeah an uber that smells of farts, vomit and piss, and the seats are sticky... that has become more commonplace for standard uber.
Uberx is much nicer for an extra dollar or two (for standard trips), no more farty taxis.
But using my power of recollection - taxis were a crapshoot before uber came along too. Some were okay, some were disgusting.
I have not had (after a night out at a comedy lounge with my wife) an uber driver chase me into another uber, try and yank open the door yelling "I was first in line! You fuck! You Fuck! Get out!" while my taxi driver speeds away tires squealing.
Since uber came along, the quality of standard taxis here in Perth has increased dramatically. The result is a net positive.
Totally agree that in the past Taxis were MUCH more of a crapshoot, but lately they've really stepped their game up, which I think is attributable to Uber/Lyft.
So all in all, I think it's been a net positive for the consumer.
> Combine that with the fact that the drivers often don't know the neighborhood
I used to travel to Houston quite a lot. Not sure if this is representative of taxis in general in the US, but the taxi drivers never knew the neighbourhood. I couldn't say "I want to go to Acme Stuff in X district", I had to give a "Cross road" (a very US thing, that) and the driver would use satnav based on that. It did seem that a lot of taxi drivers were recent immigrants (invariably chatty), so that accounts for some, but not all.
At first, this was a surprise, as in my native UK I can literally give a street name within 50 miles of where I am, and the driver cocks their head for a second, gears whir, and yes! They know it!
It's a mix in the US. "Career" taxi drivers that have been in an area for a long while will generally be able to get you where you want to go based on landmarks and place names. Many will ask for a cross-street and will take you there from memory. Newer drivers or drivers who cover a larger area will rely heavily on satnav.
Even then, many experienced drivers will still use satnav due to changing traffic conditions. Since there are usually several routes that can be taken, using Google Maps or the like will tell the driver what the fastest route is during that particular moment, which might change every 15 minutes.
I remember when Uber was new (black cars only), and the app didn't yet give the ability to enter your destination, the drivers were all very knowledgeable (in SF) and would be able to take me where I wanted to go based on pretty minimal information. Especially in SF, UberX and Lyft Line are full of drivers who don't live in the city, and must rely on satnav to get around. Very occasionally (1 in 100 rides) I'll end up with a driver who has lived in the city for decades and could drive me somewhere in their sleep.
"At first, this was a surprise, as in my native UK I can literally give a street name within 50 miles of where I am, and the driver cocks their head for a second, gears whir, and yes! They know it!"
I'm not sure where in the UK you are, but if you pick a street at random (i.e. give all streets within 50 miles equal weight, and pick a name out of the hat), it's far from guaranteed that a taxi driver would know where it is, and how to get there.
- <30 square miles: The area within 6 miles of Charing Cross, within which London taxi drivers must know every single street.
- ~606 square miles: The area of Greater London, within which London taxi drivers must know the main roads.
- ~7800 square miles: The area "within 50 miles of where I am"
Up here in Newcastle I'm yet to meet an Uber driver who knows their way around, and it's a tiny city. My favourite was the guy who had no idea how to get to the airport despite it being literally 15 minute drive from the city centre. One of the roads was closed(and Google maps of course had no idea about it, it's completely useless), so the driver started asking me for directions to get to the airport - and my only reaction was "dude, seriously? You drive a taxi for a living and have no idea how to get to the only airport for a mid-size city??". Literally every Uber I've taken so far was both useless at navigating and borderline criminal with their driving ability(driving too fast, too aggressively, not paying enough attention).
That's probably because becoming a taxi driver in places like London is extremely hard (https://www.theknowledgetaxi.co.uk), while becoming a taxi driver in Houston is probably as simple as "do you have a license?"
I lived in a small New Jersey town where getting a taxi medallion involved little more than paying $100 and promising to charge every customer no more than $5 (for in-town trips).
EDIT: If it sets a standard then why has that standard not been adopted nationwide? Your argument is dead in the water and I can only assume you’re speaking as a person who has never visited the UK.
I feel like it depends on the city. In Phoenix I typically get a relatively nice car with a fairly normal guy or girl that drives a relatively newer car as a side gig, or to keep busy during retirement.
Conversely in Columbus Ohio all the drivers I’ve had recently are clearly former taxi drivers that migrated to Uber. The cars are old and beat up, the insides are dirty, and the drivers disregard the app’s directions usually taking us to the wrong spot.
> Uber's criteria for what qualifies as an acceptable car has dramatically declined to the point where even Taxis are sometimes "nicer"
In my travels to the US, which almost exclusively meant Houston, the taxis were always very basic, "boxy" cars; not sure about make/model, but they always felt "cheap".
Meanwhile in Europe, a lot of taxis are Mercedes E class saloons, or high-spec saloons from other makers.
Here in France taxi driving is pretty hard to get into. You not only need to pass an exam, but you also need a licence that can be bought or rented from its owner, which is really expensive. New licences are basically non-existent.
In comparison the cost of the car itself isn't as important, so drivers put some effort into it. And they're more professional. I've never once in my life talked to a taxi driver in France besides entering and leaving the car.
You’ve identified one of the reasons for having nice cars, which is the relative low cost of the car as compared to buying the licence. The others are that they are only paying about 50% of the cost of their cars (as the installments are deductible from gross income), they get subsidised diesel (hence the ludicrously overpowered v6 German engines when the rest of the world is running on Japanese hybrids), and most importantly they get to use the vehicle as their personal car when not working...
Here in Romania, taxis are consistently horrible. The cars are usually old and not well maintained. It's not uncommon to see duck taped airbags. The drivers are far from friendly.
But! They are consistently horrible in my experience. Not once has one ripped me off and they always use the meter. They know every address you throw at them and get you there safely. No matter the hour. They're also dirt cheap. 2.25 RON/km. So that's about $0.55/km.
For the Romanians reading this; Bucharest is an exception and I've had nothing but bad experiences with cabs there. My experiences are based on using cabs weekly in major Transylvanian cities.
I'm with you right until the line break. The thing is: even for the quality-declined cars, we are not paying enough to cover the costs. Those are simply the economics of using a phone app to hire a person to come and pick you up in their car and then drive you somewhere.
The truth is that if you want to pay less for transport then you need to not be taking human-driven taxis.
Where are you finding these magical cabbies that know the city better than GPS? My p99 experience is the opposite (Except in London where they have The Knowledge
I agree that when it comes to finding the most efficient routes across town, cab drivers are better (especially during rush hour), but once they get to the right street the experience is so much better with Uber/Lyft/GPS.
"It's the red building in the middle of the next block. No, the next block. No, a bit further. The...it's fine, I'll just get out here."
Definitely a fan of the Select and Black options. In fact, I've been using them more and more.
The price - while higher - feels more aligned with what I would consider to be "good value".
Ranked in order of importance for me are:
- A competent + safe driver, preferably someone who knows the area.
- A nice, clean, comfortable ride.
- A driver who doesn't talk to me.
All 3 of these are markedly improved in both the Select and Black options. Given I don't take Uber that often, I can justify the expense. If it was something I relied upon on a more regular basis I just don't think I could justify using Select/Black.
I wish drivers that pick me up from the airport (or who are taking me to the airport at an early hour) would have some sense of situational awareness and realize that someone who just got off a plane (or is waking up early to catch a flight) might not be feeling all that chatty, and just wants to sit back, close their eyes, and enjoy some peace and quiet.
I wonder if this is a uniquely American problem. Over here (Australia) it's always a couple of short sentences ('how'zit goin'?', 'yeah good') then awkward silence the rest of the trip.
Unless the cricket is on the radio, then all bets are off.
I figure probably 80% of my rides are as you describe. But I don't know what it is about airport pickups. I guess it's easy to start a conversation with "where are you flying from?" maybe, and then they don't want to stop after I give a terse answer.
Uber Black, at least for me, is not a good option because it usually (seemingly every time in LA) results in getting a giant SUV. These are not comfortable, and are not discreet, by comparison to good sedans.
> Uber Black, at least for me, is not a good option because it usually (seemingly every time in LA) results in getting a giant SUV. These ... are not discreet, by comparison to good sedans.
I am dubious. You live in LA and want to be discreet?
I wish they'd relax their policy on vehicles. I would have no problem riding in 90s shitboxes. I would find it novel. As long as it's been vacuumed that week I don't care what condition it's in.
It's kind of hard to predict which way the fare would go for such a service... It might actually end up being higher than what Uber is currently charging. Which wouldn't be a bad thing necessarily.
But it's really not. At one time it was, but at least in my city, it's sanely priced. When I travel for work for example, an Uber takes my wife and child to school and back. The roundtrip time is about 15 minutes, and the cost is usually 12 to 14 dollars. That's at minimum 48 dollars per hour, which is the upper end of middle class here.
My most recent trip to SF, my ride from Berkley to Downtown each day was about 30 dollars for about a 30 minute trip. 60/hour doesn't sound absurd for that region.
A few issues with your calculation: 1. Drivers are not productive 100% of the time, 50% utilization is more common, so knock that hourly rate in half. 2. That’s revenue, not profit: you have to pay for gas, maintenance, depreciation, and probably higher insurance premiums for driving commercial and/or high mileage. The IRS deduction for business mileage for 2019 is 58 cents per mile, this is meant to be a median all-in cost, so subtract that from your fare, and subtract half again for the miles spent driving between fares or getting home after the last ride of the day.
I don't know the numbers, or if there's even enough long term data to provide the numbers yet, but supposedly the lack of a combustion engine should eliminate much of the maintenance. How much is offset by other problems EVs have compared to combustion engines, I don't know.
How about we let consumers decide what the right "price" is? If you don't like it, then you should feel free to use the higher priced/quality alternatives!
It doesn't seem like it. In my experience, a lot of taxi companies don't have fully-featured apps even today, and the ones that do were probably motivated by the spectre of Uber. They weren't motivated to do it because they already had the market captive.
You don't even have a pension? A lot of money finds its way to companies like Uber from sources almost everyone has. Even with no pension, your bank is speculatively investing the money in your account to try and earn interest.
> Without the innovation of the Uber app, the traditional taxi cartels would have no incentive to improve their services and the fact that they have been forced to do so in order to compete benefits the consumer.
The taxi “cartels” can’t “compete” with Uber or “improve their services” to match Uber. Some of the key things that make Uber attractive to customers is low rates and the ease of booking through an app. Taxi companies are *legally prohibited” from competing on rates. Rates are set by the government, and surge pricing (which allows Uber to offer cheaper rates to more cost sensitive customers by charging more to less cost sensitive customers) is illegal for taxis. Likewise, the government usually regulates metering and payment processing for cabs. It’d be illegal for most cab companies to do GPS based metering and smart phone billing like Uber.
That may well be the case, so I voted you up as I'm not sure why you were greyed out for pointing this out. But taxis are heavily regulated partly because the taxi lobby itself demanded these sorts of barriers and taxi lobbys have been notoriously effective at shutting Uber down. They appear to have a lot of political power, and convincing politicians to let taxi firms use new technology should be the easiest lobbying gig in the world.
Reality is, even in parts of the world where taxis are not heavily regulated, no taxi firms got even close to Uber's competence and sophistication. They simply don't have access to the right people or technical knowledge to produce the same experience (evidence: my local taxi apps that are trying to compete with Uber are all buggy incompetent messes).
It is completely different. Before Uber, you had to call dispatch, give them your location or your closest estimate of it: dispatch would then manually try to find a car that was available and send them to you. This usually took at least 30-40m, if they arrived at all.
With Uber, I open the app, it looks at all available cars, finds the closest one available, and sends that car to my GPS location. Oh, and if that car gets stuck in traffic, it automatically picks another car and sends that over
Uber completely revolutionized taxi services and is absolutely nothing like calling dispatch on a phone.
Totally! The one and only time that I tried to get a taxi at my house, which is in a suburb of a major metro area in the US, I was told it would be a 45 minutes wait. I waited the 45 and nobody showed and I called again. 30 more minutes. No show. Now, I can have an Uber at my door in 10 minutes and I know what it will cost.
Agreed. In SF whenever I called cabs they often wouldn't show up at all. I suppose they found a fare before they got to me. So features like ratings and assigned cars and ability to check the status added by Uber are all huge improvements for my usage.
I've not anywhere argued that it hasn't been beneficial for people, but simply that it is not innovative.
Here, Uber is just another private hire taxi. They cannot pick up random people from the street (and be insured, anyway), so they would not be picking up random other fares on the way unless the dispatcher told them to. This is what has existed for a long time before Uber appeared, so replicating that elsewhere is not innovative surely?
>I've not anywhere argued that it hasn't been beneficial for people, but simply that it is not innovative.
And that’s what’s making you look like a dolt. Taxis in most of the world were (and mostly still are) unreliable gambles that vary from city to city. Calling on the phone and waiting for 40 minutes without live tracking and automatic rerouting for when the driver decides to stop for groceries is a completely different level of usefulness.
You just compared a flip phone to a smartphone (in more ways than one).
That's fair, but understand that your city's taxi experience isn't necessarily typical, and also that Uber has the ability to make the experience nearly identical in all markets where they operate (that alone has value). For most markets, that turns out to be higher quality than the local option, but every now and then (like in your case), the reverse is true.
I've not said they don't have value, what I've said was the app wasn't innovative. To me it cannot be because something almost identical existed before, and it isn't a huge shift from telling someone where I am.
If the innovation is being a non-terrible taxi firm, then I think I stand by my point that it's because they were big enough to ignore the local rules
do you think big hits in tech are merely the first one to code the idea? proper execution and business maneuvering are arguably more important than being the first "app to book a taxi".
"For a Linux user, you can already build such a system yourself quite trivially by getting an FTP account, mounting it locally with curlftpfs, and then using SVN or CVS on the mounted filesystem"
Hacker News about Uber (2019):
"It's really not much of a shift from a phone call either"
Dropbox's weakening position isn't necessarily an indictment of the idea, just that they're in a tough market when you consider both Google and Apple offer (comparatively cheap) cloud storage that is well-integrated into their smartphone platforms. Also consider that the success of Google's and Apple's offerings has proved out the value of the idea many times over.
Also, Dropbox was an early mover. That worked well for them in their early days, but the consumer space is saturated by better options. Dropbox (and Box) are often better suited to enterprise use, where some of the more advanced features (that regular consumers mostly don't care about) are important.
Uber's S1 is available. They are, for sure, losing shit tons of money. And they have no reliable view into what happens to demand if you broadly raise prices. Maybe that works, maybe not. Nobody knows.
Judging by your parent's comment, HN would've been wrong to assume that the reason for Dropbox's decline is a mass movement of users towards rolling their own linux hosting stack.
You have conveniently missed that there was already an app for ordering taxis before Uber for me.
Also, yes, it's not much of a shift. I'm not arguing people rebuild it or have something together but the shift from:
Call cab firm and say where you are
to
App calls cab firm and says where you are
is not massively innovative. (edit - particularly when it has been done before)
I know it's fun and cool to be snarky, but you have clearly missed what I've said and equated it to something wildly different. Please put a little more effort in to your comments to make them more useful.
The Dropbox comment is amusing because that's a complex thing users would have to do and doesn't support what Dropbox supports. Switching from one app to another is really quite different.
To me, the innovation isn't using an app instead of a phone call, it's the accountability and reliability. Before Uber, I'd have to call a taxi company at least a half hour before I want to leave. If they even answer the call, the response is always "20 minutes", regardless of how long you have to wait. At least a quarter of the time, the taxi will never show up. As a result, I'd barely ever take taxis anywhere. Instead I'd drive my own car, which meant finding/paying for parking and ensuring continued sobriety, else planning to leave the car and likely get a parking ticket the next day. I guess one benefit of the old way is that I'd plan ahead a bit better, so if driving myself wasn't practical I'd leave extra time to take transit or walk.
If I order an Uber/Lyft, I'm nearly guaranteed a ride within a reasonable amount of time once my request is accepted. Yes, occasionally the driver will cancel and the app will find a new driver, which adds to the time. Sure, the time estimate itself is usually off by 10% or so. It's not perfect, but this experience is orders of magnitude better than it used to be. For the most part I only drive my car when I'm leaving the city or need to carry a bunch of things with me.
...the innovation is a consistent more reliable and timely experience, consistent across geographies, where it did not exist before.
McDonalds didn’t have the first burger franchise, the innovation is very much in the reliability of an experience that is a better fit for the needs of the consumer than the alternatives.
I too avoided booking taxis due to bad dispatchers, even though I’m sure some good dispatchers existed in some areas. That doesn’t really do you any good when the use case for a taxi is generally that you need a car in a place that is not your home, and so you are unfamiliar with the area.
Uber not only gave you a reliable dispatcher, they show you with GPS that the taxi on the way, which greatly improves consumer confidence that yes, the ride really is on its way. If that existed pre-Uber for some areas, it hardly matters if you never visit the area and so don’t know about it’s existence.
> McDonalds didn’t have the first burger franchise,
So saying "the innovation is in the franchise" wouldn't make sense, right?
> That doesn’t really do you any good when the use case for a taxi is generally that you need a car in a place that is not your home, and so you are unfamiliar with the area.
The use case for a taxi is surely dominated by when you need a car but can't or don't want to drive? I've definitely taken more taxis near my home than away from it, purely because I'm here more often.
> Uber not only gave you a reliable dispatcher, they show you with GPS that the taxi on the way, which greatly improves consumer confidence that yes, the ride really is on its way. If that existed pre-Uber for some areas, it hardly matters if you never visit the area and so don’t know about it’s existence.
This seems like an odd description of innovation to me. "I didn't know about it so it's innovative"?
Remember, innovation is not the same as value. I'm not saying it doesn't add value to have these services elsewhere, but that the app is not innovative simply because it was not new.
Innovate means to make changes in a thing that is established. The innovation here is that the thing is the same everywhere, you don’t need to know the local errata to rely on it.
I say this as someone who was downright flabbergasted that the iPhone was described as “innovative.” After all, I had been using a handheld PC with full Windows installed for years when the original iPhone came out, and it could make VoIP calls just fine! It took me awhile to accept that the incremental “new” people are talking about when they talk about innovation is distinctly NOT novelty. It’s a shuffling of the already existing puzzle-pieces in a way that, in the cases it is successful, we call innovative, and when it fails, it was simply “ahead of its time.”
>The use case for a taxi is surely dominated by when you need a car but can't or don't want to drive? I've definitely taken more taxis near my home than away from it, purely because I'm here more often.
I'm sure it depends. I've never taken an Uber near my house. (I do get driven to and from the airport but I use a private car service for that.) I don't actually use Uber/Lyft (or taxis) all that much when I travel either although I've started to do so a bit more often when I found I mostly rented a car to get to/from the airport to some destination and then just have it sit.
Regarding McDonalds, correct, the innovation was not in the franchise. The innovation was in creating the corporate and logistic structures necessary that every single McDonalds, everywhere, even though owned by franchisees, would deliver pretty much the same experience.
They said the app was innovative, it was not to me because I already had something similar, and what you're describing has nothing to do with the app. You're just describing a not terrible taxi company, which has existed in many places far before Uber.
It seems the main thing they did was be big enough to ignore the rules that kept taxis in some parts of the US so terrible.
Not at all, their main innovation was combining pricing theory in a way that worked. They got drivers on the streets during major storms to keep wait time down. Fascinating
I'm critical of U/L, but it's ignorant to say there hasn't been any innovation.
Back then, you had to know the phone number to call - I'd try to be diligent about keeping a taxi number in my contact list but it's invalid when I really need it when traveling in a different city.
Trying to hail a cab during a busy holiday? Good luck with that - cab splitting existed but nowhere near as frictionless as through apps + route-planning software. Plus phone calls usually didn't make it to the dispatcher during extremely busy times (walking out of a bar on new years).
Waiting for the cab? Better stay put where you are since they can't see your live location.
> I'm critical of U/L, but it's ignorant to say there hasn't been any innovation.
I won't say there's none, but there was a taxi app for me before Uber that knew where I was and let me book a taxi, that wasn't innovative.
> Back then, you had to know the phone number to call -
A benefit sure, but "being big" is not an innovation.
> Trying to hail a cab during a busy holiday? Good luck with that
Here when it's busy I can't get an Uber but I can book my local service. Uber is way less reliable here.
> route-planning software.
Every uber here uses Waze.
> Waiting for the cab? Better stay put where you are since they can't see your live location.
Hah! I've repeatedly had issues where Uber cars didn't seem to know where I was, their app put me in the middle of a lake once and I kept moving about trying to figure out where the hell I could meet the taxi because their position made no sense either. They cancelled on me and I had to chase them down a street and rebook, hoping it would connect to them.
So I used to call the local cab company a lot when taking work trips. Problems Uber solved for me:
- Knowing my location automatically via GPS. I don't always know where I am. I'm on a street near some bar.
- Knowing how long it'll take for my cab to get to me. I don't have to assume it's on its way and wait or call the operator to confirm ETA.
- Paying when I don't have cash. In NZ, not all taxi cabs take cards.
It's a major shift from a phone call. Not a fan of the company but it's certainly changed things with taxi companies now investing in their own apps and Uber alternatives sprouting up.
>> There is literally no way for a mass-market taxi service to make money unless they have a monopoly, or some unexpected disruptive technology comes along that gives one company an unassailable advantage in lowering costs.
I dont understand this comment. Traditional taxis made money for generations, why cant Uber? If anything, Uber has more advantages.
EVEN: Traditional taxis had the "rent" of medallions. Uber has the rent of Corporate HQ costs.
I see your point, in theory, but the increasing medallion investment/rent just lowered profit further and further until the profit to drivers was some very low wage. The driver is not usually the medallion owner, and hence the rent for the medallion goes elsewhere. The driver just ends up with the metered fare net of medallion costs.
Similarly, Uber leads to a sort of perfect competition equilibrium (https://en.wikipedia.org/wiki/Perfect_competition) where drivers keep entering the marketplace until wages drop to some low wage, but not below that (because below that, drivers start to leave the marketplace, thus decreasing supply and increasing the equilibrium price point.)
Actually it's more like a monopsony where a single buyer (uber) can dictate the price to the sellers (drivers). Uber varies the prices it charges consumers (and therefore pays drivers) based on what maximises its profit rather than general economic welfare.
Economically, it does lead to a competition equilibrium, but it does not take into account the cost of externalities such as additional traffic and pollution generated by having more drivers.
No. What happens is that roads keep becoming saturated until they are clogged with ride shares and the riders bail out when they realize they can walk faster. The equilibrium point creates complete havoc for everyone else and little productive work is actually done.
Taxis (drivers) don't make money, or rather, they are subjected to the same degree of commoditization either way.
Medallion owners make money. All of the profits are extracted into the medallions.
It's actually a bad system, really.
'Driving a taxi' is a total commodity, there's a limitless supply of people willing to do it for sub minimum wage, so the money just goes to the owners.
Rent extraction is usually a bad way to manage things; it's kind of like real-estate speculation, but there's no need for it.
It'd be nice to see the cities embrace Uber-like systems, capture the profits from it, enforce basic laws, and somehow make it fair. I'm not holding my breath.
I feel like Uber can always make money as a marketplace - but competitive pressures from other marketplaces will drive profits down. However, is there any further growth in the model? Seemingly no unless they gain monopoly.
You are making me smack my forehead to the point of giving myself a concussion. If your comment were true, market economies as a concept would be unviable. The global economy would not exist if your comment were true. Ride-sharing is a market. People compete in the market. That’s how literally every solvent business in the world operates.
People are willing to pay to get driven around for relatively short distances on-demand so I'm not sure why that's an inherently unprofitable business. I assume many taxi companies and black car companies make money.
What's probably true is that they probably have to raise prices and deal with decreased volumes in at least many markets to do so--and probably grow more organically. And it won't be the kind of profitability that's expected from VC-funded companies.
I can imagine that running a taxi company might be a lot like running an airline (a notoriously money losing business). Four out of five of Porter's five forces are working against you:
- relatively easy for new entrants to enter the market
- lots of consumer substitutes
- lots of customer buying power
- lots of competition
Historically, the market was regulated to prevent new entrants from entering the market and preventing competition. In NYC, this was a hard limit on the number of taxis with every taxi requiring a medallion. In suburban towns, taxi companies typically need to be licensed by the town and some towns have limited the number of companies or total taxis.
Uber really disrupted that as it rolled out across the US and other countries by basically rolling out illegally and then getting customer support to change laws.
This is the conundrum of creating a better marketplace. An optimal market has 0 profit opportunities. In order to make money the market must be flawed in some way. Luckily in the real world perfect markets don't exist, but in certain sectors technology has made life difficult for people who had previously had a solid reliable income with the old inefficient system.
That doesn't quite right to me. A market with the smallest profit opportunity of a selection (say worse that government bonds) wouldn't see investment to correct that inefficiency. Zero may be 'best' case, practically speaking though no one's going to arbitrage an opportunity, that's less than the opportunity cost.
So it seems to me the optimal market would a profit opportunity somewhere between being the 2nd best profit opportunity and zero profit opportunity, depending what you set the opportunity cost at.
In a perfect market the profit opportunity asymptotically approaches 0.
But a perfect market is a mathematical model, not something that you would see in real life. As you note some entrant is not going to jump into a market and undercut the competition by 1 cent (from 2 cents) and immediately capture all of the market share.
But this does illustrate the dangers of making a more efficient marketplace if your goal is to make profit.
That's rediculous. If a market with 0 profit opportunities exists them time is frozen and all future innovation is impossible. It means that every possible inefficiency of every single person working has been removed. Humans are never perfect beings, and usually far from it, so there is always opportunity for more efficiency. Also the goalpoint is constantly moving as more technology is created to replace older ideas.
If we ever reach a so called "optimal market" as you describe it then GDP growth will also stop, as will personal income growth and all manner of things..
Historically things like medallions were pretty strong barriers to new entrants in some markets. But, yeah, today not nearly the same degree.
I imagine cab companies are in roughly the same position as people who own a bunch of fast food franchises. The owners can earn a reasonable living but it's mostly not the sort of income stream that people in Silicon Valley dream about.
I'm not sure about the future profitability of this space, but I think you're disregarding a few key points.
1. The innovation was less the app and more solving supply problems. No app will be able to change that for the taxi business.
2. Competitive advantage in this space is having more drivers and less wait time. That drives folks to use one provider over another. The lock in isn't the tech, but the availability of rides.
You're right that the lock in or network effect in the ride sharing space is very different than other big tech cos (FB, Netflix, AMZN etc) in that they're localized, and should result in more competition.
The bet investors are making is that the market will shake out with one category leader, a runner up and virtually no competition beyond that. Should be interesting to watch.
1. The regulations that Uber skirted around and then loosened up to provide more drivers can also be used by other companies. The gates are open, but not only to Uber.
2. Drivers and customers are fickle. My market used to be mostly Uber and is now mostly Lyft because all the drivers hate Uber. When Uber and Lyft run out of cash to blow on subsidies, they don't really have much of a selling point.
The problem with Uber's business model is that the main cost is the driver, who is not going to go anywhere anytime soon. It's no Amazon, where they have efficiencies of scale in logistics, datacenters, etc.; you don't get economies of scale by being bigger in the taxi business. It seems more like Moviepass.
Everyone I know uses Uber exclusively for taxis now and it's partly because whenever they travel Uber works great, but using local taxis is a pain. The "taxis are local" argument is right some of the time but many people use taxis primarily when travelling, and that's a market that really only Uber and Lyft can automate with any degree of success. I don't want 50 half-baked taxi apps on my phone.
That‘s not what an economy of scale is, that‘s branding. An economy of scale would be Uber saving a portion pf costs as it gets bigger, but that‘s not really possible because the per unit cost of a ride is tied to a driver, and they‘re not pushing drivers into driving buses or other vehicles that can carry more shared trips.
You could achieve the same thing Uber achieved with branding with a franchise; McDonalds maintains quality across franchises despite not being involved in the day to day operation. And McDonald‘s certainly doesn‘t lose money on every patty sold.
No it wasn't. There were a ton of taxi related apps and startups before Uber and nothing about Uber's app was particularly impressive IP-wise - it's basically just distance search.
In San Francisco there was nothing before Uber and similar companies started operating. You called a phone number (I used to have it memorized) and some surly individual would bark at you and then maybe a taxi would come in 40 minutes or maybe not.
Later, the driver would explain the credit card machine was broken and you'd need to pay in cash.
There were a ton of taxi related apps but none of them did what Uber did; at least in London. There were apps where you could book a taxi, telling them when and where to pick you up, but if you expected anyone to show up in the next 5 minutes you were crazy. And they were twice as expensive as uber, of course.
My impression was the the previous tax-related apps just connected riders with the existing establishment taxi companies. They didn't have much in the realm of enforcing accountability or reliability. It was nearly the same as calling the taxi dispatcher yourself and hoping a taxi would show up, except an app would do it for you.
If self-driving technology is mature enough to be used and there are several implementations to choose from, what stops care manufacturers to go after that market directly and undercutting everyone else?
* They have industrial facilities to build cars
* They have dealership networks to repair cars
* They have capital or can borrow easily to do it
I can even argue that all that stops car manufacturers from operating this are government regulations -- taxi medallions as well as anti-monopoly laws. Once Uber, lyft and the like undercut those regulations, someone else can undercut them.
The same thing that largely keeps them from operating dealers (yes, now there are laws and contracts, but it was the manufacturers who wanted dealers in the first place) and rental car companies. Although there are legal impediments, companies often want to focus on a specific part of the value chain rather than having to own the whole thing.
Car2Go is a subsidiary of Daimler, though. And I suppose that being able to produce a large number of cars (all identical models and setups, all the same colour etc.) is something that an automotive company can easily leverage.
That's why I said largely. I think one or more of the US manufacturers may have investments in rental car companies as well. But I'll still argue the basic point; companies often don't want to own the whole chain. (Auto manufacturers also use a lot of upstream suppliers as well rather than designing and building many of their components.)
As a sibling comment noted, that is Telsa's plan. I believe GM is wanting to do something similar with Cruise.
However, I feel that both of those companies are still way behind Waymo in terms of R&D. Personally, I think that Waymo is the one to watch. If they get their first, they already have the ride hailing infrastructure/user network in place (Google Maps) and may even license the tech out to auto manufacturers.
Regardless of who is standing in a few years, as a customer I will choose to ride in a Tesla whenever possible for a few reasons. 1) safety 2) fun 3) support the transition to sustainable transport 4) if FSD is part of the equation by then I think Tesla is going to have the best implementation, based on their overwhelmingly massive lead in real data.
Vertical integration like this is generally considered bad in business. Sure it is possible, but it is better for car companies to work on making a better car than split their attention and risk not paying enough attention to either...
Are you saying in any city with an un-regulated taxi market means all taxi companies operate at a loss? That doesn’t sound right (Stockholm, Sweden for example would be a counterexample).
You are just fundamentally wrong. There is a cost associated with operating the “dispatch,” operating the car and paying the employees/contractors. Take that cost, distribute it over the number of rides you expect to give to your customers and then add a little on top. The question is whether or not the customers will engage in that transaction or is the cost too high? Uber has plenty of fat to cut. If it were running efficiently, there is no possible way it would go out of business. You think Uber will raise their prices 10 percent and then everyone will decide to give up ride-sharing? Uber is the most efficient method of doing taxis. It succeeds by default. I don’t understand how you can possibly think that Uber can’t make money.
He wasn't arguing that the investor were going to make money out of it. He was arguing that as a dispatcher, they can be more efficient than the current dispatcher, thus can make money.
The disruption of taxi/rental business is going to come way before from self driving cars becomes perfect. most people know how to and prefer to drive especially if its not long distance inside dense urban areas. the real use case will be the fact that self driving car will drive itself at its own pace to nearest suitable pick up point, where u can get behind the wheel and drive it where u need to go, then leave it there for it to figure out how to drive itself to next customer who needs it. half of the population prefers to drive the car themselves or their partner rather than share that tiny space with a stranger and be driven around. this completely solves the liability issue and pr nightmares that will come from 'killed by/because of self driving car' news.
If I make a widget for $100 (50/50 fixed, variable) and sell it for $90, I've covered the variable costs. But If I only have one line, all those fixed costs are attributable to that one line, so its still not making a profit.
If you had multiple lines and one line that wasn't making a profit, but was making a contribution to fixed costs, it maybe better overall to keep that line in place. That isn't what we seem to be talking about here, but it depends how 'fixed' the fixed costs are.
I find local taxi companies have started making their own 'Uber' apps that accept card and it's fantastic.
And you don't have to deal with the awful rating system Uber have. Whoever thought it was a good idea to have drivers rate their customers really doesn't understand customer service. If you're out with some friends on a night out for example, of course you're going to get a bad rating (because your friends are drunk and probably a bit rowdy) which affects you during the working day or just solo.
Local taxi services are usually cheaper too as they don't do the surge pricing like Uber do. Uber have really driven me away as a customer to the local services.
Also local taxis don't cancel so they can abuse the surge system.
Your last point is the most salient. Solving autonomy is a much harder problem than making an app. Anyone who solves autonomy can easily make their own app, or can partner with any upstart in the ride-hailing world, who would be desperate to get that autonomy software. Hard to see how Uber or Lyft truly profits unless they're the ones who own the autonomy code.
A monopoly is exactly how they'll do it. If a competitor pops up they will undercut them.
They've run over local governments to get their cars into the highly regulated taxi industry and basically operate under their own rules so I have no doubt they can operate anti-competitively too.
UBER won't be a monopoly. But UBER and Lyft could offer lower costs than taxis, because of cheap labor, no medalions, and less empty rides they could offer their drivers.
So it's basically a UBER/Lyft duopoly, after the growing phase. And Duopolies are good businesses to be in.
> because of cheap labor, no medalions, and less empty rides they could offer their drivers.
You forget that dispatcher already take a pretty big cut already and I don't know where you live, but here in Montreal, we have a bunch of them that are all profitable. Sure dispatcher started to makes apps, but they only cover a tiny market (thus the apps is more expensive to develop per ride than Uber) and plenty of their clients prefer calling, thus an human operator (which Uber doesn't has to pay for).
Our government also decided a few years ago to force them to accept credit/debit card. One of my friend worked for one of the operator that rented terminal to taxis. They were profitable too.
If Uber can't make money by being much more efficient in MULTIPLE already profitable business and that's WORLDWIDE, there's something pretty wrong.
> Self-driving cars were supposed to lower labor costs, but that's not going to be a thing for decades if it ever works.
Decades? Maybe half a decade until it starts rolling out in major markets.
> But even if it does, it won't be an exclusive technology.
Of course it will be exclusive if the developing company decides not to make it publicly available. And why should they?
> If their costs go down, so will everyone else's and they won't be able to undercut the competition without continuing to lose money.
This is econ 101. There will be an equilibirium price. Or do you think just because it's easy to make pizza since hundreds of years and there are probably a million pizza suppliers in the world, the price of pizza went to 0?
>> Self-driving cars were supposed to lower labor costs, but that's not going to be a thing for decades if it ever works.
> Decades? Maybe half a decade until it starts rolling out in major markets.
What is the evidence for this? Five years ago the same claim was made, and it hasn't happened. It's not at all clear to me that mass market self driving cars will appear in 5 years, 20 years, or 100 years.
Do people actually use the taxi uber like apps? I ask everyone I make rideshare smalltalk with and no one has ever even said they'd installed it (small, poor sample size, I know.)
> There is literally no way for a mass-market taxi service to make money unless they have a monopoly, or some unexpected disruptive technology comes along that gives one company an unassailable advantage in lowering costs.
Confident brash nonsensical statement with no factual argument to back it up.
The fact that it is voted top comment on HN says some unflattering things about this place.
Self-driving cars are already here (Phoenix, Arizona). That and falling electric car prices will be the key advantage.
Uber won’t be the one to benefit though, as the other companies at the cutting edge are too savvy to let them (Waymo, Tesla). It is very hard to get right and I think will give those companies an advantage for years.
- They scale up massively and capture a huge fraction of the ride sharing market, thus allowing them to offer low cost / low margin rides, but making up for it by volumes : At least in India, they are in a good position, but they seem to have conceded the other markets with high potential for growth like SE Asia and China.
- They have a premium offering that is actually quite a trend-setter : Revive the Uber Black service and take it up a notch, target richer clientele which will be willing to pay a premium to ride in a much better car and with trained chauffeurs.
- They push heavily in the pooling space - this allows them to use their vehicular inventory better as well as drive up margins per ride : This doesn't seem to be a huge focus for them as of now, but it could change.
The other big change that could transform their fortunes is if they put out a viable self driving product. I do not think it'll be economically profitable, or even technologically viable in the near term.
Option 4: Uber uses the expertise, infrastructure, and brand it built in ridesharing to expand into the becoming the de facto standard for timely last mile delivery. This is why UberEats is such a major strategic focus for the company. It's proof of concept that they can do more than be a taxi.
An efficient platform for quickly and cheaply ferrying around stuff around town is a way bigger market than ridesharing. We're not only talking about the obvious examples like residential packages, groceries, and laundry.
But entirely new business models that didn't previously exist, because there's no efficient last-mile delivery solution. Cloud kitchen are an example of a nascent industry that could only emerge in a post-Uber world.
Courier services have existed for years for last mile.
I have a friend who was (20 years ago) paid full time by one law office to get papers to/from the court room (he worked for a company that dedicated him to that job). Part of his job was knowing the proper way to walk into a trial in progress.
My dad more than once hired a taxi to take a package to the airport. I suspect post 9-11 this isn't legally allowed, but back then if you needed to get a bug fix to a customer your fastest option was put it on a tape, put the tape in a suitcase, buy a plane ticket for "Mr Package", and then check the suitcase in the name of Mr Package.
>My dad more than once hired a taxi to take a package to the airport. I suspect post 9-11 this isn't legally allowed, but back then if you needed to get a bug fix to a customer your fastest option was put it on a tape, put the tape in a suitcase, buy a plane ticket for "Mr Package", and then check the suitcase in the name of Mr Package
I worked for a company where we would hire a courier to fly with the package when needed.
We sent a few tapes that way, but also some important equipment when it was critical to a customer.
It was by far the fastest and best way to be sure a dude would be at the office door in X minutes, on the plane in Y, and at the customer site in Z with the needed thing(s).
It was expensive, but they were really reliable and professional.
I don’t think the “Mr Package” option has been available for a very long time, well before 9/11. I vividly remember in the 1990s being delayed for an hour at the gate while they dug around the cargo hold in search of somebody’s checked bag who didn’t show up to board the flight.
Expanding on this Option 4: They become an auction platform for last mile deliveries.
- Demand comes from third party apps through API, or SMBs that are looking to make a same-day delivery. Higher delivery bids means network is more likely to fulfill sooner.
- Uber fulfills supply with their own network of drivers but also allows other regional rideshare networks to plug in.
- Reputation is keyed to driver's license, and better reputation means preferred bids and/or a better cut of the delivery fee, scaling at a ratio to cover the risk of bad/unknown drivers.
- Self driving cars become a reality, and the network allows autonomous delivery swarms to plug in and fulfill supply.
Saying that we're going to work to dominate a low-margin sector at a staggering loss for years, so that we can enter an even lower-margin established industry and recoup our losses there, is a gutsy proposition.
Amazon was making real profits in each line of business shortly after entering - 1-2 years for books, music, etc. IIRC. They chose to reinvest that in further expansion but always had the option of halting expansion and being fully profitable if they wanted.
Uber has nothing remotely like that and, unlike Amazon, their costs scale linearly and their workers (who are most of the business) have no reason to be loyal.
Except that Amazon didn't have remotely close to the level of losses that Uber has. The year Amazon went public, they lost $30 million. Uber is losing a billion a quarter.
Maybe, but a lot of restaurants despise Ubereats and want it to die, so they can't count on goodwill or loyalty there. (This is second-hand from a couple local restaurant owners; I am not one.)
As I understand it, Uber is playing a sort of TicketMaster-ish game, demanding exclusivity (no having your own drivers, no using competitors) and funny terms about hosting your menu designed to make you dependent on them.
I despise Uber, and when my local pizza shop was essentially forced to start using them, I started walking to pick up my greasepie. So I guess Uber is good for me, too.
>As I understand it, Uber is playing a sort of TicketMaster-ish game, demanding exclusivity (no having your own drivers, no using competitors) and funny terms about hosting your menu designed to make you dependent on them.
I'm really curious about this. I've known one of the people I talked to a long time, and while I don't audit his business, I believe him when he says the contract says he can't hire his own drivers.
In my neighborhood I know of multiple restaurants that are on UberEats, Postmates and Amazon Restaurants. For example, Pick Up Stix has their own delivery service and they're on UberEats.
Pools are where the money is at, IMHO. If they can put together a good predictive transportation model, then I think they will really have a killer app. Personal transportation is just too costly for regular use. But having an "Uber Bus" that shows up down the street from your house right when you need it, then can bring you home right after work for maybe $5/day will have wide-spread appeal.
Option 4: sell your ride data to a 3rd party. Knowing who you are, where you travel to, what's around those areas. They - or a 3rd party - could advertise what's in the area you were taken to, track where you frequent and recommend riding to places you haven't been to in a while showing you what's "new" in those areas, etc.
I don't Uber (and have only used Lyft once), so maybe they already do this or are planning to.
I can't imagine there's that much data to sell. I don't think a lot of people use uber on a daily basis, the takeaways are gonna be "people travel to and from airports close to them".
They can deduce a lot and not to mention Foursquare profits on selling check-in info to fin companies. Also, check this blog from Uber http://www.whosdrivingyou.org/blog/ubers-deleted-rides-of-gl... where they (with some confidence) deduce when someone was involved in one night stand.
Not to mention they have valuable information about you on how sensitive you are to price changes, who you interact with (sharing rides), what places you frequent (bars, gyms, churches, etc), places you travel and on what season. It's a goldmine and more by cross-referencing with other data sets. They can even know when you are sick if you get an Uber to the doctor or if you are friendly or not (drivers also review you) and how strict you are with other people (your reviews of drivers). It's all about the meta-data.
Is that data worth enough to subsidize taxi rides, though?
And again, they only have that comprehensive level of data for heavy users. Lots of people only use Uber when they're going to the airport, as others said, or maybe when they plan on drinking.
I use it when I'm running late or public transit is messed up so it's very skewed data for me.
There's also a real risk that Congress or the states could ban them from selling that data.
Looking at Uber, WeWork, JustEat etc., I get the feeling there's a growing gap between what we were brought up to believe about entrepreneurship and innovation vs. what the reality is.
We're all familiar with the '>50% of small businesses fail' stat (not the real number) and that we should be toiling and not taking a salary for years until we break even, i.e. reach a point where we're no longer losing money on every project/sale. If you aren't able to achieve this, your pricing, product-market fit, etc. have failed, because the all-knowing, all-equilibrium-izing market has spoken.
Every politician out there shows reverence for the 'small businessperson' taking risks and bringing jobs and tax revenue into their communities. But once in office, the people they meet with are Travis Kalachian and others, people who cannot make a profit, but are excellent at convincing rich investors that they should make Travis a millionaire.
The reality is that a VC-backed company can simply outprice any competitor, and if it's not enough, can lobby city hall to change the laws to favour them. And this cash spigot can stay on for years, as long as you can show you're gaining customers every quarter. If you're a big enough play, you can move your whole HQ to a low-tax friendly country and administer local operations from there.
The jobs that are created by this are right around minimum-wage level, so how is this supposed to create wealth for anybody except the shareholders who got in early with cheap valuations?
The question (with Uber in particular) is that if this business model really covers up a huge ponzi scheme.
Before the last decade (or even 5 years?) the amount of money some of these companies have been raising would have been unheard of and required an IPO.
But if you can keep finding ever bigger investors to give you ever more money...
It's a really weird reality, because typically the worst kind of place to start a company is one with huge barriers to entry that requires a ton of money to get started. Yet that seems to have done quite well recently.
Squashing minimum wage service providers seems to be merely a side effect... these companies can't really make money EVEN WHEN they ignore regulations and exploit their not-technically-employees.
> with huge barriers to entry that requires a ton of money to get started
Just a note that the proof of concept stage was very cheaply done. Travis hired someone to make an app and the "dispatch" system was just a single php page. He then tested it out with his friends.
That said, I agree that ultimately to get to the position they are today required a ton of cash - just the getting started was pretty cheap.
Actually we have the blow-by-blow of how it all played out on our podcast since Jason was employee #7 and built out the original node dispatch system.
You guys ever going to do another episode Justin? I still have Techzing in my podcast app list, hoping it will light up again with a new episode sometime.
Well as I said above it's not one episode it's a lot of them. But actually I just searched and this is the first time that Uber was mentioned in the show notes:
I think that's a really interesting concept. People think Uber will reach a scale where either it can use automation to reduce costs or jack up prices. It may well be the other way around - as it matures regulations catch up and the loopholes it was using to keep costs down disappear and their costs slowly increase instead.
Or that terrible customer experiences which are currently "exceptions to the rule" end up becoming the norm at whatever they pay drivers/charge customers... there are only so many good drivers and customers/contractors burned by bad experiences will not come back to Uber's platform.
Where I live (in Norway) we are quite well accustomed to bad experiences with overpriceed taxis and bad customer services with existing taxi companies (in large operated with immigrant drivers).
Uber would give so much more transparency and security for customers that I'm baffled that it has not been allowed yet
NYC introduced fees for ride sharing with destinations or pickups in Manhattan to reduce congestion. They also added fees to guarantee a reasonable minimum wage for the drivers of the ride sharing app.
The difference in price between a cab and a uber/lyft is relatively small. Convenience seems to be the primary driver for which people use (cabs in Manhattan frequently because of ubiquity, apps in other boroughs).
> It's a really weird reality, because typically the worst kind of place to start a company is one with huge barriers to entry that requires a ton of money to get started. Yet that seems to have done quite well recently.
That is the case if a normal person is starting a business. However, for venture capitalists, it is different.
The asset they have is a ton of money, so they are looking for businesses where that provides them an advantage. They WANT to fund a business that requires a ton of money and has lots of barriers to entry, because that is their strength.
It isn't JUST a ponzi scheme, but to some degree it sure seems like it is in part a ponzi scheme. Public investors pay back VCs and the entreprenuer and then get shafted. Actually, let's work through the Wikipedia definition line by line.
> A Ponzi scheme ... is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors.[2]
One distinction that could be made is that the entreprenuer isn't actually paying investors back himself. Rather the investors are finding new investors and re-selling their shares up the river.
> The scheme leads victims to believe that profits are coming from product sales or other means, and they remain unaware that other investors are the source of funds.
In a very literal sense, when you invest in Uber's Series A and then sell your shares on an exchange after IPO, you are aware that your profits are coming from other investors. However, I think in a pretty meaningful sense people believe the value of the company has increased due to 'product sales or other means'.
It seems like a Ponzi-like startup is not illegal because it's not as deliberately deceptive nor is it schemed by a single party/person, but rather it's more the creation of the entire market and what is really causing the profits/payouts is more up-for-debate.
(I should have used the legal definition though, not Wiki.)
The dividends that are paid by the company are the ones that differentiate a public company shares from a ponzi scheme. In a Ponzi scheme, the earnings are from future investors money but there is no concept of dividends ... where one earns based on how the company is actually performing.
So... you're saying that the entire market is currently churning out legal ponzi schemes? Or is it that the entire market is itself currently a ponzi scheme?
Either way, I get the distinct impression that I've seen this movie before and I didn't like the ending.
> It seems like a Ponzi-like startup is not illegal because it's not as deliberately deceptive nor is it schemed by a single party/person, but rather it's more the creation of the entire market and what is really causing the profits/payouts is more up-for-debate.
In a Ponzi scheme, you’re led to believe that profits are from sales, luring new investors to partake by lying.
Uber is losing money but there’s still hype around it because everyone wants to get in on the ground floor. At the end of the day, they’re going to be releasing truthful quarterly reports rather than fabricating numbers out of thin air.
How much of that benefit is purely short-term though? In a hypothetical world where Uber and Lyft's current pathway to profitability never pans out, what are the ramifications. The most obvious one is that their fares will increase by 25-50% depending on the market, pricing them well above the legacy taxi services that existed before the arrival of these VC-backed companies. The second most obvious ramification is that many of those legacy taxi services have been run entirely out of business in smaller markets. My home county of 1m+ people is now down to 1 shady taxi service with a handful of ancient, beat up Crown Vics (last produced in 2011) and they only hang on due to the incredibly low standards for taxi regulation in our region. If Uber and Lyft fail or become far less useful due to cost increases, there are significant barriers to entry for a new, clean, and professional taxi service to enter the market as they don't get to play by VC rules and have to start a highly capital intensive (for a small business) operation by conventional rules while only being able to attract a customer base entirely through conventional means of marketing, and all at a very small cost advantage versus the ride sharing giants.
>How much of that benefit is purely short-term though? In a hypothetical world where Uber and Lyft's current pathway to profitability never pans out, what are the ramifications. The most obvious one is that their fares will increase by 25-50% depending on the market, pricing them well above the legacy taxi services that existed before the arrival of these VC-backed companies.
For most U.S. cities that Uber/Lyft now service there really wasn't a taxi service before them. You could get one at the airport and possibly in certain other areas of the city like by major hotels. Everywhere else it was call a company and maybe they'll show up at some point.
if there is a demand I'd expect something to come up
Note that Uber/Lyft do something the taxi companies can not. They scale to meet demand. If 1000 drivers are needed between 6pm and 8pm then they'll likely get 1000 drivers. Taxi companies can't do this as they'd lose money on drivers and cars when all of them are not in use.
I don't really understand the point you're making. Why do small taxi companies have any more right to exist than Uber/Lyft? Or what exactly are they better at than Uber/Lyft that would justify keeping them around?
Any driver who was formerly driving for a small taxi company could simply drive for Uber/Lyft. So what is the benefit of having management be local vs centralized?
Because they make money and they are being all corporatey in their big corporation buildings!
Local artisnal petite bourgeoisie businesses only available to middle class people living in downtown urban areas are the only moral form of capitalism! That and when you get tired of the city and decide to start a farm in rural Oregon.
These do all the automated hailing, tracking the taxi for pickup (got my anxiety levels down quite a bit, I've had taxis not come for important trips), as well as payment and ratings (optional).
Most 'small businesses' are not startups. Far from it.
They are shops, restaurants, contractors, accountants.
Even most 'big companies' are just small one's that grew into something. Starbucks, H&M, IKEA. They were never the kind of 'entrepreneurial' in the Valley/Startup sense.
It's why VC/Valley is so focused on tech because there are inherent multipliers.
Uber and WeWork are providing a value add. Both of them have upped the game in some way. Yes - the funding bubble distorts everything miserably but that doesn't take away from the fact that people want cheap and fast rides, and they want cool places to work.
The current VC-funded startup economy manages to combine the worst vices of central planning (capricious allocation of resources) with laissez-faire capitalism (impoverishment of those not at the top). It really is a terrible failure pattern.
Thats an excellent question. The real answer lies in 2 things: (a) Fiat money, and thus (b) Artificially low interest rates.
As long as the money printers, keep printing, and also keep interest rates at 0%, then all sorts of market distortions will continually be produced as the dream of some return is better than the promise of none.
Keep in mind that this may not change when driverless cars become widely available. Maintaining a fleet thousands of driverless cars may prove to be more expensive than crowdsourcing a vehicle fleet.
There's either two possibilities for the self-driving future.
1) Hardly anybody owns cars anymore. When we want to get from point A to point B, we just call a driverless car from the network. But this type of service is a natural monopoly.
When people are ridesharing everywhere, the network with the biggest fleet, becomes the stochastically fastest and cheapest option. Plus add in the fact that they're collecting a lot more data to constantly improve algorithm. This is a winner-take-all market with fat monopoly margins for whoever wins. If Uber prevails, it's likely that their profits will be larger than the entire global auto market.
2) People still mostly own their own cars. They're driverless, but people like the convenience, customization and sense of personal ownership with having their own vehicle. Ridesharing is still an out-of-the-ordinary option for unconventional lifestyles or special occasions.
But in this world, Uber doesn't need to own their own fleet. The same crowdsourcing logic still works. Personal vehicle ownership means a huge number of idle vehicles sitting in people's driveways. Without the pain-in-the-ass factor of actually having to be the driver, expect a lot more people to put their car on Uber's network.
1) doesn't work except in narrow circs, because there will always be an uncomfortable delay between ordering and arrival. And there are a lot of situations where that's either inconvenient (e.g you're cold and getting rained on) or more inconvenient (missing a flight because an event has removed all the available cars to the other side of the city.)
2) is a huge insurance headache. And most people aren't going to want strangers doing random things in their cars - whether it's leaving crumbs on the floor, spilling booze, or having sex.
It's the AirBNB problem - the service starts off well with high quality buyers and sellers, but over time the reliability of both degrades.
My guess is that 2) will be tried for a while but will not appeal to most owners. 1) will become a thing, but "popular" self-drive-sharing will acquire a sleazy and low-rent reputation.
0) will be an expensive upscale service with guaranteed nice cars and quickest possible delivery.
But (square root of minus one) will be something else entirely - a new disruptive AI-enhanced service that gives users live local price and availability updates on everything, from transport to deliveries to fast food to accommodation to special items.
This will algorithmically disrupt the algorithms of the disrupters, who will of course complain that it's unfair that technology is destroying their core business.
Possibility 3) The self-driving future is decades farther out than Uber/Tesla/Waymo's marketing suggestiosn and the rest of the business drags them under before it matters.
There’s a third possible future, where a significant number of individuals buy autonomous vehicles as investments, effectively renting them out on a rideshare aggregator as one might buy an investment property to rent out.
However, this aggregator almost certainly won’t be Uber or Lyft. It’s very unlikely that the time between now and ubiquitous, consumer-level AVs will be shorter than the time before Uber is acquired by Verizon for pennies on the dollar.
if I build a self driving car why would I see or lease it? I would go for the monopoly you painted. I truly believe this is Elon's dream. Figure it out and they will claim you can own a self driving car for $300/month. Don't worry about the parking, garbage or maintenance. Just use your phone to request a car.
3) Is implemented in a socialist model. Government creates a public company behind it, provides some of the initial investment, privates provide the rest; prices maintain to help pay for it (+ private quota), even though costs were cut significantly; decrease/fluctuate prices over time to match costs (maintenance, fuel).
You got yourself a national fleet. Note, that my comment does not necessarily has the US in mind.
If you maintain a fleet of thousands of driverless cars, there are at least some economies of scale you can leverage: More negotiating power with your suppliers, the ability to purchase consumables like fuel and tires at wholesale prices, the ability to have your own in-house team of mechanics who can specialize in just your fleet, etc.
If you crowdsource it, a lot of that stuff is going to have to be purchased at retail prices, which will raise the bottom line. You might be able to hide from that by capitalizing on some information asymmetry, by paying the people you crowdsource cars from less money than it's costing them to let you use their cars. But that's presumably only going to last for a short time, until private car owners wise up.
> You might be able to hide from that by capitalizing on some information asymmetry, by paying the people you crowdsource cars from less money than it's costing them to let you use their cars
People are notoriously bad at properly pricing the depreciation of their cars.
>the ability to purchase consumables like fuel and tires at wholesale prices, the ability to have your own in-house team of mechanics who can specialize in just your fleet, etc.
But they don't purchase any of that stuff now, so doesn't matter if you get to economies of scale. I understand that when you remove the driver, a huge cost goes away, but it's replaced with having to own and maintain a vehicle.
Do Uber drivers make enough to cover complete vehicle costs? I remember reading that after total costs of ownership (depreciation, insurance, gas, maintenance, etc) Uber drivers really aren't making much.
There are so many ways to slice and dice those numbers. Drivers who already own a car they aren't going to get rid of would be paying a lot of those costs anyway (other than wear & tear and fuel). Taxes are all over the place; some pay 30%+, others nothing.
What it really comes down to is the ratio of cost of living for the driver to the amount they take home after buying gas. If I'm almost broke, want to buy more stuff than I can afford, and know I can get $100 worth of rides for $20 worth of gas in less than 2 days, the decision has already been made. As long as I have close to the same buying power, this will remain true.
It's a delicate balance, though, and when you're competing against people in more dire straits who maybe aren't as good at math, at a certain point it could become unviable.
As a general rule, drivers should devote 20% of their earnings to insurance, maintenance, gas, and repairs. When this is accounted for, the average Uber driver earnings are barely above the poverty line.
The best way to think about Uber is a reverse loan on your car. If you need money in a pinch that's a way you get it but it's not a way to actually make any sort of decent living.
That's only if maintenance costs are the same (I'm assuming they won't be). I assume there will be much higher vandalism costs and some other costs that are new to owning a car.
Uber drivers use their cars for stuff other than Uber. It's a way to make additional money from something you already have. That would not be the case if Uber had its own fleet.
Why couldn't the same logic work in the post-self-driving future?
If I own a self-driving car that sits in my garage from 8 PM to 8 AM, why not just put it on the Uber network and have it make money while I sleep?
As long as people still own cars, why does Uber ever need to own their own fleet? If anything without the actual pain-in-the-ass of actually having to be a driver, I'd think a lot more people would crowdsource their idle vehicles.
If a lot of people did that, I'd expect payments to drop to somewhere around the marginal cost of operating the vehicle which is mostly mileage-based. Or below because there's no shortage of people who need money now even if they realize they're basically borrowing money from their future self.
Who needs a ride from 8pm to 8am? Nobody except drunks. Sure you can send your car out, but you need to plan to get up early every morning to clean the puke out.
Most people follow similar schedules: they go to work at rush hour, ride with co-workers to lunch around noon and then home during the second rush hour. If you are willing to let your car out 6am to 8pm you got some possibilities - but this is when you need/want your car for your own convenience.
Well, drunks, people who work late shifts, people who are going to/from the airport/train station, etc. But definitely not as many as the rush hour crowd.
Also, unless you are the sole IP owner of pivotal self-driving tech, it will just be a commodity that all ride-hailing services pay to use, meaning that price competition still implies the same poor margins as for traditional regional taxi operations.
I'm not quite sure everyone discussing this, including the economist article author, is in the loop with why Lyft and Uber are getting valued the way they are. Wall Street is not paying for a taxi company, they are betting that Uber and Lyft are the best poised to first rollout driverless ride sharing, i.e. one of them will own and monopolize patentable tech that the mass public wants to use. The existing experience is a commodity business where profits go to zero, that's well known and old news.
That's like investing in Yahoo in the .com bubble. Uber and Lyft's only asset is the interface between the customer and the driver, not self-driving cars.
It's very easy for someone to come up with an app to order a robotic taxi. This is probably the easiest part of the robotic taxi business.
It's so much so, that unless Uber or Lyft's service is essentially "free," a robotic taxi business will probably consider the cost of working with Uber or Lyft not really worth it and bypass them. They might also prefer the experience of users sticking with their own app in their own walled garden. The robotic taxis will probably have large stickers in them that say something like, "order your next car through us and $AVE!!!" (Just like how JetBlue encourages customers to use jetblue.com)
Or, to be quite honest: If I can actually hail a robotic Tesla taxi next year, I'd rather use Tesla's app instead of Lyft or Uber's app.
While I would agree with you, driverless tech is in fact the reason behind the valuation and balance sheet deficit. No large investors at this point think they are going to get a dividend paying profitable commodity business.
>Driverless ride sharing isn’t coming, in a meaningful way*, in the next ten years, I’m willing to bet my house on that.
You'll have to expand on 'meaningful'. I can see driverless tech being used in specific use-cases between specific locations along controlled or established routes (example, moving cargo between a seaport and the train depot).
I don't see driverless being available as a general purpose consumer vehicle that you can summon to pick up your buddy and drive back to your work.
Patents are not valid indefinitely. Given the ridiculous amounts of money thrown at this, patents will probably expire long before the break-even point is met.
Besides patents, Uber has no way to bind customers. Yes, it's a commodity business, and I see no way around it. Users can simply use a different and cheaper car, which will inevitably exist and become popular.
Both rideshares subsidize about half of what they pay drivers, but their deficit is not nearly half of their total revenue. Take out the drivers, profit tomorrow. Patent good for 20 years. That's about as juicy as it ever gets.
Take out the drivers and you have a company that makes short term rentals of automobiles to consumers. There are already companies that do this. You may have rented a car from one of them last time you traveled. Take a look at Hertz or Budget and see if those are companies you actually want to be invested in.
And regarding patents: what will probably end up happening with self-driving patents is that there will be a bunch of different entities (everyone currently working on self-driving tech) that will cross license their IP to each other. A patent in this space is going to be good for licensing fees, but not for giving yourself a monopoly on self-driving tech.
Well... the last patent that makes driverless actually feasible in the real world will last for 20 years, and for most of that time the development will already be done.
More than one company is working on driverless cars. Either most of the patents will be easy to work around by some other approach, or several companies will each hold some of the needed patents and all will license from each other - it might stop someone new from getting in but it won't stop everyone already in. I would expect some combination of both.
If it’s about driverless ride sharing why don’t you buy stock in a company like google that makes money and is developing driverless cars, instead of a taxi company that loses money.
Google could build everything Uber has in a weekend once Waymo gets driverless cars working.
No, in its current state, they can't be profitable. Other transportation options will become more desirable if Uber had to truly charge what it costs to transport a customer so for now and the near future they have to subsidize the rides which kills the possibility of profit.
Autonomous cars will help but that won't happen for years, 5-10 maybe more. Additionally, if autonomy becomes a reality for Uber it will happen for other modes of transportation too so they will have to compete there too. That will be even harder since it's easier to get a bunch of cars working once the tech is available.
Also Uber will not survive as it stands now. Regulations and public pressure will eventually force it to conform to something similar to a very large cab company.
Every industry eventually gets hit by consolidation. A business of individual drivers can be even more profitable if it joins drivers into groups. They become more reliable, they cost less to maintain and they gain power that they can leverage against large industry actors. Maybe then, it will become profitable. But that won't happen until the industry matures.
I wonder if self-driving cars will be like Fusion, but instead of always being 20-40 years away, it's always 5-10 years away.
I do really feel like Waymo will prove successful in specific environments THIS year and increment slowly, and eventually our transportation habits will change to better utilize a cheaper, safer form of transportation.
But I wouldn't be surprised if I'm still saying that ten years from now.
The mouse changed the way we work, and it got commoditized. Just because a company was first to adopt and make a business out of a disruptive technology doesn't mean it's going to corner the market with it. In fact, history shows that it's not the best approach to be the first adopter of a technology (Kodak, Altavista, etc..)
My observation - Uber is starting to have hard times competing on local market. The quality of local competitors - their apps, fleet and service overall is growing and Uber seems trying to reduce costs in this situation, which probably won't help in a way, so to speak.
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Re Competition
Taxis or Uber are not always the cheapest way. One of my friends used to do a lot of travelling to Tokyo on work assignments. The others from the company always hailed a cab and ended up paying $100 for a trip from the airport to the downtown hotels. My friend would jump onto the Tokyo subway and was always there at the hotel to greet the rest of them when their cabs would arrive. He usually paid just a few bucks for the subway token.
Myself, I would sometimes get rides in the day from people I just met on the plane. But then it was a more trusting time. But maybe there is an app there that pairs people arriving in the same town. Those that have their cars in the airport parking lot and are willing to share a ride and those that are willing to pay a few bucks.
With all of the ride sharing companies burning money it seems like the real bet here is being the last one standing. If Lyft folds, Uber will have much more leverage to play with the margins.
Theoretically, couldn't they just fire almost all non-maintenance engineers and continue running the app without building new features? Wouldn't that make them profitable instantly?
Stopping expanding would probably have a bigger impact. Are they really doing a lot of new features/incremental infrastructure development at this point? (Though I don't know how much they're still blowing on self-driving.)
This might be ignorant, but I've wondered about this for a while.
Isn't Uber essentially a software company? The drivers doesn't get anything besides their share of the fares?
According to the free part of the article they've lost 7.9 billion dollars since 2009.
How expensive can it possible be to develop and operate their software? According to some sources uber takes a cut from 20-25% (although some claim much higher fractions in practice)
http://www.businessofapps.com/data/uber-statistics/#6 claims ~10B _quarterly_ revenue for 2018, with net loss at close to 1B. (EDIT: seem the revenue is counted as full fare price - not ubers cut, so that brings "actual" revenue to ~2B/Q)
How are they not making money..? Lots of normal taxi services have booking apps too. If they IPO it'll be interesting to see a more detailed breakdown of their costs.
I want to talk to someone who has invested in Lyft (or plans to do so for Uber) through the public markets and is in it for a long-term buy and hold. Like someone who really thinks the share price represents the net present value of all future cash streams for Lyft/Uber.
I think I'd have a hard time finding someone like this. You don't have to believe the company will make money, you just have to believe you can sell your piece of the company to the next guy for more.
> Here is the thing about Uber and Lyft (and much of the “sharing economy”).
> They don’t pay the cost of their capital.
> The wages they pay to their drivers are less than the depreciation of the cars and the expense of keeping the drivers fed, housed, and healthy. They pay less than minimum wage in most markets, and, in most markets, that is not enough to pay the costs of a car plus a human.
> These business models are ways of draining capital from the economy and putting them into the hands of a few investors and executives. They prey on desperate people who need money now, even if the money is insufficient to pay their total costs. Drivers are draining their own reserves to get cash now, but, hey, they gotta eat and pay the bills.
Tesla is in the best position to win in this arena. As the article points out it's cutthroat so the one with the lowest costs, acquisition and operation will win.
Telsa makes it's own cars, the cars have super low operating costs: built for 1m miles, almost no ongoing maintenance, powered by electricity that is already much cheaper than gas and will continue to get cheaper. And finally no driver with self driving software.
No one else has this combination attributes for the lowest cost operation. Though it could be Tesla after it's bought by Google.
Uber wants to be the Walmart of taxis where they start with super cheap pricing to hook in new customers and then turn the switch on once everyone is dependent on them.
It'll be very hard or impossible for Uber to be a monopoly and having more competitors means the prices will have to compete to remain attractive to people.
An unlikely idea for Uber becoming profitable is if they form a cartel with Lyft and other Uber-esque services to give all users no choice but to pay the high prices, but then they'll be competing with traditional taxi services once again.
I think Uber can easily make money if they function more as a marketplace and less as an opaque transportation company.
Their job is to connect riders to potential taxi providers (which is what they are, since they're all 'contractors'). Contractors could have a rating that's viewable before accepting a ride offer from the driver.
Fire almost all of their staff, just need a skeleton crew to keep the webstore and ride-match stuff up. Stop wasting money on self driving stuff, it's never going to happen. Take a flat rate per-ride, done.
They have other lines of business. I think Uber Freight has a lot of potential to make money (and might already be doing so?). I'm a little skeptical of Uber Eats, though.
What's the point of these speculative pieces that just list pros and cons? Give me actual projections, explore what it would take for them to be profitable. Otherwise it's just not that interesting
The people writing these pieces have neither the depth, nor the insights to generate those projections. If they did, they wouldn't be writing blog posts for ads clicks.
Will the Patriots win the Superbowl? Will Brad and Angelia get back together? Will Biden beat Sanders?
So much of the news is now just speculative junk where after you finish reading the article, you realize you got nowhere and just wasted your time. Sometimes I'm embarrassed at how much time I've wasted on junk news.
"Uber can't make money and here is why" is a factual claim and news. Those are the stories that the economist should be writing. "Can Uber ever make money" is pure speculation and a waste of time.
So UBER is just an more advanced cab company. You call a driver to drive you from A to B. It tries to under cut the traditional cab company significantly, and unfortunately that means a loss is needed until they can get rid of drivers using autonomous systems. At that time when it will also drive the cost down as they will
Not be the only one with autonomous systems. It will look more like a commodity unless you are an monopoly
The same way Amazon can make shareholder money back. Stay out of reach of the law forever. In ueber case it bets on cutting out the trad taxicompetition- one way or another.
Means ueber will want to be the market structure provider like Amazon for rides Haring and bets on becoming mandatory for all mobility related services.
It really jars the mind- all those billions betted against trust busting.
Uber isn't in the taxi business, it's in the self-driving car business. Taxis with drivers are just a stopgap, just like DVD's were a stopgap for Netflix.
The Economist is right that there are few real network effects or moats around the taxi business. But Uber's valuation depends on it:
- Developing the best driverless tech
- Being able to roll driverless taxis out to an established customer base faster and at far larger scale than anyone else (main advantage over Waymo/Tesla)
- Using a headstart in driverless tech, compared with huge data advantage from millions of Uber rides, to maintain the #1 position
Of course all this depends on Uber being able to develop the best self-driving tech, and getting such a data+scale first-mover advantage to stay ahead of competitors.
Skeptics will say Waymo will have the best tech, and expand/scale its taxi service effortlessly, and thus that Uber's existing customer base doesn't provide any advantage at all -- everyone will just jump ship from Uber to Waymo.
As a customer I would just use whatever is cheap, safe, and fun. Tesla M3P, no chatty-but-dull driver = cheap, 5+ star safety rating = safe, and performance = fun.
Uber will eventually profit from long-term SAAS+Ops+robots contracts with municipalities and governments, assuming they can grow/operate for that long and out-lobby and out-execute Lyft, Ford, Tesla, Google et al.
If I was a car manufacturer I would invest heavily on Uber. The fact that people need to have a new car to work for Uber is one of the main factors that keep the auto industry out of recession.
Well, this may drive a crowd away, but maybe the best way for monetization is to make Uber a subscription based thing. Obviously, it would have to be cheap though.
Moviepass tried do so the subscription thing on a very large scale and that didn't really work. Netflix pulls it off since they own most of the content and some of the distribution network.
It didn’t work for Moviepass because they were trying to sell a subscription at a price that was less than one movie a month.
AMC is doing it quite successfully. The difference?
- they made a deal with the movie distributors to account for all shows to be sold for $8.99. AMC keeps 50-70%. Worse case, AMC pays $6.30 per movie. Movie Pass had to pay the full retail price.
- AMC has crazy margins on concessions. Add to that the theatres with bars and full restaurants.
Netflix pulls it off because they have nearly 0% cost of goods sold, so it doesn't matter how much you use Netflix, nearly all of your subscription price contributes to profit. Not so with companies that sell physical goods and services.
Is Uber yet selling the information on who took a ride, when, from where and to where? I expect them to monetize that. Privacy? Is that something edible?
Uber can't make money from taxi service. It's trying to mimic Amazon model where profit comes from subsidiary service. Uber is yet to find such thing. Without valid profit source I don't understand how SEC approves an IPO for a license to suck away average joe investment. Uber is walking a very thin line between being a hoax and a business.
If I bought 10 McDonald's franchises today, my expenses would be higher than my revenue for probably the entire first year if not more.
If things are going well, and I make another bet by buying 10 more, my expenses would continue being higher than my revenue (even if the first 10 stores become profitable).
If I keep doing this, I may not show a profit on my balance sheet for a long time.
This example illustrates why "expenses are higher than revenue" doesn't reveal anything and that such a simplistic picture of a business is useless.
They're blowing a ton of money on R&D for autonomous cars. Also they are spending a fortune on lawyers to fight every municipal cab company in the world. Also, their business model is undercutting the existing competition, which makes big profits hard to come by.
Uber might make sense as a public utility. If it's going to lose money no matter what, why not fund it like public transportation? Lots of taxes on the back end offset by user fees to take some of the sting off and mitigate overuse.
> If it's going to lose money no matter what, why not fund it like public transportation?
Why would we as a society care if Uber exists enough to socialize the cost of it? I kind of like using Uber, but probably not enough to justify footing the full bill for it (thank you VCs).
The Uber app was the original innovation, but it's not particularly innovative anymore. Besides Lyft, traditional taxi companies have similar apps in some markets.
Skirting regulation and good labor practices were also supposed to help, but that can't last once you become competitive with the establishment.
Self-driving cars were supposed to lower labor costs, but that's not going to be a thing for decades if it ever works. But even if it does, it won't be an exclusive technology. They won't be able to make any more profit from it. If their costs go down, so will everyone else's and they won't be able to undercut the competition without continuing to lose money.