The commercial airline industry has lost money over the whole of its existence. If I'm flying from NYC to DAL, I'm flying the cheapest carrier (with a slight nod to Frequent Flyer programs).
I'm not sure how Uber, Lyft, etc are any different than Southwest, American, etc. Cab companies (which I hate) and airlines saw this years ago and promoted regulations to protect their fees (and, thereby, wages). Airlines lost those regulations under Reagan.
To wit, I had dinner with a few friends in SF and it was raining when we left: "I'll call an Uber and we can share. ewww... 250% surge pricing or $90. Lemme check Lyft. Sweet, Lyft is about $50. Our Lyft will be here in 3 minutes." There was zero friction switching from Uber to Lyft.
Winning in this market seems to require a Level 4+ autonomous car [1] monopoly. Level 4+ autonomous cars are not going to be here anytime soon and Uber's not going to have a monopoly. So it's going to continue to be a gnarly pricewar, made worse by Level 3 (in which the "driver"/pilot is a student doing his homework for $5/hour, taking over driving once or twice per hour).
Not sure I agree so much with the body of TFA but I certainly agree with its conclusion.
TFA and a lot of commenters here don't seem to understand that Uber doesn't want to compete with taxi services, which are a niche business to be disrupted en route to the real prize. It wants to compete with your car - imagine 12 lanes of L.A. traffic composed mostly of Ubers. That's their dream. They even admit this in public. [0]
The day they can get cost per mile one penny below what you'd spend owning a Toyota Camry, they'll open up the biggest transport market ever created (the intentionally-inefficient American built environment). They're taking all this VC money and expanding so aggressively not because they like the scale, but rather because that's the only way to compete with private car ownership.
Here's a table of Uber's funding rounds.[1] What's keeping Uber going is Saudi Arabia's sovereign-wealth fund, which put in $3.5 billion last summer. They also took on $1.15 billion in debt last year. That's real debt at 5% interest, not some convertible deal.
Bloomberg says Uber is losing $800 million per quarter.[2] Unless they can find a bigger sucker than the Kingdom of Saudi Arabia, they run out of money in 2018.
Thanks for this. Knew they took on debt but didn't know the arrangement. My biggest concern about them is if they run out of runnway. People think money chases after these deals, but there's only so many companies able to do billion dollar rounds. People that are looking for 10x returns will be looking elsewhere.
In my opinion, giving large scale subsidies to customers seems like a business anti-pattern, and is surely gonna kill a lot of startups in near future.
I have been sold to the Idea that Investors are killing any Internet "Business" by advising Founders against simple & straight-forward business plans. They constantly ask founders not to monetize earlier and wait until founders have no choice but to trash out the company/app to advertisers. The End Result is that founders get more and more scared of asking their customers for money.
If It was upto me, I would take 1000 paying customers over 100k free customers any day. Also this would mean free customers(subsidized customers in Uber's case) not hogging company's valueable resources and company could better serve lower number of paying customers.
Edit: I don't really know how to spell "customer".
Amen! VC's favor this approach because this is the only strategy that requires their scale of money. If you just go out and make a useful product and sell it to people you may do very well... but there isn't room for the kind of huge returns VC's need. Through massive subsidies the VC's are trying to buy monopolies in entire markets... and it may be that transportation is such a large market that no amount of private capital can deter competition indefinitely.
I think a lot of investors and founders try to replicate the model that worked for Paypal. By accepting a high customer acquisition cost (in the form of literally giving away money) at the start you can scale up phenomenally quickly. It's a proven model. The problem is that it's hard to know if you can still attract new customers without that artificial appeal, so actually stopping is a huge risk. Your growth figures could collapse. Uber have managed to amass such a ridiculous warchest of cash that they won't need to stop for a really long time. And I suppose that's the point - if they can get to profit even with the subsidies before they run out of money they won't ever have to stop giving away money to new customers.
Investors, early stage in particular, are optimizing for exits, not profitability. I know that's not what's on their mind when they're advising (I assume the best of intentions), and they do provide the best of what they have, but if that's what gets rewarded, that's what'll get optimized for, and there's nothing the "Good ones" can do about it if they want to be/remain successful.
Very few people other than those pesky customers, seem to care if a business is actually making money on its own these days.
Bing might be 90% as good as google, but when people are trying to search for something they are just going to use google. I really started to realize how useful Uber was when i was traveling internationally I just pulled out my phone and a car came. I didn't have to worry about what the rate was going to be. It might have even been above what a taxi might charge, but at least I knew what the cost was going to be. It just kind of works.
I live in Singapore and Uber is a little cheaper than the excellent cab services which operated here even before Uber. There is a big competitor to Uber here called Grab. I switched to Uber because their service is good, drivers are gracious and cars are nice and they give me good offers. Last year I took 300 Uber rides, never once taking the usual Comfort Delgro Cab because their drivers suck. If prices were the same, I would pick an Uber over the traditional cab over 90% of the time due to nicer drivers and service consistency across geographies. The rest of the 10% is when I urgently just need to hail a cab.
I don't think you meant to say that Uber won't be a success. You probably meant that you feel it's over valued. Uber is a success. People love it. They pay surge prices for it. I do it all the time. It MAY be over valued but it is already a success. wake up.
I have lived in both the states and in Singapore (current). I've taken approximately the same amount of Ubers as you but it's also because its prohibitively expensive to own a car here. For the benefit of others: it can cost upwards of $100k to own a car, and that's for a cheap ass car and you've a maximum tenure of 10 years on that.
I've to agree with you on the other points however, traditional cab companies have shitty drivers who would mostly refuse to take you to your destination. Grab car drivers are usually rude (relatively) and unpleasant to deal with. I seriously wonder why this is so, in an island as small as ours and with both companies marketing to the same pool of potential drivers.
If my business is standing on the street corner handing people Saudi gold, people will love me. For a while. That doesn't make me a successful business.
I lived a short while in Chiang Mai Thailand. At the time Uber was just getting started and Grab was WAY better than Uber. I really wanted to like Uber there, but after about 5 times of the drivers 1. not finding me (yes, even with GPS), 2. not showing up at all after a long time waiting, or 3. not knowing where they were going.. I gave up. It seemed that they lacked training and that they were mostly trying to get the bonus that Uber was offering in the introductory period. Grab was much more established and worked really well.
That said, the past few times I've landed in an airport and need a ride to my hotel, I didn't bother with Uber or Grab (in Thailand and various US states), because it was just so much more convenient to walk to the curb where the taxi mafia was congregated, tell them my hotel, and be on the way.
Your statement depends on what people define as 'success'. Is Uber a product people love? Yes. So, by a product measure it's a success. Is it currently or will it be in the future a profitable business (without VC money subsidies)? We don't know, so therefore people have differing opinions on whether it will be a successful business.
People also loved products like Napster and The Pirate Bay, but does it mean they were a success? I'd say that they're not successful businesses, but were successful products that many people used.
I live in India and Uber / Ola (Uber's domestic competitor) are a godsend! In India we have Autos(https://en.wikipedia.org/wiki/Auto_rickshaw) And the drivers were (are?) ill mannered, demand exorbitant fairs. But Uber changed that. Since the drivers know that the ratings matter, they are nicer. Yes, one in a while you still get a negative experience, but as a whole. it's whole lot better.
For most of the Indians, cars rides are expensive. But I wouldn't mind if the Autos operate the same way Uber for cars work. Ola is already offering Auto rides in the same manner.
Even though I own a car, I don't enjoy driving because of traffic conditions and use Uber and Ola just because I don't feel like driving on a particular day.
I desperately hope that the Uber model succeeds in India, going back to what it was before is too painful to think about.
I haven't taken that much taxi in SG but never had a bad driver. Always polite, speak excellent English and knows where to go. Unlike in MY. They are however often very hard to find. So many taxis but whenever I seem to want one they are all occupied.
But the OP is arguing that it is unsustainable because of subsidies. If I created a business where I give you $100 a day for being a nice person, you would think it's great. But that will not be a successful business most likely.
I don't understand his point. Maybe I'm dense (today, ha).
If Uber has a (simplified) split cost per drive consisting of vehicle (+maintenance) and/or fuel & driver. If subsidised part is generally covering the driver part. When you replace driver with autonomous vehicle and you remove subsidies, you're left with a sustainable (presumably) model on a certain margin that is already rolling. Rolling in a sense that it is already an established business - people know it and use it. You've used subsidies (well, investors cash) to build a business.
Of course, this relies on a presumption they will build a sustainable model on replacing drivers with autonomous vehicles. It also presumes they will not venture into other, (potentially) more profitable business like logistics.
One thing is certain. They are positioning themselves for a great catch which relies on few key components working in the (near) future.
I think real hazard for Uber is regulation (autonomous vehicles for example) and market regulations (see taxi debates in Europe).
Uber's current problem is they have run out of things to innovate on. They've pretty much nailed the UX in their app, and all they're left with is cars taking people from Point A to Point B. What is left to improve on there?
So now, their only way to grow is to race to the bottom on price and undercut their competitors. And the only way to do that is to light billions of VC dollars on fire in the form of subsidized trips. That money isn't being invested in R&D or any form of innovation, just bridging the price gap between what the ride should cost (because of driver + vehicle costs) and what they are charging (which is a stupid low price most of the time).
The longshot they're taking on innovating by transitioning to self driving cars is downright reckless considering nearly all experts agree we're at a MINIMUM 5 years off from anything feasible in the real world, more likely 10+ years.
So they're going to have to raise their prices, or continue raising funds at an absurd rate (mind you, they've already raised $13,000,000,000 damn dollars). And they'll have to continue to light that VC money on fire in subsidized rides, rather than innovating on their product, because there's not really any other way to innovate on these rides.
As for the subsidies, I can't even understand why they are lowering their prices so aggressively anymore. It feels like each time I get into an Uber it's slightly cheaper. I was happy paying $25 for an uber to the airport rather than $30 for a cab, but now it's something like $14, which is great for my wallet, but I really don't even need it that cheap. It's bizarre.
The network effects are pretty obvious actually: as the number of people on the platform increases, the amount of time a driver has to drive to pick you up becomes increasingly shorter, thus enabling the drivers to spend more of their time with a passenger in their car (which is when they are earning money). If drivers are making more money, Uber can pay them less (reduce the subsidy).
Old taxi cab companies can't compete because they have to drive much farther on average for each pickup
A lot of people think if their Uber/Lyft ride is cheaper than their traditional taxi because it's subsidized. The lower fare for the most part is due to extreme efficiency difference between a taxi company and Uber/Lyft.
1. Uber/Lyft don't own the cars. They are leveraging car owners capital
2. Uber/Lyft drivers are more efficient because they don't have to roam around the city to find a passenger and they get notifications for when to work. The system scales up and down on demand. No taxi company that owns cars can do this.
3. Uber and Lyft are more convenient for the passenger and it makes people to use them more. I can definitely see myself and people around me to use Uber/Lyft way more than taxi since they came along.
Uber and similar companies are purring cash into this growth because at the end of the day they can make a profit because they are more efficient. And no, it's not easy to make a clone. The network effect is huge!
I think Uber's business model relies on self-driving cars. They're paying subsidies now to build a brand -- the name "Uber" has become synonymous with "pull out your cell phone and call for a ride" -- that will be very valuable once self-driving taxis become a commodity (which will happen shortly after their introduction).
Uber is not a bet on who can build the most profitable taxi company now -- it's a bet on a brand in an industry that will rapidly commoditize. Given that literally everything else Uber does has been replicated by at least one team at every hackathon I've been to in the last decade, there is very little sustained advantage from technology.
The auto industry is at a crossroads: you have new upstarts like Tesla that are very obviously planning to convert to a transit-as-a-service model. The "old" auto industry (basically everyone that makes cars and is not Tesla) is still struggling to adapt to a more "continuous development" model like Tesla. Tesla's engineering process is far simpler -- an electric car replaces the complex internal combustion drivetrain (an engine block that requires separate air, water, oil and gasoline systems, plus the transmission) with a far simpler electric engine.
The electric system in a Tesla is actually far simpler than your average car: the sensor package in a modern internal combustion engine is an incredibly complex piece of engineering. This gives them a huge cost advantage over existing automakers -- if Tesla is providing transit as a service directly to customers AND making/maintaining the vehicles themselves, that displaces a lot of revenue (auto sales/maintenance to companies like Uber).
I think Uber will eventually merge with an auto manufacturer (and likely keep the Uber branding since it's likely to be the most valuable part of the company). They already have realized that Tesla is their biggest competition; and I think that the autonomous driving deal with Ford is simply testing the waters for a future acquisition.
15 years from now, most people will likely have 3 or 4 choices of how to get somewhere by car: Uber, Tesla, Lyft and likely a mix of local / regional companies. Brand value is powerful; and I guarantee you that at the end of this, the Uber brand will be worth more than what they've put into it.
The problem with Uber paying subsidies now to build a brand is that for people paying attention to them their actions independent of the drivers are building even more of one.
Living in an area covered by both Lyft and Uber (and probably with many/most drivers working both), I will pretty much exclusively use Lyft - and I pay more for it as well, as I've tipped the drivers on every one of my rare trips. In the long term I expect their prices to rise to the point where it's more comparable to taxi services, but they still have some advantages there at least to my mind.
Agreed, and the author even sets us up for this - again and again he mentions how the largest sink is the drivers, the largest cost is the drivers, the biggest blocker is the drivers. Remove the drivers from the equation and things suddenly become a lot simpler.
Imagine if instead of becoming an uber driver, you retrofit your car with an Uber Automated Car Taxi Converter(c), "guaranteed to put your car to work for you!"
Self-driving cars will remove Uber's one significant competitive advantage: The network effects of having lots of drivers.
I very much doubt Uber's brand will be a significant asset in 10 years. I cannot see any reason why the economics of self-driving cabs would be any different to airlines.
Warren Buffett summed up businesses like this quite well[0]:
> The worst sort of business is one that grows rapidly, requires
significant capital to engender the growth, and then earns little or no money. Think airlines. Here a
durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a
farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by
shooting Orville down.
I've been an Uber driver for 2-years in a metro-area of about 1-million people. The first year was rough, as Uber aggressively lowered rates and royally screwed me over income-wise. But now, I'm making more than ever thanks to the service scaling.
The author of this blog post admits that he hasn't run any numbers, and his conclusions make that obvious. I've run the numbers, and I make part of my living as an Uber driver (it's not busy enough in my city to do this full-time). Uber doesn't worry about my expenses because it's not their job to worry about my expenses. Their job is to run their servers and make an app that customers want to use, and they've been doing a great job at that IMO. My job is to worry about my expenses, and yes, I've accounted for fuel, maintenance, and depreciation of my vehicle, and I am making enough profit to make it worth doing.
As for self-driving cars, Travis has publicly stated that Uber does not intend to own and maintain them, they are going to look to their former drivers to do that. I doubt Uber is planning on having a monopoly for self-driving cars, they just want to be in on a part of the action, but their main focus will probably always be the software of their core app.
Uber has created more jobs faster than any company in history, and this is something our economy sorely needs. They literally let everyone who passes a background check on their platform. That means no discrimination can even take place at the company level, which I think is something very very cool, especially since I have a serious health condition that has riddled my resume with holes. (Discrimination can still take place from riders however, as the ratings are what determine whether a driver stays as a driver or not.) Also, since I am my own boss, I can rest when I need to, which is essential for coping with my condition.
Uber does not create jobs. Drivers are freelancers and not employees. It's not job with all covered insurance, benefits, days out etc. Uber is exactly like Upwork for freelance programmers and designers.
How do you define a successful business? Is it solely based on return to investors? How long does it need to be in business to be successful? How does Uber define success?
I hear rumors that IBM is not successful anymore. Also same of GE and GM.
The potential for autonomous point-to-point freight shipping should pay off sooner than it's consumer business, allowing it to reduce it's investment requirements. Debatable on the timelines though.
You assume though that the network they've built up isn't valuable when you talk about self-driving vehicles. I agree the car tech will be commoditised and to my mind Uber owning their own fleet isn't the best option. It'd be very capital intensive and not a great use of cash.
I liken the switch to self driving cars to the same market as buy-to-let home rentals. If you've got the money why not buy a one (or more) of them, send them out and rent them through Uber/Lyft etc. and keep the money rolling in around the clock. Uber takes a smaller cut but also doesn't incur anything like as much risk.
Why theorize about "economies of scale won't help"? We know the answer is "yes they will" -- Uber's US operations were profitable in 1Q16[1] and that included many non-scaled markets.
Like I said 8 years ago[2]: "Facebook made ~$200mm in 2008. It's pretty clear they could profit on those revenues, and instead are choosing to invest in further growth (with outside capital)."
The author forgot another significant problem Uber faces.
When self driving fleets can be deployed for ride sharing, a new startup, one without the hundred of millions / billions in losses that Uber will have accumulated, will come on the scene.
How can Uber, a company with massive losses to recover from, compete with a new, nimble and well-funded startup that doesn't have those legacy losses weighing down their ability to raise capital and pay back investors?
What OP, and everyone in this thread don't seem to understand is that Uber has waaaay more up it's sleeve than a mere taxi app.
Uber has more data about traffic patterns in every major city they operate in, than any other entity, including the cities themselves. Uber can use that data as leverage in so many ways.
They have an API, they are a logistics platform in a sense. Uber's endgame will be allowing people to plug into that platform for a price.
If they can manage to become the defacto cab platform for all major US cities alone, they are close to being worth their current valuation as is. Expand this all over the globe.
Do not forget they have a 20% stake in Didi as well now, which will more than make up for their 2 billion loss while trying to capture the chinese market.
Investors are giving Uber a near infinite bankroll so it's hard to say that they'll be allowed to fail.
I was in Southeast Asia recently and it's insane how cheap Uber is. It almost doesn't make sense to take any other form of transportation. I imagine once the competition dies, they'll have complete control over the market.
Interesting thoughts. I wrote along this line about UberEats and what is wrong with their current model. They believe they can win the battle thanks to subsidized unit economics. However this is simply not sustainable. The same conclusion is valid for all on-demand delivery startups.
Instead they should leverage their existing community, i.e. users being located next to each other. Similarly to UberPool where ride-sharing is the only way for Uber/Lyft/etc to work, grouping users for food delivery with variable rewards based on location (i.e. discounts) is the way to go.
I agree with this, however I don't agree with the author's take on the self driving car part. He says:
> Let’s assume that we will see fully autonomous vehicles that can navigate city traffic in the near future [...] If this technology becomes available, I doubt that Uber will have a monopoly on self-driving car technology.[...]I think it’s safe to say that many companies will have access to self-driving car technology.[...]In this scenario I don’t see how Uber can generate reasonable profits
In the ideal 'future' society, everyone will have a self-driving car they can order to pick them up wherever they are. This would drive Uber out of business. However there will be a whole taxi industry for performing this service when someone is outside of their own city.
I believe the taxis of the future will be there to assist someone in one of two scenarios:
1.) Someone in their own city who doesn't own a self driving car
2.) Someone who is in a city different than their own
I still think there will be plenty of business in the above scenarios - and Uber is positioning itself to be the industry leader/titan. It's definitely a huge gamble since predicting the future is impossible at worst, and extremely hard at best; but we'll see if Uber can stay afloat long enough to reach it.
[+] [-] CoffeeDregs|9 years ago|reply
I'm not sure how Uber, Lyft, etc are any different than Southwest, American, etc. Cab companies (which I hate) and airlines saw this years ago and promoted regulations to protect their fees (and, thereby, wages). Airlines lost those regulations under Reagan.
To wit, I had dinner with a few friends in SF and it was raining when we left: "I'll call an Uber and we can share. ewww... 250% surge pricing or $90. Lemme check Lyft. Sweet, Lyft is about $50. Our Lyft will be here in 3 minutes." There was zero friction switching from Uber to Lyft.
Winning in this market seems to require a Level 4+ autonomous car [1] monopoly. Level 4+ autonomous cars are not going to be here anytime soon and Uber's not going to have a monopoly. So it's going to continue to be a gnarly pricewar, made worse by Level 3 (in which the "driver"/pilot is a student doing his homework for $5/hour, taking over driving once or twice per hour).
Not sure I agree so much with the body of TFA but I certainly agree with its conclusion.
[1] http://www.techrepublic.com/article/autonomous-driving-level...
[+] [-] avn2109|9 years ago|reply
The day they can get cost per mile one penny below what you'd spend owning a Toyota Camry, they'll open up the biggest transport market ever created (the intentionally-inefficient American built environment). They're taking all this VC money and expanding so aggressively not because they like the scale, but rather because that's the only way to compete with private car ownership.
[0] https://twitter.com/travisk/status/564065776005808128
[+] [-] bsirkia|9 years ago|reply
Part 1: http://www.nakedcapitalism.com/2016/11/can-uber-ever-deliver...
Part 2: http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver...
Part 3: http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver...
Part 4: http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver...
Part 5: http://www.nakedcapitalism.com/2016/12/can-uber-ever-deliver...
Part 6: http://www.nakedcapitalism.com/2017/01/can-uber-ever-deliver...
[+] [-] habosa|9 years ago|reply
It is possible that some future Uber innovation will make them profitable, but their current operation is smoke and mirrors.
[+] [-] Animats|9 years ago|reply
Bloomberg says Uber is losing $800 million per quarter.[2] Unless they can find a bigger sucker than the Kingdom of Saudi Arabia, they run out of money in 2018.
[1] https://www.crunchbase.com/organization/uber/funding-rounds [2] https://www.bloomberg.com/news/articles/2016-12-20/uber-s-lo...
[+] [-] hmate9|9 years ago|reply
[+] [-] withdavidli|9 years ago|reply
[+] [-] cryptozeus|9 years ago|reply
[+] [-] falloutx|9 years ago|reply
I have been sold to the Idea that Investors are killing any Internet "Business" by advising Founders against simple & straight-forward business plans. They constantly ask founders not to monetize earlier and wait until founders have no choice but to trash out the company/app to advertisers. The End Result is that founders get more and more scared of asking their customers for money.
If It was upto me, I would take 1000 paying customers over 100k free customers any day. Also this would mean free customers(subsidized customers in Uber's case) not hogging company's valueable resources and company could better serve lower number of paying customers.
Edit: I don't really know how to spell "customer".
[+] [-] djyaz1200|9 years ago|reply
[+] [-] onion2k|9 years ago|reply
[+] [-] diminoten|9 years ago|reply
Very few people other than those pesky customers, seem to care if a business is actually making money on its own these days.
[+] [-] samfisher83|9 years ago|reply
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] 1_2__3|9 years ago|reply
There's so much in our world we could do if we only demanded profit, rather than 20+% profit YoY from every corner of our existence.
[+] [-] pweissbrod|9 years ago|reply
[+] [-] ahuja_s|9 years ago|reply
I don't think you meant to say that Uber won't be a success. You probably meant that you feel it's over valued. Uber is a success. People love it. They pay surge prices for it. I do it all the time. It MAY be over valued but it is already a success. wake up.
[+] [-] earthtolazlo|9 years ago|reply
[+] [-] sonotwhat|9 years ago|reply
I've to agree with you on the other points however, traditional cab companies have shitty drivers who would mostly refuse to take you to your destination. Grab car drivers are usually rude (relatively) and unpleasant to deal with. I seriously wonder why this is so, in an island as small as ours and with both companies marketing to the same pool of potential drivers.
[+] [-] freyir|9 years ago|reply
[+] [-] spraak|9 years ago|reply
That said, the past few times I've landed in an airport and need a ride to my hotel, I didn't bother with Uber or Grab (in Thailand and various US states), because it was just so much more convenient to walk to the curb where the taxi mafia was congregated, tell them my hotel, and be on the way.
[+] [-] BigCatStuff|9 years ago|reply
Your statement depends on what people define as 'success'. Is Uber a product people love? Yes. So, by a product measure it's a success. Is it currently or will it be in the future a profitable business (without VC money subsidies)? We don't know, so therefore people have differing opinions on whether it will be a successful business.
People also loved products like Napster and The Pirate Bay, but does it mean they were a success? I'd say that they're not successful businesses, but were successful products that many people used.
[+] [-] princeb|9 years ago|reply
> their drivers suck
haha.
a lot of people use uber here. I think they've got a better hold on the market than grab.
if only the uber drivers will stop driving by gps because their mapping software is always wrong.
[+] [-] pritambarhate|9 years ago|reply
For most of the Indians, cars rides are expensive. But I wouldn't mind if the Autos operate the same way Uber for cars work. Ola is already offering Auto rides in the same manner.
Even though I own a car, I don't enjoy driving because of traffic conditions and use Uber and Ola just because I don't feel like driving on a particular day.
I desperately hope that the Uber model succeeds in India, going back to what it was before is too painful to think about.
[+] [-] sleepyhead|9 years ago|reply
[+] [-] dinkumthinkum|9 years ago|reply
[+] [-] brobinson|9 years ago|reply
[+] [-] Keyframe|9 years ago|reply
If Uber has a (simplified) split cost per drive consisting of vehicle (+maintenance) and/or fuel & driver. If subsidised part is generally covering the driver part. When you replace driver with autonomous vehicle and you remove subsidies, you're left with a sustainable (presumably) model on a certain margin that is already rolling. Rolling in a sense that it is already an established business - people know it and use it. You've used subsidies (well, investors cash) to build a business.
Of course, this relies on a presumption they will build a sustainable model on replacing drivers with autonomous vehicles. It also presumes they will not venture into other, (potentially) more profitable business like logistics.
One thing is certain. They are positioning themselves for a great catch which relies on few key components working in the (near) future.
I think real hazard for Uber is regulation (autonomous vehicles for example) and market regulations (see taxi debates in Europe).
[+] [-] dchuk|9 years ago|reply
So now, their only way to grow is to race to the bottom on price and undercut their competitors. And the only way to do that is to light billions of VC dollars on fire in the form of subsidized trips. That money isn't being invested in R&D or any form of innovation, just bridging the price gap between what the ride should cost (because of driver + vehicle costs) and what they are charging (which is a stupid low price most of the time).
The longshot they're taking on innovating by transitioning to self driving cars is downright reckless considering nearly all experts agree we're at a MINIMUM 5 years off from anything feasible in the real world, more likely 10+ years.
So they're going to have to raise their prices, or continue raising funds at an absurd rate (mind you, they've already raised $13,000,000,000 damn dollars). And they'll have to continue to light that VC money on fire in subsidized rides, rather than innovating on their product, because there's not really any other way to innovate on these rides.
As for the subsidies, I can't even understand why they are lowering their prices so aggressively anymore. It feels like each time I get into an Uber it's slightly cheaper. I was happy paying $25 for an uber to the airport rather than $30 for a cab, but now it's something like $14, which is great for my wallet, but I really don't even need it that cheap. It's bizarre.
[+] [-] cody3222|9 years ago|reply
Old taxi cab companies can't compete because they have to drive much farther on average for each pickup
[+] [-] msoad|9 years ago|reply
A lot of people think if their Uber/Lyft ride is cheaper than their traditional taxi because it's subsidized. The lower fare for the most part is due to extreme efficiency difference between a taxi company and Uber/Lyft.
1. Uber/Lyft don't own the cars. They are leveraging car owners capital
2. Uber/Lyft drivers are more efficient because they don't have to roam around the city to find a passenger and they get notifications for when to work. The system scales up and down on demand. No taxi company that owns cars can do this.
3. Uber and Lyft are more convenient for the passenger and it makes people to use them more. I can definitely see myself and people around me to use Uber/Lyft way more than taxi since they came along.
Uber and similar companies are purring cash into this growth because at the end of the day they can make a profit because they are more efficient. And no, it's not easy to make a clone. The network effect is huge!
[+] [-] exelius|9 years ago|reply
Uber is not a bet on who can build the most profitable taxi company now -- it's a bet on a brand in an industry that will rapidly commoditize. Given that literally everything else Uber does has been replicated by at least one team at every hackathon I've been to in the last decade, there is very little sustained advantage from technology.
The auto industry is at a crossroads: you have new upstarts like Tesla that are very obviously planning to convert to a transit-as-a-service model. The "old" auto industry (basically everyone that makes cars and is not Tesla) is still struggling to adapt to a more "continuous development" model like Tesla. Tesla's engineering process is far simpler -- an electric car replaces the complex internal combustion drivetrain (an engine block that requires separate air, water, oil and gasoline systems, plus the transmission) with a far simpler electric engine.
The electric system in a Tesla is actually far simpler than your average car: the sensor package in a modern internal combustion engine is an incredibly complex piece of engineering. This gives them a huge cost advantage over existing automakers -- if Tesla is providing transit as a service directly to customers AND making/maintaining the vehicles themselves, that displaces a lot of revenue (auto sales/maintenance to companies like Uber).
I think Uber will eventually merge with an auto manufacturer (and likely keep the Uber branding since it's likely to be the most valuable part of the company). They already have realized that Tesla is their biggest competition; and I think that the autonomous driving deal with Ford is simply testing the waters for a future acquisition.
15 years from now, most people will likely have 3 or 4 choices of how to get somewhere by car: Uber, Tesla, Lyft and likely a mix of local / regional companies. Brand value is powerful; and I guarantee you that at the end of this, the Uber brand will be worth more than what they've put into it.
[+] [-] aetherson|9 years ago|reply
[+] [-] fencepost|9 years ago|reply
Living in an area covered by both Lyft and Uber (and probably with many/most drivers working both), I will pretty much exclusively use Lyft - and I pay more for it as well, as I've tipped the drivers on every one of my rare trips. In the long term I expect their prices to rise to the point where it's more comparable to taxi services, but they still have some advantages there at least to my mind.
[+] [-] komali2|9 years ago|reply
Imagine if instead of becoming an uber driver, you retrofit your car with an Uber Automated Car Taxi Converter(c), "guaranteed to put your car to work for you!"
[+] [-] MarkMc|9 years ago|reply
I very much doubt Uber's brand will be a significant asset in 10 years. I cannot see any reason why the economics of self-driving cabs would be any different to airlines.
[+] [-] CardenB|9 years ago|reply
[+] [-] nstj|9 years ago|reply
> The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.
[0]: http://www.berkshirehathaway.com/letters/2007ltr.pdf
[+] [-] catcow|9 years ago|reply
The author of this blog post admits that he hasn't run any numbers, and his conclusions make that obvious. I've run the numbers, and I make part of my living as an Uber driver (it's not busy enough in my city to do this full-time). Uber doesn't worry about my expenses because it's not their job to worry about my expenses. Their job is to run their servers and make an app that customers want to use, and they've been doing a great job at that IMO. My job is to worry about my expenses, and yes, I've accounted for fuel, maintenance, and depreciation of my vehicle, and I am making enough profit to make it worth doing.
As for self-driving cars, Travis has publicly stated that Uber does not intend to own and maintain them, they are going to look to their former drivers to do that. I doubt Uber is planning on having a monopoly for self-driving cars, they just want to be in on a part of the action, but their main focus will probably always be the software of their core app.
Uber has created more jobs faster than any company in history, and this is something our economy sorely needs. They literally let everyone who passes a background check on their platform. That means no discrimination can even take place at the company level, which I think is something very very cool, especially since I have a serious health condition that has riddled my resume with holes. (Discrimination can still take place from riders however, as the ratings are what determine whether a driver stays as a driver or not.) Also, since I am my own boss, I can rest when I need to, which is essential for coping with my condition.
[+] [-] Mikho|9 years ago|reply
[+] [-] boto3|9 years ago|reply
[+] [-] AndrewKemendo|9 years ago|reply
I hear rumors that IBM is not successful anymore. Also same of GE and GM.
[+] [-] alexlatchford|9 years ago|reply
You assume though that the network they've built up isn't valuable when you talk about self-driving vehicles. I agree the car tech will be commoditised and to my mind Uber owning their own fleet isn't the best option. It'd be very capital intensive and not a great use of cash.
I liken the switch to self driving cars to the same market as buy-to-let home rentals. If you've got the money why not buy a one (or more) of them, send them out and rent them through Uber/Lyft etc. and keep the money rolling in around the clock. Uber takes a smaller cut but also doesn't incur anything like as much risk.
[+] [-] shawndrost|9 years ago|reply
Like I said 8 years ago[2]: "Facebook made ~$200mm in 2008. It's pretty clear they could profit on those revenues, and instead are choosing to invest in further growth (with outside capital)."
[1] https://skift.com/2016/12/21/uber-isnt-profitable-in-the-u-s... [2] https://news.ycombinator.com/item?id=427212
[+] [-] midnitewarrior|9 years ago|reply
When self driving fleets can be deployed for ride sharing, a new startup, one without the hundred of millions / billions in losses that Uber will have accumulated, will come on the scene.
How can Uber, a company with massive losses to recover from, compete with a new, nimble and well-funded startup that doesn't have those legacy losses weighing down their ability to raise capital and pay back investors?
[+] [-] ams6110|9 years ago|reply
[+] [-] iamcasen|9 years ago|reply
Uber has more data about traffic patterns in every major city they operate in, than any other entity, including the cities themselves. Uber can use that data as leverage in so many ways.
They have an API, they are a logistics platform in a sense. Uber's endgame will be allowing people to plug into that platform for a price.
If they can manage to become the defacto cab platform for all major US cities alone, they are close to being worth their current valuation as is. Expand this all over the globe.
Do not forget they have a 20% stake in Didi as well now, which will more than make up for their 2 billion loss while trying to capture the chinese market.
[+] [-] kin|9 years ago|reply
I was in Southeast Asia recently and it's insane how cheap Uber is. It almost doesn't make sense to take any other form of transportation. I imagine once the competition dies, they'll have complete control over the market.
[+] [-] pwellens|9 years ago|reply
Instead they should leverage their existing community, i.e. users being located next to each other. Similarly to UberPool where ride-sharing is the only way for Uber/Lyft/etc to work, grouping users for food delivery with variable rewards based on location (i.e. discounts) is the way to go.
More here: https://medium.com/@pwellens/how-a-single-feature-could-fina...
[+] [-] jc_811|9 years ago|reply
> Let’s assume that we will see fully autonomous vehicles that can navigate city traffic in the near future [...] If this technology becomes available, I doubt that Uber will have a monopoly on self-driving car technology.[...]I think it’s safe to say that many companies will have access to self-driving car technology.[...]In this scenario I don’t see how Uber can generate reasonable profits
In the ideal 'future' society, everyone will have a self-driving car they can order to pick them up wherever they are. This would drive Uber out of business. However there will be a whole taxi industry for performing this service when someone is outside of their own city.
I believe the taxis of the future will be there to assist someone in one of two scenarios:
1.) Someone in their own city who doesn't own a self driving car
2.) Someone who is in a city different than their own
I still think there will be plenty of business in the above scenarios - and Uber is positioning itself to be the industry leader/titan. It's definitely a huge gamble since predicting the future is impossible at worst, and extremely hard at best; but we'll see if Uber can stay afloat long enough to reach it.