1 - Uber has a weak network effect (drivers drive Lyft and Uber) same for consumers.
2 - Uber is not very scalable (this is why they have to burn so much money to grow)
3 - Self-driving cars will actually destroy Uber's business.
Uber = Driver -> Uber -> Passenger. Self-driving cars will remove the Driver from the equation. Uber becomes a consumer facing app. Very vulnerable to Apple and Google should they ever want to get into that business. I think Google maps and Siri will become the interface to care sharing eventually as Apple/Google will have far more access to mobile experience that Uber will ever get.
I had made the above points before and predicted Uber will probably go the ways of AOL. It seems like more and more people are beginning see that too.
Could we maybe have a sober conversation about Uber that doesn't involve self driving cars? Because I hate to tell you, but whatever reckoning is coming for Uber will come long before self driving cars are viable. I do not understand why so many HN commenters ignore the reality of self driving car tech and regulation and think it's right around the corner. It's so far away that the only relevance it has to this conversation is already in the article (and completely disagrees with your claim): if Uber is planing to rely on self driving cars they're already dead. The tech will not be ready in time for them.
What I've found interesting in Chicago atleast is that pretty much all the drivers I've had from Uber also drove for Lyft or were very new to the platform. However a significant number of my Lyft drivers said they drove Lyft exclusively after initially coming in from Uber and then driving both.
Its anecdotal but most of the people I've asked about it said the pay on Lyft is better and they get far fewer bad passengers. Is Lyft losing as much cash as Uber? That would be a pretty bad trend if they're losing drivers and making less off of the drivers they have.
1) Lyft is in the USA only. Uber is in 400+ cities. Lyft is not remotely close to Uber in terms of hurting them.
2) No. It is scalable. They burn to drown their competition. They've got more money, so once the oxygen runs out for their competitors, Uber will just put margins back to where they are, stop comping so many rides, etc...
3) Not sure how you get to this approach. Self-driving = Lower/zero driver costs. Consumer facing app mobile experience is not going to be the deciding factor of Uber's success.
I'm not sure if your statement is trolling, or if you were actually being serious... If it's a troll, very well done... If it's not, then I strongly disagree with you.
Self-driving cars have a long way to go. Even if they are technologically advanced sufficiently, many countries (especially in the third world, which are the high growth markets currently) would take a very long time to even draft legislation around it. I can already imagine bus/taxi guys going on strike to disallow licenses for self-driving cars in the interest of protecting jobs !
Also, its not so difficult for uber to start it's own fleet of self driving cabs , they already have a brand name, so consumers who cannot afford to buy the car , might still go the uber way !
to add to the self driving car platform, there's just not enough of a competitive advantage to getting your app in front of customers, the real competitive advantage will be had by companies that can run / service and maintain fleets of cars. something uber isn't adept at, they would need to invest unimaginable amounts into physical capital to get to parity with some existing companies when automated cars actually become a thing.
An example of a network effect is a chat app: if 1 person uses a chat app worldwide, that person can get literally 0 utility out of it.
If 2 people use it, they have a tiny amount of utility: there is a single other person who can use it.
If three billion people use it, they all have massive utility: they can talk with anyone.
So, without changing the product, the more people who use it,the more utility each person has.
By that standard, Uber has no network effect at all (0, not "weak"): I simply don't get more utility whatsoever from the number of other people using Uber in my city.
If there are 5 available Uber cars which can take me to my destination, it really, really doesn't matter whether another 1,500 Uber cars in that city are already in use or whether that is the total 5 Uber cars which are available.
This shows that there is 0 (not "weak") network effect.
All of these pieces carefully avoid talking about the fact that Uber claims to have been profitable in several US cities in 2016. In places where they have had time to figure our their model, pricing and supply/demand, they appear to be capable of becoming profitable. While most people can understand pricing and supply/demand being different between cities, Uber's model actually changes in some cities as well. In some parts of the world they don't charge using credit cards because no consumers use them, in other parts their drivers don't use cars because it's impractical.
I'm all for calling out companies for exhibiting abhorrent behavior toward contractors and employees. That has value and can elicit change.
Doom & gloom pieces on the other hand are a dime a dozen. This one specifically I find lacking. Uber isn't losing mountains of cash because it's unsustainable. It's losing mountains of cash because it can afford to and wants to in order to continue it's absolutely astonishing growth rate. They may be bad people. You may not want to work for them. I grant those premises. I got an offer and turned it down. That said, I simply can not understand the desire to see them fall. The delta between what existed before and what they've built is vast. I'd happily pay 2x my current rate and the claim that I would _have_ to pay 5x to cover their costs is laughable.
> All of these pieces carefully avoid talking about the fact that Uber claims to have been profitable in several US cities in 2016.
This piece does talk about that:
> The company reportedly said it wanted to achieve profitability in the second quarter of 2016, and it claimed at the time it had reached that goal [0] in the U.S. and Canada.
In the very next sentence, however, we learn that:
> But by December, according to Bloomberg [1], Uber was losing money again in the U.S., to the tune of $100 million per year.
(links from original article)
So maybe they were profitable -- in 2Q16 -- but apparently that didn't last very long.
> I'd happily pay 2x my current rate ...
In order for Uber to become profitable and/or continue to exist long term, you -- and all other Uber customers -- may have to.
According to the article:
> ... amid findings that rider fares only cover roughly 40 percent of a ride, with the remainder subsidized by venture capitalists ...
> All of these pieces carefully avoid talking about the fact that Uber claims to have been profitable in several US cities in 2016. In places where they have had time to figure our their model, pricing and supply/demand, they appear to be capable of becoming profitable.
No, they don't. Mid-way through the article, Uber's profitability by geo is addressed. It's not broken down by city because apparently the data isn't available. But purportedly Uber had set goals to reach profitability in the US and Canada but backslid on US profitability at least. It's profitability by geo and operating line of business is also discussed with respect to their debt from investment banks.
>I'd happily pay 2x my current rate and the claim that I would _have_ to pay 5x to cover their costs is laughable.
That's the thing, though; I think demand is super elastic. I used Uber almost every day when they ran their 50% off specials. It was glorious; whole weeks where I didn't drive at all. Now? sure, sometimes when I'm tired, I'll take an uber home (and back to work the next day) but most of the time, I drive myself, unless I'm drinking or going somewhere with challenging parking. At 2x current rates, I'd probably very rarely use the service to commute, though I'd still use it when there's even a chance of me getting a drink. even at 5x, I'd choose uber or lyft over a cab from five years ago, but I wouldn't use it much more than a cab from five years ago.
but... this is all predicated on the current "no planning required" density of cars. right now, where I live, uber or lyft will be here within five minutes of my request, most of the time. If people took uber or lyft less often because it was more expensive, we'd have fewer cars in service, and my wait times would increase.
That was the reason I didn't use cabs very often before the advent of uber; I didn't want to plan my rides in advance. The ride sharing services have a certain SLA they have to meet; if in service uber or lyft drivers fall below a certain density, demand will fall off a cliff.
so that's the question; if they have to double their rates, will that drop demand (and thus supply of drivers) below that critical mass that allows them to be "transportation without planning"?
> A common comparison to describe Uber’s approach is Amazon, which lost money consistently over the first several years of its existence. As Horan notes, however, Amazon’s “worst losses were $1.4 billion in its fifth year of operations, but shrank rapidly thereafter, while Uber’s losses have been steadily growing and will be over $3 billion in its seventh year.”
Some key differences between Uber and Amazon:
1. Amazon's loss in 2000 was $1.4B[0] on $2.7B of revenue[1]. Uber this financial year will lose ~$2.6B on $5.5B of revenue - so they're doing a little better
2. Uber's revenue is growing at more than 100% p.a while Amazon was growing at 15% p.a at that time
3. Amazon had to cut back spending to survive while Uber has $10B in the bank and ready sources of cheap additional capital if it requires it
4. Uber is growing much, much faster internationally than Amazon ever did. Amazon even today is only 15 countries while Uber is already at 81 - so they are growing more in a shorter space of time.
5. Uber's margins will eventually be a lot larger than Amazon's - there is potential there for a greater net profit margin and greater multiple. It's reported that the core business will only lose $100M this year in North America and should turn to profitable next fy.
6. In almost every metric Uber is beating Amazon at a similar stage - revenue, revenue growth, etc.
7. Uber has the benefit of remaining private for longer, no burst dotcom bubble, economic downturn or fundraising problems and founder control
The comparison is definitely appropriate, tho - similar loss-leading strategies to build market share with products that don't necessarily enforce natural monopolies. You need to outspend and drive down your competition in the near-term to win the long-term.
There are very few markets where Uber has lost or is losing and their model seems easier to adapt internationally than Amazon's.
I think the impact of all the bad PR has a limited reach outside of tech circles. Among my friends no-one has even heard about any of this and Uber is more popular than ever (especially UberEats).
The bad PR within tech circles is damage enough, given that to grow as a tech company, Uber needs to compete with other tech companies with regards to hiring new talent, as well as retaining existing talent.
Same here. In my town people still feel somewhat more advanced and 'cool' calling Uber instead of taxi. Funny thing is, that most of them are left wing 'justice warrior'/hipster type. I chuckle every time I see this act of irony.
The only thing that keeps Uber going is $3.5 billion from Saudi Arabia's sovereign wealth fund, which allows them to undercut everybody else on price. Uber is losing $800 million a quarter, and some time in 2018, they should run out of cash. It's hard to see where they could find a bigger sugar daddy. An IPO seems unlikely; they're way overvalued.
Suppose a hypothetical IPO in 2018 values them at $100B.
They float 10% of their shares on the public market, requiring their iBankers to place $10B worth of shares with their clients. Personally I feel like even with bad numbers, give the iBankers a juicy enough placement incentive and they will find a way to place that $10B and collect their fee/spread.
Now, Uber may fail afterwards, but if they really need a public liquidity event, I think they can get it. Directors and C level folks will be able to shed some shares at IPO preceding the lockup and make out like bandits. ;)
Having friends who have had startups that relied on contractors the death blow is being forced to treat contractors as employees. The mass market model doesn't work when you have to charge 40% more just to cover the additional costs in benefits, overtime, taxes, hr etc. link to good article of friend who experienced this in his startup https://medium.com/@kaleazy/theres-no-magic-in-venture-backe... So the real question from all this bad press will it sway states and cities to start forcing uber to make this change? If so it will definitely hamper who they can service and their valuation.
> The mass market model doesn't work when you have to charge 40% more just to cover the additional costs in benefits, overtime, taxes, hr etc.
Perhaps there was no model to begin with then, no? That 40% doesn't magically disappear. The cost is borne by the "contractors" themselves. In software development that usually means charging a lot more than a salaried employee costs because you aren't guaranteed work all the time and you need to cover your own benefits.
Building a business on forcing people into slavery would be profitable in some circumstances. Building a business on finding free gold coins buried in the ground would definitely be profitable. Doesn't mean you have a sustainable business.
I find your lack of regard for the well being of Uber drivers, and workers generally, concerning. I understand that the startup funding model you are focused on may not be as lucrative for founders and their startup backers if they must begin to adequately take into account the well being of their employees, but workforce compensation and well being cannot continue to be ignored and even actively fought against as is the case with Uber.
The additional costs of payroll taxes, overtime, paid sick leave, minimum
wage regulations, benefits and health insurance, unemployment tax, workers
comp insurance, and potential for lawsuits in a highly litigious industry
put us in heavy handcuffs.
God forbid he treats employees like people who may get sick and need to see a doctor, or who get minimum wage, or take responsibility for their screwups, or ...
Basically, he had a good time when he could pretend employees were contractors, pay his employees 1099, and compete against people paying W2, but the party ended.
I understand why all the Uber negativity exists right now (really it existed since early on), they've earned most of it. However, not a single thing in that article does a good job of arguing why Uber is doomed. Having an emotional reaction and a strong dislike to the way a corporation behaves, isn't an argument for why it must fail. Just wanting something to be, doesn't make it so, and most of what that article does is want Uber to fail.
Back in reality, once a technology company acquires the kind of market position that Uber has, they almost never end up doomed. Quite the opposite, they overwhelmingly tend to go on to dominate their market for a long time. If disliking a corporation could make it fail, Monsanto wouldn't exist, and Microsoft would have been broken into pieces by the government (the hysteria around Microsoft for example, while different from Uber, was every bit as extreme and angry in the tech world circa 1996-2000; tech people flat out hated Microsoft and its behavior with a special passion).
The problem with Uber is their valuation. Nobody disputes there's a business here-- it's whether it's as big as it needs to be to make the math work. They could conceivably create a monopoly on ride-sharing, but if they do that and raise prices (probably to roughly taxi parity, all told), then demand basically stays at where it was for taxis, we all live slightly more convenient lives, and all Uber's investor's lose their asses because this was not the moonshot they were promised.
For Uber to justify their valuation, they're going to need to invent the self-driving car, and frankly, they don't have time. There will not be a clear winner in the self-driving car market, which does not exist at this point in time, anywhere near the timeframe they're going to have to return their investment or go kick rocks.
> However, not a single thing in that article does a good job of arguing why Uber is doomed.
"rider fares only cover roughly 40 percent of a ride, with the remainder subsidized by venture capitalists" - The equations don't work when the loss-leader is also your only product.
The article also talks about how Uber is also burning through the goodwill of the drivers at the moment. Sleeping in your car is not a way for a long-term employee to behave. And also the goodwill of the developers.
The article seems to make point after point after point about how Uber is overextended and can't sustain itself long-term. Yes, as long as you're subsidised, you can dominate the market, but how long are VCs going to pump in 60% of every fare? What happens when Uber burns through the available workers?
Microsoft was profitable. Uber isn't. Lacking a non-hand-wavy path to profitability and being default-dead[1] are pretty good arguments against a company's viability.
In some countries Uber is not the largest I know for a fact that Grab in East Asia and Careem in Pakistan and many Arab countries is the first option for many people instead of Uber. It's Market position is not because of any technology break through or advantage that can't be copied it is mostly because of discounts. Someone with larger pockets can out muscle them. With the negative publicity around Uber it could become harder for them to get more cash from investors. The next big thing will be self driving taxis where Uber won't be able to compete with car manufacturers providing the same services directly or to its competitors. Even google saw that it is hard for it to get car manufacturers on board with its self driving tech with most opting to do it on their own despite they are a few years behind in tech.
> Having an emotional reaction and a strong dislike to the way a corporation behaves, isn't an argument for why it must fail.
I agree with you here, but this is hardly the only argument presented in the article.
Something has to change when investor subsidies dry up. It might be a shift to self driving vehicles, a significant fare increase, or a monopolisation of the market. His assertion (which I broadly agree with) is that none of those seem likely to be successful.
Uber is buying revenue. It is straight out of the 90's dot-com bubble company handbook. Everything they do screams 'pump and dump'.
Problem is that a lot more external parties are in on the scam than most people realize - media, politicians, other companies owned by the same VCs, and so on. All of these can help them keep up appearances of being a successful company and a promising future behemoth, even while the most basic common sense says the opposite.
I agree. Uber cannot monopolize the space because principally, there are no barriers to entry, and no network effects or switching costs for users. This means profits will simply be competed away until a perfect competition graph is achieved.
I have yet to see any really solid arguments against either of those points.
Once I figured out that Uber loses money on each ride, I started taking it more. I don't really like this company, and I don't think their valuation is justified, but me being literally subsidised by SV venture capitalists feels good.
"amid findings that rider fares only cover roughly 40 percent of a ride, with the remainder subsidized by venture capitalists", Hard for me to make it past the first and second paragraph where false premise is laid. Addressed this about a week ago. It's amazing how false information propagates. https://news.ycombinator.com/item?id=13682428
"You can't take Uber's cut of passengers payments (~18%) and then divide by Uber's costs to say 'passengers were paying only 41% of the actual cost of their trips', as the bulk of the cost of the trip goes directly to the driver. If you take this into account the rider is actually covering about 80% of the total cost of the trip"
The general consensus seems to be, on HN atleast, that what they are doing in unsustainable - which economically it obviously is - but how many people would short Uber?
As far as I see it, if venture continues to fund its expansion Ubers access to private capital from banks is almost infinite. Ride sharing might be a non-zero sum game, but I fully expect Uber to buy lyft eventually and then it becomes far easier to cherry pick any smaller upstarts when they reach a certain scale.
In fact, Ubers forray into new markets would be far more economically viable by doing so. Allowing smaller companies to establish in new cities or regions before purchasing them makes a lot of sense as the business matures.
Additionally, like the deal with Didi shows, there is a massive incentive to monopolise through partnership. I would imagine this is the route Uber would go should any of the large tech companies decide to establish itself as a viable competitor.
One thing I don't understand is, why can't Uber put the price up so that they are 100% covered by fares? Or at least same price as Lyft.
What would be the knock on effects of that for the company?
I guess my point is, isn't the convenience of always having a ride 5 mins away enough? And now thy are so ubiquitous no one could have that same level of service as them.
>I guess my point is, isn't the convenience of always having a ride 5 mins away enough? And now thy are so ubiquitous no one could have that same level of service as them.
the ride is always 5 minutes away because they get so many fares. They get so many fares because their prices are so low.
Now, they could go to lyft rates; experimentally, lyft gets here pretty quick, too. but the point being that "5 minutes away" is a function of their critical mass, which is a function of their low price.
[+] [-] salimmadjd|9 years ago|reply
2 - Uber is not very scalable (this is why they have to burn so much money to grow)
3 - Self-driving cars will actually destroy Uber's business.
Uber = Driver -> Uber -> Passenger. Self-driving cars will remove the Driver from the equation. Uber becomes a consumer facing app. Very vulnerable to Apple and Google should they ever want to get into that business. I think Google maps and Siri will become the interface to care sharing eventually as Apple/Google will have far more access to mobile experience that Uber will ever get.
I had made the above points before and predicted Uber will probably go the ways of AOL. It seems like more and more people are beginning see that too.
[+] [-] 1_2__3|9 years ago|reply
[+] [-] Larrikin|9 years ago|reply
Its anecdotal but most of the people I've asked about it said the pay on Lyft is better and they get far fewer bad passengers. Is Lyft losing as much cash as Uber? That would be a pretty bad trend if they're losing drivers and making less off of the drivers they have.
[+] [-] michaeldunworth|9 years ago|reply
1) Lyft is in the USA only. Uber is in 400+ cities. Lyft is not remotely close to Uber in terms of hurting them.
2) No. It is scalable. They burn to drown their competition. They've got more money, so once the oxygen runs out for their competitors, Uber will just put margins back to where they are, stop comping so many rides, etc...
3) Not sure how you get to this approach. Self-driving = Lower/zero driver costs. Consumer facing app mobile experience is not going to be the deciding factor of Uber's success.
I'm not sure if your statement is trolling, or if you were actually being serious... If it's a troll, very well done... If it's not, then I strongly disagree with you.
[+] [-] vcool07|9 years ago|reply
Also, its not so difficult for uber to start it's own fleet of self driving cabs , they already have a brand name, so consumers who cannot afford to buy the car , might still go the uber way !
[+] [-] shrewduser|9 years ago|reply
[+] [-] logicallee|9 years ago|reply
An example of a network effect is a chat app: if 1 person uses a chat app worldwide, that person can get literally 0 utility out of it.
If 2 people use it, they have a tiny amount of utility: there is a single other person who can use it.
If three billion people use it, they all have massive utility: they can talk with anyone.
So, without changing the product, the more people who use it,the more utility each person has.
By that standard, Uber has no network effect at all (0, not "weak"): I simply don't get more utility whatsoever from the number of other people using Uber in my city.
If there are 5 available Uber cars which can take me to my destination, it really, really doesn't matter whether another 1,500 Uber cars in that city are already in use or whether that is the total 5 Uber cars which are available.
This shows that there is 0 (not "weak") network effect.
[+] [-] wwalser|9 years ago|reply
I'm all for calling out companies for exhibiting abhorrent behavior toward contractors and employees. That has value and can elicit change.
Doom & gloom pieces on the other hand are a dime a dozen. This one specifically I find lacking. Uber isn't losing mountains of cash because it's unsustainable. It's losing mountains of cash because it can afford to and wants to in order to continue it's absolutely astonishing growth rate. They may be bad people. You may not want to work for them. I grant those premises. I got an offer and turned it down. That said, I simply can not understand the desire to see them fall. The delta between what existed before and what they've built is vast. I'd happily pay 2x my current rate and the claim that I would _have_ to pay 5x to cover their costs is laughable.
[+] [-] jlgaddis|9 years ago|reply
This piece does talk about that:
> The company reportedly said it wanted to achieve profitability in the second quarter of 2016, and it claimed at the time it had reached that goal [0] in the U.S. and Canada.
In the very next sentence, however, we learn that:
> But by December, according to Bloomberg [1], Uber was losing money again in the U.S., to the tune of $100 million per year.
(links from original article)
So maybe they were profitable -- in 2Q16 -- but apparently that didn't last very long.
> I'd happily pay 2x my current rate ...
In order for Uber to become profitable and/or continue to exist long term, you -- and all other Uber customers -- may have to.
According to the article:
> ... amid findings that rider fares only cover roughly 40 percent of a ride, with the remainder subsidized by venture capitalists ...
[0]: https://www.bloomberg.com/news/articles/2016-04-14/lyft-is-g...
[1]: https://skift.com/2016/12/21/uber-isnt-profitable-in-the-u-s...
[+] [-] erdevs|9 years ago|reply
No, they don't. Mid-way through the article, Uber's profitability by geo is addressed. It's not broken down by city because apparently the data isn't available. But purportedly Uber had set goals to reach profitability in the US and Canada but backslid on US profitability at least. It's profitability by geo and operating line of business is also discussed with respect to their debt from investment banks.
[+] [-] lsc|9 years ago|reply
That's the thing, though; I think demand is super elastic. I used Uber almost every day when they ran their 50% off specials. It was glorious; whole weeks where I didn't drive at all. Now? sure, sometimes when I'm tired, I'll take an uber home (and back to work the next day) but most of the time, I drive myself, unless I'm drinking or going somewhere with challenging parking. At 2x current rates, I'd probably very rarely use the service to commute, though I'd still use it when there's even a chance of me getting a drink. even at 5x, I'd choose uber or lyft over a cab from five years ago, but I wouldn't use it much more than a cab from five years ago.
but... this is all predicated on the current "no planning required" density of cars. right now, where I live, uber or lyft will be here within five minutes of my request, most of the time. If people took uber or lyft less often because it was more expensive, we'd have fewer cars in service, and my wait times would increase.
That was the reason I didn't use cabs very often before the advent of uber; I didn't want to plan my rides in advance. The ride sharing services have a certain SLA they have to meet; if in service uber or lyft drivers fall below a certain density, demand will fall off a cliff.
so that's the question; if they have to double their rates, will that drop demand (and thus supply of drivers) below that critical mass that allows them to be "transportation without planning"?
[+] [-] paulddraper|9 years ago|reply
[+] [-] nikcub|9 years ago|reply
Some key differences between Uber and Amazon:
1. Amazon's loss in 2000 was $1.4B[0] on $2.7B of revenue[1]. Uber this financial year will lose ~$2.6B on $5.5B of revenue - so they're doing a little better
2. Uber's revenue is growing at more than 100% p.a while Amazon was growing at 15% p.a at that time
3. Amazon had to cut back spending to survive while Uber has $10B in the bank and ready sources of cheap additional capital if it requires it
4. Uber is growing much, much faster internationally than Amazon ever did. Amazon even today is only 15 countries while Uber is already at 81 - so they are growing more in a shorter space of time.
5. Uber's margins will eventually be a lot larger than Amazon's - there is potential there for a greater net profit margin and greater multiple. It's reported that the core business will only lose $100M this year in North America and should turn to profitable next fy.
6. In almost every metric Uber is beating Amazon at a similar stage - revenue, revenue growth, etc.
7. Uber has the benefit of remaining private for longer, no burst dotcom bubble, economic downturn or fundraising problems and founder control
The comparison is definitely appropriate, tho - similar loss-leading strategies to build market share with products that don't necessarily enforce natural monopolies. You need to outspend and drive down your competition in the near-term to win the long-term.
There are very few markets where Uber has lost or is losing and their model seems easier to adapt internationally than Amazon's.
[0] http://www.wikinvest.com/stock/Amazon.com_(AMZN)/Data/Net_In...
[1] http://www.wikinvest.com/stock/Amazon.com_(AMZN)/Data/Revenu...
[+] [-] Kiro|9 years ago|reply
[+] [-] ckastner|9 years ago|reply
[+] [-] kbart|9 years ago|reply
[+] [-] Animats|9 years ago|reply
This isn't going to end well.
[+] [-] hkmurakami|9 years ago|reply
They float 10% of their shares on the public market, requiring their iBankers to place $10B worth of shares with their clients. Personally I feel like even with bad numbers, give the iBankers a juicy enough placement incentive and they will find a way to place that $10B and collect their fee/spread.
Now, Uber may fail afterwards, but if they really need a public liquidity event, I think they can get it. Directors and C level folks will be able to shed some shares at IPO preceding the lockup and make out like bandits. ;)
[+] [-] oisino|9 years ago|reply
[+] [-] xenadu02|9 years ago|reply
Perhaps there was no model to begin with then, no? That 40% doesn't magically disappear. The cost is borne by the "contractors" themselves. In software development that usually means charging a lot more than a salaried employee costs because you aren't guaranteed work all the time and you need to cover your own benefits.
Building a business on forcing people into slavery would be profitable in some circumstances. Building a business on finding free gold coins buried in the ground would definitely be profitable. Doesn't mean you have a sustainable business.
[+] [-] vuldin|9 years ago|reply
[+] [-] x0x0|9 years ago|reply
Basically, he had a good time when he could pretend employees were contractors, pay his employees 1099, and compete against people paying W2, but the party ended.
[+] [-] deepsun|9 years ago|reply
[+] [-] adventured|9 years ago|reply
Back in reality, once a technology company acquires the kind of market position that Uber has, they almost never end up doomed. Quite the opposite, they overwhelmingly tend to go on to dominate their market for a long time. If disliking a corporation could make it fail, Monsanto wouldn't exist, and Microsoft would have been broken into pieces by the government (the hysteria around Microsoft for example, while different from Uber, was every bit as extreme and angry in the tech world circa 1996-2000; tech people flat out hated Microsoft and its behavior with a special passion).
[+] [-] warcher|9 years ago|reply
For Uber to justify their valuation, they're going to need to invent the self-driving car, and frankly, they don't have time. There will not be a clear winner in the self-driving car market, which does not exist at this point in time, anywhere near the timeframe they're going to have to return their investment or go kick rocks.
[+] [-] vacri|9 years ago|reply
"rider fares only cover roughly 40 percent of a ride, with the remainder subsidized by venture capitalists" - The equations don't work when the loss-leader is also your only product.
The article also talks about how Uber is also burning through the goodwill of the drivers at the moment. Sleeping in your car is not a way for a long-term employee to behave. And also the goodwill of the developers.
The article seems to make point after point after point about how Uber is overextended and can't sustain itself long-term. Yes, as long as you're subsidised, you can dominate the market, but how long are VCs going to pump in 60% of every fare? What happens when Uber burns through the available workers?
[+] [-] __derek__|9 years ago|reply
[1]: http://www.paulgraham.com/aord.html
[+] [-] dandr01d|9 years ago|reply
Most have, though.
[+] [-] xbmcuser|9 years ago|reply
[+] [-] MarkPNeyer|9 years ago|reply
Their argument seems to be "There's no lock in this market, and there doesn't seem to be any network effects."
[+] [-] unknown|9 years ago|reply
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[+] [-] huckyaus|9 years ago|reply
I agree with you here, but this is hardly the only argument presented in the article.
Something has to change when investor subsidies dry up. It might be a shift to self driving vehicles, a significant fare increase, or a monopolisation of the market. His assertion (which I broadly agree with) is that none of those seem likely to be successful.
[+] [-] unknown|9 years ago|reply
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[+] [-] aedron|9 years ago|reply
Problem is that a lot more external parties are in on the scam than most people realize - media, politicians, other companies owned by the same VCs, and so on. All of these can help them keep up appearances of being a successful company and a promising future behemoth, even while the most basic common sense says the opposite.
[+] [-] coralreef|9 years ago|reply
I have yet to see any really solid arguments against either of those points.
[+] [-] Grue3|9 years ago|reply
[+] [-] laser|9 years ago|reply
"You can't take Uber's cut of passengers payments (~18%) and then divide by Uber's costs to say 'passengers were paying only 41% of the actual cost of their trips', as the bulk of the cost of the trip goes directly to the driver. If you take this into account the rider is actually covering about 80% of the total cost of the trip"
[+] [-] aanm1988|9 years ago|reply
[+] [-] chrisherd|9 years ago|reply
As far as I see it, if venture continues to fund its expansion Ubers access to private capital from banks is almost infinite. Ride sharing might be a non-zero sum game, but I fully expect Uber to buy lyft eventually and then it becomes far easier to cherry pick any smaller upstarts when they reach a certain scale.
In fact, Ubers forray into new markets would be far more economically viable by doing so. Allowing smaller companies to establish in new cities or regions before purchasing them makes a lot of sense as the business matures.
Additionally, like the deal with Didi shows, there is a massive incentive to monopolise through partnership. I would imagine this is the route Uber would go should any of the large tech companies decide to establish itself as a viable competitor.
[+] [-] robryan|9 years ago|reply
Sure the cars use CNG and the drivers probably don't make much but the fares are tiny compared the western locations.
[+] [-] jv22222|9 years ago|reply
What would be the knock on effects of that for the company?
I guess my point is, isn't the convenience of always having a ride 5 mins away enough? And now thy are so ubiquitous no one could have that same level of service as them.
[+] [-] lsc|9 years ago|reply
the ride is always 5 minutes away because they get so many fares. They get so many fares because their prices are so low.
Now, they could go to lyft rates; experimentally, lyft gets here pretty quick, too. but the point being that "5 minutes away" is a function of their critical mass, which is a function of their low price.
[+] [-] Shorel|9 years ago|reply
Taxis can improve their service, other companies can compete with Uber, etc. All these solutions are acceptable.
Current taxi service in most cities is not acceptable. A small number of cities have good taxi service. Most cities don't.
[+] [-] doener|9 years ago|reply
[+] [-] viach|9 years ago|reply
[+] [-] paki123|9 years ago|reply
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[+] [-] sebleon|9 years ago|reply
[+] [-] acjohnson55|9 years ago|reply
A far more useful response would attempt to identify at least one flaw in the author's logic.
[+] [-] mrmondo|9 years ago|reply
[+] [-] temp|9 years ago|reply