Uber and lyft are both on the way down. The price at which they need to operate to be profitable is not a price that most americans are ready to pay. As simple as that.
For now they delay this reality by subsidizing rides in order to generate business. In some cities like San Francisco, most incentives were removed and among my friends we all stopped using Uber (unless we really have to). It simply became way too expensive.
(Comment that I already issued yesterday on a similar thread)
The line item in Uber's results you want to look at here is "Excess Driver Incentives" which covers:
"Cumulative payments to a Driver could exceed cumulative revenue from a Driver as a result of Driver incentives or when the amount paid to a Driver for a Trip exceeds the fare charged to the consumer."
What's really interesting here is that year over year this number went down substantially ($21m total) for their "Ridesharing" eg their core platform is subsidizing substantially fewer rides today as a percentage of overall revenue than it was a year ago.
But that total "Excess Driver Incentives" line item exploded upwards from $221,000,000 to $544,000,000 for just their uber eats platform!
That means that your rides were somewhat subsidized and getting better, but your hamburger's ride was subsidized to the tune of a half billion dollars :)
And further qualifying this the Uber Eats business unit doubled in revenue but the incentives grew at an even faster rate.
I think it's more the massive amount of spending they do with little to nothing to show for it. They spent $457m last year on autonomous and flying cars with $0 in revenue from those projects. Maybe that will work out, but I bet every penny was ultimately wasted.
Not spending billions a year on R&D certainly makes the financials look nicer. It might not attract as nice of a multiple, but it's not the ride prices that are out of whack at Uber IMO.
The difference between taxi fares and Uber/Lyft fares has all but vanished. People were willing to pay taxi rates all along, now they are doing so and getting what is arguably a much better service.
To figure out Uber's core business economics look at Lyft's Contribution Margin which rose to 46%. Uber's, which includes a lot more immature markets, went back positive to around 9%.
Same thing happened with Via in NYC. They used to offer $5 flat rides to anywhere in Manhattan, now prices for the most part are variable and sometimes much more. It was unfortunately too good to be true. They offer a subscription pass that can use pre-tax dollars but for me personally it's not the same.
I took my first Uber in 2011. It was amazing. Expensive, to be sure, but the service was amazing. Black Sedan, extremely professional, shows up wherever you want, drops you off wherever you want, never really had to look at GPS. Just amazing.
It was so good I figured I'd never need car again. But it was expensive, so I used it sparingly. I'd take public transit or walk most of the time, but when I needed to get somewhere that didn't go or I needed to get somewhere fast, Uber was there.
Now it's a joke. A total joke. The service is shit. The base tier has people picking you up in minivans that rattle like they are about to fall apart and the people can barely drive… if they pick you up at all. There's like a 50/50 chance it will take 15 minutes for a pickup because the driver will go in the completely wrong direction and then cancel the ride. The "premium" service tiers come with fancier cars, but most driver still have no idea where they are going.
It was good when it was small. It was good when they only had professional drivers with carrier passenger permits and commercial insurance. It made sense. It was good for everyone. It was good when they actually had "drivers", not random people struggling to make minimum wage.
Uber emerged into the market as a disruptor in the absolute worst sense of the world - it was challenging an entrenched industry with low efficiency (cab companies make ungodly amounts of money in some markets) but it did so by playing by a different set of rules - skirting both the disingenuous regulations put in to protect cab companies' profit and those in place for the safety of the general public. Even disregarding all of the legion HR issues at that company their business model depended on not playing fair and they're paying for it.
I like to compare them to the car sharing companies (like zipcar/car2go etc...) which managed to de-throne the entrenched rental agencies without going out of their way to break laws.
You are missing the part where Uber let you get a cab through an app rather than hoping a taxi was driving by and waving your hands at them. It really is a far, far better product when you can get a cab wherever you want, instead of just in a few areas.
The regulated taxi medallion system wasn't good for drivers either. It was good for medallion owners.
Before Uber, taxi medallions in New York were selling for around $1 million. These pricey medallions tended to get bought up by large companies that could afford the investment. Your driver likely couldn't afford one, so instead, drivers would rent a cab and medallion for about $100 per 12-hour shift, on top of the dispatcher fees.
This system was supposed to restrict the supply of cabs to ensure drivers earned a decent wage. Instead, all the value is extracted by the medallion holders.
>I like to compare them to the car sharing companies (like zipcar/car2go etc...) which managed to de-throne the entrenched rental agencies without going out of their way to break laws.
Except for the fact that Avis bought Zipcar. So not sure about the dethroning part.
I know some folks who really depend on short-term rentals to support being carless but it's a relatively niche service--especially with current Uber/Lyft pricing.
Glad they're down, and hope the whole "gig economy" burns down too.
Where gig economy = padding the loss of decent jobs by replacing the bottom end with desperate deals where "non employed" employees, without regular salary, benefits, company provided work tools, etc., make a pittance, while the organizing company gets a cut from millions of transactions.
In some cases, no jobs is better than subsistence/dead-end/exploitative jobs. At least the former makes the problem evident, and ups the pressure to do something about it on a society/policy/economy level -- as opposed to helping perpetuate it.
No doubt they are struggling to show a path to profitability, but $3.9B of that is a one-time recognition of all their stock comp which makes look much worse than it should (Assuming that a 1.3B loss is more "normal")
Remember that article yesterday about the company that resold movie tickets at a loss to gain market share? That's Uber's business model.
(Self driving cars were never going to save them. Not only do they not work yet, there's no reason to think they'd be much cheaper for years to come. Uber would have to pay for them, garage them, maintain them, operate control centers, etc. They'd be in the car rental business, which is not hugely profitable. Uber's business model is to dump their operating costs on their drivers. With self driving cars, they couldn't do that.)
I never understood why people thought self driving cars would lift Uber out of their miseries. Even if they do make it more profitable (although it's not as trivial as you mention), they would also be in a much more competitive landscape compared to the duopoly situation they have now. The costs might go down, but it doesn't mean they would be able to maintain their market share.
Apparently Lyft upped its guidance, and Uber stock took off today; it was up 8.25% percent from yesterday. As of right now, it's now down 10% off closing to 38.66, a value it hasn't had since... last Wednesday morning.
Disappointing if you're a holder, sure, but not as catastrophic as you'd think if you only read this news.
(To the extent I have bias here, it is bias against trying to judge stock performance only by reading about its massive jumps up or down. Uber I'm not a particular fan of but I can't say I'm all that personally passionately against it either. I don't mean this as attack or defense, only a perspective on the news that I think is closer to a truth.)
I only like uber/lyft for one very important reason. Drinking.
I truly believe its saved a ton of lives thanks to its ease of use. I'm in college right now, and I couldn't even imagine trying to get home without lyft or uber in many circumstances. Its made it so convenient to get a ride at any time, anywhere, that nobody even thinks about driving home anymore. Public transport simply isnt an option at 2am where I live, and the area is not very dense either.
I strongly believe Uber is going to shut down their self driving car unit at some point. May be in a year or two. There is no reason to keep that running when the end is not in sight for SDCs. That is not going to happen at the level Uber wants any time soon. If not today, very soon, Uber is going to accept it and dump their unit.
1,740 Cost of revenue
864 Operations and support
638 General and administrative
_____+
3,242
That’s higher than revenue (3,166), so even ignoring R&D (3,064), Marketing and Sales (1,222), Interests (151), and a few other expenses, they aren’t making money.
Also: what’s in “Cost of revenue”? It is neither “Operations and Support” nor “General and Administrative”. The subsidies they give drivers? If it is, prices would have to go up by about 50% for that to go to zero.
IMO, the idea that fully self-driving cars are anywhere close to being created was always just a combination of hype and wildly irrational underestimation of how hard it is to create them. The challenge of building a road-safe fully self-driving car is not far from the challenge of building artificial general intelligence. I think that road-ready fully self-driving cars are many decades away, and they may never actually be created.
What really surprises me is how many otherwise savvy and tech-knowledgeable people bought into the hype.
That said, I also think that not everyone involved in spreading the hype does it for innocent reasons. For example, people often criticize Elon Musk for making absurd claims about self-driving cars, but then argue that he does it because he is innocently deluded. I suspect it's more likely that he is lying through his teeth.
FWIW, I don’t think self driving cars would have made them a good business. Once you no longer need drivers, all you’re doing is deploying a fleet of automobiles. We already have companies that do this: taxi services and auto rental companies. They’re shitty, low margin businesses with tons of competition. The promise of Uber was being a monopoly because they were first mover on a market with network effects. Much like eBay. But self driving cars remove the network effect inherent in needing to attract both drivers and riders.
It makes no financial sense. You can't even talk about what the P/E multiple should be for that growth rate because you can't guess what their earnings will be. As many others have posted they are not close to breaking even so it is hard to conclude what changes they would have to make to earn $1 in operations. (I know they have had a profit in a qtr. I am taking operating profit.)
Stupid question: but how is this the case? The fare I pay for an Uber or Lyft seems much higher than the time/car/insurance cost of driving myself ($30-$50 for a 25 min ride to SFO). But the drivers don’t get much of that fare, so I assumed the bulk of the money went to Uber/Lyft. But they’re badly in the red... so where is the money going? I’m missing something here.
> But the drivers don’t get much of that fare, so I assumed the bulk of the money went to Uber/Lyft.
Ridestar claims that 61% goes to the driver; 39% to Lyft/Uber.[0]
Their S-1[1] shows lots of sales and marketing, lots of R&D (remember, they're working on self-driving cars, among other things), and lots of general/admin (I suspect they spend a lot on legal).
Oof. This doesn't look good no matter how you shake it. I wonder how long the investors go on before saying "enough is enough."
I don't have a horse in this race, but if Uber/Lyft fail there are going to be substantial societal repercussions. Admit it or not, they have disrupted the transportation industry significantly.
Well, that explains why my daily commute has gone up in the last few weeks. If they'd let me buy a ride pass, that'd at least make me use them. Instead, Lyft gets my business.
Just as a note: without a low-cost private car, I literally could not keep my job.
Can't help but feel schadenfreude after a rather nasty interviewing experience at Uber earlier this year. In the eyes of their recruiter, preferring competing offers that are > $100k higher than Uber's makes you a despicable person who only cares about money, apparently. Coming from a nonprofit I would have felt bad for a second but Uber? Come on.
The most ridiculous thing in Sydney is all the Uber drivers drive for Uber, Bolt and Ola. The same car, the same driver but the only difference is a which button I push on my phone.
So whoever gives me a discount I will use and if no one will I will catch a bus or taxi. Google Maps shows me the estimated cost for Uber and Bolt.
I wouldn't say it's really that ridiculous, not any more than different grocery chains carrying the same products. I think this is exactly what gig economy, and in general market capitalism, should be like -- pushing the price down through competition for the benefit of the consumer.
I wish more companies did that, effectively trickling down the VC and investor money down to their employees, and preferably the gig workers. We should be encouraging more companies to adopt the Uber model, except we should insist on that gig worker compensation.
The biggest issue with Uber for me is pricing. I like to pay a fair price. Uber uses AI, therefore, you don't pay a fair price. I don't feel like researching options every time I need a ride. Many tech companies hope for lazy consumers, who sign up for food deliveries and don't notice 5c price hike on eggs. Who get used to ride sharing service and fail to ever verify that uber/lyft still offers competitive pricing.
I don't want to work around it. Therefore, I rarely use these services. It is becoming more and more hassle.
I'm assuming by AI you mean adjusting the prices based on supply and demand? What do you suggest as an alternative? If prices don't adjust accordingly, you simply won't be able to get a ride.
Uber laying off 400 two weeks ago felt like a leading indicator that they were going to deliver a weak quarter, I'm surprised this wasn't priced into the stock (which is now down ~10% after hours after finishing today's session at +8%). What was the market expecting?
The recent realization by cities that these services are making traffic worse will induce more regulation which will make these services even less viable than they already are.
As rides get more expensive or as these companies run lower on cash to burn; I suspect we'll eventually get back to the traffic reduction use case; an easy way to make a buck driving a route you're otherwise already taking or just a few miles from your house.
I heard on the news yesterday that 13% of all traffic in San Francisco is ride sharing vehicles, and that at any given time there are approximately 5700 ridesharing vehicles cruising around the city. Pretty stunning if you think about it.
Do they make traffic worse? I think you can only compare them to people owning and driving their own car, which has to be parked all day when not in use.
[+] [-] rainyMammoth|6 years ago|reply
For now they delay this reality by subsidizing rides in order to generate business. In some cities like San Francisco, most incentives were removed and among my friends we all stopped using Uber (unless we really have to). It simply became way too expensive.
(Comment that I already issued yesterday on a similar thread)
[+] [-] aresant|6 years ago|reply
The line item in Uber's results you want to look at here is "Excess Driver Incentives" which covers:
"Cumulative payments to a Driver could exceed cumulative revenue from a Driver as a result of Driver incentives or when the amount paid to a Driver for a Trip exceeds the fare charged to the consumer."
What's really interesting here is that year over year this number went down substantially ($21m total) for their "Ridesharing" eg their core platform is subsidizing substantially fewer rides today as a percentage of overall revenue than it was a year ago.
But that total "Excess Driver Incentives" line item exploded upwards from $221,000,000 to $544,000,000 for just their uber eats platform!
That means that your rides were somewhat subsidized and getting better, but your hamburger's ride was subsidized to the tune of a half billion dollars :)
And further qualifying this the Uber Eats business unit doubled in revenue but the incentives grew at an even faster rate.
https://investor.uber.com/news-events/news/press-release-det...
[+] [-] jonknee|6 years ago|reply
Not spending billions a year on R&D certainly makes the financials look nicer. It might not attract as nice of a multiple, but it's not the ride prices that are out of whack at Uber IMO.
[+] [-] standardUser|6 years ago|reply
[+] [-] burtonator|6 years ago|reply
The blitzscaling strategy might in fact work but it would effectively be an end to democracy. We would basically have a marketplace of ALL monopolies.
It just doesn't scale.
[+] [-] pbreit|6 years ago|reply
ie, core business prints money.
[+] [-] dman|6 years ago|reply
[+] [-] aiddun|6 years ago|reply
[+] [-] catacombs|6 years ago|reply
What's been the alternative? Regular taxis? Aren't they just as expensive?
[+] [-] themagician|6 years ago|reply
I took my first Uber in 2011. It was amazing. Expensive, to be sure, but the service was amazing. Black Sedan, extremely professional, shows up wherever you want, drops you off wherever you want, never really had to look at GPS. Just amazing.
It was so good I figured I'd never need car again. But it was expensive, so I used it sparingly. I'd take public transit or walk most of the time, but when I needed to get somewhere that didn't go or I needed to get somewhere fast, Uber was there.
Now it's a joke. A total joke. The service is shit. The base tier has people picking you up in minivans that rattle like they are about to fall apart and the people can barely drive… if they pick you up at all. There's like a 50/50 chance it will take 15 minutes for a pickup because the driver will go in the completely wrong direction and then cancel the ride. The "premium" service tiers come with fancier cars, but most driver still have no idea where they are going.
It was good when it was small. It was good when they only had professional drivers with carrier passenger permits and commercial insurance. It made sense. It was good for everyone. It was good when they actually had "drivers", not random people struggling to make minimum wage.
I also try to avoid it.
[+] [-] mav3rick|6 years ago|reply
[+] [-] avocado4|6 years ago|reply
[+] [-] rreichman|6 years ago|reply
[+] [-] randyrand|6 years ago|reply
[+] [-] munk-a|6 years ago|reply
I like to compare them to the car sharing companies (like zipcar/car2go etc...) which managed to de-throne the entrenched rental agencies without going out of their way to break laws.
[+] [-] lacker|6 years ago|reply
[+] [-] nearbuy|6 years ago|reply
Before Uber, taxi medallions in New York were selling for around $1 million. These pricey medallions tended to get bought up by large companies that could afford the investment. Your driver likely couldn't afford one, so instead, drivers would rent a cab and medallion for about $100 per 12-hour shift, on top of the dispatcher fees.
This system was supposed to restrict the supply of cabs to ensure drivers earned a decent wage. Instead, all the value is extracted by the medallion holders.
[+] [-] paxys|6 years ago|reply
What regulations are these? Is there any case where taking taxis was or is safer for an average customer than Uber?
[+] [-] ghaff|6 years ago|reply
Except for the fact that Avis bought Zipcar. So not sure about the dethroning part.
I know some folks who really depend on short-term rentals to support being carless but it's a relatively niche service--especially with current Uber/Lyft pricing.
[+] [-] coldtea|6 years ago|reply
Where gig economy = padding the loss of decent jobs by replacing the bottom end with desperate deals where "non employed" employees, without regular salary, benefits, company provided work tools, etc., make a pittance, while the organizing company gets a cut from millions of transactions.
In some cases, no jobs is better than subsistence/dead-end/exploitative jobs. At least the former makes the problem evident, and ups the pressure to do something about it on a society/policy/economy level -- as opposed to helping perpetuate it.
[+] [-] jcdavis|6 years ago|reply
[+] [-] Animats|6 years ago|reply
(Self driving cars were never going to save them. Not only do they not work yet, there's no reason to think they'd be much cheaper for years to come. Uber would have to pay for them, garage them, maintain them, operate control centers, etc. They'd be in the car rental business, which is not hugely profitable. Uber's business model is to dump their operating costs on their drivers. With self driving cars, they couldn't do that.)
[+] [-] orangep|6 years ago|reply
[+] [-] jerf|6 years ago|reply
Apparently Lyft upped its guidance, and Uber stock took off today; it was up 8.25% percent from yesterday. As of right now, it's now down 10% off closing to 38.66, a value it hasn't had since... last Wednesday morning.
Disappointing if you're a holder, sure, but not as catastrophic as you'd think if you only read this news.
(To the extent I have bias here, it is bias against trying to judge stock performance only by reading about its massive jumps up or down. Uber I'm not a particular fan of but I can't say I'm all that personally passionately against it either. I don't mean this as attack or defense, only a perspective on the news that I think is closer to a truth.)
[+] [-] kart23|6 years ago|reply
[+] [-] yalogin|6 years ago|reply
[+] [-] Someone|6 years ago|reply
Also: what’s in “Cost of revenue”? It is neither “Operations and Support” nor “General and Administrative”. The subsidies they give drivers? If it is, prices would have to go up by about 50% for that to go to zero.
[+] [-] _bxg1|6 years ago|reply
[+] [-] watermall|6 years ago|reply
What really surprises me is how many otherwise savvy and tech-knowledgeable people bought into the hype.
That said, I also think that not everyone involved in spreading the hype does it for innocent reasons. For example, people often criticize Elon Musk for making absurd claims about self-driving cars, but then argue that he does it because he is innocently deluded. I suspect it's more likely that he is lying through his teeth.
[+] [-] toasterlovin|6 years ago|reply
[+] [-] ummonk|6 years ago|reply
[+] [-] georgeecollins|6 years ago|reply
[+] [-] throwaway713|6 years ago|reply
[+] [-] lkbm|6 years ago|reply
Ridestar claims that 61% goes to the driver; 39% to Lyft/Uber.[0]
Their S-1[1] shows lots of sales and marketing, lots of R&D (remember, they're working on self-driving cars, among other things), and lots of general/admin (I suspect they spend a lot on legal).
[0] https://www.ridester.com/uber-fees/
[1] https://www.sec.gov/Archives/edgar/data/1543151/000119312519...
[+] [-] ghaff|6 years ago|reply
[+] [-] dcchambers|6 years ago|reply
I don't have a horse in this race, but if Uber/Lyft fail there are going to be substantial societal repercussions. Admit it or not, they have disrupted the transportation industry significantly.
[+] [-] Endy|6 years ago|reply
Just as a note: without a low-cost private car, I literally could not keep my job.
[+] [-] throwaway382948|6 years ago|reply
[+] [-] aussiegreenie|6 years ago|reply
So whoever gives me a discount I will use and if no one will I will catch a bus or taxi. Google Maps shows me the estimated cost for Uber and Bolt.
[+] [-] xyzzyz|6 years ago|reply
[+] [-] buboard|6 years ago|reply
[+] [-] avgDev|6 years ago|reply
I don't want to work around it. Therefore, I rarely use these services. It is becoming more and more hassle.
[+] [-] i_cant_speel|6 years ago|reply
[+] [-] monitorman|6 years ago|reply
Do you understand how many other industries use AI for pricing? What about buying things on Amazon? Hotels? Airline tickets? Gas?
You may as well go back to using taxis if you don't think Uber is giving you a fair price.
[+] [-] aresant|6 years ago|reply
(1) https://www.nytimes.com/2019/07/29/technology/uber-job-cuts....
[+] [-] Tiktaalik|6 years ago|reply
[+] [-] smileysteve|6 years ago|reply
[+] [-] duderific|6 years ago|reply
[+] [-] astrodust|6 years ago|reply
It may as well be trying to hold back the sea. They can do this in the short-term, but not forever.
[+] [-] crispyporkbites|6 years ago|reply