Much is made in this article of the trust which users have in the Uber system. That is probably valid today, but is unlikely to scale. Anyone who used Craigslist or eBay over the past 10-15 years can tell you that as such systems grow from tens or hundreds of thousands of users to tens or hundreds of millions, the experience becomes very different.
Today we can rely on Uber's mutual rating system. We used to do the same on eBay, but eventually a "business decision" was made and eBay switched to quasi-unilateral ratings (sellers cannot negatively rate buyers anymore).
Today when an Uber driver picks us up, it is likely that they are reasonably in touch with modern society, probably at least a little bit educated, etc. Craigslist used to be like that too. Now it's a spam bazaar full of non-owners selling by owner, hookers pretending to be girlfriends, and so on.
These sorts of changes are inevitable if Uber grows to the sort of revenues being discussed here. Trust hasn't scaled before, and Uber probably can't innovate that away.
Indeed. Anecdotally I've felt like Uber has gotten worse in NYC - probably because they originally started by recruiting experienced drivers, promising greater income (and delivering it). At this point it feels like that pool is tapped out, and they're starting to recruit a lot of drivers who just don't really know the city as well.
The last 3 Uber rides I've had from my office in Brooklyn the driver didn't know how to get on the Manhattan Bridge. With yellow cabs or early-Uber drivers you never see them futzing with a GPS unit, but this is now a regular experience.
Uber recently lowered UberX prices in NYC to be lower than yellow cabs. Funnily enough, given the lack of experience of their drivers and the amount of time I waste circling, or having them type things into a GPS unit, it seems more like a price correction to me than a real price drop.
>'Trust hasn't scaled before, and Uber probably can't innovate that away.'
I don't use Ebay, Craiglist or Uber so perhaps I just don't understand how these things work, but my first thought is simply to create tiers and let customers self-select?
Isn't that what UberX / Taxi / Black / SUV / Lux already are?
Just shift the balance of expectation/price for each tier or perhaps create a new one to handle growth without creating the mismatched bazaar of Craigslist.
Part of this is just Finance 101. Valuation is an art as much as it is a science. Arguing assumptions is exactly what valuation is about-- this does not seem to reveal anything great.
Gurley is obviously a buyer of Uber while Damodaran is not. The lower TAM or penetration numbers could even be written off as conservatism, after all humans are generally more optimistic about future prospects.
Gurley makes a good point on the elasticity of Uber but frankly if I am in a suburb (as most of my close friends and family), you do not use Uber as much given you own a car you paid $30K+ for. In areas like NYC where Uber is used more, there could be higher demand but then you meet a limit- the number of cars on the road... too many causes congestion and people opt for mass transit. I do agree with the napkin sketch but I think there are multiple forces working against Uber away from large metropolitan areas (which is stated as a growth opportunity) including 1) car ownership; 2) infrequent trips -- you generally do a bunch of errands in one shot due to distance; 3) physical space-- how many ubers can there honestly be in a 20-40 mile radius in a lower volume area? Why not go to a nearby city, instead?
Uber is a great service and I use it a lot but I find it hard to see as a car alternative. It is an alternative to existing cabs and mass transit in most areas. It will be interesting to see how it grows and like previously stated, what kind of margins it's drivers are earning... at a certain point you can only drive so much in price drops till they leave for the alternative.
"Appendix"
I even spoke to a yellow cab driver in NYC the other day and he stated that he is rounding up support from the commissioner for help on two things: 1) Green cabs (limited to where they can physically pick up but often times break rules) and 2) Uber.
The other thing about non-large-metro areas is that they're expensive to expand into. You need to promote Uber locally, recruit drivers, use promotions to drive demand while building supply, and all of that for a not very large market. There are a lot of these not-very-large markets, and, in aggregate, they're definitely a big opportunity. But they're inherently more expensive to acquire and slow to move into. Great for a mature company -- but hard to drive rapid growth with such a strategy.
It sounds like you skimmed or didn't read the entire article. The author addresses many of your concerns. The situations you describe are already happening and we are barely in the first inning. My own experience with Uber is that it works even better in the suburbs where all alternative transportation (taxis, towncars, shuttles, Zipcar, bus, rail, relayrides, etc) is substantially worse.
Reading the back-and-forth, the takeaway for me was just how much pure guesswork - on both sides - went into the estimates. It's not just the professor's arguments that are easy to poke holes in, it's every single valuation you can think of for Uber. Here are three scenarios, for example, where Uber value trends toward zero:
Google brings self-driving cars to market. Instead of owning a car, a fleet of autonomous vehicles drive around and pick up any passenger who requests it. No drivers are necessary, the app is built into the Android OS, and all the logistics are handled by Google Maps.
Workable telepresence solutions are developed, relying on combinations of e-mail, web applications, GitHub, videoconference, and some yet-to-be-invented virtual presence system (holodecks? Oculus Rift?). Instead of requiring that you be in a physical office, all knowledge workers can telecommute from wherever they live, and their "office" exists only in virtual reality. Seeking cheaper real estate, larger houses, and yards, workers leave cities in droves. Socializing happens in virtual worlds, and all those trips that Ubers are currently necessary for never happen.
The taxi union lobbies hard and gets Uber and similar ride-sharing services declared illegal in all major cities.
And that's discounting the truly black-swan events like "World War 3 breaks out, and we're all wiped out by nuclear winter."
It really drives home how the market value of a company is set by the last person to buy a share of that company, no matter how crazy or irrational his beliefs are. I could momentarily drop the market cap of Google to $6.75M by selling a share at $0.01, but presumably the market would correct itself in a millisecond. In thinly-traded private stocks, this market correction mechanism is not always available, and so valuations can be way off the mark until all the assumptions built into those valuations have become public and been judged as likely or not likely by the market.
Not read the Tesla piece but at least with the Uber piece the assumptions were clearly stated so they can be challenged.
One challenge I would make to this article's assumptions is that the world is like San Francisco. In many places there are already cheap private hire options available[0]. I'm not sure how to calculate for the existing cost and availability of such options. If it makes sense for the drivers they may become Uber drivers but there may be less decrease in car ownership and changes in customer behaviour.
Yeah, but tesla as a car company is overvalued right now and was then, and last year that's all it was or looked to ever be.
This article is refuting the market for the product; I don't think anyone believes the market for electric vehicles is significantly larger than the current automotive market.
The issue with using a DCF based approach, is that you have to bet only a single scenario whereas if you take a decision tree/probability based model, you can account for a range of scenarios. Here is Charlie Munger on Warren Buffet:
One of the advantages of a fellow like Buffett, whom I've worked with all these years, is that he automatically thinks in terms of decision trees and the elementary math of permutations and combinations....
====
Here is a probability model vs DCF based model. Goldman uses a probability based model which can be used to evaluate changing shifts in technology such as Tesla's Autonomous technology
Is Uber more disruptive because of its experience or the fact that it technically violates the rules/regulations in the taxi cab market? Cabs can't compete on price because, the prices are regulated and fixed, and of the cost of medallions and compliance etc are non-zero. Similar remarks for the hotel industry and AirBnB.
Can this/should this be done in other markets? If someone built an equity crowdfunding platform that ignores SEC rules (and the JOBS act) but investors like it/use it, would it succeed? In the cases of Aereo and Silkroad, they didn't succeed in fighting the laws.
The rules and regulations exist ostensibly to "protect" consumers, but we see that when consumers don't agree with them, huge companies get created.
Let's split up the questions and look at them one by one:
Is Uber disruptive? Probably in some places.
Why? Because some free market-liberal cooked up a way to cap the number of available taxis. Ubers skirts these restrictions by loudly proclaiming not to be taxis in various creative ways, thereby lowering their price structure.
How could this be done in other markets? Definitions matter. Could you raise funding by callling it something else? Very unlikely (it's hard to deny why people send you money). Could you sell useless medicine by calling it something else? Very likely (see "homeopathy", "natural medicine").
I think that there is a difference between rules intended to protect consumers and those designed to protect incumbency. In many cases, such as taxi medallions and other types of business licensing, what once was designed to be a light weight way to protect the public because cumbersome and anti-competitive. These are the areas ripe for disruption.
However, regulations that still predominantly serve the public interest, such as those set out by the EPA, FDA and SEC (though not perfect) are much less open.
The rules in the AirBnB world make a lot more sense than for Uber. While homeowners should have some minimal ability to rent out their abodes, there are good reasons why it should be limited to less than a full-time business.
For Uber, I still haven't heard a decent articulation of the need for such rules as is seen in the taxi business.
My understanding is this... In New york, you hail a cab, and you call a car/limo service. Uber operates legally as a car service. The cab companies are upset because uber is faster, whereas car service typically require a long wait time.
I realize positions need to be based off something, but it always seems strange to me to see analysis like the one being challenged here for a young (albeit large) innovative tech company. Think of Google in 2003, Amazon in 99' or MSFT in 89'.
None of your medium-long term assumptions can stand on very solid ground. What the market is, it's size, it's structure and the company's potential role in it.
Assumption: "the primary market Uber is targeting is the global taxi and car-service market ($100 billion)" - is this correct in 5-10 years? Could Uber target other markets? Deliveries
Assumption: Uber are taking over market share. Can other forms of transport, public or private be replaced by Uber? Where do new technologies (like self riving cars) affect things?
My own speculations gravitate towards efficiencies from having all that data valuable at once.
The 5 seater is a general purpose vehicle for 1-5 people and used for highway driving and for short trips along congested streets. Could Uber's smart system offer regular Sedans for 25 mile highway journeys and golf cart like cars for 1 person inner city journeys?
Could hub and spoke systems exist where several cars take single passengers to a van/shuttle for longer (more expensive) journeys.
Everything is low probability big payoff. Even the the straightforward mission:'take over the existing taxi-limo' is still a high risk-reward proposition. Basically, I think this rebuttal is better than the original analysis. I think neither ow them can give you a number.
> I realize positions need to be based off something, but it always seems strange to me to see analysis like the one being challenged here for a young (albeit large) innovative tech company. Think of Google in 2003, Amazon in 99' or MSFT in 89'.
You mention Google, Amazon, and MSFT in the same breath, but one of those is not like the other. Google in 2003 and MSFT in 1989 were targeting markets that were small, but young and uncertain. However, Amazon's target market was mature and well established, but huge.
Assigning a big valuation to Google in 2003 or MSFT in 1989 would mean having the confidence that lots of people in the future would be doing something that they didn't do at the time. However, assigning a big valuation to Amazon in 1999 meant having the confidence that Amazon's technology would allow them to dominate an existing, large market. After all, people aren't buying more books and toilet paper in 2014 than they did in 1999: they're just doing more of it through online sources instead of brick & mortar ones.
The problem with Uber is that the most obvious target market, taxis & cabs, isn't big enough to justify its valuation even if they totally take over the market with better technology. They're targeting a mature market that's about $100 billion, versus Amazon, which is targeting a mature market that's in the trillions of dollars.
To make the case for a high valuation for Uber, you have to redefine the market. Either by saying that the real target is logistics more broadly ("Uber for X") or by saying that the real market is auto transportation generally. In the latter situation, Uber isn't going to create a higher demand for getting from point A to point B. Instead, they have to take market share away from personal automobiles. In a country with almost as many cars as people, and urban and suburban areas that are designed around personal autos, that's a really uphill battle. E.g. running errands in a suburb isn't like in a city where you just go into town, buy everything you need, and take a cab back home. It's a multi-hop tour through strip mall after strip mall. Personal autos are well-suited for that: Uber totally is not.
I think the most important article to estimate Uber's market size is this article, where their CEO mentions that the ground transportation market in San Francisco is around $22B and this is only for 800,000 people (http://qz.com/218717/what-people-who-think-uber-is-worth-17-...). Now multiply this by 10,000 so that you are at 8B people and you have a global ground market of 220 trillion dollars. Now that number is probably too high, as the gross global product is $100T, but the transportation market can be well in the range of $10T.
So once self-driving cars are up and running, nobody will drive their cars by themselves anymore, because self-driving cars are 5 times safer than humans driving them and for that reason, insurances will charge 5 times more if you want to drive your car yourself. Where do you order get these self-driving Google cars? You order them through Uber and then you have Uber attacking the $10T ground transportation market.(http://techcrunch.com/2013/08/25/uberauto/)
What is your basis for the $10T valuation, except for the fact that $220T is "probably too high"?
And what is your basis to conclude that if something works in San Francisco, it works elsewhere? Is the competition there so fierce that anything that succeeds that everywhere else can be considered an easy market?
The reasoning here is that Uber should not only overtake the global (London, Ankara, Beijing, Calcutta and everything in between) taxi market, but grow it.
Extraordninary claims should require extraordninary evidence. The given reasons are that customers feel safer, that expansion has been "rapid" even outside San Francisco (!), and that customers "feel safer". Also no cash.
Somehow I'm not convinced.
The only vaguely reasonable point is the GPS visibility of cabs. Which is great, but not really a billion dollar product. (What I thought to be Uber's great feature, upfront fixed fees, is not even mentioned.)
No, if you want to argue that Ubers valuation is somehow rooted in reality, you'd have to make a much more compelling argument. I expect it to be one where they take a big bite out of the larger logistics market, perhaps look to expand the delivered groceries market together with Amazon or something.
I find it rather interesting to see that one of the investors thinks the valuation needs to be defended in writing.
Once drivers find out that you don't make the 90k salaries touted by Uber [1] (note: conveniently excluded cost of gas, insurance, tolls, parking, maintenance and repairs, and required more than 40 hour workweeks) driver supply may not match consumer demand. Slashing the prices wasn't exactly beneficial for current drivers either [2]
Uber driving is basically an unskilled job (most Americans know how to drive). A job that an unskilled person can reliably get for $50k take home a year is gold (remember that the US median household income is 50k - and that's for the whole household). This doesn't mean Uber will succeed, but they will never lack for labor.
The professor's analysis was so obviously bad that it's very surprising it made it into FiveThirtyEight. I have dozens of friends who used to take a taxi trip or 2 a week who now take a dozen or more Ubers in the same time. It's patently obvious that the Uber market opportunity is much larger than the current taxi/towncar industry.
And Uber works even better in the suburbs than in cities.
Edit: I commented before reading the whole article which totally nails it. Uber might be the first to $1 trillion in revenue.
Your analysis is obviously wrong. All MY friends don't use Uber and never will. Therefore their market opportunity is miniscule. That should count as absolute proof.
I see you're in San Francisco. May I suggest that living in a city that has a unique combination of density and awful transit options probably colors your views. Of my friends who live in the suburbs or sprawly cities like Atlanta, none take Uber. Why would they? They have a car, commute 10+ miles ($14 just in mileage charges on UberX!), and on weekends their travel generally involves multiple hops in various areas (drive to the Target, then the Costco, etc). Also 10+ miles added together.
And my friends in NYC or Chicago don't use Uber because they can just hail a cab. Five minutes is "high liquidity?" If it takes me five minutes to hail a cab here in downtown Philly, I'm having a bad day!
I have the exactly same experience with russian Yandex.Taxi service. Just because of the service quality, reliability and price I started catching cabs about 2-3 times more often then before; and after they lowered their prices a few months ago (minimum trip of $7 for 10 minute trip), drivers weren't happy at first, but then I heard from them that the amount of orders increased drastically.
[+] [-] jzwinck|11 years ago|reply
Today we can rely on Uber's mutual rating system. We used to do the same on eBay, but eventually a "business decision" was made and eBay switched to quasi-unilateral ratings (sellers cannot negatively rate buyers anymore).
Today when an Uber driver picks us up, it is likely that they are reasonably in touch with modern society, probably at least a little bit educated, etc. Craigslist used to be like that too. Now it's a spam bazaar full of non-owners selling by owner, hookers pretending to be girlfriends, and so on.
These sorts of changes are inevitable if Uber grows to the sort of revenues being discussed here. Trust hasn't scaled before, and Uber probably can't innovate that away.
[+] [-] potatolicious|11 years ago|reply
The last 3 Uber rides I've had from my office in Brooklyn the driver didn't know how to get on the Manhattan Bridge. With yellow cabs or early-Uber drivers you never see them futzing with a GPS unit, but this is now a regular experience.
Uber recently lowered UberX prices in NYC to be lower than yellow cabs. Funnily enough, given the lack of experience of their drivers and the amount of time I waste circling, or having them type things into a GPS unit, it seems more like a price correction to me than a real price drop.
Scalability. It's hard.
[+] [-] incision|11 years ago|reply
I don't use Ebay, Craiglist or Uber so perhaps I just don't understand how these things work, but my first thought is simply to create tiers and let customers self-select?
Isn't that what UberX / Taxi / Black / SUV / Lux already are?
Just shift the balance of expectation/price for each tier or perhaps create a new one to handle growth without creating the mismatched bazaar of Craigslist.
[+] [-] xorcist|11 years ago|reply
In a world where $10 buys you 10k followers on Twitter (and it does), using a rating system to build trust does create a lot of questions.
[+] [-] TheBiv|11 years ago|reply
Real life still has trust that scales, called the credit system.
[+] [-] santoshsankar|11 years ago|reply
Gurley is obviously a buyer of Uber while Damodaran is not. The lower TAM or penetration numbers could even be written off as conservatism, after all humans are generally more optimistic about future prospects.
Gurley makes a good point on the elasticity of Uber but frankly if I am in a suburb (as most of my close friends and family), you do not use Uber as much given you own a car you paid $30K+ for. In areas like NYC where Uber is used more, there could be higher demand but then you meet a limit- the number of cars on the road... too many causes congestion and people opt for mass transit. I do agree with the napkin sketch but I think there are multiple forces working against Uber away from large metropolitan areas (which is stated as a growth opportunity) including 1) car ownership; 2) infrequent trips -- you generally do a bunch of errands in one shot due to distance; 3) physical space-- how many ubers can there honestly be in a 20-40 mile radius in a lower volume area? Why not go to a nearby city, instead?
Uber is a great service and I use it a lot but I find it hard to see as a car alternative. It is an alternative to existing cabs and mass transit in most areas. It will be interesting to see how it grows and like previously stated, what kind of margins it's drivers are earning... at a certain point you can only drive so much in price drops till they leave for the alternative.
"Appendix" I even spoke to a yellow cab driver in NYC the other day and he stated that he is rounding up support from the commissioner for help on two things: 1) Green cabs (limited to where they can physically pick up but often times break rules) and 2) Uber.
[+] [-] aetherson|11 years ago|reply
[+] [-] pbreit|11 years ago|reply
[+] [-] billybones|11 years ago|reply
http://aswathdamodaran.blogspot.com/2013/09/valuation-of-wee...
OP's article nails it: precise financial analysis is meaningless if you base your projections on way-off assumptions.
[+] [-] nostrademons|11 years ago|reply
Google brings self-driving cars to market. Instead of owning a car, a fleet of autonomous vehicles drive around and pick up any passenger who requests it. No drivers are necessary, the app is built into the Android OS, and all the logistics are handled by Google Maps.
Workable telepresence solutions are developed, relying on combinations of e-mail, web applications, GitHub, videoconference, and some yet-to-be-invented virtual presence system (holodecks? Oculus Rift?). Instead of requiring that you be in a physical office, all knowledge workers can telecommute from wherever they live, and their "office" exists only in virtual reality. Seeking cheaper real estate, larger houses, and yards, workers leave cities in droves. Socializing happens in virtual worlds, and all those trips that Ubers are currently necessary for never happen.
The taxi union lobbies hard and gets Uber and similar ride-sharing services declared illegal in all major cities.
And that's discounting the truly black-swan events like "World War 3 breaks out, and we're all wiped out by nuclear winter."
It really drives home how the market value of a company is set by the last person to buy a share of that company, no matter how crazy or irrational his beliefs are. I could momentarily drop the market cap of Google to $6.75M by selling a share at $0.01, but presumably the market would correct itself in a millisecond. In thinly-traded private stocks, this market correction mechanism is not always available, and so valuations can be way off the mark until all the assumptions built into those valuations have become public and been judged as likely or not likely by the market.
[+] [-] unknown|11 years ago|reply
[deleted]
[+] [-] josephlord|11 years ago|reply
One challenge I would make to this article's assumptions is that the world is like San Francisco. In many places there are already cheap private hire options available[0]. I'm not sure how to calculate for the existing cost and availability of such options. If it makes sense for the drivers they may become Uber drivers but there may be less decrease in car ownership and changes in customer behaviour.
[0] Minicabs, rickshaws etc.
[+] [-] ameister14|11 years ago|reply
This article is refuting the market for the product; I don't think anyone believes the market for electric vehicles is significantly larger than the current automotive market.
[+] [-] nrao123|11 years ago|reply
====
http://old.ycombinator.com/munger.html
One of the advantages of a fellow like Buffett, whom I've worked with all these years, is that he automatically thinks in terms of decision trees and the elementary math of permutations and combinations....
====
Here is a probability model vs DCF based model. Goldman uses a probability based model which can be used to evaluate changing shifts in technology such as Tesla's Autonomous technology
http://uautoinsurance.com/b/tesla-valuation-cm488/
[+] [-] jeffyee|11 years ago|reply
Can this/should this be done in other markets? If someone built an equity crowdfunding platform that ignores SEC rules (and the JOBS act) but investors like it/use it, would it succeed? In the cases of Aereo and Silkroad, they didn't succeed in fighting the laws.
The rules and regulations exist ostensibly to "protect" consumers, but we see that when consumers don't agree with them, huge companies get created.
[+] [-] xorcist|11 years ago|reply
Is Uber disruptive? Probably in some places.
Why? Because some free market-liberal cooked up a way to cap the number of available taxis. Ubers skirts these restrictions by loudly proclaiming not to be taxis in various creative ways, thereby lowering their price structure.
How could this be done in other markets? Definitions matter. Could you raise funding by callling it something else? Very unlikely (it's hard to deny why people send you money). Could you sell useless medicine by calling it something else? Very likely (see "homeopathy", "natural medicine").
[+] [-] Pro_bity|11 years ago|reply
However, regulations that still predominantly serve the public interest, such as those set out by the EPA, FDA and SEC (though not perfect) are much less open.
[+] [-] pbreit|11 years ago|reply
For Uber, I still haven't heard a decent articulation of the need for such rules as is seen in the taxi business.
[+] [-] andrewtbham|11 years ago|reply
right?
[+] [-] netcan|11 years ago|reply
I realize positions need to be based off something, but it always seems strange to me to see analysis like the one being challenged here for a young (albeit large) innovative tech company. Think of Google in 2003, Amazon in 99' or MSFT in 89'.
None of your medium-long term assumptions can stand on very solid ground. What the market is, it's size, it's structure and the company's potential role in it.
Assumption: "the primary market Uber is targeting is the global taxi and car-service market ($100 billion)" - is this correct in 5-10 years? Could Uber target other markets? Deliveries
Assumption: Uber are taking over market share. Can other forms of transport, public or private be replaced by Uber? Where do new technologies (like self riving cars) affect things?
My own speculations gravitate towards efficiencies from having all that data valuable at once.
The 5 seater is a general purpose vehicle for 1-5 people and used for highway driving and for short trips along congested streets. Could Uber's smart system offer regular Sedans for 25 mile highway journeys and golf cart like cars for 1 person inner city journeys?
Could hub and spoke systems exist where several cars take single passengers to a van/shuttle for longer (more expensive) journeys.
Everything is low probability big payoff. Even the the straightforward mission:'take over the existing taxi-limo' is still a high risk-reward proposition. Basically, I think this rebuttal is better than the original analysis. I think neither ow them can give you a number.
[+] [-] rayiner|11 years ago|reply
You mention Google, Amazon, and MSFT in the same breath, but one of those is not like the other. Google in 2003 and MSFT in 1989 were targeting markets that were small, but young and uncertain. However, Amazon's target market was mature and well established, but huge.
Assigning a big valuation to Google in 2003 or MSFT in 1989 would mean having the confidence that lots of people in the future would be doing something that they didn't do at the time. However, assigning a big valuation to Amazon in 1999 meant having the confidence that Amazon's technology would allow them to dominate an existing, large market. After all, people aren't buying more books and toilet paper in 2014 than they did in 1999: they're just doing more of it through online sources instead of brick & mortar ones.
The problem with Uber is that the most obvious target market, taxis & cabs, isn't big enough to justify its valuation even if they totally take over the market with better technology. They're targeting a mature market that's about $100 billion, versus Amazon, which is targeting a mature market that's in the trillions of dollars.
To make the case for a high valuation for Uber, you have to redefine the market. Either by saying that the real target is logistics more broadly ("Uber for X") or by saying that the real market is auto transportation generally. In the latter situation, Uber isn't going to create a higher demand for getting from point A to point B. Instead, they have to take market share away from personal automobiles. In a country with almost as many cars as people, and urban and suburban areas that are designed around personal autos, that's a really uphill battle. E.g. running errands in a suburb isn't like in a city where you just go into town, buy everything you need, and take a cab back home. It's a multi-hop tour through strip mall after strip mall. Personal autos are well-suited for that: Uber totally is not.
[+] [-] domiono|11 years ago|reply
So once self-driving cars are up and running, nobody will drive their cars by themselves anymore, because self-driving cars are 5 times safer than humans driving them and for that reason, insurances will charge 5 times more if you want to drive your car yourself. Where do you order get these self-driving Google cars? You order them through Uber and then you have Uber attacking the $10T ground transportation market.(http://techcrunch.com/2013/08/25/uberauto/)
[+] [-] xorcist|11 years ago|reply
And what is your basis to conclude that if something works in San Francisco, it works elsewhere? Is the competition there so fierce that anything that succeeds that everywhere else can be considered an easy market?
[+] [-] rayiner|11 years ago|reply
[+] [-] unknown|11 years ago|reply
[deleted]
[+] [-] xorcist|11 years ago|reply
Extraordninary claims should require extraordninary evidence. The given reasons are that customers feel safer, that expansion has been "rapid" even outside San Francisco (!), and that customers "feel safer". Also no cash.
Somehow I'm not convinced.
The only vaguely reasonable point is the GPS visibility of cabs. Which is great, but not really a billion dollar product. (What I thought to be Uber's great feature, upfront fixed fees, is not even mentioned.)
No, if you want to argue that Ubers valuation is somehow rooted in reality, you'd have to make a much more compelling argument. I expect it to be one where they take a big bite out of the larger logistics market, perhaps look to expand the delivered groceries market together with Amazon or something.
[+] [-] pbreit|11 years ago|reply
Uber doesn't need to make a dime in logistics in order to achieve $1 trillion in gross sales.
[+] [-] notlisted|11 years ago|reply
Once drivers find out that you don't make the 90k salaries touted by Uber [1] (note: conveniently excluded cost of gas, insurance, tolls, parking, maintenance and repairs, and required more than 40 hour workweeks) driver supply may not match consumer demand. Slashing the prices wasn't exactly beneficial for current drivers either [2]
[1] https://medium.com/@felixsalmon/how-well-uberx-pays-part-2-c...
[2] http://uberdriverdiaries.com/uber-slahes-prices-new-york-cit...
[+] [-] cm2012|11 years ago|reply
[+] [-] pbreit|11 years ago|reply
And Uber works even better in the suburbs than in cities.
Edit: I commented before reading the whole article which totally nails it. Uber might be the first to $1 trillion in revenue.
[+] [-] xorcist|11 years ago|reply
[+] [-] rayiner|11 years ago|reply
And my friends in NYC or Chicago don't use Uber because they can just hail a cab. Five minutes is "high liquidity?" If it takes me five minutes to hail a cab here in downtown Philly, I'm having a bad day!
[+] [-] golergka|11 years ago|reply
[+] [-] abalone|11 years ago|reply
That's plausible, but is there any good data on what Uber drivers make, or how much margin these price cuts leave Uber with?