The really interesting story here is that if drivers are so willing to switch networks for better opportunities, there isn't a compelling reason for Uber to have the valuation that they do.
The value of Uber isn't really in the tech or the app - it's in the networks of riders and drivers in each city. If each of those can be aggregated into some other kind of service, where Uber, Lyft, etc. are just providers of payment processing, and possibly some operations expertise, that middleman network will capture all of the value.
Basically while there are network effects in the sense that any provider (Uber, Lyft etc.) will need to have some critical mass before there are enough drivers and enough riders, both can subscribe to multiple providers and there is no long-term stickiness at the moment.
In other words, this is not a winner take all market with FB/LinkedIn/Twitter type network stickiness and the overall market is still fair game. The driver's rating is the only sticky data, and it is unclear in this context as to how valuable that is as riders are not going to wait an extra 30mins to get a 5-star driver vs. a 4-star driver.
This should not come as a surprise to anyone since right now most metros have multiple competing taxi service providers, so it makes sense that that may be replaced by a similar multiple mobile-app taxi providers.
Also, it is difficult to re-paint your taxi when you move from one traditional provider to another, in the Uber/Lyft/etc. world, that is no longer required, so provider switching or aligning with multiple providers is trivial which will imply that in future the providers' margins will be squeezed out and riders and drivers will keep the most benefit.
I'm not sure a middleman service is even really necessary. There's plenty of drivers right now driving for multiple services. The more services there are, the more competition there is for drivers' time, which means drivers have more leverage.
One could read Uber's insistence on canning drivers who turn down too many rides as an attempt to reduce this leverage, since the only way drivers can exercise it is to turn down Uber rides in order to drive for somebody else. Requiring them to accept a certain volume of Uber rides effectively ties them to Uber.
I think Uber realizes this, thus their strategy is to eliminate Lyft and any future competitors from entering the market as soon as possible. AFAIK, Lyft currently makes no money on its operations while Uber does (by virtue of their greater scale).
I'm afraid of a world in which Lyft is forced to quite (as you only so long sustain on VC money), and Uber then abusing it's monopoly power.
The difference to the existing cab market is the extraordinary scale and growth Uber posses. They can simply afford to undercut everyone's prices for the short term with their billion of dollars in VC money.
But in a future where a large percent of rides are shared by 3 passengers on average, or maybe even more via SUV(for cost savings of course), being the dominant provider is tied directly achieving optimal routes and average share ratios.
In such a future , the network effects over riders is much stronger , and it's probably a "winner takes most" market.
I recently was in a Lyft where the driver was also an Uber driver. I don't know how rapidly he switched contexts (ride to ride, day to day, or something like surges). Does either company do anything to prevent this?
> if drivers are so willing to switch networks for better opportunities, there isn't a compelling reason for Uber to have the valuation that they do.
There are two sides to the story: If customers are so enamored with Uber that they wouldn't consider Lyft or the other services, Uber will still be in control.
EDIT TO CLARIFY: Did not mean to suggest that customers are indeed enamored with Uber. Only wanted to point out that driver promiscuity does not necessarily threaten Uber so long as customers flock to them.
The value of Uber isn't really in the tech or the app - it's in the networks of riders and drivers in each city.
One thing to keep in mind, is that a "spontaneous pick-up of a new rider" workflow is very similar to a "switch rider to a new network" workflow. If the apps are designed to be rapidly downloaded over cellular/LTE then this could often be accomplished in the space of a single ride, facilitated by coinciding GPS information.
Yes. I think a good comparison is airlines. They generate enormous value, but because there's a lot of competition, they don't generate much in the way of profits. Another useful analogy is real estate: because it's so easy to become a real estate agent (you need business cards, people skills, and modest arithmetic skills), it's a relatively hard business to me in. I wouldn't buy into Uber right now.
What would it take for somebody to just build a free, open-source matchmaking service for drivers and riders? It doesn't seem like what Lyft or Uber offer is very technically demanding (perhaps doing it at scale is), and presumably you could attract a lot more drivers by offering them the chance to keep ~99% of the fare.
The existence of Lyft demonstrates that Uber's first-mover advantage isn't insurmountable, so who's to say the third-mover shouldn't be a free utility that provides matchmaking at cost?
The value is in the network of riders and drivers not in the software. The big value for the drivers comes when you can minimize the time gaps between rides, and for riders to be able to get pickups down.
Lyft was actually the first mover on the the UberX product category, Uber was only doing premium service when Lyft started growing.
Ultimately this market is a race to the smallest commissions possible. There are costs involved like credit card processing, insurance, operations, etc. I could see commissions going down to 5%.
Who would provide customer service, sales, marketing, user research and the other non-technical elements of the business? It's true of many companies that what they do is not very technically demanding (Amazon, Facebook, eBay, etc) but that very often means that you _can't_ replicate them by just replicating the technology - these successful companies are much more than just their software.
And anyway, I bet there is a surprising level of sophistication to eg: Uber's software
There's no incentive to build and run a free Uber/Lyft competitor the traditional way.
If someone were to build a Stellar-like decentralized market that matched drivers with riders who pay with the market's internal currency, the incentive to build and improve upon the service would be the appreciation of the currency. People who thought it could succeed would buy some of the currency cheaply, build applications that make the market easy to use, and profit from the gains their improvements cause.
Interesting consequence of the lower cost of technical resources. I'm guessing the higher cost would be in marketing the service to get initial critical mass.
Taxi rides are basically futures contracts. Not exactly fungible due to location but you might be able to price that in, somehow. Bring on a generic taxi ride commodities exchange.
This is a much more specific issue than most of the comments here are making it. People are talking about capitalism, competition, etc...
The problem is simply that a couple weeks ago Uber started sending UberX fares to Uber black car drivers. Which was a dumb move, because they are unprofitable and undercut the value of the premium car service. They've now reversed that dumb move.
Exactly. This was a protest over a very specific issue, and Uber ended up listening.
The article surprisingly doesn't really spin this into generalized pontificating and really talks about this specific grievance at length. HN commenters however are responding as if this was a general piece on Uber's failings as a whole... Strange.
It's great to see how easy it is for drivers to switch networks if they are unhappy, but drivers have to understand that prices are going down and they'll likely earn less money over time on all networks.
When articles are posted about Uber drivers earning $90k/yr, I'm sure many folks quit their $40k office job and hit the road. The thing is, driving taxi is pretty low skilled so the growing supply of drivers will really push down their income. There's an efficiency problem when an Uber driver "can earn" more than 75% of Americans, and existing drivers have been reaping the benefits of those inefficiencies.
Even if $90K a year is sustainable, driving a taxi is a very high-expense business. You'll drive your car into the ground far quicker than you did before, insurance is going to be insanely expensive (an UberX driver I talked to once told me his insurance is $7K a year), and gasoline isn't free (and getting less and less free every day).
The take-home from $90K driving taxis is very different than the take-home from $90K sitting at a desk.
This is how capitalism works, survival of the fittest. If someone comes along that allows the drivers to make more money, prudent drivers will likely switch to that service.
> This is how capitalism works, survival of the fittest*
* Unless you have enough money to change regulations in your favor, skirt regulations, and so on, in which case it's survival of the financially-backed.
Lyft drivers are creeped out by Uber. "Operation: Shave the Stache" [1] is one of the most manipulative business practices I've heard of. Lyft chooses to invest its money on improving the experience inside the car, and hiring socially intelligent people, who they then treat like human beings. Uber could learn a lot from them.
The drivers, who are mostly comprised of SUV and black car drivers, have planned a protest outside of the Long Island City Uber Office
I wonder how much good the office protest will do versus just emailing Uber saying "Adios Uber! I'm headed to Lyft because of..."
The on site picketing made sense for blue collar industrial and government workers because the switching cost of quitting your job and (hoping) to get hired at another plant would have been very high. For hire drivers working for Uber and Lyft essentially have close to zero switching costs. A demonstration of that would seem more effective than picketing.
The media attention that drivers get through this action help signal to consumers that they are moving to a competitor. This might make me (a rider) more likely to fire up the Lyft app instead of Uber next time I need a ride.
This is how free market capitalism is supposed to work - where mobility (switching services) is low to non-existent and so then users can migrate en mass to the ecosystem that is governed better or more in their favour.
That's awesome I cancelled my account last month due to the issue of "we are lowering prices for summer" me thinking naively that this meant eventually prices would go up after a month or two. However after receiving not only notification that the prices would not go up further (Houston drivers at a minimum) but also I would now be required to pay 10 dollars a week to maintain service. Prior to Uber I was thinking the sharing ecnonomy was an embodiment of a change in corporate attitudes. F me right?
The current incarnation of ride shating is fatally flawed. I imagine a superior model in which there is no direct reward for picking somebody up, rather a network of normal people, who can submit and receive requests to pick up. The only compensation would be that in a splitting of gas, which could potentially be done automatically.
The main difficulty in getting a network like this to succeed is the fact that there is no incentive for new drivers to join.
Until then, they are just a taxi company with lax employment protocol.
I can think of two possible sources of driver lock-in: insurance (on the clock but between rides) and car financing. Anyone heard of uber or lyft working on this?
There is another reason: employment status and the resulting side-effects.
If you lock in a driver, you start to look like an employer with employees. This creates enormous payroll tax responsibility, workers comp insurance and other headaches for Uber/Lyft.
I would bet that Uber/Lyft have burned a metric crapton of lawyer and accountant brains in an effort to be on the "safe" side of the independent contractor vs employee fight. They're not going to screw that up.
If the drivers create the value/provide the service and Uber is facilitating that by taking a share, it has to make sense for the value-creator/service provider to continue the relationship. If Uber erodes that margin, the drivers will leave.
Eventually Uber has to change to benefit their service providers and act a little more ethically. The drivers know of their underhanded ways with dealing with Lyft and eventually the public will.
I am an immigrant, I drove a black car in NYC(many years ago), my cousin drives one now. He is none too happy with the UberX situation right now.
Uber should consider the plight of the drivers and not their 100X VC overlords. Nobody ever got rich driving a cab, why victimize the drivers?
"Because we can?"
"We are making the market more efficient"
"Frictionless"
It is just at the expense of the drivers. That's your friction point.
Hard working people just want a fair shot, not to be exploited.
Instead of a billion-dollar pay day, why not just a little human decency.
I'm going to go ahead and assume there's an app that aggregates Uber/Lyft/whatever and just gets you the closest driver regardless of network. Uber's service goes from being a premium product to a replaceable commodity in a blink.
The bottom line is: If you're easily replaceable, you will feel the squeeze sooner or later.
Been in those kind of jobs myself and the only way out is to upskill until your value as a worker is high enough that ruthless managers that couldn't care less about the impact of their decisions on individuals won't get away with it.
http://fortune.com/2014/09/11/uber-vs-lyft-the-credit-cards-... It doesn't look like a lot of competition honestly. That probably paints Lyft in the best possible light too because it just takes into account US only trips (100% of Lyft's business and only a fraction of Uber's). But even then, that's only competition for the uberx market. These drivers are black car drivers, where uber has no competition at all.
[+] [-] jefflinwood|11 years ago|reply
The value of Uber isn't really in the tech or the app - it's in the networks of riders and drivers in each city. If each of those can be aggregated into some other kind of service, where Uber, Lyft, etc. are just providers of payment processing, and possibly some operations expertise, that middleman network will capture all of the value.
[+] [-] yumraj|11 years ago|reply
Basically while there are network effects in the sense that any provider (Uber, Lyft etc.) will need to have some critical mass before there are enough drivers and enough riders, both can subscribe to multiple providers and there is no long-term stickiness at the moment.
In other words, this is not a winner take all market with FB/LinkedIn/Twitter type network stickiness and the overall market is still fair game. The driver's rating is the only sticky data, and it is unclear in this context as to how valuable that is as riders are not going to wait an extra 30mins to get a 5-star driver vs. a 4-star driver.
This should not come as a surprise to anyone since right now most metros have multiple competing taxi service providers, so it makes sense that that may be replaced by a similar multiple mobile-app taxi providers.
Also, it is difficult to re-paint your taxi when you move from one traditional provider to another, in the Uber/Lyft/etc. world, that is no longer required, so provider switching or aligning with multiple providers is trivial which will imply that in future the providers' margins will be squeezed out and riders and drivers will keep the most benefit.
[+] [-] smacktoward|11 years ago|reply
One could read Uber's insistence on canning drivers who turn down too many rides as an attempt to reduce this leverage, since the only way drivers can exercise it is to turn down Uber rides in order to drive for somebody else. Requiring them to accept a certain volume of Uber rides effectively ties them to Uber.
[+] [-] nchuhoai|11 years ago|reply
I'm afraid of a world in which Lyft is forced to quite (as you only so long sustain on VC money), and Uber then abusing it's monopoly power.
The difference to the existing cab market is the extraordinary scale and growth Uber posses. They can simply afford to undercut everyone's prices for the short term with their billion of dollars in VC money.
[+] [-] pinkyand|11 years ago|reply
But in a future where a large percent of rides are shared by 3 passengers on average, or maybe even more via SUV(for cost savings of course), being the dominant provider is tied directly achieving optimal routes and average share ratios.
In such a future , the network effects over riders is much stronger , and it's probably a "winner takes most" market.
[+] [-] supercanuck|11 years ago|reply
Carry one phone for Uber and one phone for Lyft, and swap out the branding when representing one or the other.
[+] [-] Spooky23|11 years ago|reply
[+] [-] mayneack|11 years ago|reply
[+] [-] sheetjs|11 years ago|reply
There are two sides to the story: If customers are so enamored with Uber that they wouldn't consider Lyft or the other services, Uber will still be in control.
EDIT TO CLARIFY: Did not mean to suggest that customers are indeed enamored with Uber. Only wanted to point out that driver promiscuity does not necessarily threaten Uber so long as customers flock to them.
[+] [-] stcredzero|11 years ago|reply
One thing to keep in mind, is that a "spontaneous pick-up of a new rider" workflow is very similar to a "switch rider to a new network" workflow. If the apps are designed to be rapidly downloaded over cellular/LTE then this could often be accomplished in the space of a single ride, facilitated by coinciding GPS information.
[+] [-] wpietri|11 years ago|reply
[+] [-] cordite|11 years ago|reply
[+] [-] ThomPete|11 years ago|reply
[+] [-] smacktoward|11 years ago|reply
[+] [-] ForHackernews|11 years ago|reply
The existence of Lyft demonstrates that Uber's first-mover advantage isn't insurmountable, so who's to say the third-mover shouldn't be a free utility that provides matchmaking at cost?
[+] [-] seanmccann|11 years ago|reply
Lyft was actually the first mover on the the UberX product category, Uber was only doing premium service when Lyft started growing.
Ultimately this market is a race to the smallest commissions possible. There are costs involved like credit card processing, insurance, operations, etc. I could see commissions going down to 5%.
[+] [-] calpaterson|11 years ago|reply
And anyway, I bet there is a surprising level of sophistication to eg: Uber's software
[+] [-] natrius|11 years ago|reply
If someone were to build a Stellar-like decentralized market that matched drivers with riders who pay with the market's internal currency, the incentive to build and improve upon the service would be the appreciation of the currency. People who thought it could succeed would buy some of the currency cheaply, build applications that make the market easy to use, and profit from the gains their improvements cause.
It could happen.
[+] [-] spydertennis|11 years ago|reply
[+] [-] eli|11 years ago|reply
[+] [-] wcummings|11 years ago|reply
[+] [-] abalone|11 years ago|reply
The problem is simply that a couple weeks ago Uber started sending UberX fares to Uber black car drivers. Which was a dumb move, because they are unprofitable and undercut the value of the premium car service. They've now reversed that dumb move.
[+] [-] anateus|11 years ago|reply
The article surprisingly doesn't really spin this into generalized pontificating and really talks about this specific grievance at length. HN commenters however are responding as if this was a general piece on Uber's failings as a whole... Strange.
[+] [-] seanmccann|11 years ago|reply
When articles are posted about Uber drivers earning $90k/yr, I'm sure many folks quit their $40k office job and hit the road. The thing is, driving taxi is pretty low skilled so the growing supply of drivers will really push down their income. There's an efficiency problem when an Uber driver "can earn" more than 75% of Americans, and existing drivers have been reaping the benefits of those inefficiencies.
[+] [-] potatolicious|11 years ago|reply
The take-home from $90K driving taxis is very different than the take-home from $90K sitting at a desk.
[+] [-] SEJeff|11 years ago|reply
It is a no brainer.
[+] [-] mkal_tsr|11 years ago|reply
* Unless you have enough money to change regulations in your favor, skirt regulations, and so on, in which case it's survival of the financially-backed.
[+] [-] philip1209|11 years ago|reply
[+] [-] ChrisAntaki|11 years ago|reply
[1] http://www.theverge.com/2014/8/26/6067663/this-is-ubers-play...
[+] [-] pkfrank|11 years ago|reply
It would be such an Uber-move.
[+] [-] canvia|11 years ago|reply
[+] [-] jbigelow76|11 years ago|reply
I wonder how much good the office protest will do versus just emailing Uber saying "Adios Uber! I'm headed to Lyft because of..."
The on site picketing made sense for blue collar industrial and government workers because the switching cost of quitting your job and (hoping) to get hired at another plant would have been very high. For hire drivers working for Uber and Lyft essentially have close to zero switching costs. A demonstration of that would seem more effective than picketing.
[+] [-] peatmoss|11 years ago|reply
[+] [-] loceng|11 years ago|reply
[+] [-] sprkyco|11 years ago|reply
[+] [-] tjbt|11 years ago|reply
The main difficulty in getting a network like this to succeed is the fact that there is no incentive for new drivers to join.
Until then, they are just a taxi company with lax employment protocol.
[+] [-] ed|11 years ago|reply
[+] [-] philiphodgen|11 years ago|reply
If you lock in a driver, you start to look like an employer with employees. This creates enormous payroll tax responsibility, workers comp insurance and other headaches for Uber/Lyft.
I would bet that Uber/Lyft have burned a metric crapton of lawyer and accountant brains in an effort to be on the "safe" side of the independent contractor vs employee fight. They're not going to screw that up.
[+] [-] 11Blade|11 years ago|reply
If the drivers create the value/provide the service and Uber is facilitating that by taking a share, it has to make sense for the value-creator/service provider to continue the relationship. If Uber erodes that margin, the drivers will leave.
Eventually Uber has to change to benefit their service providers and act a little more ethically. The drivers know of their underhanded ways with dealing with Lyft and eventually the public will.
I am an immigrant, I drove a black car in NYC(many years ago), my cousin drives one now. He is none too happy with the UberX situation right now.
Uber should consider the plight of the drivers and not their 100X VC overlords. Nobody ever got rich driving a cab, why victimize the drivers?
"Because we can?"
"We are making the market more efficient"
"Frictionless"
It is just at the expense of the drivers. That's your friction point.
Hard working people just want a fair shot, not to be exploited.
Instead of a billion-dollar pay day, why not just a little human decency.
[+] [-] Pxtl|11 years ago|reply
[+] [-] josephjrobison|11 years ago|reply
[+] [-] aetherson|11 years ago|reply
[+] [-] spiritplumber|11 years ago|reply
[+] [-] unknown|11 years ago|reply
[deleted]
[+] [-] stefan_kendall3|11 years ago|reply
I'll keep using UberX in cars that don't need $80/day in gas.
[+] [-] gaikokujin|11 years ago|reply
Been in those kind of jobs myself and the only way out is to upskill until your value as a worker is high enough that ruthless managers that couldn't care less about the impact of their decisions on individuals won't get away with it.
[+] [-] jonifico|11 years ago|reply
[+] [-] viscanti|11 years ago|reply
[+] [-] deadfall|11 years ago|reply