What I want to know is, when the VC money runs out, what's the barrier to entry to this business? Right now, Uber can beat everybody on price and quality because they don't have to be profitable for a long time. But once they have to compete on price, where's their advantage? Installed user-base? Incumbents forced out of business?
Many times I call for an Uber and a cab comes first and then they lose my business to the cab, which kind of highlights the commodity nature of rides--especially in the unregulated environment they themselves advocate. Maybe the long-term plan is de-regulate and re-regulate in favor of Uber?
Just thinking out loud because I'm genuinely curious what the strategy is.
There is no barrier to entry. Seriously. Mobile apps? Backend infrastructure? Trivial. I take that back; the biggest barrier to entry might be a massive trove of ride data for machine learning used to predict capacity requirements. In large metro areas, you might be able to get this data in an open format, obviating the need for you to gather the data yourself (the recently FOILd New York Cab Ride data comes to mind [1]).
Anyway! I see Uber going the way of webvan. Great proof of concept that VC money is going to burn through, followed up by some combination competitors, self-driving cars, and local/state government transportation agencies putting together federated/open APIs to perform the same services but in a regulated manner (or governments contracting with smaller players to perform the same services).
No amount of VC is going to remove a government's ability to regulate transportation (Montreal, Canada impounded 40 Uber drivers' vehicles the other day [2]). Then again, it shouldn't. Transportation should be regulated, but not for monopolistic reasons.
Uber is a classic two-sided network [0], like eBay or Craigslist. It is extremely difficult to displace a first-mover advantage. The hundreds of thousands of drivers are set up with Uber and will stick with it unless something new is meaningfully better (and Lyft is currently worse). Same with the users.
I think you can be legitimately critical of Uber's poor business ethics [1], but the sustainability of their current business model looks excellent, at least for each city in which they are established as the first mover.
> Many times I call for an Uber and a cab comes first and then they lose my business to the cab, which kind of highlights the commodity nature of rides
In that scenario, Uber should be charging you a penalty for the cancelled ride.
> Right now, Uber can beat everybody on price and quality because they don't have to be profitable for a long time.
I certainly hope they're not losing money on each ride right now.
>Maybe the long-term plan is de-regulate and re-regulate in favor of Uber?
That's one option. Grow until they are dominant, then support greater regulation. They can afford it, new competitors can't. Similar to Amazon and sales tax.
Probably pivot or add another service that compliment its existing one.
I've heard they're beta testing package delivering over at reddit iirc.
An example would be Netflix, they had cheap license for old tv shows and dvd rentals. Now that production studios have squeezing Netflix in licensing deal with higher prices, they've pivot to becoming HBO like, with a smaller selection of tv shows and movies license.
The second line of the article states that growth is beginning to slow. It felt ominous, but buried in the 5th paragraph it says they are still expecting 512% YoY growth in 2015.
> Lyft projects $796 million for 2015, a slowdown in growth but still an impressive 512 percent jump from 2014
The crazy thing is how a relatively small miss on a large growth rate can cause big valuation problems. When the value of the company is in future revenue, this happens. (Look at Twitter)
> The $130 million in revenue for 2014 is based on the combined net revenue from Lyft Classic and gross revenue from Lyft Line during the month of December, which implies $10.8 million in revenue during that month.
> in 2014, it was 51,000 drivers and 2.2 million monthly rides, according to the document
> A ride booked in San Francisco through the Classic service generates a 92-cent profit for Lyft, including marketing costs but excluding corporate expenses, such as software developers and office space.
and assuming that all these 26.4 rides where Lyft Classic(which is of course foolish, but good for now), they would have around $24.28M for corporate expenses. Well and office in SF with ~500 people and all these perks in the heart of Mission district, makes me wonder if they are even profitable...
I keep hearing about this huge war between Lyft and Uber, but I don't see anything evidenced in the price to the user. Now, maybe I'm just naive, but shouldn't this kind of competition drive the prices down?
Have you used uber pool or lyft's equivalent? I can take a 45 minute ride in LA for $5. I've only had someone else get in the car once out of at least 20 rides. They're definitely losing some money there.
Does anyone have a link to the actual pitch document? I couldn't find it in the article or on google. Interesting excerpts but I'm greedy and want all the context in the doc :)
gphil|10 years ago
Many times I call for an Uber and a cab comes first and then they lose my business to the cab, which kind of highlights the commodity nature of rides--especially in the unregulated environment they themselves advocate. Maybe the long-term plan is de-regulate and re-regulate in favor of Uber?
Just thinking out loud because I'm genuinely curious what the strategy is.
toomuchtodo|10 years ago
Anyway! I see Uber going the way of webvan. Great proof of concept that VC money is going to burn through, followed up by some combination competitors, self-driving cars, and local/state government transportation agencies putting together federated/open APIs to perform the same services but in a regulated manner (or governments contracting with smaller players to perform the same services).
No amount of VC is going to remove a government's ability to regulate transportation (Montreal, Canada impounded 40 Uber drivers' vehicles the other day [2]). Then again, it shouldn't. Transportation should be regulated, but not for monopolistic reasons.
Anyone want to make a cheap long bet for funsies?
[1] http://www.andresmh.com/nyctaxitrips/
[2] http://www.cbc.ca/news/canada/montreal/montreal-taxi-bureau-...
dankohn1|10 years ago
I think you can be legitimately critical of Uber's poor business ethics [1], but the sustainability of their current business model looks excellent, at least for each city in which they are established as the first mover.
[0] http://en.wikipedia.org/wiki/Two-sided_market [1] http://en.wikipedia.org/wiki/Uber_(company)#Sabotage_against...
JoshTriplett|10 years ago
In that scenario, Uber should be charging you a penalty for the cancelled ride.
> Right now, Uber can beat everybody on price and quality because they don't have to be profitable for a long time.
I certainly hope they're not losing money on each ride right now.
smackfu|10 years ago
That's one option. Grow until they are dominant, then support greater regulation. They can afford it, new competitors can't. Similar to Amazon and sales tax.
digitalzombie|10 years ago
I've heard they're beta testing package delivering over at reddit iirc.
An example would be Netflix, they had cheap license for old tv shows and dvd rentals. Now that production studios have squeezing Netflix in licensing deal with higher prices, they've pivot to becoming HBO like, with a smaller selection of tv shows and movies license.
tswartz|10 years ago
> Lyft projects $796 million for 2015, a slowdown in growth but still an impressive 512 percent jump from 2014
mathattack|10 years ago
russell_h|10 years ago
What is this sentence supposed to mean?
HockeyPlayer|10 years ago
tomashertus|10 years ago
> in 2014, it was 51,000 drivers and 2.2 million monthly rides, according to the document
> A ride booked in San Francisco through the Classic service generates a 92-cent profit for Lyft, including marketing costs but excluding corporate expenses, such as software developers and office space.
and assuming that all these 26.4 rides where Lyft Classic(which is of course foolish, but good for now), they would have around $24.28M for corporate expenses. Well and office in SF with ~500 people and all these perks in the heart of Mission district, makes me wonder if they are even profitable...
lbarrow|10 years ago
MadManE|10 years ago
mayneack|10 years ago
jordanthoms|10 years ago
BAMartelly|10 years ago