Yes. Meanwhile they prepare for the transition to the era of driverless cars. Once you dominate the market you can penetrate into markets like pacakge delivery and other industries where moving stuff is still profitable.
Amazon and others are trying this with food delivery, package handling, etc, and either the industry is smaller than the newcomers think it is (food delivery) or the industry is already so low cost that it can't be scaled well unless you have a certain amount of volume consistently transiting your infrastructure, which Amazon and DHL have been unable to hit nearly anywhere.
DHL at this point is just for same day business deliveries (where they have done an excellent job too!) and Amazon is just trying to break even on this being their own shipping company business, which is not going very well.
And in the mean time, us consumers get to take advantage of ridiculous free same-day shipping on low-ish cost items, get cheap taxi rides in many places, etc etc.
I see this argument a lot, but Uber is spending a lot to effectively lower the barrier of entry/switching by eliminating legal restrictions and changing people's expectation of car services. If I were at Uber, I'd be very worried about customers and/or drivers switching allegiances en masse.
Seeing how those articles are from 2014 and we're not currently reading glowing reviews of direct-from-store Uber deliveries, my guess is that their unit economics didn't work out.
> with a very low entry cost since anyone car develop the same software that you do now that it's been tested and proven
Cloning the current state of UBER is a really hard task. Anyone cloning them must invest in building brand, convincing drivers and building everything else. Not trivial and all + very expensive to do. UBER is much more than a few UI widgets in a native app. They have 8000 engineers. Do you think they sit all day around and play Doom?
> extremely highly regulated so you're highly dependent on government's good will
True, but they seem to get away with it in most countries. Many old businesses were unregulated for a time being 100 years ago.
> live in a world where competition is a religion
Still, close-to-monopolies exists. Google currently dominates search in world where competition is religion.
The biggest cost is labor, so if they could theoretically shift to self-driving cars soon, fares would pay for more than 100% of ride cost. What that timeframe is would be the $69 billion question. Given that self driving car technology is in its infancy, and will likely require a driver to be ready to take over, they can't ditch drivers anytime soon (unless they make passengers serve as backup drivers?).
"Labor," huh? Uber's "laborers" also carry the capital cost, operating cost, and risk of the transportation service they provide. They own their vehicles and pay for fuel, maintenance, and insurance.
Who covers those costs when no drivers are in the mix?
Somebody has to pay for that stuff. It's still true that a big chunk of uber's success in big cities comes from dodging regulations and medallion costs. In other words, they are gypsy cabs with a slick app.
"In other words, they are gypsy cabs with a slick app."
My question is how do you lose money doing that? Ignore expensive regulations and licensing, automate the heck out of the backend, should make piles of money not lose.
Maybe the losses are some form of hollywood accounting to keep the fire off the whole "ignore regulations" aspect of the business model.
Let's say driverless cars happen in the next five to ten years. I see two scenarios happening - neither do I need uber. First scenario is my local car at my house becomes driverless. I can simply call my car to pick me up from anywhere. It can return home and wait (or go and pick up others as it's own on demand taxi). I now don't need uber at all - even though I use them now. So that is not a good scenario.
Second scenario is I am traveling and need a car/taxi as my local car is at home. If so, why would not other people in that city simply allow for their cars to pick me up while they are not in use. Every driverless car is now a taxi.
Basically all that is needed is an app and some service where owners subscribe and let their cars be used as a taxi. Perhaps uber controls the app and service as the dominant leader. But I bet there will be a lot of competition in that area with car rental companies, manufacturers, local cab companies, individuals and uber all competing.
I suppose the third scenario is that many people do not own a car in the future and we just subscribe to a car service. Perhaps in that area uber is the choice. But perhaps the manuacturers roll their own service too that you subscribe for a time share of a car.
Or could you actually get rid of your own car and ride only on Uber? Due to it's scale, Uber might be able to offer competitive pricing.
If there is no driver involved the cost structure for you and Uber is pretty much the same. Except Uber can probably negotiate better deals on new cars and service (due to volume) and also achieve higher utilization. On the other hand, Uber of course needs to make a profit.
> Uber can probably negotiate better deals on new cars and service (due to volume)
Same argument could be applied to car rental businesses (some of which are owned by automakers which makes the relationship super-cozy), yet I've never seen a deal from Avis or Hertz to make it a worthwhile replacement to owning.
Big cities have an added cost of parking and extra miles driven to find a gas station or a public charger. But big cities also have low-cost public transportation (or so I've heard, I live in LA).
I actually find the cost of renting cars makes a decent amount of sense for me, given how infrequently I use them. However, it's such a hassle, since I've got to go quite out of the way to where they're kept and I can only return them at inconvenient times (or I have to rent for two days because they're not open at the weekend, for example).
Being able to book one to use for a journey then let it go home would be great.
Important to note that currently it's the Uber and Lyft drivers that are subsidizing the cost of getting the car to you - they are not getting paid for the miles driven. Whether or not this cost will be subsidized by Uber/Lyft in the future remains to be seen.
I've done exactly this. I live in a city with ok, but not great, public transit. When we started having constant issues with our metro, I started taking Uber to and from work.
It's more expensive than the train, but cheaper than buying a car, paying operating expenses, paying for parking at my apartment and paying for parking at work by a dramatic amount.
For longer uses or multi-stop errands, I grab a Car2Go or a Zipcar. For whole-day trips or longer, I head to National where I can pick any car from the Aisle for around $50/day.
>> the third scenario is that many people do not own a car in the future and we just subscribe to a car service
I have a feeling this is whats going to happen. People bought records, now they subscribe to Spotify.
Question is who will make money? Spotify does not, because labels have monopoly rights.
I cannot see a scenario where Uber is the winner here. Unlike record companies, there is competition between car companies, but still Uber has no entrenched position here to make a lot of money as far ad I can see.
> I see two scenarios happening - neither do I need uber
You'd need Uber or another Uber-like alternative.
Scenario one requires that you make a massive investment in purchasing your own car - while using Uber's will be cheaper unless you're using cars all day long.
Scenario two requires an app for the coordination/hailing. That's where Uber would come in.
Uber's drivers aren't just a labor cost, they are one of the company's main sources of capital since it is the drivers who must buy or lease the cars and make the payments. Here in Seattle there are around 9,000 drivers, presumably with roughly one car each costing about $25,000 apiece (avg. Prius), or over $200MM in capital equipment for just one city. Current estimates are that an Uber driver working full time nets <$40,000 per year not including the cost of the car, which is likely at least $6,000 in payments. There are over 160,000 Uber drivers in the US, collectively they're paying about $1BN a year to provide the cars for Uber. In a driverless model that cost is entirely shifted to Uber itself.
Yes but Uber would benefit from fleet pricing on purchasing and maintenance as well as the centralization of facilities (you could put the Uber fleet offices far away since the cars can drive themselves there for servicing).
Facilities = more capital. Just the yard to park and service 9000 vehicles is a lot to buy and then there's the buildings: if each car needs service just once a year you'd need at least half a dozen service bays running full time.
The car companies have another option for getting into the car sharing business with instant rentals. Daimler (car2go) already has about 750 cars here in Seattle and BMW (ReachNow) another 520, and they keep adding them. Or they can go the Lyft/GM's ExpressDrive route and provide a pool of rental cars to drivers. It will be far more profitable in the near term for other companies to jump into these markets than invest the billions it would take to build out a driverless fleet.
If the business is large enough, you could combine drivers and AI. For example when hauling people to/from airports, the difficult situations usual arise on the city end. The airport and highway part could be "easily" covered by AI. Driver would jump to car closer to the city.
Or you could use different vehicles. AI driven minibus for long haul and current driver system for shorter distances. If the system runs smoothly (no extra waiting) and pricing is right, I could imagine using something like this.
Serious question: why bother with the current Uber service? Why not just focus all money on self driving and not spend money on subsidized rides.
My guess is that self driving is a scapegoat , and that their business model is more simple: push driver wages down + surge pricing + extinguish competitors. No need for tech there.
Owning, repairing, cleaning, maintaining, parking and fueling (re-charging) self-driving cars is fleet management, which Uber doesn't really have a lot of experience with.
It really depends on your definition of ethical. Volkswagen is unarguably unethical (or at least has been unethical) and profited hugely because of it. Nestle wants to have a monopoly on water. Almost all tradition energy companies (some of them are the biggest, most successful companies in the world) make the rest of the world pay for the negative externalities that they create.
Lots of worse companies have survived and continue to survive.. I don't disagree that there have been problems with Uber, but I don't think there is a direct relationship from ethics to survival, though that would be ideal..
Every day you (and other people) vote with their wallet which company is getting their money. So simply vote against Uber and inspire lots of people to do so, too, if this is your opinion.
Upvoted; I'd like to defend ethics here from the other respondents. Despite what may seem counterintuitive to making money; there is a positive correlation between company success and ethics. An ethical
company is more likely to have ethical staff and ethical staff are less likely to cheat the company. This rot from within is often a companies biggest risk.
With that said, the actual financial analysis of Uber's numbers in the writeup is so amateurish and frankly incorrect that I can't recommend anyone waste time reading it. I'm not trying to defend Uber's valuation, but this person's math is just wrong. Also the data is stale, just not worth it.
They came to my city recently, I've only used them here once - but this is the only place I can directly compare them to a taxi for the same journey. They were about 10% cheaper for that journey. If they kill taxis and need to break even, we'll be paying over 2x as much then?
If this is true then I expect the competition regulators in some countries to start taking action. Such pricing is illegal in some areas because its only reason for existence is to drive out the competition. For instance loss leading in supermarkets in the UK.
57 comments
[ 2.9 ms ] story [ 85.0 ms ] threadDHL at this point is just for same day business deliveries (where they have done an excellent job too!) and Amazon is just trying to break even on this being their own shipping company business, which is not going very well.
http://money.cnn.com/2014/08/19/technology/innovationnation/...
https://www.insideretail.com.au/blog/2014/08/26/uber-deliver...
Seeing how those articles are from 2014 and we're not currently reading glowing reviews of direct-from-store Uber deliveries, my guess is that their unit economics didn't work out.
* with a very low entry cost since anyone car develop the same software that you do now that it's been tested and proven
* extremely highly regulated so you're highly dependent on government's good will
* live in a world where competition is a religion
Cloning the current state of UBER is a really hard task. Anyone cloning them must invest in building brand, convincing drivers and building everything else. Not trivial and all + very expensive to do. UBER is much more than a few UI widgets in a native app. They have 8000 engineers. Do you think they sit all day around and play Doom?
> extremely highly regulated so you're highly dependent on government's good will
True, but they seem to get away with it in most countries. Many old businesses were unregulated for a time being 100 years ago.
> live in a world where competition is a religion
Still, close-to-monopolies exists. Google currently dominates search in world where competition is religion.
http://highscalability.com/blog/2016/10/12/lessons-learned-f...
Who covers those costs when no drivers are in the mix?
Somebody has to pay for that stuff. It's still true that a big chunk of uber's success in big cities comes from dodging regulations and medallion costs. In other words, they are gypsy cabs with a slick app.
My question is how do you lose money doing that? Ignore expensive regulations and licensing, automate the heck out of the backend, should make piles of money not lose.
Maybe the losses are some form of hollywood accounting to keep the fire off the whole "ignore regulations" aspect of the business model.
Second scenario is I am traveling and need a car/taxi as my local car is at home. If so, why would not other people in that city simply allow for their cars to pick me up while they are not in use. Every driverless car is now a taxi.
Basically all that is needed is an app and some service where owners subscribe and let their cars be used as a taxi. Perhaps uber controls the app and service as the dominant leader. But I bet there will be a lot of competition in that area with car rental companies, manufacturers, local cab companies, individuals and uber all competing.
I suppose the third scenario is that many people do not own a car in the future and we just subscribe to a car service. Perhaps in that area uber is the choice. But perhaps the manuacturers roll their own service too that you subscribe for a time share of a car.
If there is no driver involved the cost structure for you and Uber is pretty much the same. Except Uber can probably negotiate better deals on new cars and service (due to volume) and also achieve higher utilization. On the other hand, Uber of course needs to make a profit.
Same argument could be applied to car rental businesses (some of which are owned by automakers which makes the relationship super-cozy), yet I've never seen a deal from Avis or Hertz to make it a worthwhile replacement to owning.
Big cities have an added cost of parking and extra miles driven to find a gas station or a public charger. But big cities also have low-cost public transportation (or so I've heard, I live in LA).
In smaller towns the cost of ownership tends to be lower and with sub-$10,000 products on the market http://jalopnik.com/5072303/new-pricing-of-9990-makes-2009-n... you have a reliable guaranteed ride whose cost is usually spread over 6-7 years.
Being able to book one to use for a journey then let it go home would be great.
Important to note that currently it's the Uber and Lyft drivers that are subsidizing the cost of getting the car to you - they are not getting paid for the miles driven. Whether or not this cost will be subsidized by Uber/Lyft in the future remains to be seen.
It's more expensive than the train, but cheaper than buying a car, paying operating expenses, paying for parking at my apartment and paying for parking at work by a dramatic amount.
For longer uses or multi-stop errands, I grab a Car2Go or a Zipcar. For whole-day trips or longer, I head to National where I can pick any car from the Aisle for around $50/day.
I have a feeling this is whats going to happen. People bought records, now they subscribe to Spotify.
Question is who will make money? Spotify does not, because labels have monopoly rights.
I cannot see a scenario where Uber is the winner here. Unlike record companies, there is competition between car companies, but still Uber has no entrenched position here to make a lot of money as far ad I can see.
You'd need Uber or another Uber-like alternative.
Scenario one requires that you make a massive investment in purchasing your own car - while using Uber's will be cheaper unless you're using cars all day long.
Scenario two requires an app for the coordination/hailing. That's where Uber would come in.
Uber might have a compelling narrative here.
... but what would prevent car companies to deploy their own Uber-like network?
The cost of the software is low and the design has been proven.
Uber is the Lycos of transportation.
Or you could use different vehicles. AI driven minibus for long haul and current driver system for shorter distances. If the system runs smoothly (no extra waiting) and pricing is right, I could imagine using something like this.
My guess is that self driving is a scapegoat , and that their business model is more simple: push driver wages down + surge pricing + extinguish competitors. No need for tech there.
https://www.uber.com/elevate.pdf
You can to compare them to other big names in the transportation/logistics industry, like Webvan (https://en.wikipedia.org/wiki/Webvan)
If you run your company in an ethically abhorrent way across the globe from the get-go, is it any wonder you eventualy will go belly up?
But Uber has been like this from the beginning starting with the founder. The body is as corrupt as the head.
I hope Uber fails while bringing about auto driving to the market. The disruption from an Uber piñata bursting will be good for the market.
... and convinced your surroundings to never use them? ;-)
HTH.
/sarcasm
There was already a HN discussion based on a link to the original Naked Capitalism blog post about Uber: https://news.ycombinator.com/item?id=13079023
With that said, the actual financial analysis of Uber's numbers in the writeup is so amateurish and frankly incorrect that I can't recommend anyone waste time reading it. I'm not trying to defend Uber's valuation, but this person's math is just wrong. Also the data is stale, just not worth it.