>Uber passengers were paying only 41% of the actual cost of their trips ... That means your $25 trip into Manhattan from Brooklyn should actually cost around $60. Investors in the private company are currently footing the other $35 (most!) of your fare.
Ehhh I don't buy the thesis. The author is suggesting all Uber rides run at a loss, but Uber makes a killing on some rides. Not every ride is subsidized, I've paid $60 for a 20 minute ride through LA during surge pricing, and I'm certain both Uber and the drive made a profit off me. I've seen stories of $300+ Uber rides too. There's no way Uber and drivers don't make money off these.
I know many rides are subsidized and Uber loses some money on them, but implying Uber's business model is a failure based off average cost is a fallacy.
Looks like the author is being intentionally deceptive. Uber lost $1.27bn globally (mostly in China AFAIK), but only $100m in the US. The author spent all his time talking about the US, and then tried to group the global loss onto the price of all rides. Not all rides are equal. Not all loses come from driver wages. Big overhead and marketing costs trying out the Chinese market.
Uber booked well over 100M US rides. I think 400M, but I can't find a reliable source ATM. You do the math. Uber rides don't cost an average of $2 in the US. Uber isn't paying 50% of our bill in the US.
You can't run a company at break even, you need profit from the average ride. So, if it's a ~50 billion dollar company making 4% or 2 billion in profit per year, and the US is 10% of that profit they need to charge an average of 6$ more per ride.
Which is flat out not going to happen without reducing the number of riders thus pushing up prices even more. Which is why it's not a 50 Billion dollar company long term.
The argument is that they are turning a profit on the average ride in mature markets, and losing money on the average ride in emerging ones. Right now, because they are trying to grow quickly, they have a lot more emerging market rides than mature market rides, and so the average across all rides looks pretty bad.
This is perfectly common for companies starting up business in new markets. The trick is to turn emerging markets into mature ones.
If indeed Uber is losing money on their local operations plus non-growth overhead, then it's bad. But we don't have those numbers.
Uber is 8 years old and still losing money on the US market.
I have no problem saying they could eventually break even by adding ~2$ a ride in the US. But, that's only enough to be a multi million dollar company to be a multi billion dollar company they need to raise the price 5+$ in the US and the rest of the world without losing ridership.
Now, increasing prices reduces demand... So, to be a 50 billion dollar company they would need to keep a huge ridership while charging ~twice as much on average. Or charge ~5+$ more per ride while becoming a monopoly.
QED: They have zero paths to maintain their current valuation let alone growth to offset the risk of failure.
Uber 'competition' in China was a marketing thing, surely? The country CEOs were cousins. It seemed to me that Uber entered China to fail, and China-savvy, but 'fail' doesn't mean lose, as they grabbed a big chunk of Didi (China's Uber equivalent).
The Naked Capitalism “analysis” never broke down how much Uber spends opening new markets vs. it’s costs in mature markets. Their conclusions are totally farcical.
I'm not sure that I buy the logic of "Winner take all" in the TNC space. The service is intrinsically localized. There were competitors in NYC that I had never heard of before after living in SF, and SF companies that New Yorkers had never heard of. Furthermore, their is little efficiency to operating such a business at scale. The marginal cost of each ride is the same. I can see some strong network effects from travelers, but that doesn't prevent a service from cropping up in a local market that can compete with Uber.
All of the scenarios that I see where Uber can grind out competitors is by continually operating at a loss? I would imagine that eventually investors would tire of such a position.
Wait till Uber (and others) launches a rewards points system. All they have to do is to give regular riders some multiple of their number of completed rides. People will willingly lock themselves inside the Uber World network to earn points. Leading the charge will be people like The Points Guy.
Then comes co-branded credit cards.
The endgame is to replicate the airline industry - 4-5 companies controlling everything.
This. Airlines are not a favorable model.
Airlines irrationally invest, deal with fuel costs they have to partially hedge, can't store capacity... the list goes on.
There is already some of this - some credit card companies have "save x percent on all your uber charges" or "every tenth uber ride is free" promotions.
Uber sort of already experimented a reward system, but limited to customers who own Captial One credit card, at least in my experience. See [1]. They stopped this but it was not a bad reward system when I was consistently using Uber for a while.
But where are the profits? Uber is already subsidizing rides, while cabs and cab companies have to turn profits. Trying to build loyalty with points just increases Uber's costs, as they can't push that off onto drivers. Retaining customers and increasing ridership by increasing loss per trip is not a sustainable model.
Ride services are completely different from airlines, if only because the capital outlay is incomparable. You could run a ride sharing business and get two hundred drivers driving around New York by December for 250k. That won't even pay for a single flight crew for a year, much less a plane to put them in.
Furthermore, pretty much by definition, pretty much all airline passengers are travelers. Some car hire users are travelers. Many are just people going out for drinks in their local city.
I assume the mix varies by locale.
I don't use taxis etc. a lot when I travel but if I did a single goto brand would be useful. Locally, if Bob's app was the best local taxi service, I don't really care if someone else operates in 500 cities worldwide. (Just like I don't care that the car service I use to get me to the airport covers only a slice of even my local area.)
I'd not considered it, but you're right. Centralization of any business which absolutely requires physical proximity of the person providing the product and the person receiving it has a pretty poor track record. Sure, there are things like McDonald's, but they will never displace independent restaurants and smaller regional chains and the like.
The Internet and software makes solving the problem of distribution trivial which provides an existential threat to any traditional business which does not absolutely require physical proximity of producer and consumer, but Uber isn't acting in that space. They do not seem to be preparing themselves for a future where they are only one among many (even if the biggest)... would they be likely to be able (or willing) to survive with a smaller piece of the pie?
I've always thought Ubers big problem was that they built it so much like a traditional company when their only actual value was running some servers and knocking down regulatory hurdles which doomed them to be replaced by a much lighter-weight organization taking only a standard 10% 'finders fee' for hooking up a provider and consumer (a standard older than our money)... but now I'm not sure if they'll make it to the point where they get to see that even.
And there's endless debate about what that is. If you disagree with that statement then please give a definitive universally-accepted (by those able to assess the methodology) value for the climate sensitivity. There isn't one. Currently as far as I can tell, values up for that debate range from < 1 to 5.5.
>"Uber passengers were paying only 41% of the actual cost of their trips; Uber was using these massive subsidies to undercut the fares and provide more capacity than the competitors who had to cover 100% of their costs out of passenger fares."
Wouldn't that constitute very clear violation of the Sherman Antitrust Act and be considered profound anticompetitive behavior? I'm fuzzy on specifics, but I thought offering your product at a loss to drive away or outlast competitors was one of the big giant no-nos alongside price-fixing. Is the person doing the analysis just interpreting the numbers in that way because they're not showing a profit? Or, in other words, would the FTC be likely to interpret the situation in the same way?
Loss leaders are products priced under cost to get customers in the door to buy your other products. Selling your only product below cost in order to kill competitors is antitrust dumping. Luckily, antitrust enforcement in the US is a joke.
I could very easily be wrong, but I thought that only counted if you were a monopoly or coordinating with other companies? I mean, it's the "Antitrust" act. Would love it if anybody could clarify this.
Correct. You can only get in trouble under antitrust laws if you're a big fish in the "relevant market". Defining this term is generally where all the fighting centers, because it makes or breaks the case. And in the case of Uber, they would argue that cabs are part of the same market. Including cabs (and not just Lyft) would make the market big enough that Uber would not be considered to have monopoly power. (Even with just Lyft, this is probably also the case.)
Source: I was a summer law clerk for the antitrust department of the CA DOJ.
The market is personal transportation. Uber competes with cabs, other TNCs, personal cars, car rental, public transportation, biking, walking, etc.
In a few circumstances an Uber passenger may consider only cabs and Uber when deciding how to be transported. In many many other cases, Uber passengers are considering any of the other transportation methods above.
I personally often decide between an Uber or taking the bus. I don't own a car.
The Sherman Antitrust Act has a great deal more in it than only defining monopoly powers. No business is permitted to engage in price-fixing, regardless of size, and that is due to that act. Many other anticompetitive practices are defined in it as well, and also apply to all businesses deemed to be engaging in 'commerce'. I'm not talking about claiming Uber is a monopoly at all, just that their actions (as described by the article) sounds to me like anticompetitive practices that are illegal under the act.
The Sherman Antitrust Act regulates tons of different aspects of what businesses may do, and does not apply solely to large monopolies. It's certainly been used in the past to break up monopolies, but it is also the law which forbids companies of any size from using physical aggression, general intimidation tactics, and similar to collect debt for instance. If I own a lawn-mowing business and you owe me money, I can't go tell your neighbors and family that you're a deadbeat, and that's because of the Sherman Antitrust Act. (Notably, insurance companies are considered 'not commerce' so not regulated under this and medical insurance companies are known to do exactly this sort of thing to intimidate people into paying money they owe.)
This is so absurd - a company that loses $1.27 billion is seen as a market leader. Only in tech is this a possibility. A manufacturing company would be closed for years before they can even achieve such losses.
Their pricing scheme is also illegal or of dubious character, [1]:
> Predatory pricing (also undercutting) is a risky and dubious pricing strategy where a product or service is set at a very low price, intending to drive competitors out of the market, or create barriers to entry for potential new competitors.
> ...
> Nowadays predatory pricing is considered anti-competitive in many jurisdictions and is illegal under competition laws. However, it can be difficult to prove that prices dropped because of deliberate predatory pricing rather than legitimate price competition. In any case, competitors may be driven out of the market before the case is ever heard.
In my opinion, the true cost of a Uber ride is much higher on society, rules, ethics and other aspects. The money that Uber loses (or the rider gains) isn't even on my radar. Massive VC funding, "winner takes all" assumptions, and the primary goal being "acquire the entire world market" are propelling many companies forward and making our world a comparatively worse place (when looked at along side benefits).
In the case of “ridesharing”, how is it making the world a worse place?
It’s not clear that this market is winner take all. Rides are very cheap for consumers on Uber or Lyft. The experience is MUCH better than cabs in every city except maybe NYC. Drunk drivers are reduced.
So far it looks like the loser is going to be VCs. What’s wrong with that?
Turns taxi industry into a subsistence workforce. Uber drivers get screwed in the equation once you factor in all the costs and depreciation, then uber sucks up the profits and takes them out of local communities.
The sharing/on-demand economy is incredibly cruel to the 1099s doing the heavy lifting
The Naked Capitalism analysis was a joke, and there literally is no evidence supporting their conclusions.
Imagine Uber issues a financial report saying they lose $3B in a year on $2B in revenues (total spending $5B). We also know they opened over 100 new markets that year, and in new markets spend an average of over $100 each to recruit new drivers.
So what’s the truth? That passengers are only paying 40% if Uber’s ride costs? Or that Uber front loaded billions in new market development costs internationally, while more mature markets like the US are already close to profitability?
Naked Capitalism would have you believe the first scenario, without enough detail in Uber financial reports to give any idea which scenario is true.
Some of us despise Uber so much, that unfounded speculation by NC tells them what they want to hear, so they turn off all critical thinking about it.
Not only does this article ignore rapidly improving Uber financials since the NC takedown, but that booking a ride costs Uber pennies. Their share of the ride revenues is dollars. How is that not going to be super profitable once new market development costs ramp down?
> that booking a ride costs Uber pennies. Their share of the ride revenues is dollars. How is that not going to be super profitable once new market development costs ramp down?
Because Uber has no business "barrier to entry" for the ride booking: Other people can write smartphone apps that talk to the cloud or whatever also. If the money involved in the app is dollars from pennies, then others will be highly motivated to write the app.
So, the taxi business can return to small, local operators who also use a smartphone app.
Then the dollars Uber is getting stay with the driver and/or their local company.
Uh, mostly the taxi business is a local business. To me, for a centralized company to hope to make big bucks, or even any bucks at all, in the taxi business is wack-o.
For self-driving taxis, okay, for Level 3 automation, but that doesn't help much. What might help would be Level 5 automation, but IMHO that would require essentially full, real AI, and no one knows how to do that. Thus, to me, the idea that the taxi business will be affected by self-driving cars is just nonsense hype -- the media likes to have hype to get clicks.
The Taxi business used to be a local business. It used to be insular and protected from competition by cozy relationships with regulators. That’s no longer true.
Uber is on hundreds of millions of phones. It’s incredibly expensive to get your apps on phones nowadays. And saying other people can write apps that talk to the cloud is a massive oversimplification, building a system that tracks tend of thousands of simultaneous transactions while giving real-time updates to drivers and riders, with 99.xx% uptime, and web/android/ios front ends, is a massively expensive effort.
Lastly even if you spend hundreds of millions getting your apps on phones and building real-time infrastructure, no one is going to use your service until you acquire a massive amount of drivers in their market.
Uber’s brand, which includes that massive bases of installed apps and active drivers, is a huge competitive advantage. It’s the reason 6x more riders choose Uber over Lyft every day, despite Lyft having app installs, drivers, real time software, and despite Uber itself spending the last year or so shutting on their own brand with their tawdry behavior.
Even if you target Uber in a single market or small set of markets to reduce your investment costs for acquiring app installs and drivers, but now your infrastructure costs can’t be amortized over as large a base, making you a high cost competitor.
> Lastly even if you spend hundreds of millions getting your apps on phones and building real-time infrastructure, no one is going to use your service until you acquire a massive amount of drivers in their market.
I don't get it: The taxi business is older than cars! Before cars we had essentially taxis pulled by horses. In parts of Asia, there were taxis pulled by people, on foot or bicycle.
The times I used a taxi, I just called a phone number.
Now with smartphones, people can call such a phone number while walking down a street. Answering the phone can be a person and/or computer.
For the branding, etc., if you are right about the difficulty of having a computer answer the call from a smartphone, then have some company write a generic app that all taxis in the world can use.
The difficulty of getting an app installed? Depends on the app!
I'm still having a super tough time seeing any money in a central taxi business, computers or not, smartphones or not, etc. E.g., people have done serious, well funded, polished research on just how to do dial-a-ride for 40+ years.
Dial a ride? That’s something to research 40 years ago. The new world is app driven, no one need answer a phone call.
The Taxi business has always been about two things, dispatch and monopoly rights. The drivers made a pittance while the profits accrued to dispatchers and medallion owners.
Ride sharing has (mostly) broken the monopoly, so the profits are going to accrue to the most successful dispatchers. I agree with you that it seems existing Yellow Cab/Green Cab/etc dispatchers could invest to build a similar dispatch system and jump in quickly to compete with the hundreds of thousands of existing cars/drivers they have.
But in reality it’s a lot harder than that. They have to be willing to compete on price and service while throwing away their existing business and angering their existing medallion owning stakeholders. It almost never happens that an existing business torches itself to change everything to compete using a new business model.
> Dial a ride? That’s something to research 40 years ago. The new world is app driven, no one need answer a phone call.
Look, you've got it in spite of some of what you write: The "dispatching" part is 40 years old. So, that's nothing new. When I looked at dispatching as an optimization problem, it looked so ill-defined that any optimization looked not worth the bother. Or, just assign the next call to the closest taxi or some such.
I have a quite good background in optimization and a year or so communicated with a guy who claimed to be high in Uber and working on optimization. I sent him some outlines of some approaches, some questions to clarify the real problem, etc. and never got back anything at all meaningful. My guess was that he knew next to nothing about optimization and had made no real progress on optimization at all. I doubt that Uber's dispatching optimization amounts to much.
For answering the phone, for a solo business, let the driver answer his own phone. Or let his wife or kids at home do it. Or have 10 taxi guys form a little informal group and rotate the phone answering one day at a time among themselves or their wives.
For a simple server to answer the phone, that can't be very hard to do. Then for the app, the smartphone just uses a standard Web browser, no mobile app required.
> The new world is app driven, no one need answer a phone call.
Don't need an app; on the client side, a Web browser, including on a smartphone, is enough.
Besides, having a human answer the phone stands to be a big, huge advantage. Nearly any taxi customer would much rather talk to the nice voice of the wife or daughter of the taxi driver than some computer. Out where I am, when I called for a taxi, that's what I got, a wife or daughter.
Where I live, 70 miles north of Wall Street, the taxi business is just mom and pop operators. There's no way for Uber to make any money here; nothing like Uber is an advantage to anyone or needed or wanted.
You have talked about medallions, monopolies, sweet-heart deals with governments, etc., but out where I am my impression is that the situation is fairly simple, that anyone who wants to be a taxi service need only say so or nearly so. On my computer I have lists of phone numbers of local taxi services. That's all I need. I don't have or need a smartphone (a friend gave me a cell phone, but I've never bothered to learn to use it; I just don't need it), but if I did and was out someplace and needed to call a taxi, then I'd have the phone numbers of the local taxi services on my smartphone. When my startup is farther along, I'll do more driving, get a smartphone, carry it in my car just in case, and to use it will just make a phone call to a local taxi service.
Here's one: Just set up a Web site with names, addresses, phone numbers, and user rankings of taxi services, for the world. In the US, include GPS coordinates, Zip code, and area code. Link to maps at Google. Start in a medium sized US city where there are lots of small, local taxi services and expand from there. Client side? Sure, just a Web browser. A smartphone user could just paste in his GPS coordinates, and the Web server would give back the 10 closest taxi services. Giving back the 10 closest is common at Web sites now.
At least in all but two dozen or so of the largest US cities, anyone who uses a local taxi service has a good shot at being a well-known, favorite customer of a local taxi service, that is, with "the human touch", and get good service -- a good situation for both the taxi and the customer. It would be harder but not impossible for a big company to do some such.
Sure, if I suddenly had to travel to some medium sized city in Europe for the first time, maybe I'd be glad to use the brand name of Uber. But so far I've never been in Europe even once! Maybe when my startup is doing well!
I'm not attacking you. You are describing a world you'd like to see exist, but Uber is the largest dispatcher in the real world, has massive advantages and proof is they are still growing super fast and maintain a massive lead on Lyft and everyone else. And they aren't worried about 10 taxi drivers rotating a phone.
You may prefer calling a taxi using a phone. Some people still prefer traveling by ship, yet airlines continue to carry more people over water every year. No one thinks ships are making comebacks. More people use apps every year, and they prefer them.
And maybe Uber guy never called back on route optimizations because they solved that problem on their own, or their problem is different from a taxi optimization.
I don't see their advantages as being massive or even significant. The best possible dispatching is not very good and not very difficult to do.
All around the world, for nearly all customer trips, the locals can offer in nearly all respects better service at lower prices. The prices can be lower if only due to the lack of Uber overhead.
For something like a taxi service, an app is not the way to go. The UI/UX of a good Web page with a Web brower is plenty good and much easier 'system managament' for both the client and the server.
Having a fully automated dispatch system that requires no phone operators, and with its development/operational costs amortized over worldwide markets 100x the size of any individual taxi market is a huge increase in economy of scale.
> but that booking a ride costs Uber pennies. Their share of the ride revenues is dollars. How is that not going to be super profitable once new market development costs ramp down?
Yes, booking the ride costs pennies, but actually providing the ride costs them dollars. The question is how many dollars do they need to charge customers and pay drivers to maintain them both, and whether that calculation leaves Uber (or any other of these services) any profit. This is where the 'low barrier to entry' argument comes into play; it is so easy to enter this market combined with the fact that both drivers and customers can (and already do) swap to the service with the best financial benefit to themselves. It remains to be seen what the steady state of this equation is.
Booking rides doesn’t cost them dollars. Whatever the customer pays, Uber skins a few bucks off of and sends the rest to the driver. The entire costs of providing the actual ride falls on the driver, Iber just pays the cost of their software platform, which again, is pennies per ride.
Ultimately drivers will make what the market will bear. If they don’t make enough, driver count will fall, Uber will raise rates to compensate, until equilibrium is reached. And the business will go on, every ride costing Uber a few cents to dispatch, and then still skimming a couple bucks from the amount paid the driver.
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[ 4.0 ms ] story [ 106 ms ] threadSince when has dumping become "charity in disguise" ?
Ehhh I don't buy the thesis. The author is suggesting all Uber rides run at a loss, but Uber makes a killing on some rides. Not every ride is subsidized, I've paid $60 for a 20 minute ride through LA during surge pricing, and I'm certain both Uber and the drive made a profit off me. I've seen stories of $300+ Uber rides too. There's no way Uber and drivers don't make money off these.
I know many rides are subsidized and Uber loses some money on them, but implying Uber's business model is a failure based off average cost is a fallacy.
Uber booked well over 100M US rides. I think 400M, but I can't find a reliable source ATM. You do the math. Uber rides don't cost an average of $2 in the US. Uber isn't paying 50% of our bill in the US.
Which is flat out not going to happen without reducing the number of riders thus pushing up prices even more. Which is why it's not a 50 Billion dollar company long term.
This is perfectly common for companies starting up business in new markets. The trick is to turn emerging markets into mature ones.
If indeed Uber is losing money on their local operations plus non-growth overhead, then it's bad. But we don't have those numbers.
I have no problem saying they could eventually break even by adding ~2$ a ride in the US. But, that's only enough to be a multi million dollar company to be a multi billion dollar company they need to raise the price 5+$ in the US and the rest of the world without losing ridership.
Now, increasing prices reduces demand... So, to be a 50 billion dollar company they would need to keep a huge ridership while charging ~twice as much on average. Or charge ~5+$ more per ride while becoming a monopoly.
QED: They have zero paths to maintain their current valuation let alone growth to offset the risk of failure.
"Uber Losses Not explained by Uber China and No One Can Explain How Profitability Can Be Achieved"
The losses covered in that article don't include anything from China.
[1] https://www.nakedcapitalism.com/2016/11/can-uber-ever-delive...
All of the scenarios that I see where Uber can grind out competitors is by continually operating at a loss? I would imagine that eventually investors would tire of such a position.
Then comes co-branded credit cards.
The endgame is to replicate the airline industry - 4-5 companies controlling everything.
1: https://newsroom.uber.com/payment-rewards/
Ride services are completely different from airlines, if only because the capital outlay is incomparable. You could run a ride sharing business and get two hundred drivers driving around New York by December for 250k. That won't even pay for a single flight crew for a year, much less a plane to put them in.
I assume the mix varies by locale.
I don't use taxis etc. a lot when I travel but if I did a single goto brand would be useful. Locally, if Bob's app was the best local taxi service, I don't really care if someone else operates in 500 cities worldwide. (Just like I don't care that the car service I use to get me to the airport covers only a slice of even my local area.)
The Internet and software makes solving the problem of distribution trivial which provides an existential threat to any traditional business which does not absolutely require physical proximity of producer and consumer, but Uber isn't acting in that space. They do not seem to be preparing themselves for a future where they are only one among many (even if the biggest)... would they be likely to be able (or willing) to survive with a smaller piece of the pie?
I've always thought Ubers big problem was that they built it so much like a traditional company when their only actual value was running some servers and knocking down regulatory hurdles which doomed them to be replaced by a much lighter-weight organization taking only a standard 10% 'finders fee' for hooking up a provider and consumer (a standard older than our money)... but now I'm not sure if they'll make it to the point where they get to see that even.
Wouldn't that constitute very clear violation of the Sherman Antitrust Act and be considered profound anticompetitive behavior? I'm fuzzy on specifics, but I thought offering your product at a loss to drive away or outlast competitors was one of the big giant no-nos alongside price-fixing. Is the person doing the analysis just interpreting the numbers in that way because they're not showing a profit? Or, in other words, would the FTC be likely to interpret the situation in the same way?
Source: I was a summer law clerk for the antitrust department of the CA DOJ.
In a few circumstances an Uber passenger may consider only cabs and Uber when deciding how to be transported. In many many other cases, Uber passengers are considering any of the other transportation methods above.
I personally often decide between an Uber or taking the bus. I don't own a car.
> Predatory pricing (also undercutting) is a risky and dubious pricing strategy where a product or service is set at a very low price, intending to drive competitors out of the market, or create barriers to entry for potential new competitors.
> ...
> Nowadays predatory pricing is considered anti-competitive in many jurisdictions and is illegal under competition laws. However, it can be difficult to prove that prices dropped because of deliberate predatory pricing rather than legitimate price competition. In any case, competitors may be driven out of the market before the case is ever heard.
[1] https://en.wikipedia.org/wiki/Predatory_pricing
It’s not clear that this market is winner take all. Rides are very cheap for consumers on Uber or Lyft. The experience is MUCH better than cabs in every city except maybe NYC. Drunk drivers are reduced.
So far it looks like the loser is going to be VCs. What’s wrong with that?
The sharing/on-demand economy is incredibly cruel to the 1099s doing the heavy lifting
Imagine Uber issues a financial report saying they lose $3B in a year on $2B in revenues (total spending $5B). We also know they opened over 100 new markets that year, and in new markets spend an average of over $100 each to recruit new drivers.
So what’s the truth? That passengers are only paying 40% if Uber’s ride costs? Or that Uber front loaded billions in new market development costs internationally, while more mature markets like the US are already close to profitability?
Naked Capitalism would have you believe the first scenario, without enough detail in Uber financial reports to give any idea which scenario is true.
Some of us despise Uber so much, that unfounded speculation by NC tells them what they want to hear, so they turn off all critical thinking about it.
Not only does this article ignore rapidly improving Uber financials since the NC takedown, but that booking a ride costs Uber pennies. Their share of the ride revenues is dollars. How is that not going to be super profitable once new market development costs ramp down?
Because Uber has no business "barrier to entry" for the ride booking: Other people can write smartphone apps that talk to the cloud or whatever also. If the money involved in the app is dollars from pennies, then others will be highly motivated to write the app.
So, the taxi business can return to small, local operators who also use a smartphone app.
Then the dollars Uber is getting stay with the driver and/or their local company.
Uh, mostly the taxi business is a local business. To me, for a centralized company to hope to make big bucks, or even any bucks at all, in the taxi business is wack-o.
For self-driving taxis, okay, for Level 3 automation, but that doesn't help much. What might help would be Level 5 automation, but IMHO that would require essentially full, real AI, and no one knows how to do that. Thus, to me, the idea that the taxi business will be affected by self-driving cars is just nonsense hype -- the media likes to have hype to get clicks.
Uber is on hundreds of millions of phones. It’s incredibly expensive to get your apps on phones nowadays. And saying other people can write apps that talk to the cloud is a massive oversimplification, building a system that tracks tend of thousands of simultaneous transactions while giving real-time updates to drivers and riders, with 99.xx% uptime, and web/android/ios front ends, is a massively expensive effort.
Lastly even if you spend hundreds of millions getting your apps on phones and building real-time infrastructure, no one is going to use your service until you acquire a massive amount of drivers in their market.
Uber’s brand, which includes that massive bases of installed apps and active drivers, is a huge competitive advantage. It’s the reason 6x more riders choose Uber over Lyft every day, despite Lyft having app installs, drivers, real time software, and despite Uber itself spending the last year or so shutting on their own brand with their tawdry behavior.
Even if you target Uber in a single market or small set of markets to reduce your investment costs for acquiring app installs and drivers, but now your infrastructure costs can’t be amortized over as large a base, making you a high cost competitor.
I don't get it: The taxi business is older than cars! Before cars we had essentially taxis pulled by horses. In parts of Asia, there were taxis pulled by people, on foot or bicycle.
The times I used a taxi, I just called a phone number.
Now with smartphones, people can call such a phone number while walking down a street. Answering the phone can be a person and/or computer.
For the branding, etc., if you are right about the difficulty of having a computer answer the call from a smartphone, then have some company write a generic app that all taxis in the world can use.
The difficulty of getting an app installed? Depends on the app!
I'm still having a super tough time seeing any money in a central taxi business, computers or not, smartphones or not, etc. E.g., people have done serious, well funded, polished research on just how to do dial-a-ride for 40+ years.
The Taxi business has always been about two things, dispatch and monopoly rights. The drivers made a pittance while the profits accrued to dispatchers and medallion owners.
Ride sharing has (mostly) broken the monopoly, so the profits are going to accrue to the most successful dispatchers. I agree with you that it seems existing Yellow Cab/Green Cab/etc dispatchers could invest to build a similar dispatch system and jump in quickly to compete with the hundreds of thousands of existing cars/drivers they have.
But in reality it’s a lot harder than that. They have to be willing to compete on price and service while throwing away their existing business and angering their existing medallion owning stakeholders. It almost never happens that an existing business torches itself to change everything to compete using a new business model.
> Dial a ride? That’s something to research 40 years ago. The new world is app driven, no one need answer a phone call.
Look, you've got it in spite of some of what you write: The "dispatching" part is 40 years old. So, that's nothing new. When I looked at dispatching as an optimization problem, it looked so ill-defined that any optimization looked not worth the bother. Or, just assign the next call to the closest taxi or some such.
I have a quite good background in optimization and a year or so communicated with a guy who claimed to be high in Uber and working on optimization. I sent him some outlines of some approaches, some questions to clarify the real problem, etc. and never got back anything at all meaningful. My guess was that he knew next to nothing about optimization and had made no real progress on optimization at all. I doubt that Uber's dispatching optimization amounts to much.
For answering the phone, for a solo business, let the driver answer his own phone. Or let his wife or kids at home do it. Or have 10 taxi guys form a little informal group and rotate the phone answering one day at a time among themselves or their wives.
For a simple server to answer the phone, that can't be very hard to do. Then for the app, the smartphone just uses a standard Web browser, no mobile app required.
> The new world is app driven, no one need answer a phone call.
Don't need an app; on the client side, a Web browser, including on a smartphone, is enough.
Besides, having a human answer the phone stands to be a big, huge advantage. Nearly any taxi customer would much rather talk to the nice voice of the wife or daughter of the taxi driver than some computer. Out where I am, when I called for a taxi, that's what I got, a wife or daughter.
Where I live, 70 miles north of Wall Street, the taxi business is just mom and pop operators. There's no way for Uber to make any money here; nothing like Uber is an advantage to anyone or needed or wanted.
You have talked about medallions, monopolies, sweet-heart deals with governments, etc., but out where I am my impression is that the situation is fairly simple, that anyone who wants to be a taxi service need only say so or nearly so. On my computer I have lists of phone numbers of local taxi services. That's all I need. I don't have or need a smartphone (a friend gave me a cell phone, but I've never bothered to learn to use it; I just don't need it), but if I did and was out someplace and needed to call a taxi, then I'd have the phone numbers of the local taxi services on my smartphone. When my startup is farther along, I'll do more driving, get a smartphone, carry it in my car just in case, and to use it will just make a phone call to a local taxi service.
Here's one: Just set up a Web site with names, addresses, phone numbers, and user rankings of taxi services, for the world. In the US, include GPS coordinates, Zip code, and area code. Link to maps at Google. Start in a medium sized US city where there are lots of small, local taxi services and expand from there. Client side? Sure, just a Web browser. A smartphone user could just paste in his GPS coordinates, and the Web server would give back the 10 closest taxi services. Giving back the 10 closest is common at Web sites now.
At least in all but two dozen or so of the largest US cities, anyone who uses a local taxi service has a good shot at being a well-known, favorite customer of a local taxi service, that is, with "the human touch", and get good service -- a good situation for both the taxi and the customer. It would be harder but not impossible for a big company to do some such.
Sure, if I suddenly had to travel to some medium sized city in Europe for the first time, maybe I'd be glad to use the brand name of Uber. But so far I've never been in Europe even once! Maybe when my startup is doing well!
You may prefer calling a taxi using a phone. Some people still prefer traveling by ship, yet airlines continue to carry more people over water every year. No one thinks ships are making comebacks. More people use apps every year, and they prefer them.
And maybe Uber guy never called back on route optimizations because they solved that problem on their own, or their problem is different from a taxi optimization.
> has massive advantages
I don't see their advantages as being massive or even significant. The best possible dispatching is not very good and not very difficult to do.
All around the world, for nearly all customer trips, the locals can offer in nearly all respects better service at lower prices. The prices can be lower if only due to the lack of Uber overhead.
For something like a taxi service, an app is not the way to go. The UI/UX of a good Web page with a Web brower is plenty good and much easier 'system managament' for both the client and the server.
Yes, booking the ride costs pennies, but actually providing the ride costs them dollars. The question is how many dollars do they need to charge customers and pay drivers to maintain them both, and whether that calculation leaves Uber (or any other of these services) any profit. This is where the 'low barrier to entry' argument comes into play; it is so easy to enter this market combined with the fact that both drivers and customers can (and already do) swap to the service with the best financial benefit to themselves. It remains to be seen what the steady state of this equation is.
Ultimately drivers will make what the market will bear. If they don’t make enough, driver count will fall, Uber will raise rates to compensate, until equilibrium is reached. And the business will go on, every ride costing Uber a few cents to dispatch, and then still skimming a couple bucks from the amount paid the driver.