California did not rule that Uber drivers are employees. Rather, a single labor commissioner made that finding (not a ruling) in an informal, non-binding hearing that is based on the facts of the specific driver’s circumstances, applies only to that driver, is likely to be appealed, and is of no precedential effect. Other commissioners in other circumstances have found the opposite
It's clear that there are coming changes to the contractor / on-demand economy and how labor is treated, the value of Uber is likely a proxy for the depth of the changes that are expected.
I get the feeling the law will be changed on this. There is far too much money involved to not have workers rights further eroded by Internet billionaires.
This may be just me..but I feel like Uber is being built up way too much. People outside SF see it as some shining beacon of Silicon Valley tech startups. If they make missteps and show weakness I wonder if it will shake people's perception of how strong the tech industry is now.
I remember following Groupon closely and feeling like Groupon was spending a bunch of money teaching people around the world how to use daily deals, only to have competitors come in make it a race to the bottom because the barriers to entry were so low.
I feel like Uber is doing the same: spending a bunch of money teaching people how to hail a cab from their phone. When competitors like Lyft, Hailo, and Via enter the market and compete with them, it starts to look like the same race-to-the-bottom that happened with Groupon.
(Last I heard, both Via and Lyft Line are cheaper than UberPool right now in Manhattan. I suspect both are taking a loss on many rides to compete.)
Groupon doesn't have a network effect. Uber has a VERY strong network effect. In fact, it has the type of network effect that can keep its advantage over competitors (see Facebook versus Google+).
What network effect? How does my friends using Uber force me to use Uber as well? I see it more like a toilet paper or shampoo thing: My friends might recommend Uber, but other friends would recommend Lyft, and others a local competitor. There is nothing that locks me in. We can disagree and I can live with them using Uber and me using some other service for years.
Unlike Facebook, Uber is easily replaced. I can't convince my friends to change to a Facebook competitor, but for Uber I don't have to. I don't lose out by using an Uber competitor. With Microsoft in the 90s I couldn't share or read documents if I used a competing OS. I literally had to use Windows.
Right now, Uber is paying lobbyists and lawyers squirming around the issues with braking taxi laws, labor laws, tax laws etc. And they are paying for marketing to teach us to order cabs using apps. And then, local competitors can make apps that are as good and the business model is easy to compete with.
If I travel to London I might not know what the local competitor of Uber is called and I may wanna go with Uber or a conventional taxi. But back in my city, Uber is just one of a bunch, soon one of many. That's, by the way, a difference from AirBnB who is only used by people who are out of town.
More users (i.e., your friends) drive higher service levels (more Uber drivers and quicker service times, which spirals). There is no "forcing," just as no one "forces" you to have a Facebook account.
If you want bad service (long wait times, high prices) then your argument makes sense. However, the more people that use Uber will lead to better service levels and lower prices. Drivers benefit by minimizing wait times and being able to depend on the money.
And if you went to London, you get the convenience of not having to download a local app. You simply use Uber (what you're used to, what you depend on, what you trust), and you have one less thing to worry about in your travels.
No it doesn't have any speakable economic moat built around it. Like the parent comment mentions, it's just one of the many possible ways to get around the city, there's no cost of change.
>However, the more people that use Uber will lead to better service levels and lower prices.
That would be very bad for Uber. Lower prices would mean that they are constantly operating at a loss against traditional taxis and other competitors or apps.
Your argument fails to support that there is a network effect that would raise the cost of switching to alternative means of transport and incorrectly assumes that uber is able to operate at a loss constantly as the network size grows.
Take a look at the airline industry. The first guys to do it are nowhere. Everyone is undercutting each other because customers are not locked into one airline and are price sensitive.
There's as much difference between Uber and the airline industry as there is in a $10 ride home versus a $250+/person flight.
Uber doesn't own any cars. How would better service and lower prices be bad for Uber? It wouldn't. The more activity they generate, the better off they are. They simply get a cut off everything. It would be wiser to compare to VISA/MasterCard. Those are software companies with huge network effects similar to Uber. Could anyone just go out and create their own payment network? Sure. Are prices per transaction competitive? Sure. Do VISA and MasterCard make a TON of money? Absolutely. And in this case (the more accurate comparison), the first guys to do it are still the main players, and they haven't needed to truly innovate in decades.
I think a lot of people tend to forget that these valuations aren't just some people out there being euphoric about the future. These valuations come from experienced investors, using real money, making thoroughly calculated guesses.
The fact that they don't own any car proves there is no barrier to entry. If they had their own self driving cars it would be a very different story but since they don't own any of the assets like an airline does, the barrier entry is nil. To start an airline you need large investments (you need to rent or purchase airplanes, crew, fuel). To start something like Uber does not require the same investment in assets, there is no such cost apart from copying the app and offering lower prices as soon as Uber begins to raise prices.
Nothing suggests they are like Mastercard company, rather the logistics company line is a better explanation of their high valuation. But network effect or lock in? It simply doesn't happen by purchasing more assets because the customer simply does not care in a price sensitive market.
The network effect is the barrier to entry. It's a huge barrier to entry. There wasn't a barrier to entry a few years ago, but now there is a huge one. There won't be more than a few of these companies in the future; it's just not worth it for customers to have 5+ apps - 2 or 3 will do just fine (at the most). I only have the Uber app, like most people, and I don't have a reason to download another until Uber disappoints me. However, more users lead to more drivers, which minimizes the chance Uber disappoints me.
Logistics companies are an ok comparison, but not really. A higher number of people that use a certain logistics company doesn't necessarily translate to better service. FedEx/UPS would be a better comparison (more people utilizing their capacity will reduce shipping rates and increase service levels, i.e. delivery times), but they own inventory, so it's not a perfect comparison.
Although you may be technically correct, it doesn't change the argument. Their contract terms still force them to try to extract every penny out of customers to maintain profitability.
Airlines get squeezed by airports and manufacturers (Boeing, Airbus, etc). Uber doesn't get squeezed by anything. They don't have the same risk to oil prices, and they certainly don't have to worry about covering MASSIVE fixed costs like airlines. Uber simply gets a cut of every transaction, and those transactions will continue to flow. They don't have to schedule anything with anyone (100% on demand), they aren't subject to airport fees, they don't have to worry about $billions of planes, and they don't even provide the service (the driver does - he is the one operating the vehicle and arranging the pickups/dropoffs).
Uber's software does all of this already. They just need to maintain a certain level of marketing and overhead to support the whole shebang, while collecting boatloads of cash.
> More users (i.e., your friends) drive higher service levels (more Uber drivers and quicker service times, which spirals).
Considering how many drivers are signed into multiple apps (and that will be the law of the land if Uber wants to keep them as independent contractors), there's also a bit of network subsidy - top network adding liquidity to its competitors.
But how many customers are signed into multiple apps? I don't think very many. And even if competition forces prices to go incredibly low, only the biggest players will survive. Uber's scale will allow it to weather low prices, especially since they just rake in transactional fees without requiring significant investment.
I wouldn't call it network effect, it's just a market. They need riders and drivers, just like Groupon needed buyers and businesses, but the fact that my friends use Uber doesn't stop me from trying Via. My Via driver the other night was telling me about how he drives for Uber on weekends. The switching costs are very low for both the rider and driver.
But it is a network effect. The more people that use the service, the better that service will be. If only a few people used Uber, there would only be a few drivers. This would lead to high prices and poor service levels. The more people that use Uber, the more drivers there are, and the lower the price and better the service. That leads to consolidation to those services with a high number of users, and those services will be the only ones that survive, hence the network effect.
I don't think you understand what network effect is. A network effect is where the network raises the costs of switching to another network significantly that they are locked in. ex. FB and your friends.
There is nothing that suggest Uber has a network effect that locks in a user to use Uber. You are talking about a quality effect from the assumption that more assets will lead to a lock in effect but it's hopeful at best. There are no barriers to entry to erode future Uber profits if they make money and no perceived cost of using new entrants services or existing ones.
Well, I think you don't understand what a network effect is. From Wikipedia, "A network effect is the effect that one user of a good or service has on the value of that product to other people."
It's as simple as this: the more users Uber has, the more drivers it will have. The more drivers Uber has, the better the service and the lower the prices. Therefore, a greater number of users leads to greater value of the product (service) to other people.
"You are talking about a quality effect from the assumption that more assets will lead to a lock in effect but it's hopeful at best."
I think you're totally missing here. Why is everyone talking about Uber and not Lyft or some other company? Why would anyone switch from Uber to another app if he/she is happy with Uber? Why don't you or anyone else write an app and go create a network of drivers? Because no one will switch, that's why. And that's the effect of the network.
Facebook didn't have any more assets than Google+, except for the users. How is this any different from the "quality effect" you are talking about?
But it's localized network effect. Taxi drivers and consumers in Moscow or Barcelona are not going to switch right over just because #1 taxi app in San Francisco just arrived in their market.
If a yellow cab owner from NYC decided to expand to Tucson or Kansas City, you'd expect him to do okay with his background in the ins and outs of the business, but expecting total domination based on his knowledge of NYC market is bit of a stretch.
It's a localized network effect only if they are isolated to local areas. However, most people in the U.S. (especially outside of SF) only have Uber, so the network effect grows stronger as consumers only need one app regardless of the city they are in.
I'm not sure I understand your yellow cab comparison. With Uber, no one needs an understanding of the local markets (aside from the laws, which can be done at the corporate level). Uber just shows local drivers how to make money, and they take a cut because they have a strong technology, brand, and user base.
As far as international expansion, I agree it would be much tougher. But even if they aren't successful outside of the U.S. (which I still think they will be), they will cash in billions.
You also have existing taxi companies to compete against. Way before Uber was a thing, my preferred company in Stockholm had a simple hailing app, it was basically one button for "I want a cab, here, now". No tracking, no payments, nothing fancy, but still.
These days, Taxi Stockholm has a hailing app that is on par with Uber's app, and I just can't see how Uber can compete with that. I can use Taxi Stockholm and get a professional cab driver in a nice luxury car that is insured, regulated, cctv'd and has a trusted brand name, or I can use Uber and get a non-professional in a regular car, no taxi license plate, unknown insurance situation, for maybe a cheaper price.
Uber is fantastically successful in places where the existing taxi market sucks for whatever reasons, but there are plenty of places where it doesn't suck, and it's very questionable what Uber can bring to the table then. Or Lyft, Hailo, etc. Any technology they make can be easily copied by their competitors, but local vehicle fleets can't.
I think the Taxi companies are taking note and Uber is going to force them to innovate since they feel threatened. If they are able to do this, I think Uber will find themselves in serious trouble.
Compared to SF, oh yes, much better! The most common taxi in Stockholm is probably a Mercedes, and the average car of the kind of people who would want to drive for Uber is definitely not. I don't see how Uber could mobilize a comparable fleet to compete with that. I can see UberPool working where people expect a "regular" car, and I could see them becoming the dispatch of choice for non-affiliated taxi drivers, but that's the bottom of the barrel of that market.
If people think that taxi markets everywhere look like the one in SF, then I understand why people value Uber so highly and think they'll conquer every market easily. But the truth is that Uber doesn't have anything that isn't easily replicatable by entrenched taxi companies that are willing.
I'm concerned with what happens when Uber exits "rapid expansion" mode. Right now a lot of what they do is subsidised by VC cash in order to dominate the market. Once the competition is done, the cash will dry up, and we'll all be surprised at things getting more expensive.
While I do have problems with Uber's valuation for other reasons, this isn't it. Uber tends to massively increase the market for taxis. Loads of people I know who would never take 'normal' taxis now use Uber. Even teenagers use Uber regularly, they would never hail a black/yellow cab on the street (in my eyes).
Uber is best positioned to usher in self-driving cars. If they are successful at it, their market opportunity is much larger than the Taxi-cab industry.
> Uber is best positioned to usher in self-driving cars.
Fleet management is all about buying, parking, filling up, maintaining, cleaning and eventually selling the vehicles once they ran their course. Why would Uber be better at all those things?
Economies of scale that it can drive from its platform given that it will have the largest base of customers as well as suppliers. It is very close to what Amazon did to bookstores and eventually to ecommerce business.
Some of that doesn't scale rapidly. If they need to buy a thousand car washes nationwide, an owner in Omaha is not going to sell at a discount just because they already own 10 car washes in Los Angeles. Similarly with pricing for gas/electricity.
Their economies of scale are akin to those of Avis or Enterprise Rent-a-Car, and those companies are not valued at high multiples, due to high upfront capital requirements, insurance burden, fast depreciation, low barrier to entry, etc.
Current multiples for Uber are there precisely because of the lack of all liabilities associated with car ownership and maintenance.
I would be surprised if the prevalent economic models will continue to apply. Think Walmart, Costco, Amazon and how they leveraged their scale to drive efficiency through the ecosystem.
The prevailing models during those times were revisited which included prices, contracts, payments.
In your specific example about car washes, I envision a huge warehouse with multiple floors to do automated car washes which is super efficient. This will happen as there will be a metric that will show how a minute saved on the car wash floor can save the company millions of dollars because of their scale. There will be no "car wash" dealership to negotiate with.
Looking back since 2008 or so, with the possible exception of groupon, I can't think of a single $5+ billion dollar web 2.0 company that has crashed and burned.
A significant number of these web 2.0 companies seem to have defied the ‘crash and burn’ that characterized the first boom. Pets.com and Webvan were pretty much failures from inception, but sites like Pinterest and Airbnb keep getting more successful and more valuable.
I think there will be no shortage of private investors who want a piece of pie and would cough up monies to that end. It's similar to properties. Real estate in Kensington, London is valuable but the market is ever dynamic so investors don't go by the historic trends but rather short term trends when deciding the value of property.
I love when the press accelerates startup success, even among the most successful companies of all time. They want everything to be an overnight success.
There is no timeline where Uber could be justified as being 5 years old. For example, there is a Techcrunch article [1] about the company launching the initial product over 5 years ago (which I'm sure took some time to develop!). Uber's website says the company existed in 2009, along with Travis' LinkedIn profile.
And then they spend a good chunk of the article comparing the speed that the two companies reach different valuations. I wonder what arbitrary date they picked as the date Facebook was founded...
Slightly confused; are you saying they should say they're more than 5 years old? 2009 was 5 years ago, and if that's when the company was founded, saying they're 5 years old makes sense.
The graph on the article is demarcated in months, leading me to believe they are indicating that Uber is exactly 5 years old.
Travis' LinkedIn says he has been working for Uber for: 6
years, 2 months
Crunchbase founding date of Uber (Mar 1, 2009): 6 years, 4 months ago
Last day of 2009 (conservatively based on Uber's about page): 5 years, 6 months ago
It is just very sloppy fact checking. They wanted to write the story about how Uber is the fastest growing company ever (which it very well might be), but they care much more about the headline than the facts. Again: this is one of the most successful companies of all time in terms of growth, and the tech press is still exaggerating it.
This is why you shouldn't compare yourself to the myths of other startup's success that are being written about by the press.
The first UberCab website appears in Archive.org at March of 2010 -- They might be ever-so-slightly older than 5 years, but it doesn't seem too misleading to call them a 5-year old company.
Their Delaware date of incorporation is actually 7/2010.
The founding date shouldn't be when the website first launched, or when they incorporated (though both are good minimums). The founding date is when the founders got together and starting working on the idea full time.
This is a pet peeve of mine because often in the first year not much happens. For Uber, it seemed like they were building the app and preparing for a private beta. This doesn't mean the company didn't exist before the beta was launched or the app existed. This is important because many founders who don't know any better think that if their company isn't crushing it after a few months then they are doing something wrong.
It takes time to get stuff going, and when looking retrospectively if you skip over this time it creates a misleading timeline of how successful companies are created.
We don't have access to their pitch deck - market size, roadmap and traction. If we were privy to that info, am sure some of this would make more sense.
Aswath literally wrote the book on corporate finance. The valuation was done mainly viewing Uber through the lens of a taxi replacement. I think his caveat at the end explains away the pessimism;
This framework lends itself easily to other narratives.
For instance, one of the more optimistic takes says that
Uber is in the logistics market, i.e. it’s a player in any
business that involves moving people or things from
one point to another. That would lead you to define
Uber’s market more broadly and come up with a much
higher valuation.
Based on his way of assessing value Twitter is worthless. It has no profit. I think the real value in Uber is in how it has become so beloved by customers who hated using cabs. I know it's heavily impacted the way I drive. Living in Chicago I hated dealing with cabs, it made more sense to pay a slight premium to drive my own car and park in a garage. Now I can literally jump into an uber and be somewhere in minutes with a better experience and for less than a cab would cost me. That's awesome! That's powerful. That's going to change the entire transportation industry. Cabs are just the beginning.
His analysis used the size of the current taxi market as the ceiling for Uber's revenue. In San Francisco Uber is already generating 3x as much as the traditional taxi market was.
Looking at it as it is, this can seem ridiculous. But, considering their domestic and international expansion it really isn't. Uber can pretty much replace cabs worldwide. When Uber has its driver API service fleshed out, you can expect tons of companies to be able to tap into that and essentially get anything delivered beyond Uber Eats.
Uber's revenue numbers are awful. "According to Bloomberg, Uber had revenue of $415 million (we assume net revenue after payments to drivers, not gross revenue) and an operating loss of $470 million." That's for 2014, and it's leaked data. But it's not good. Why are they losing money? They're an app and a server farm, some "driver centers", and an admin staff. It's not like Amazon, with giant warehouses full of expensive inventory. They're already scaled out; the expansion phase is over.
They're losing money because they are aggressively expanding into new markets.
They're an app and a server farm, some "driver centers", and an admin staff.
And, you know, a lot of cars and drivers. Of course Uber would want to make sure we all remember they are not Uber property and employees, but they still have to spend a lot of money to get them on board.
Yes, but a market being big doesn't mean there is a lot of low hanging fruit in that market. In a market with a regulated number of cabs it's easy to see how uber can find market share (like in NYC). In a market without medallions or similar, where there is already competition among taxi companies making margins slim, I don't see how Uber can be so disruptive. Having an app, dynamic pricing, and abusing the workforce should be obvious steps already taken by existing taxi companies in those markets!
> They're losing money because they are aggressively expanding into new markets.
So expenses related to office space, hiring and marketing in each new market? Now, are those one-time charges that will scale overtime, or does the model call for local presence in every single market and becomes inherently unscalable?
I think they're still expanding into new markets, and they gin both the supply side (boosting drivers' wages) and the demand side (giving drivers discounts) to establish themselves in each new place.
Uber's revenue will continue to skyrocket. They are not "scaled out," and as revenue exceeds well-beyond $1B and they no longer have solid investment opportunities for growth, their expenses will get in line.
I'm actually pretty sure their main expense - at least when it comes to expanding internationally - is lawyers and lawsuits. I mean Uber drivers get threatened and their cars wrecked in France, where the existing taxi companies - that have to pay a lot of money and / or have certain connections to be able to drive a legal taxi - have protested against Uber vigorously.
Inflation will have to play a significant role. Going by how currencies are based, $100B startup is a reality although a magnitude higher would put us in hyper-inflationary zone perhaps.
I agree. I know people who crunch data for Uber and some of things they're doing are really valuable. All these rides - pickups, dropoffs, times of day, routes, etc. And this is just the tip of the iceberg what they're doing. These kinds of basic projects inspire more complex analysis I'm sure.
The information gathered will allow them to move into new phases of development. The cab hailing service is not the end game here.
I'd hate to be Uber right now. The early innovators always bear the full cost of discovery and paving the way for future entrants who will gladly waltz right in once Uber establishes itself in cities by lobbying and fighting regulation. The barrier to entry is not as high they make it seem and like Groupon, a focus on future potential earnings without facing realities, almost always ends up in favor of late market entrants. I recall Peter Thiel talking about this in more detail how you should never be the first at anything and that if you can't build a monopoly you will face the same fate that other first movers have met.
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[ 101 ms ] story [ 3126 ms ] threadThis ruling only effects California and a single driver, as explained by an article in Forbes: http://www.forbes.com/sites/quora/2015/06/30/the-california-...
California did not rule that Uber drivers are employees. Rather, a single labor commissioner made that finding (not a ruling) in an informal, non-binding hearing that is based on the facts of the specific driver’s circumstances, applies only to that driver, is likely to be appealed, and is of no precedential effect. Other commissioners in other circumstances have found the opposite
$100B, $200B, $400B?
I feel like Uber is doing the same: spending a bunch of money teaching people how to hail a cab from their phone. When competitors like Lyft, Hailo, and Via enter the market and compete with them, it starts to look like the same race-to-the-bottom that happened with Groupon.
(Last I heard, both Via and Lyft Line are cheaper than UberPool right now in Manhattan. I suspect both are taking a loss on many rides to compete.)
Unlike Facebook, Uber is easily replaced. I can't convince my friends to change to a Facebook competitor, but for Uber I don't have to. I don't lose out by using an Uber competitor. With Microsoft in the 90s I couldn't share or read documents if I used a competing OS. I literally had to use Windows.
Right now, Uber is paying lobbyists and lawyers squirming around the issues with braking taxi laws, labor laws, tax laws etc. And they are paying for marketing to teach us to order cabs using apps. And then, local competitors can make apps that are as good and the business model is easy to compete with.
If I travel to London I might not know what the local competitor of Uber is called and I may wanna go with Uber or a conventional taxi. But back in my city, Uber is just one of a bunch, soon one of many. That's, by the way, a difference from AirBnB who is only used by people who are out of town.
If you want bad service (long wait times, high prices) then your argument makes sense. However, the more people that use Uber will lead to better service levels and lower prices. Drivers benefit by minimizing wait times and being able to depend on the money.
And if you went to London, you get the convenience of not having to download a local app. You simply use Uber (what you're used to, what you depend on, what you trust), and you have one less thing to worry about in your travels.
>However, the more people that use Uber will lead to better service levels and lower prices.
That would be very bad for Uber. Lower prices would mean that they are constantly operating at a loss against traditional taxis and other competitors or apps.
Your argument fails to support that there is a network effect that would raise the cost of switching to alternative means of transport and incorrectly assumes that uber is able to operate at a loss constantly as the network size grows.
Take a look at the airline industry. The first guys to do it are nowhere. Everyone is undercutting each other because customers are not locked into one airline and are price sensitive.
Uber doesn't own any cars. How would better service and lower prices be bad for Uber? It wouldn't. The more activity they generate, the better off they are. They simply get a cut off everything. It would be wiser to compare to VISA/MasterCard. Those are software companies with huge network effects similar to Uber. Could anyone just go out and create their own payment network? Sure. Are prices per transaction competitive? Sure. Do VISA and MasterCard make a TON of money? Absolutely. And in this case (the more accurate comparison), the first guys to do it are still the main players, and they haven't needed to truly innovate in decades.
I think a lot of people tend to forget that these valuations aren't just some people out there being euphoric about the future. These valuations come from experienced investors, using real money, making thoroughly calculated guesses.
Nothing suggests they are like Mastercard company, rather the logistics company line is a better explanation of their high valuation. But network effect or lock in? It simply doesn't happen by purchasing more assets because the customer simply does not care in a price sensitive market.
Logistics companies are an ok comparison, but not really. A higher number of people that use a certain logistics company doesn't necessarily translate to better service. FedEx/UPS would be a better comparison (more people utilizing their capacity will reduce shipping rates and increase service levels, i.e. delivery times), but they own inventory, so it's not a perfect comparison.
Airlines get squeezed by airports and manufacturers (Boeing, Airbus, etc). Uber doesn't get squeezed by anything. They don't have the same risk to oil prices, and they certainly don't have to worry about covering MASSIVE fixed costs like airlines. Uber simply gets a cut of every transaction, and those transactions will continue to flow. They don't have to schedule anything with anyone (100% on demand), they aren't subject to airport fees, they don't have to worry about $billions of planes, and they don't even provide the service (the driver does - he is the one operating the vehicle and arranging the pickups/dropoffs).
Uber's software does all of this already. They just need to maintain a certain level of marketing and overhead to support the whole shebang, while collecting boatloads of cash.
Considering how many drivers are signed into multiple apps (and that will be the law of the land if Uber wants to keep them as independent contractors), there's also a bit of network subsidy - top network adding liquidity to its competitors.
There is nothing that suggest Uber has a network effect that locks in a user to use Uber. You are talking about a quality effect from the assumption that more assets will lead to a lock in effect but it's hopeful at best. There are no barriers to entry to erode future Uber profits if they make money and no perceived cost of using new entrants services or existing ones.
It's as simple as this: the more users Uber has, the more drivers it will have. The more drivers Uber has, the better the service and the lower the prices. Therefore, a greater number of users leads to greater value of the product (service) to other people.
"You are talking about a quality effect from the assumption that more assets will lead to a lock in effect but it's hopeful at best." I think you're totally missing here. Why is everyone talking about Uber and not Lyft or some other company? Why would anyone switch from Uber to another app if he/she is happy with Uber? Why don't you or anyone else write an app and go create a network of drivers? Because no one will switch, that's why. And that's the effect of the network.
Facebook didn't have any more assets than Google+, except for the users. How is this any different from the "quality effect" you are talking about?
If a yellow cab owner from NYC decided to expand to Tucson or Kansas City, you'd expect him to do okay with his background in the ins and outs of the business, but expecting total domination based on his knowledge of NYC market is bit of a stretch.
I'm not sure I understand your yellow cab comparison. With Uber, no one needs an understanding of the local markets (aside from the laws, which can be done at the corporate level). Uber just shows local drivers how to make money, and they take a cut because they have a strong technology, brand, and user base.
As far as international expansion, I agree it would be much tougher. But even if they aren't successful outside of the U.S. (which I still think they will be), they will cash in billions.
These days, Taxi Stockholm has a hailing app that is on par with Uber's app, and I just can't see how Uber can compete with that. I can use Taxi Stockholm and get a professional cab driver in a nice luxury car that is insured, regulated, cctv'd and has a trusted brand name, or I can use Uber and get a non-professional in a regular car, no taxi license plate, unknown insurance situation, for maybe a cheaper price.
Uber is fantastically successful in places where the existing taxi market sucks for whatever reasons, but there are plenty of places where it doesn't suck, and it's very questionable what Uber can bring to the table then. Or Lyft, Hailo, etc. Any technology they make can be easily copied by their competitors, but local vehicle fleets can't.
Are the cabs in Stockholm actually nice?
If people think that taxi markets everywhere look like the one in SF, then I understand why people value Uber so highly and think they'll conquer every market easily. But the truth is that Uber doesn't have anything that isn't easily replicatable by entrenched taxi companies that are willing.
That's just one anecdote, but my business wouldn't be counted as Uber taking part of the taxi market.
Before uber I'd spend maybe 200 bucks a years on cabs. Now I take on almost daily.
Also 1 billion for 2% of Uber doesn't necessarily mean it's worth 50 billion because there might be liquidation preferences.
Fleet management is all about buying, parking, filling up, maintaining, cleaning and eventually selling the vehicles once they ran their course. Why would Uber be better at all those things?
Their economies of scale are akin to those of Avis or Enterprise Rent-a-Car, and those companies are not valued at high multiples, due to high upfront capital requirements, insurance burden, fast depreciation, low barrier to entry, etc.
Current multiples for Uber are there precisely because of the lack of all liabilities associated with car ownership and maintenance.
The prevailing models during those times were revisited which included prices, contracts, payments.
In your specific example about car washes, I envision a huge warehouse with multiple floors to do automated car washes which is super efficient. This will happen as there will be a metric that will show how a minute saved on the car wash floor can save the company millions of dollars because of their scale. There will be no "car wash" dealership to negotiate with.
A significant number of these web 2.0 companies seem to have defied the ‘crash and burn’ that characterized the first boom. Pets.com and Webvan were pretty much failures from inception, but sites like Pinterest and Airbnb keep getting more successful and more valuable.
There is no timeline where Uber could be justified as being 5 years old. For example, there is a Techcrunch article [1] about the company launching the initial product over 5 years ago (which I'm sure took some time to develop!). Uber's website says the company existed in 2009, along with Travis' LinkedIn profile.
And then they spend a good chunk of the article comparing the speed that the two companies reach different valuations. I wonder what arbitrary date they picked as the date Facebook was founded...
1: http://techcrunch.com/2010/07/05/ubercab-takes-the-hassle-ou...
2: https://www.uber.com/about
2013: 2 years ago
2012: 3 years ago
2011: 4 years ago
2010: 5 years ago
Not necessarily.
Date diff today (2015-07-31) and (2014-09-01) is 4 years, 10 months, and 30 days.
Travis' LinkedIn says he has been working for Uber for: 6 years, 2 months
Crunchbase founding date of Uber (Mar 1, 2009): 6 years, 4 months ago
Last day of 2009 (conservatively based on Uber's about page): 5 years, 6 months ago
It is just very sloppy fact checking. They wanted to write the story about how Uber is the fastest growing company ever (which it very well might be), but they care much more about the headline than the facts. Again: this is one of the most successful companies of all time in terms of growth, and the tech press is still exaggerating it.
This is why you shouldn't compare yourself to the myths of other startup's success that are being written about by the press.
Their Delaware date of incorporation is actually 7/2010.
This is a pet peeve of mine because often in the first year not much happens. For Uber, it seemed like they were building the app and preparing for a private beta. This doesn't mean the company didn't exist before the beta was launched or the app existed. This is important because many founders who don't know any better think that if their company isn't crushing it after a few months then they are doing something wrong.
It takes time to get stuff going, and when looking retrospectively if you skip over this time it creates a misleading timeline of how successful companies are created.
[1] http://www.businessinsider.com/uber-leaked-financials-look-u...
They're an app and a server farm, some "driver centers", and an admin staff.
And, you know, a lot of cars and drivers. Of course Uber would want to make sure we all remember they are not Uber property and employees, but they still have to spend a lot of money to get them on board.
Uber invests $1 billion in Indian market
http://money.cnn.com/2015/07/31/technology/uber-india-1-bill...
Yeah, there are some big markets out there yet.
So expenses related to office space, hiring and marketing in each new market? Now, are those one-time charges that will scale overtime, or does the model call for local presence in every single market and becomes inherently unscalable?
I still don't get how that gets them to $50B.
The information gathered will allow them to move into new phases of development. The cab hailing service is not the end game here.