Lyft losing as much as $50M a month, president confirms
siliconbeat.com
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Assuming the latter is the case, i'm not sure if they have reason to believe this will change over time. Instead, it feels like the human drivers are really just plays to keep the company growing until hypothetical fleets of automated driving cars. In theory, such a fleet would deliver massive profits, but those fleets will be enormously expensive to assemble. Even when they are assembled each company should expect tumultuous legal battles in many areas.
When i try to make all the monkey math work, it doesn't seem to add up. Maybe i'm not enough of a gambling man, but i really don't understand how the venture market still supports business models like these.
But the real play here is to use taxi service as a pretext/generator for building up an on-demand courier service [1] with superior returns -- and performance that vastly dwarfs any incumbents.
[1] https://rush.uber.com/how-it-works
EDIT: after the introduction of courier services, picking up passengers serves as a baseline load [2] (to borrow from electricity distribution terminology) to keep drivers incentivized to be on the roads, but the real prize will be the courier tasks.
So people will drive their sedans around the city delivering flowers and cakes and laundry? And instead of picking up flowers at the flower store, or laundry from the laundromat down the street, I'll pay $5 more for everything to have it delivered? Uber and Lyft's master plan for superior returns is to become Postmates?
Somehow I'm skeptical.
> picking up passengers serves as a baseline load ... to keep drivers incentivized to be on the roads, but the real prize will be the courier tasks.
Why waste valuable space with bodies if courier tasks are the real prize? Drivers are incentivized by money. If drivers could make more money driving dresses than humans, most would fill their car with dresses and kick the humans to the curb.
That's a market for sure - but really not such a big market.
[1] http://www.businessinsider.com/the-on-demand-economy-2014-7
That vast majority of Americans do everything they can to save a few bucks, even when it's an inefficient use of resources (time and money).
I'm not sure "nickel and diming" a few wealthy people for home delivery is a $60BB business. There's not a huge barrier to entry and margins are low. But what do I know.
A few? With between 11 and 13 million millionaires in the US, it's a $60 billion business. And that's ignoring the vast number of people in the US earning $150,000+ in a household while not being millionaires; people that can easily afford such services.
And then there's this:
"The Richest Generation in U.S. History Just Keeps Getting Richer"
http://www.bloomberg.com/news/articles/2016-07-12/the-riches...
The boomers are getting older and richer, and will benefit massively from courier services.
What are you basing that on, without knowing any financial information? If the mere existence of millionaires makes a massive company viable, then what company isn't?
Do you believe that the very wealthy, today, are doing these things themselves, and that an Uber courier is solving a huge problem for them? Paying people to deliver stuff isn't new. Neither is driving people around. What Uber has done is made in convenient and, thus far, inexpensive. Do you think Uber will reap massive margins here? The barrier to entry is very low.
If Lyft is burning $50M/month driving me across town for $15, or me and two strangers for $5 each, how does substituting a person for a dress or a shaving kit or a bag of groceries suddenly make it hugely profitable?
And if this is the case, why isn't Postmates / Instacart/ etc. getting billions in VC money to expand and corner this underserved market? Why did all the courier startups immediately go belly up in the dot-com bubble last time around?
We had to wait another 15-20 years for those feverished VR dreams to become a reality
I reckon it'll be the same for self-driving. We are 20-25 years away, not 5-10
A self driving vehicle would do the long-haul and a human would do the tricky city/country lane leg of the journey.
Automating the whole journey is a long way off as you say.
Multiply that by the number of states/countries where you want to operate and by the level of bureaucracy in each country.
I'd say that from the day the tech actually works properly (which might be many years away, still), it will take at least 10 years for its availability across the globe, if not more.
I'm not saying Tesla should be stopped or that Elon should go to jail. But I think it's a clear case of false advertising, where lives are on the line.
Since you know about historical autopilots I suspect this will be redundant, but here it is anyhow: https://en.wikipedia.org/wiki/Autopilot#Modern_autopilots
"Modern" autopilots have been around for a while, something like 40-50 years. Sure if you go back 80 years you can find autopilots that aren't as advanced. If you want to move the goalposts like that, relative to what a reasonable person might expect, knock yourself out.
And there are plenty of systems below that. For example:
http://sarasotaavionics.com/category/autopilots/certified-au...
Note: single axis and 2-axis. Just like what I said it can be.
But yes, the people insisting that "autopilot" does not imply autonomy, simply because no autonomous autopilot exists on any commercial aircraft, are torturing the language. Sure.
Ask those same ~10 people what an autopilot does for a car. They'll say something like "it drives the car". Given what the Tesla Autopilot (tm) is capable of doing, their understanding of what the name means and what the software can actually do only has maybe a 20% overlap.
So yes I would call that torturing language. It's an autopilot that can drive the car under a very limited set of circumstances AND it requires that Jesus (you, the driver) is always 100% alert and ready to snatch the wheel the second the car starts to do an unsafe thing.
It's a totally different control problem in cars than it is in airplanes, and it's impressive that they're doing well enough to where people will trust the system enough to get into this kind of trouble. But right now it seems like Tesla's in the uncanny valley of self-driving. Good enough to make people say "huh, it works" but not so good that it works 100% of the time, always, forever, no matter the conditions, other crazy drivers and all the freak occurrences that are literally 1 in a million, but given that there are 1.1 billion car trips per day in the US will happen 1100 times a day. Even at 1 in a billion it'll still happen once per day.
But let's say it's true. Why would people think that, when that's not how they actually work? That's an honest question I asked above when I said, "Where did everybody get the idea that 'autopilot' implies full autonomy?"
Do we at least agree that actual factual airplane autopilots are fairly analogous to Tesla's? If so, how is it "torturing the language" to use the term that way? Overestimating the intelligence of the public when creating a term is a long way from "torture."
Nope! That's the whole point of contention, actually. Autopilots are very advanced and can do almost the whole flight. Because the control problems for airplanes and cars are very, very different.
If something goes wrong with the autopilot in an airplane you've got minutes (at least) to figure it out and not die. ~30,000 feet of altitude and huge glide ratios and nearly empty skies do wonders.
In a car your average car-to-car separation in rush-hour traffic is a few seconds along the line of motion, and perhaps less sideways. If you're not on the freeway you might be a jerk of the wheel and half a second from a head-on collision.
Now you might say that the technical capabilities of both systems are the same, but nobody really cares about that. They care that it can meet some criteria that they already have in their head and they aren't going to go to school for 5 years to understand that it's not the autopilot's fault that their kid enabled in bad circumstances and died, they're going to sue Tesla to hell and back. And judges and juries will quite likely be sympathetic.
I keep talking about the simple end of what "autopilot" covers and you keep countering me by pointing out the advanced ones. I'm not denying the advanced ones exist, I'm just pointing out that the simple ones exist too, so using the word "autopilot" for simple systems is entirely appropriate.
I'm not terribly interested in the legal aspects of it, I'm just curious where everyone got this idea that "autopilot" implies autonomy (if in fact everyone does have that idea, which I'm not sure about), and I strongly disagree with your assertion that using "autopilot" to describe Tesla's system is "torturing language," given that using "autopilot" to describe a simple wing-leveling system is perfectly acceptable.
I have argued that when people hear the word "autopilot" they think that it's very advanced. You argue that technically, something that just keeps the wings level is also an autopilot. I agree! I just disagree that the average person would know enough about the finer points of what a particular word actually means versus what just about everyone thinks it means.
Finally I would argue that if just about everyone thinks that a word means a particular thing, that's what it means. It might technically be incorrect, but words are just noises that people say to convey an idea from one brain to another. If you know what someone meant well enough to correct them, they probably used the word correctly.
Here's a major news website reporting on what an autopilot is and is not in the wake of the germanwings crash about a year ago. It maintains that autopilots on commercial jets (what people tend to think of when you say "airplane" or "flight"). This was the 3rd or 4th google hit for the phrase "what is an autopilot" http://www.cnbc.com/2015/03/26/autopilot-what-the-system-can...
I fully agree that if just about everyone thinks a word means something, then it means something. I'm not trying to argue based on some technicality. What I am arguing is:
1. I'm not at all sure that this understanding of "autopilot" is as ubiquitous as you say it is.
2. Even if that understanding is nearly ubiquitous, I can hardly fault someone for using "autopilot" to mean something simpler if they are doing so because they are familiar with actual autopilot systems and are naming by analogy to the systems, not to popular understanding of the term.
3. If people really do all think that "autopilot" means a fully autonomous system, the fact that no such thing is found on real airplanes means that they're a bunch of idiots, and I'd really like to know where that idea came from.
If things were implemented really well, I could imagine travelling part of the journey in self driving car and then jumping to regular one for the "last mile" (or the other way round). This way one could use the self driving cars in the easy, but time consuming sections (for example congested high ways leading to airport).
Until they can prove a self driving car can navigate a road at night in horrible weather conditions with and without other cars then its not self driving.
If anything the current crop should be emphasizing that they can warn of bad driving habits.
But wouldn't everyone use self-driving cars and that level the playing field again? If you can't make a profit now, would that really change later?
So if Uber is building their long term business plan on the idea that once automated cars exist they will buy them in bulk, build the infrastructure to maintain them in each city they operate in, and reap the profits then I am pessimistic on their model.
Wouldn't be surprised if that's exactly the way it happens. Lyft OnStar.
How is Uber a "better product" than a taxi? As far as I can tell, it's competing on price, and that's it. If cabs were the same price as Uber, I would take a taxi every time.
You can just call one from your apartment when headed across town instead of waiting for one to drive by on the street. In my experience calling taxis isn't always reliable. Uber etc. show you the driver's location and distance, and they won't stop to bring someone else to the airport.
I think a big part is the quality of the taxis in your area. In San Francisco, they'd do the "card machine is broken" bit (eventually turning it on when you have no cash), or just not pick you up if you were headed out into the Sunset, or drive a longer way hoping you don't notice.
In Dublin, Ireland, calling an Uber will invariably call a taxi. They're usually friendly folks that don't mind that you're only going a few blocks to bring home your groceries because you missed the bus.
But the bar to call Uber a 'better product' is pretty low. There's nothing it does spectacularly better than Lyft or Flywheel or any other app.
A big part of their value is how low the customer experience can go with a traditional taxi. I just want to rent someone's time for point to point transit without any bullshit.
Rusty car. Driver doesnt speak english. Smoking out the window and talking on cell phone in another language. Floors it and slams on the brakes. Seatbelts broken. Credit card machine broken.
Hum why would I take a lyft.
As a really simple example, as applies to my city, I have had to wait 2 hours for a taxi more than once. I've never waited more than 25 minutes for an uber. Average times are ballpark 10 minutes vs. 30 minutes.
I would take uber if it were more expensive than taxis any day.
I really don't get what's so good about uber, they're just like taxis, but worse quality, and bending the law.
Once they have it, they'll have little reason to underprice anymore. You need drivers to run this kind of business (for now), and they will create an upward pressure on cost (to a point) as they move between legitimate services based on who actually pays them a living.
Note: Just to skip a potential semantic argument that always crops up around this: whether or not you believe it's appropriate to call it a monopoly if it's not enforced by government fiat is beside the point.
They won't have many particular incumbent advantages if / when self driving cars arrive; all their carefully tuned business model, investment and product is about how to handle human drivers.
What could give Uber/Lyft an advantage in the robotaxi age would be huge amounts of cash for the enormous investments required to blanket whole cities with cars to locally reach the critical mass of "a robotaxi is always closer than my own car would be", but I don't see how luring users with subsidized prices now would in any way help with that then.
Fixed costs are presumably low, so it can't be scale that would lead to profitability.
Utilisation rates? I've not heard a lot on if rates could come down to compensate for more passenger-miles. But of course a fair bit of the cost must be tied to passenger-miles.
Intentional avoidance of profit by acquiring or R&D? I suppose this could be the play for self-driving cars in the future. As you say, automated cars seem to be the easiest way to drop the passenger-mile cost. But I don't know if automated cars will be a winner-takes-all market, at least globally and in a way that would lead to monopoly-like profitability.
So, at least here, it's pretty obvious to me that they do have a viable business model. There's thousands of hire-car drivers and mini-cab companies already making profit in the space. All Uber is doing is making the process of getting a hire car to pick you up significantly more convenient.
http://uk.businessinsider.com/uber-financials-for-2014-and-2...
This one might be relevant too:
http://www.forbes.com/sites/briansolomon/2016/06/02/uber-is-...
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EDIT: This is ridiculous. Why am I getting downvoted? I think the linked sites clearly answer the question of the parent as well as is possible. If it's about the "I googled" I was merely trying to show what search I used in case the reader has a better idea for a search string that results in better links. Some people here IMHO show ridiculous voting behavior. I made a serious effort at trying to answer the question - with a very usable result IMHO.
However, hearing that they're losing up to 50MM per month is quite disconcerting, and it makes me wonder how much time they have and if they will break even. Even at a large valuation ($25 billion if I remember right?) they seemingly can't continue at such a loss without a drastic change to their business model or continuous large outside investment. I think one of better things they could do is really use their positive PR as a strong advantage, because they don't have major blunders like Uber (e.g. Uber gets $3 billion investment from Saudi Arabian investment fund and adds one of their managers as a board member).
Meanwhile Uber is expanding around the entire world while Lyft is still struggling with the US.
heh
2. Subsidizing the cost of rides with VC money. For example, paying the driver more than the customer is charged for a normal ride. Also, I'm not sure if it's still this way but at one point Lyft Line in SF was a flat rate ~$5 even for long distances.
Tune the discount percentages to arrive at the maximum "losable" amount.
That president broke a cardinal rule of VC-backed startups -- never reveal your numbers. Although some do, admittedly.
But at that rate of burn, it's pretty surprising he got approval to disclose that. If I'm an LP -- looking at the #2 in the space -- and they're treading water against #1 while losing $50M a month -- I'd rather check out the #1 in the space.
Although Uber's burn rate is also quite high -- losing $1 billion dollars in China alone: http://money.cnn.com/2016/02/19/technology/uber-losing-1-bil...
Also, remember they've raised $2B [0].
If that is the burn rate, it's 40 months ~= 3.3 years of runway with everything else constant (admittedly a bad assumption). That's a lot more runway than most startups have. I'd suspect they have multiple alternative burn rates paths to go down that are more/less conservative with burn rate, like a 5- or 10-year runway before being profitable.