Lyft raises $500M
cnbc.com
cnbc.com
However, Uber is more global, therefore has much more large cities around the globe. It wouldn't be unreasonable to assume that on average cities are 2-3x larger.
This alone could justify valuation gap. I would also assume that because of global presence, Uber has higher usage due to travellers.
[1] http://uberestimator.com/cities [2] http://www.theverge.com/2017/1/25/14383370/lyft-expansion-ne...
I think I agree that Lyft is the better opportunity right now to Uber based on valuations -- while Lyft is clearly the less valuable company, it's hard for me to believe that it's 10x less valuable. 5x? Sure. But that makes Lyft twice as good an opportunity as Uber.
Unfortunately, I think that both companies are most likely doomed. Uber almost certainly, Lyft maybe a little less certainly. There really isn't much sign that there's a $7B business in ride sharing, much less a $70B business.
Minimal costs to maintain infrastructure and 20% cut on millions of ride's a day.
The only reason Uber was struggling is because it wanted total global domination. It was a land grab, and they played it quite well. Failed in China, but succeeded in quite large portion of the globe.
I think that this is the reality:
1. There are lots of reasons why customers may not take an Uber. They could take a Lyft, they could take their own car, they could take public transportation, they could take a taxi, and they could in many cases just not go out or substitute a closer destination.
2. Uber achieves high ride volumes in the face of #1 by heavily subsidizing both drivers and passengers, even in the case of relatively mature markets. This drives their profit margins down to extremely thin levels, or in fact negative.
3. Their proposed technological solutions to their margin problem have either not been broadly popular (Uber Pool) or have major roadblocks to even existing (self-driving cars).
4. Their proposed business model solution to their margin problem (being a logistics company) have the problem that nobody wants to be their customer.
5. All of the above are true even in the developed world, where a ride might average $15 and Uber's cut before subsidies might average $3. All of their expansion opportunities now (and in the last few couple of years) are in areas where a ride might average $5 and Uber's cut before subsidies might average $1 (or worse), making it harder and harder to recover the relatively fixed costs of expansion.
6. There is obviously a profitable business in being a taxi company. It's just not a $70B business, and indeed I'm not sure it's a $7B business.
I originally wanted to argue against you, by saying that Asia has some very large and fast growing non-China/Japan countries... but I'm not sure the data shows that. US+EU is $35T total GDP. The largest non-China/Japan Asian economies, India+Indonesia+South Korea+Taiwan+Thailand+Hong Kong+Phillipines+Malaysia is ~$7T[1]. Is it worth all the risk and effort to add only 20% of your potential business?
Maybe, and those countries do have higher GDP growth rates[2]. But given the small market sizes, difference in laws, and substantial local competitors (especially Grab), it doesn't seem like being in Asia should increase Uber's worth by a large multiple, relative to Lyft. That said, if being in Asia is responsible for 20% of Uber's valuation, that is still a gigantic $14B, larger than many fortune 500 companies.
[1]-https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi...
[2] https://en.wikipedia.org/wiki/List_of_countries_by_real_GDP_...
Both Go-Jek (Indonesia) and Grab have raised huge capital in the last 5 years or so.
Go-Jek seems to be the leader in Indonesia as they've also expanded their capability to food delivery, document delivery, payment gateway, etc (they're becoming more like WeChat minus the chatting/social network aspect)
I have my doubt that Uber in Indonesian will provide significant return to HQ. Uber currently is in 3rd place after Go-Jek and Grab.
Gett raised $100 million [1], designed a decent app and put up a bunch of billboards all over Manhattan. I tried to use it for over a month. The drivers were friendly, the cars were wonderful and the rates were great. But the waits were like 20 minutes. Haven't used it since.
[1] https://www.bloomberg.com/news/articles/2016-11-30/uber-riva...
Which is to say: Is it an advantage for Doritos that they have tons of brand recognition and a large customer base? Sure! They get economies of scale, and it is easy for them to convince retailers to carry their product. In turn, their customers know that they can get Doritos anywhere, and that's an advantage for their customers.
But no reasonable person would regard Doritos as a network-effect business.
Passengers for Uber do not make the service better for other passengers. In fact, they make it worse, by driving surge multipliers. If another business provides a rival service to Uber, passengers experience no negatives for switching, the way they do to a brand new social network, where their friends aren't.
The existence of Uber's brand, and the demand that Uber experiences, is of course an advantage for Uber. Obviously, it is a good thing for Uber that they have passengers, and can sell their services. But that's not a network effect -- it's just a regular old "advantage of being big and having a brand."
1. Drivers want to have passengers close by for pickup. Passengers want to have drivers close by for pickup. The more drivers, the quicker passengers will get picked up, the more passengers will use the service, and the more drivers will use the service.
2. In addition, UberPool/Lift Line have obvious and strong network effects. Sharing a ride is only possible with a large number of users. The more rides that can be shared, the cheaper the rides can be.
In both these ways, additional passengers do add value to other passengers.
These services are really just curated marketplaces of drivers and passengers. Uber has its driver/passenger marketplace, Lyft has its marketplace. It's tough to replicate the power of these marketplaces, just as its tough to replicate the marketplace power of Craigslist or eBay.
You need a substantial amount of both buyers and sellers for the service to be worth anything. If Doritos was not yet in Canada, they could provide value immediately by selling Doritos in one 7/11 shop, no problem. For Uber to expand to Canada, they would need a minimum number of drivers and passengers in a given geographic area.
And, I mean, that's true. It really is an advantage. But it is again, obviously absurd to describe Doritos as having a network effect. A network effect means a scale advantage over-and-above the effect that is enjoyed by everyone with a big brand and built in demand.
2. Uber Pool and Lyft Line have a genuine network effect, that's true. But as far as I can tell, they're just not compelling products.
For example, a hotel chain is more valuable if it has a global presence because it can leverage that to create customer loyalty. That is not a network effect. To the consumer, it does not matter how many people use those hotels. They could be completely empty for all they care, they just want a room for a competitive rate.
More efficiency through higher utilization (more passengers lowers the cost of pooled rides) is a classic example of economy of scale.
There are counter-examples to your "Uber expand to Canada" argument. For instance, a mobile provider is not going to be very successful in a market until they have coverage across the area of that market. Nobody would say that a mobile provider has a network effect because they have invested in build-out.
1) Economies of scale: You hire an ops team of 10 people, they manage a city of 10k riders, to get to 50k drivers (5x), you only need to add 5 ops people to manage the city (1.5x).
2) Network Effects: A city starts with 10k drivers. Wait times on average are 10 minutes for a rider, and during rush wait times grow to 25 minutes (less supply elasticity), and the average time from hail to pickup is 12 minutes (IE, app blings the driver, and they are 2 miles away from rider, takes them 12 minutes to drive to rider), and the total pickup loop is hail -> 12 minutes to pickup (unpaid) -> 2 minutes waiting for ride (unpaid) -> 12 minutes on ride, so ~50% of a driver's time on a trip is unpaid. The city grows 5x (50k drivers). Now, average wait time is 3 minutes, and during rush, the average rider wait time is 5 minutes (more supply elasticity), and the average time from hail to pickup goes from 12 minutes to 4 minutes, while the wait time and trip time stay the same, so now the driver is unpaid for only ~20% of a trip. As the percent of time that a "driver is being paid" goes up, the ridesharing fares can go down, to attract more riders, until a sort of equilibrium is reached. The benefit to the consumer of more drivers is lower wait times and lower fares (because you're paying for less driver 'non productive time').
A rider can do the same by attempting to get a ride with their preferred app, then the dominant one. It's annoying, but surely possible.
How many Duck Duck Go users say "I search with the default search, don't find what I want. Then I do !g and I find what I'm looking for."
They're still making the most of the non-dominant platform.
Digg had all of the attention (and marketshare), got courted with a few acquisition offers and ends up flaming out...
And in the background is Reddit, just plugging away, doing what it does best and long term, ends up being more influential.
Sounded like he's a pretty straight person. I liked it.
https://webcache.googleusercontent.com/search?q=cache:XCaMdJ...
Lyft might be quietly making moves in this direction too, but I'd worry about their ability to stay competitive without an aggressive self-driving initiative.
But if we grant for a moment the premise that the lawsuit could substantially set back Uber's program if it is won, and that it has a decent chance of winning, then what is the incentive for Google to settle? Uber doesn't just get to decide to settle unilaterally.
If we don't grant that premise, what is our basis for believing that the premise is untrue? Personally, I don't claim to really understand the ins and outs of these kinds of lawsuits, and am comfortably agnostic.
Was mighty kind of Uber and its investors to prove out the business model for Google.
a. Bigger than Uber.
b. Have actual profitable businesses that they can use to fund their research.
I have never seen any kind of evidence that Uber will either be the first to market with true self-driving cars, or that their self-driving cars will be superior in kind to their competitors. The closest thing to evidence that I've ever seen anyone provide that Uber self-driving cars are going to have any advantages to their many rivals is "this is an existential issue to Uber."
Companies fail all the time. This is pretty strong evidence that "existential problems" are not guaranteed to be solvable ones.
We have ample evidence that Uber's self-driving cars require human intervention orders of magnitude more frequently than Waymo's. The fact that they're using human-driven cars with self-driving assist in a vaguely commercial manner is a marketing tactic, not a statement of technological proficiency.
On-demand car sharing is the future, making Tesla's consumer car ownership model outdated. Uber is 5-7 years ahead of Tesla on the operations side of managing and deploying a fleet.
Lyft partners with GM that acquired Cruise and their tech is solid. They are making cars will all the sensors built in, not add-ons like Uber.
Also Uber is losing a shit ton of money. Tesla is not profitable but doesn't bleed that much money.
Depending on how Waymo vs Uber goes, Uber may have to shut down their self driving car program temporarily. Stealing 40,000 files is ridiculous.
Add that to fact that they didn't get a proper licence so they don't have to report crashes and their self driving car crashed pretty bad.
Uber is a risky bet.
right, uber might have to shutdown its autonomous car program, or it may just settle with google and move on with life...
Uber has a proper license to run in sf again
Uber is absolutely a risky bet. But if they succeed, they may eclipse the car ownership market and get 10x bigger
Also arguably the company providing the contact with the customer is more of a commodity. Certainly its the easiest aspect to replace. 100 companies could handle that tomorrow with existing tech for example. I can imagine people using a service that shops a bunch of car services and lets you connect with any of them.