The most exciting implication here is that we can finally pour over the financials of a major ride-hailing company. Whether these companies have the unit economics to succeed is, remarkably, still an open question.
I don't think there are many people who doubt that ride hailing apps can be done profitably. I think the big question is (a) is it a commodity business (I personally believe it is) and (b) can potential profit margins support their astronomical valuations.
I think the main problem (though MUCH more so for Uber than for Lyft) is that it is valued as a "network effects" business, e.g. something like a Facebook or a Google with substantial pricing power, but I think the reality is that it will turn out to be much more like the airline business - basically a commodity business where raising prices is extremely difficult.
I believe you are onto something there. What did people do before Lyft/Uber? They walked more. They biked. They took public transportation. Maybe they drove themselves. Maybe they drove/carpooled with a friend. Maybe they took a good old fashioned taxi.
Faced with a price hike attempt, those options are again always on the table.
But I feel like the Lyft/Uber mode of transport is generally more spontaneously and is therefore generally more elastic. Sure, there are undoubtedly some inelastic use cases, like regular commutes, but there are also some very elastic use cases, like a ride home from the bar or a rescue from the rain. I am definitely interested to see how the breakdown of these different use cases turns out to be, but for me and my friends and peers in the SF Bay Area, the latter use case definitely dominates.
However, my sense is that for at least certain locations/demographics, that's probably changed with Uber/Lyft. I don't personally use them much but anecdotally a lot of people have started using them as an alternative to public transit or just because it's easier if they're going out for a night on the town. And I work with a lot of people for whom the reflex seems to be to pull out a smartphone anytime they need to go more than a few blocks while traveling. I expect those behaviors would change if the price suddenly went to 2X. (It also definitely makes a difference at the margins when renting cars and that's mostly a straightforward price calculation.)
They manage demand via surge pricing, I thought. So is it really elastic?
The basic economics of Uber/Lyft-style transportation is very profitable. The biggest economic challenges are 1) entering a market and 2) pools. And Lyft & Uber fighting each other.
The drivers gladly use multiple apps so these businesses don't really hold much power in terms of lock-in.
1. Start in one city only and concentrate on that. 2. Get your service listed in Google Maps. 3. Gradually expand.
Job done. The only real defence against that is that Uber/Lyft could probably afford to undercut you until you go out of business, Walmart-style.
I wonder if people who say things like this are actually drivers, because every driver I know has a car full of random stuff that lives permanently in it incase it’s needed. No one is going to carry all that with them; if they did it wouldn’t live in the car in the first place! Ownership isn’t going anywhere, or taxis would already have killed private ownership (and hotels would have killed the housing market...)
Taxis have killed ownership in places where taxis are more convenient than car ownership. As ride sharing becomes more ubiquitous—especially as self driving vehicles move into the space—that's going to become a reality in more and more locations.
Do I need to keep all that in my car? Probably not and maybe I wouldn't if I lived in a city and just needed a car for basic transport now and then. But it's convenient and it describes how pretty much everyone I know uses their car--especially if they have kids.
And, as I said elsewhere, I actually expect self-driving will tend to cause people to spread out more and create even more incentive to make cars a customized self-contained work and entertainment space.
Added: More transportation options definitely make a difference at the margins, whether it's a second family car or dropping an infrequently used automobile in the city. I know a couple in SF who don't own a car but depend heavily on a combination of biking, short-term car rentals, regular rentals, and Uber/Lyft. Pre-Zipcar and Uber/Lyft I'm guessing they'd still have a car. On the other hand, I live in a semi-rural area and I'm going to own a car pretty much no matter what other options you introduce.
They just don't carry them. If it starts raining and you didn't bring an umbrella then oh well, you get wet.
Besides lunch of course, because we're not savages. We enjoy our lunch sitting down at a restaurant. ;)
- mess cleanup (paper towels, wipes, windex)
- small tool kit (leatherman, couple wrenches, battery post brush, duct tape)
I think there’s more but that’s off the top of my head.
Note for example Amazon, which didn't turn a profit for years, had extremely good unit economics and invested in growth.
Unit economics always matter, at least after a certain point (and an IPO would definitely be that point).
> Ownership as we know it will become meaningless.
Do you really want to rent everything instead of owning it and pay everyone for their work rather than doing it yourself?
Certainly there are many people that prefer to own condos/cars/phones/books.
To pore is to think deeply about to something, to dwell on it.
A pour-over is a type of coffee.
I’ve learned something new today. :)
“Pour over” is the sense you describe would be a metaphor.
Ok, I still think it’s an unusual example but you’ve convinced me.
I retract my earlier comment and replace it with a “today I learned” for me. :)
The only thing I usually correct is jibe vs jive....