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Comment by pochamago | Hacker News Reader

What are the big expenses that cost Uber and Lyft so much? The driver takes the cost of owning and maintaining the vehicle, and they're only paid a fraction of whatever rides they get. Aren't the companies just running an app?

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Because of churn and driver recruitment incentives Lyft pays the driver more than it charges the rider. For example a new driver gets 80% of the fare plus $8 per trip in the first month. If you can pick up 155 people per week, Lyft also eats the entire cost of your vehicle. Also, Lyft is paying 100s of millions of dollars to Amazon and Google to run their app.

I'd be really interested to know what resources they are using in cloud and why it is so expensive. I don't disagree they need resources but 100s of millions seems a bit on the wasteful side.

It's running in hundreds cities in tons of countries with huge pools of drivers. The server costs alone are going to be big. Plus you have to hire and pay for really good reliability engineers. Any outages are going to cost you a lot of confidence, and a lot of money. This is a really big amount of data, more than most people realize.

Lyft only operates in the US and a few cities in Canada.

If it's the same as uber, they are subsidizing the cost of rides. They also spend a lot on advertising and promotions, which is necessary for awareness in new markets and to attract more drivers. Or in the case of uber, to convince people they're safe, respectful, etc.

The main expense is driving out any competition by price dumping: rapid expansion, subsidising trips for (1-3-6-12 months) etc.

Since they have infinite investor cash (for now), they can do that in many countries at the same time (hence the costs).

All this will eventually crash, and/or Uber will be forced to comply with labor/taxi/etc. laws.

Biggest expenses are keeping driver supply high in new cities until the service adoption gets traction among consumers, and customer support / fraud mitigation (again, primarily in new cities).

For the most part, established cities are profitable (at least for Uber, I don't know the story for Lyft).

That makes sense, but it makes me skeptical, then, of the article's claim that they have no path to profitability.

Many investors are extremely short-sighted.

The better analyses I've seen say that Lyft could be profitable, if they stopped subsidizing growth via their profit centers, but then they have to somehow overcome the one-trick pony problem and it's not very clear how.

Uber, on the other hand, has several verticals, and also enough muscle to be able to strike profitable deals w/ local competitors, as it has already done in various countries.

I wonder how much litigation is costing them.

They hired a lot of engineers working on internal stuff. Probably will have a large layoff round to reduce costs.

They don't lose billions each year on engineering. Not even close.

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