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Comment by panarky | Hacker News Reader

> can't imagine how Uber is worth anything

If the operation doesn't make an economic profit, and if there isn't sufficient moat to defend the operation until it can become profitable, then I agree with you it's not worth anything.

But in fact, Uber does have a massive moat -- its network of drivers and riders in thousands of cities around the world. No competitor is even close.

It takes tremendous capital expenditure to build that network, and it will take tremendous capital expenditure to neutralize it.

It remains to be seen if Uber can make an economic profit, but with an operating loss of just 10% of gross revenue, it's not at all inconceivable.

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> It takes tremendous capital expenditure to build that network, and it will take tremendous capital expenditure to neutralize it.

Does it, though? Every driver I've talked to basically drives for "all of them". Several told me they try to find whatever apps are local for driving and they setup those alone with Uber and Lyft and simply take whatever pays the most / is more frequent.

Uber's software and network are solid but I don't think there is a whole lot of loyalty there. Anyone who can drive a wedge into a spot in their business could slowly erode it, IMO.

Now, they're too big to die quickly or anything like that. But it doesn't seem impossible at all to me.

> literally drives for "all of them".

But how many have they _stopped_ driving for?

None, they just drive less of A and more of B until they barely have any customer for A anymore until A dies.

it's economically unreasonable to drive for more than one apps simultaneously. Now, it could be economically reasonable to drive for more than one apps at many points in the past.

If Lyft and Uber are so easily exchangeable, why is Lyft is still a minority in the US while spending more money?

There's something more interesting here.

It's not unreasonable, people do it all the time. Look at the window stickers in a rideshare, if they've got one they've got four, all around Seattle.

like i said it's reasonable to drive for all at different points in the past but it's unreasonable to drive for all 4 at the same time. Think about it, incentive-wise, if you complete 50 trips you got $x , if you complete 100 trips you got $2x. If you only got 50 trips in you, why are you splitting them between two apps 25 trips each and got $0 incentive?

Almost every driver I ride with is switching between the Lyft and Uber apps to see which one is offering better rates/destinations. The incentives appear to be insufficient to offset rate disparity in this market - unclear if that holds true everywhere.

I'm not at all well-versed in statistics, but it seems that without enough extra cash to consistently one-up the competition in terms of incentive structures, a ride share company could not make the driver's choice of which app to use a non-random event. So yes, a driver wouldn't necessarily choose all four at once, but they also wouldn't consistently pick one.

It's a well known fact that the biggest factor in taxi revenues is how much paid miles/km you can do per day. The single biggest factor to increase your revenues is increasing that number.

So unless the incentives are massive, a driver will always look for the next ride by any means necessary. It's nearly never worth it to "wait for a better option".

How many paid miles you do a day. Deadheading is not good.

Agreed - Facebook has a network effect/moat because a new service that's better in every way is useless if your friends aren't on it. Getting the network to migrate is hard and when this does happen FB is quick to buy the threat (Instagram, WhatsApp) or compete and kill them (Snap).

Nobody holds an allegiance to Lyft or Uber - they pick whichever is currently a better deal for both driving and riding. Uber's recent loyalty program is the first thing that slightly moves this in favor of continuing to use Uber, but it's only a little incentive. Large swings in price still favor switching.

Their only moat comes from being able to undercut competitors with VC money in any market they appear in until the competitor is dead and Uber can then raise prices to be profitable.

It's probably a winner take all market. A SDC competitor would be a threat, but I'd be both impressed and surprised if Google could pull that off.

FWIW, I have a loyalty to Lyft and will use its service even if Uber is a bit cheaper, but that's because I'm a techie that is aware of all the shady shit Uber has done.

I do this as a rider, but I suspect it's different when you're a driver and your livelihood depends on it.

Uber actually has one moat: their international presence. Other networks don't have it.

If you're a business traveler, you can Uber out of most airports without having to install the local application, and business customers are less price sensitive than local customers in general.

Definitely agree with your point about nobody having an allegiance for local rides, and it's not clear if Uber can defend against hyper local upstarts at scale.

Except it isn't everywhere, so their moat isn't complete and is eroded by the fact that you need to rely on local transport options in a lot of areas - I don't think this really counts much as a strength of theirs, and I think their current attempts to operate in so many markets and their reliance on a lack of enforcement/laws that can change may make this more of a liability for the company.

Quick note that Facebook, unfortunately, has no real competitor for the sheer number of things it does. As soon as one comes out built for non-technical users the way Facebook is - and hopefully is a nonprofit - I’ll go running to it and encourage my friends, too.

I’d want one that’s just an online account with a single picture, name, address, phone number that lets you have friends. No posting - basically just a contact list that’s always up to date because people update themselves.

Keybase could be this.

The main way to get people in would be a focus on event scheduling relying on twilio and sms for including users that don’t have accounts.

Make it cheap but not free ($1/month for people with more than 25 contacts) and advertise no ads or tracking ever.

What would motivate everyone you know to use this service?

Convenient way to do event scheduling - some friends I know are not on FB so it’s a pain currently.

Also having up to date contacts to stay in touch. Phone numbers and addresses change and it’s hard to know when that happens (and currently most people don’t put this on FB).

Could LinkedIn go this way...bridge from its business network to casual social network also?

I doubt it - linked in is a mess. They also have too much tied up with recruiters being their real users.

I’d want something simple.

> non-technical users

what did you mean?

I didn’t write that, but I’d guess easy to use like FB (grandma can use it).

Not setting up your own locally hosted diaspora node.

It's amazing how FB has gotten so easy to use now. As one of the early users I remember FB was more cooler I'm those days because majority found it too difficult to use.

FWIW I deleted fb 3 years ago.

This is indeed what I meant.

> Nobody holds an allegiance to Lyft or Uber - they pick whichever is currently a better deal for both driving and riding.

That's not exactly true: I use Lyft exclusively because have anti-loyalty against Uber because of their greater level of past unscrupulous behavior and scandals.

Yeah - I should strike 'nobody' from my vocabulary in most cases. I meant most people.

Here in Brazil my experience has been the same: drivers use all apps.

I just don't see how Uber can maintain said network on the long run and still be profitable, not something I'd put my money in.

What Uber is doing would generally be described as predatory pricing on other sectors. On sufficiently unregulated markets such is Uber's it's extremely risky, no anti-trust legislation is needed to trump it, just a continuously low entry barrier, including lax regulation. For a more concrete, though only related example (rather than speculation as to Uber's future) see Dow's history.

> Does it, though?

It absolutely takes tremendous capital expenditure to build the network. Uber has an accumulated deficit of $20 billion precisely because they subsidized both drivers and riders to build the two-sided network.

It doesn't have to be winner-take-all. A duopoly in most medium to large cities is perfectly viable. But you won't see dozens of competitors because the drivers and riders would wait too long for a match in a sparse network.

Unless the ride-share commodity can be differentiated some other way, it would take large subsidies for a long time to make much of a dent in Uber.

> It absolutely takes tremendous capital expenditure to build > the network.

I always think some Uber drivers shall copy Uber and run a non-profit version of Uber to compete on pricing. What can prevent this?

Have you seen RideAustin? https://rideaustin.com

Love it. That's how it should be. Drivers should get max possible cut of the fares while the network operator works as a non-profit.

100B pump/dump is a scam. Think about all the indices-tracking-ETFs/Funds that will pick up this overpriced stock(our hard earned 401ks). Sigh. Silicon Valley should not have pumped up what was originally a good idea. This has a high chance of ending badly

What funds are those specifically? Certainly not the S&P 500. The Russell 3000, but they don’t have a choice.

The point of investing is deciding what you believe in (financially speaking)! If you don’t like Uber, make some money on it! You can’t short in an IRA, or sell naked options, but you can sell futures or buy put options. All of these would express a bearish sentiment on Uber. So don’t feel like you sre being screwed, go make some alpha!

For the record I agree with you, and will short Uber the day it IPOs. I’ve already made some good money on shorting Lyft and expect I’ll do well on the same strat with Uber.

Uber is a non-profit version of Uber. They made a 10% loss last year. So a non-profit (assuming they intend to at least break even) would actually need to pay the drivers less.

That’s an amusing proposition but a true non-profit could have more advantages like tax breaks and volunteer staff.

I think the intent of the parent's question was to say why can't a group of drivers get together and create a ride sharing app that is jointly shared by all the drivers and just gives all the money to the drivers, hence taking no profit (rather than the more formal term 'non-profit' which has the tax implications like you say.)

Besides, companies only pay taxes on profits, so loss making companies don't pay any tax either. (And usually have some kind of ability to carry forward losses to reduce future tax bills)

Why would anyone work voluntarily for what would essentially just be a company that gave all it's profits to the drivers but expected them to work for free. Volunteers tend to work for causes they believe in for some ethical or moral reason, and while I sympathize with the drivers like I'm sure many do I doubt many would work for free so someone else can earn more.

> volunteer staff

Why would some people work for free so that drivers can earn more or riders could pay less?

Uber racked up a $20 billion cumulative deficit by subsidizing both drivers and riders.

Even if you cloned the Uber app and had people volunteer to do customer support, you'd still wind up with a service where riders pay more, or drivers earn less, or both.

That works for BlaBlaCar [0] that's true carpooling, without drivers trying to make a living on the platform. Riders pay less and drivers get paid less.

But if Uber is losing $4 billion a year at the current prices, it's hard to see how there would be a sustainable market where drivers make more and riders pay less.

[0] https://en.wikipedia.org/wiki/BlaBlaCar

You don’t pay tax if you don’t make money.

> It absolutely takes tremendous capital expenditure to build the network.

It's like breaking trail: It's a whole lot of work for the person in front, but it's damn easy for everyone else.

Uber, being first mover, had to spend great heaping piles of money convincing people to become rideshare drivers in the first place. Because they had to sell people on the idea of driving folks for a living, and then get them to buy new cars that meet their standards, and then train them on how to be a rideshare driver, and all that fun stuff.

Everyone else just needs to convince a group of people who have already bought the car and learned how to drive it that it's in their interest to hedge their bets. Which, given how Uber has historically treated its drivers, is something that requires approximately zero convincing.

"Every driver I've talked to basically drives for "all of them". Several told me they try to find whatever apps are local for driving and they setup those alone with Uber and Lyft and simply take whatever pays the most / is more frequent."

I heard the same from drivers. It's the ultimate replaceable commodity. Drivers jump ship on an instant and so do I as user. I don't care if it's Lyft, Uber or anybody else.

For the drivers, Uber (and Lyft) tie some hurdle rates (rides/week or hours driven etc) to cash bonuses reward their loyalty. It seems like they have some status levels as well (e.g. Uber Diamond Pro) that I guess probably leads to better economics / bargaining power for the driver. So on margin drivers will specialize in one type of service especially in consistently high demand areas (i.e. cities). Unclear which one is better but on surface it seems Uber has more of these in place than Lyft IMO.

For the riders, Uber Rewards and Uber Cash (that actually forces you to reload if you have below whatever your current ride costs) also make the product quite sticky and make the rider less inclined to take other options on margin.

Small economic tools like these that exploit our psychological biases (e.g. loss aversion, gamification) may go a long way in protecting the moat in this commoditized, competitive environment, and Uber seems to be ahead so far.

(Of course, whichever player comes out with SDCs wins the whole pie)

Is there a valid comparison between Uber and a company like Amazon? Amazon's loss leader strategy paid off and they're doing well now, so can Uber "become profitable whenever they want to" and be fine?

Huge barriers to entry to compete with Amazon (warehouses, tech). Thus no serious direct competitor. Few barriers to entry in ride business (just another app)

Amazon was CF positive and invested it's cash heavily in capital assets (warehouse, etc.). Uber invested (burned) its money on subsidies. Not really a comparable.

Amazon burned less than $100m... it was funded off of positive cashflow... inventory was shipped and paid for by customers, before Amazon had to pay the vendor. It was/is a marvellously capital efficient business.

At least on Android, for ~75% of mobile users globally, Google Maps is more important than Uber for getting from place to place. Every Android user has Google Maps. Virtually every Android user uses Google Maps. The same is not true for Uber.

Uber has a shallow moat around an ugly castle.

and they were genius to acquire waze et al before anyone noticed they were going for the monopoly end game.

I have a strong feeling that Uber will be launching their standalone mapping service soon

>It takes tremendous capital expenditure to build that network

What I don’t understand with the gig economy is why the gig workers organize and cut out the platforms.

Do the drivers need uber/Lyft? Do renters need Airbnb? Let these companies take on VC build the tech platform, launch, verify the market...then fuck them, leave them holding their own bag while the workers ride off in the sunset.

Besides the Founders and VCs, who wouldn’t love to wake up tomorrow morning and read about all the uber drivers organizing, launching their own platform and getting equity?

People who like low prices might not like it, because the main reason Uber, Lyft, etc are cheap is that they use VC money to subsidize rides.

People vastly underestimate the work it takes to build Lyft/Uber because it's simple to use.

They would need someone to do all the legal/compliance work, validate drivers, handle marketing, handle payments, detect and combat fraud, resolve disputes, and the million other things you don't think about when you use the service.

It would be incredibly cool if each of these pieces could be subscribed to as a service. Especially if there was a way to expose your business surface area, domain knowledge, etc. in a way that it could "seamlessly" plug in.

I think it would make more sense for them to unionize, rather than recreate the entire platform from scratch.l

That is so not true. There is no 'moat' whatsoever.

No Uber drivers are exclusive. In the US I see tons of cars with Uber AND Lyft stickers on. In SEA it was extremely common the same drivers had the Uber AND Grab app installed (before Uber gave up).

> No Uber drivers are exclusive

Bing is just a click away from Google.

Hulu is just a click away from Netflix.

My local grocery store is just one block away from a different grocery store.

Exclusivity isn't required to defend a large network. People are creatures of habit, and it would take a big innovation in the service or massive subsidies to dismantle that network.

Except myself and apparently many others in this thread switch easily between Uber and Lyft, etc, and anecdotally the drivers do too.

I agree, which is why I believe Uber's biggest threat is Waymo. Waymo is uniquely positioned to absolutely demolish Uber almost overnight. They have the Google brand and financial backing. Their network of users is already in place as well (Google Maps).

None of those describe a moat. Google is better than Bing. Hulu has a different offering from Netflix (and a lot of people use both). No idea what different distances of grocery stores have to do with anything.

None of those describe a 'moat'. Something like Facebook is a moat. Instagram. A messaging app. Anything where your participation increases the value of the whole offering and hence you'll be locked in, else you lose a lot of value (e.g. from all the contacts you made in the aforementioned networks)

> it will take tremendous capital expenditure to neutralize it.

It doesn't take tremendous concentrated capital, though. A bunch of independent regional competitors can fight for each city / country separately. Uber has a leg-up with short-term tourists, who already have their app installed, but for regular users, anyone with a decent app and some ad money can be a competitor.

Grandparent post is assuming self-driving cars, which take one side of the network (the drivers) out of the equation entirely.

> But in fact, Uber does have a massive moat -- its network of drivers and riders in thousands of cities around the world. No competitor is even close.

Given Uber's financials, this still reads to me as, "Nobody in the world can burn money anywhere near as fast as we can."

It's not inconceivable that they could get into the black, but a year-over-year adjusted EBIDTA loss that's getting larger instead of smaller, and a revenue as a percentage of gross bookings that's doing the same, says that they've got no better idea than I do of how to make that actually happen.

>But in fact, Uber does have a massive moat -- its network of drivers and riders in thousands of cities around the world. No competitor is even close.

Merely being ahead of competitors isn't a moat, it would have to be something that makes "entering into serious competition" difficult for any new entrants. Uber already lacks the monopoly power to raise prices significantly because of competition from Lyft and local providers.

TNCs do experience network effects, but it's nothing like e.g. operating systems or social networks.

> Merely being ahead of competitors isn't a moat

No competitor can catch up without heavily subsidizing both drivers and riders. If no competitor is willing to spend billions to steal 20% of the market, then that's a pretty effective moat.

In VC parlance, a "moat" means something much more than just needing money to enter the market, but an insurmountable barrier even with a lot of money.

The network effects are the moat, and it would take a lot of money to disrupt that.

Any given market can't sustain more than a 2 or 3 rideshare services because splitting the network makes it too sparse for drivers and riders to match within a few seconds or minutes.

Uber has the #1 or #2 spot in virtually every market. That's an economic moat if I ever saw one.

https://www.investopedia.com/terms/e/economicmoat.asp

A moat has nothing to do with the venture’s current rank, and network effects (as above) are much weaker, what with drivers able to drive for multiple services, the ability to start a service in niche markets (eg wingz and airport rides), and the ability of customers to get a new app and probe multiple wait lists. Austin was able to sustain an extremely fragmented market when Uber left.

I hope your read that link, which concurs that being number 1 by a large margin is not itself a moat. A patent on the key technology is a moat. The unwillingness of everyone to switch is a moat. “They’re number 1” is not a moat.

And the instant they become profitable someone will undercut them. Thanks VCs for subsidizing my rides!

>But in fact, Uber does have a massive moat -- its network of drivers and riders in thousands of cities around the world. No competitor is even close.

Ola in India, Didi in China... both are expanding internationally.

If Lyft somehow manages to offer riders consistently cheaper fares (say, 50% off the Uber fare for 1 month) people will switch in droves.

> 50% off the Uber fare for 1 month

That's exactly what it would take.

A tremendous capital expenditure, sustained over time, to dismantle Uber's network of drivers and riders.

Lyft can survive 1 month of that no problem...

25% off would probably do the trick.

The cost of driving multiple platforms is pretty low. If the maps in my city are accurate, literally the same drivers are active on both platforms at once...

If there is significant regulation, like airport partnerships, that could be a good moat. Just like the taxis had

Neither the drivers nor the riders are capital items.

What moat? All the driver needs to do is load another app on their phone.

What moat? All the user has to do is change the search engine to Bing from Google.

Yet not many people switch to Bing but so many drivers drive for both Uber and Lyft and riders who easily take whichever is cheaper between Uber and Lyft.

That's right: Google has to constantly be better then Bing or else lose searches. Remember Ask Jeves?

> But in fact, Uber does have a massive moat -- its network of drivers and riders in thousands of cities around the world. No competitor is even close.

Their platform is a commodity to both drivers and riders. I haven't met a driver who only drives for Uber. Uber provides no incentives for loyalty to drivers, like actual employment as employees. As a user, I have no loyalty to Uber, either.

> Uber does have a massive moat -- its network of drivers and riders

The network of drivers would be rendered obsolete by SDC

Not necessarily, the capital costs of SDCs means that Uber has time to continue development since their costs for cars is essentially zero.

The driver network is worth precisely zero as a competitive moat if (and only if) you are competing against a company with self driving cars. The customer network is a competitive edge but it is also far less sticky than having a robust network of drivers that riders can depend on.

it is not that hard to gain foot in any market. just advertise lower rates to customers and higher pay to drivers and within a week u will have more than half of all uber drivers registered on your platform too. 90% of people driving for uber also have lyft account if lyft is available in their area. uber has 0 brand loyalty. it has failed to establish itself as a safe option. its just as shitty as the next option in eyes of most riders.

> its network of drivers and riders in thousands of cities around the world

Whose switching costs are virtually zero. smh

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