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Looks like Uber is better on every metric, total volume, growth, revenue, the only area they are behind is margin where they are taking less from their drivers than Lyft is.

We lose money on every sale but make it up in volume is supposed to be a joke, not a business strategy!

They don't lose money on every sale.

30% margins for Lyft, 20% margins for Uber (and 10% for uber eats.

Including amortizatized customer acquisition costs?

Do those figures include refund fraud?

I've reported several fraudulent trips; trips where the driver accepts my fare and pretend he's actually picked me up and then ends the trip after some time. When I requested a refund, Uber happily credits my account, not my credit card that they billed.

Seems like some fancy accounting tricks that bump up numbers are being ignored too.

You have to press for the refund. Refunds usually cost money to issue, so they would avoid it unless necessary.

Crediting my account isn't a refund. I never requested a credit. So I stand by my assertion that it is fraud. The same goes for having to meticulously scour my trip logs for where the driver didn't end the ride when I exited the vehicle, or other such shenanigans.

I don't think GP's comment was challenging your view but was more like advice ("if you complain enough to support, you'll get a refund instead of a credit").

You can’t consider credits revenue until they are used. This is GAAP.

You should just ask for refund. I've the similar story, Uber suggested credit. But immediately issued refund once I declined credit and asked to refund money back to my credit card.

I don't know about Lyft but Uber says they lost money in Q4 2018, hopefully not in each sale but definitely in aggregate.

The money the got from customers for rides / food delivery didn’t cover the money they paid to the drivers / restaurants providing the service.

Edit: Ok, looking at the numbers more carefully they are still be positive after paying drivers / restaurants. But they lose money when the operating, marketing and administrative costs directly attributable to the sale are included.

I think the idea is those costs don’t scale linearly with the number of rides, so if you can increase the volume of rides which each have a small profit and hold the other operational costs constant or at least less than linear, you eventually get to profitability. That’s the theory anyway.

Sure, but right now they are losing money with every sale. Using their own "Core Platform Contribution Margin [which] demonstrates the margin that we generate after direct expenses. We believe that Core Platform Contribution Margin is a useful indicator of the economics of our Core Platform, as it does not include indirect unallocated research and development and general and administrative expenses (including expenses for ATG and Other Technology Programs)."

According to Aswath Damodaran [1], Professor at NYU and an expert at valuing companies, if he had to invest between Uber and Lyft, he will choose the latter.

Who are we kidding? Uber, already a gigantic loss machine, continues to invest in loss-making ventures like Food Delivery and E-Scooters. Uber has spread itself to so many areas and markets that I can't see how it'll ever be profitable without making huge cutbacks. The volume and growth are of little significance when they are failing miserably to contain their losses.

Compounding it is the fact that there's nothing sticky about any of their business ventures. Customers will choose the cheapest option, so they can never go beyond a certain range of prices. Even if Uber does become profitable, I highly doubt it ever will join the leagues of Apple, Google or Facebook.

[1]: https://www.youtube.com/watch?v=K0wky8yyjuM

> loss-making ventures like Food Delivery

Uber Eats revenue was $1.5 billion in 2018, representing an increase of 149% from the $0.6 billion in revenue the food delivery service generated in 2017.

What does that have to do with whether or not it’s loss making?

Damodaran is “overvalued” and grossly undervalued the entire tech landscape over the past decade. I would not call him an expert in anything.

We've been in a bull market for the past decade. I wouldn't trust any record, good or bad, that's only been tested in one half of a cycle.

Cool window into an interesting epistemological model. Considering the null hypothesis: "Damodaran is no better at predicting the market than any other person.", what would be evidence that rejects it?

Presumably not being in concordance with the market is insufficient evidence based off this and sibling comments. I wonder if there is a duration where this will even work.

Does there exist any evidence that would lead one to fail to reject the null hypothesis? Or would this model always reject?

Certainly, our current conclusion must be that Damodaran has poor predictive power over the short-term.

Before I have seen the musings of a fund manager posted, predicting the next downturn. Apparently he’s been doing this since before the last downturn. His fund is barely above flat since inception in the early 2000s, even though the S&P has more than doubled. After pointing out all that, I still got some respondents who claimed that active funds are known to underperform during good times and outperform in bear markets. Perhaps it is true but I remember feeling skeptical.

I guess there is no evidence that will convince everyone that someone is a bad money manager or prognosticator. That’s why, despite my general discomfort with Nassim Taleb, some of what he said in Skin in the Game really seems true. People can believe what they want, but beliefs don’t matter much if they aren’t confirmed, and the only meaningful way to confirm or reject market beliefs is via investment results.

Suppose you have someone that says "amazon is overvalued, there's no way they are worth more than $400B" over and over again for years as Amazon goes from $600B to $900B. I'd still keep an open mind as long as the market in general was irrationally exuberant over that period. It's only once the market as whole returned to sanity and most stocks went down, but amazon continued to raise that I'd say that guy probably doesn't know what he's talking about.

Yes, a so-called 'expert in valuing companies' who doesn't do any actual investing himself.

I don't know anything about the man or his success record, but as an academic he may not wish to be accused of conflict of interest by promoting companies where he has a personal financial stake.

Or he just correctly observes that neither is a particularly good investment period.

It's possible to express an opinion on the relative value of two stocks while remaining neutral on their correlated returns, by going long one/short the other in the appropriate ratio.

Academics (pure academics) don't have a good track record predicting valuations/prices, period.

The people who actually have the ability or to predict valuations/prices (better than the market) are busy making millions, if not billions, of dollars, and they most certainly aren't going to tell you about their predictions/models. If they do, it's after they've already invested or shorted the asset.

This isn't quite true and you've pretty much identified the reason why. Academics are not investors and their objective isn't to profit but to publish their research.

Academics identify a pattern that generates superior risk-adjusted returns and then publish their findings - this then leads to the anomaly disappearing as investors trade away the alpha. [0] The track record of an academic can therefore only be meaningfully discussed in terms of how well their model performs in back-testing. Saying they don't have a good track record misses this point.

Perhaps there are successful academic investors who achieve alpha and don't publish their research, however they wouldn't show up in any meta analysis.

[0] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3054718

Why would someone publish money making information rather than make the money for themselves?

> Why would someone publish money making information rather than make the money for themselves?

Perhaps because they enjoy academia far more than money making?

Some people like Grigori Perelman [0] are just not interested in money or fame, or both.

0: https://en.wikipedia.org/wiki/Grigori_Perelman

I’m not aware of Perelman publishing a “a pattern that generates superior risk-adjusted returns".

That type of information is worth millions, and there are many investment firms offering very lucrative positions to those that can identify a pattern that generates superior risk-adjusted returns.

Outside of very rare outliers, it doesn’t seem reasonable to assume that information that will generate outsized returns will be publicly available.

Because if your chosen career is an academic that's what you do. You research, write and publish. You could probably make more money by selling your ideas in private industry but that's an entire career pivot, it's like a junkyard becoming a cheap used car lot. It's a lot of work and comes with risk. If you're tenured or close to it you should probably just publish. Sure you could try and sell your ideas on the side but that's not going to endear you to other people in academia.

A fair valuation may not be the same as market valuation since you can always bid for a stock high if there's a greater fool to buy it off you. This is what bubbles are made of - and once the music stops valuations will return to the fair valuation derived from multiples of revenue or asset values.

"there's nothing sticky about any of their business ventures"

Their critical mass of 'drivers' and their brand are hugely sticky, and massive barriers to entry.

Once Lyft and Uber have made sure that they are the only players, prices will inch up as they de-facto collude together, just like supermarket chains or anything else.

If a new entrant in a city tries to challenge them, they'll price way below market value until that challenger is gone, and then bring prices back up.

Wins and losses will be on a city-by-city basis, so it's possible that some city, somewhere has a 3rd party that wins out. Like maybe in Texas, due to whatever framework some other entity 'won' and came 1st (i.e. 'in Texas we proudly use 'Whatadriver'!), then it's possible for 3rd parties to exist, but the same rules will apply.

This market will settle down, and both Lyft and Uber will cut all of their stupid projects, and then they'll settle into oligarchy type pricing and profits.

As far as valuation, that's difficult to tell, but I think they have very viable business models that are not going away.

Facebook and Twitter could dissapear as quickly as they came, but Uber/Lyft found a back door into a very ancient market and they have their claws in their now, so they are not going away. They'll be around. It's just a matter of valuation at this point.

Most of the ubers and lyfts I've been in had both apps running. If a third app comes in with decent driver incentives, and can convince google maps to show them, they'll be able to get passengers and drivers. And, as you said, they only need to do it city by city.

I will say, when i needed a ride in a more rural area near Seattle, I did go right to Uber, and that driver wasn't on Lyft (but was considering it), so there is some stickiness, but I don't think it's much.

I see your point, but there has been a zillion attempts to do the Lyft/Uber thing and tons of money has already tried. The pie is just to big to ignore. So if hasn't happened already, it's not likely going to happen.

So yes, maybe a 'serious competitor' could try in some city, and as you say maybe 'word would travel fast' and maybe it might be possible to get a critical mass of drivers ... but then Uber/Lyft will just undercut them in a war of attrition.

To your mini-case: maybe there was a few other 3rd parties in existence, but you possibly never even heard of them. And even if the drivers sign up ... without the demand well there's no game anyhow.

It's been commoditized, so the advantage now is scale, brand etc. which the incumbents have, and they have money.

That market is done for now, until something comes from a different angle: new tech, new regulation, public transport shift, self driving cars etc.

You can't fight a subsidy war with uber/lyft now while they're still in growth mode. Once investors start demanding profits, and the prices go up, that's the time to come in and spend your money driving people around. Especially if you hear about others doing the same in other cities, or when some of the big loans are coming due.

It's a commodity, brand doesn't matter. Scale across cities doesn't really help that much. Money helps, but public market investors don't like to see it being spent quarter after quarter.

Why do people compare Uber to Apple, Google or Facebook? Why do people talk about them as if they were a tech company?

It's a taxi company. They have a web site and a mobile application, but so does several retailers as well as pretty much every bank out there. And no one is accusing them of being tech companies, or expect their growth to mirror that of Google or Facebook.

If you just look at the business of Uber, it's clear their current business does not inspire confidence that they will ever be profitable, much less deserving of Google-level valuations.

Sure, they may be able to become successful, but that would be on the back of a different business model. But then you'd have to justify why Uber would be able to execute on this as-of-yet-unknown business model better than any competitor.

> It's a taxi company. They have a web site and a mobile application, but so does several retailers as well as pretty much every bank out there

Taxi companies own taxis, calling uber a taxi company is too simplistic.

Correct, they also hire thousands of engineers to make the little cars move on the map.

If food deliveries are made using the same driver fleet as the transport business then it is actually essential to squeeze more revenue per driver hours. Having the fleet there only to serve transport is inefficient because driver time is fungible between the businesses.

Honestly I don't understand how anyone could be thinking that investing in Lyft's stocks is a good idea when they have a competitor like Uber. It's like investing in eBay when there is Amazon or investing in homestay when there is Airbnb.

Like investing in eBay when there is Amazon?

Maybe not the best analogy? eBay and Amazon both started in the 90s and were both HUGE successes for investors.

Further to that point and to their credit, ebay smashed Amazon in auctions.[1]

Auctions was one of a dozen or so large failures on the part of Amazon to find a profit center. eBay wiped the floor with them and Amazon gave up relatively quickly. Since then, eBay has generated over $15 billion in profit in auctions, a figure Amazon struggles to match in its entire retail history despite the scale difference.

All these years later, eBay is generating ~$2.3 billion in operating income and their auction business is under no serious competitive threat (it is a slow growth business however, basically fully saturated). Amazon's huge retail business is only barely able to match the profit of eBay's auction business.

The ultimate value in Amazon of course wasn't retail. For eBay, the value is actually in the ecommerce.

[1] 2001: https://www.zdnet.com/article/amazon-auctions-losing-momentu...

eBay has indeed found an amazing niche. I've been gladly forking what one would consider an outrageous fee for auctioning off one's items, simply because the stuff sells so predictably. I regularly list stuff that one would consider junk and make a buck. Just auctioned off a decade old Asus eee PC for $50 (it still works though). Im so okay giving ebay 5 bucks for this ability! I made a few dollars, a working laptop found some home, and i threw less into the trash!

> I made a few dollars, a working laptop found some home, and i threw less into the trash!

I love this about auctions, it seems to preserve value. Rather than e-waste going for scrap it might go to a collector, upcycler, charity, or specialist recycler.

  Since then, eBay has generated over $15 billion in profit in auctions

Source? eBay has squashed most of its own auction activity in favor of fixed-price items. Participation in auctions has been spiraling downward for years, resulting in underpriced items, resulting in sellers abandoning auctions altogether.

I suspect part of the decline of auctions is that they're risky for low-velocity products.

Example: your item is worth $200 on the fair market, but might only sell one or two a month. There are simply not that many people chasing, say, a Commodore 4040 disc drive or a high-grade 1898 half-crown. You can park it on a Buy it Now listing forever until you get $200. If you try to auction starting at $200, or with a $200 reserve, people will pass because if they're not getting a deal, they'd better at least get immediate gratification rather than waiting 10 days for the auction to close. You can list at $100 or $1 at auction and get interest, but then you're praying people get interested enough to push it back to $200. Buy it now is the safest route for that.

I tend to use eBay these days as "one step above Banggood/AliExpress/etc." They have many of the same items but there will usually be a few sellers offering it dispatched from the US, letting me get it in 3 days instead of 25, for a couple dollars more.

> Lyft's reception after the IPO was quite negative, with the stock falling 30% immediately in the days that followed

Pretty much everyone who invested before the IPO is up on their money. Lyft’s is not a story of a crap company going public. It’s a story of a crap IPO at the wrong price. JPMorgan priced the stock too high, didn’t adequately surveille for bad short selling, and generally numptied up a straightforward process.

Amazon is a decent comparison. Not because of a similar capital investment requirement though (which as you noted in Amazon's case went into things like warehouses). Rather, because the original business isn't where the great value turned out to be.

Amazon has a business that is worth an optimistic $150 billion if it were only traditional retail, without AWS and their relatively new ad business. That's assuming a richer valuation than their peers due to expectations of growth.

The real value to Uber is not going to be in the ride hailing. It's going to be somewhere else, spawned out of the original business, riding on the back of the huge network they've put together in some manner. They'll find something else to monetize with richer margins, or they'll never justify a $100+ billion valuation. With everything they might be able to touch with their scale, I'd bet on them finding enough other business opportunities over time (that said, I also wouldn't be a buyer anywhere near the IPO valuation). The $10b IPO will buy them another likely five or six years of additional cash burn. And if they're smart, in the first year after the IPO, they'll dilute again and go get another $5 billion or so. With their need to find another business, their AWS, they can't have enough capital.

The stock being down doesn't mean that the IPO was quite negative. It just means that the price for the stock went down. If Twitter stocks were down after IPO, would that mean that buying FB stocks is a bad investment?

I agree, too many people overlook market corrections:

https://en.wikipedia.org/wiki/Market_correction

Basically I always suspect every IPO to have a period of rising stock prices, and eventually it will dwindle. That's just the way the market works. You can't expect prices to rise indefinitely. Some corrections come sooner than others. I find it much more healthy for Lyft to not have an extreme correction at least.

Note I'm not invested in Lyft or any related company (Uber), I'm just a humble novice investor.

The stock being down in the months after an IPO generally means the company raised on good terms as they were able to get more than market value for the equity they sold. That’s unrelated to whether it’s fundamentally a good company.

There's still a difference between "stocks are down because the IPO was way overvalued but the company makes a healthy profit" (FB) and "stocks are down because the IPO was a little optimistic for a company that's bleeding money and has a bigger competitor".

> Even with better economics and larger scale the larger question looms, which is how do these businesses turn profitable.

With self driving cars much further away than previously thought, this is the real danger for a company like Uber, who is bleeding money through their standard taxi-like services, quarter after quarter.

But even today, my understanding is that essentially all of Amazon's profits are from AWS.

So do we know for sure that their e-commerce model will ever be profitable?

Has anyone sat down and figured out what a reasonable valuation would be for AWS as a stand alone business? Surely not $900B, but half? A quarter?

Public cloud is about $300b per year right now. Assume amazon gets 66% long term, so $200b (this is unlikely for many reasons...) Cisco gets about $50b of revenue currently, and is worth ~250b. Extrapolating gets $1T. (I certainly don’t believe the above analysis; it’s terrible in multiple ways. For one thing, it ignores profit margins.)