For now they delay this reality by subsidizing rides in order to generate business. In some cities like San Francisco, most incentives were removed and among my friends we all stopped using Uber (unless we really have to). It simply became way too expensive.
(Comment that I already issued yesterday on a similar thread)
The line item in Uber's results you want to look at here is "Excess Driver Incentives" which covers:
"Cumulative payments to a Driver could exceed cumulative revenue from a Driver as a result of Driver incentives or when the amount paid to a Driver for a Trip exceeds the fare charged to the consumer."
What's really interesting here is that year over year this number went down substantially ($21m total) for their "Ridesharing" eg their core platform is subsidizing substantially fewer rides today as a percentage of overall revenue than it was a year ago.
But that total "Excess Driver Incentives" line item exploded upwards from $221,000,000 to $544,000,000 for just their uber eats platform!
That means that your rides were somewhat subsidized and getting better, but your hamburger's ride was subsidized to the tune of a half billion dollars :)
And further qualifying this the Uber Eats business unit doubled in revenue but the incentives grew at an even faster rate.
https://investor.uber.com/news-events/news/press-release-det...
Not spending billions a year on R&D certainly makes the financials look nicer. It might not attract as nice of a multiple, but it's not the ride prices that are out of whack at Uber IMO.
Cost of revenue $1.68bn
Operations and support $434mn
Sales and marketing $1.04bn
Research and development $409mn
General and administrative $423mnHow complicated needs to be an IT infrastructure that lets you book a taxi via an app and pay the driver? Is it really something to throw billions at each year? Sometimes I feel these companies are throwing billions in IT simply because they're expected to be disruptive technology companies, and not for real technical reasons.
Essentially they seem to be repeating whatever Google and Facebook are doing: but those are pure technology companies that serve two orders of magnitude more customers and have contributed building the web as we know it. Uber is a taxi company.
Also because when Uber was young, it was not motivated to seek profits or consider expenses, it was just growth at any cost. Once that work culture is established, it can be hard to shake.
They use this data to update their surge pricing by the minute for all these different geofences all over the world... yeah, I think having the self image of a technology company that wanted to attract the best talent definitely created a lot of expensive problems for itself.
You can read here on HN how their large IT staff spends most of its time migrating back and forth between MySQL and Postgres.
Ride sharing is extremely local, so it's not like you need any cleverly scalable tech. Most places will be tracking a few hundred cars at any given moment. Only in very large cities like NYC would you need to spend a little more on big servers.
What Uber presumably does is collect and analyze a lot of real-time data, which isn't strictly necessary to provide the service they're providing.
I mean, is there a chance these three companies develope autonomous vehicles and decide NOT to compete in ride sharing?
Frankly, the R&D spend is the least of their worries. They recently trimmed some fat from their marketing department[1] but the subsidized rides problem continues to be the biggest issue they face financially.
[1]: https://www.nytimes.com/2019/07/29/technology/uber-job-cuts....
Try hailing a cab in Thailand, Indonesia or Malaysia. They will ask your destination and quote you 5-10x meter fare. Use a ride hailing app and you get approximately the meter fare.
Uber is not a tech company. It’s a taxi-company with a fancy app.
There’s literally no reason their operating expenses should be this big.
Also Uber as a company has zero experience of owning and maintaining a fleet of vehicles. They’ve entirely sidestepped that problem. What evidence is there they can do it better than anyone who does do it, like say Hertz?
The vehicles get told to go from point A to point B and does safely and effectively. Uber still plays the role of interacting with the customers, "booking" a car for them, collecting payments, etc.
Autonomous vehicles will never work in the chaos of Delhi or Jakarta's traffic
I sincerely hope they weren't expecting any revenue from those for the next decade or two. Anything else would be delusional.
I personally agree it's a multi-decade (if ever) thing, but if Uber et al. claim they'll have it in 2 years, without facts on the table it boils down to who the investors believe in.
Only until Uber and Lyft run out of cash (a few more quarters based on cash on hand), at which point taxi fares will rise to properly reflect the actual cost of the service.
People will choose a combination of walking, public transit, traditional cab companies, and perhaps an e-scooter and/or bicycle. We lived before Uber and Lyft, we'll live after them. Fun experiment while it lasted.
It is not an understatement to say that I hate traditional taxis. I hate the terrible service. I hate having them refuse fares based on where I'm going. I hate calling to schedule a pickup in advance and the driver just not bothering to show up. I hate being pressured to pay in cash instead of credit card and having them berate and insult me when I insist on card. I hate having to be on alert to see if they're taking a deliberately longer route or running up the meter. I hate the verbal and sexual harassment they have doled out to me and my friends with no consequences, because there is absolutely nothing in their business model that provides them any incentive to treat their customers with courtesy and respect.
I want to see taxis crash and burn, I want to see them fail, I want to see them removed from my experience on this earth. I don't think I'm alone in that, and I will continue to use Uber and Lyft and pay far more than taxis because they provide an exceptionally better service.
Also Uber Pool/Lyft Line are brilliant and taxis will never bother to replicate that kind of efficiency.
- Accusations of racism
- Dangerous driving
- Detours/no idea where they're going
- Being held hostage (took 4 very strong demands to be let out)
- Given a lecture because the driver couldn't find the address and told if you don't like the service to get out.
The grass isn't always greener
I have a bad experience maybe 10% of the time I take a rideshare, with taxis it's more like 75%. That does mean bad experiences will continue to happen either way, but I still favour the former and will pay more for it. Plus ridesharing still has the benefit of pooling, knowing costs up front, paying through cards without harassment, having the company keep a detailed record of your pickup/dropoff and route so reports of issues can be substantiated, quickly rescheduling if a driver fails to show (plus a map to see when a driver is not on route), etc. I think it's a clear win - at worst they share some of the problems taxis have, but taxis share none of the benefits that rideshares have.
We take taxis quite seriously in England. They are granted licences from the local government (the council). They are overseen by Licensing Officers.
I've only reported a taxi driver once (I can't recall exactly what for, but it wasn't anything too egregious), but it seemed like a swift and thorough investigation. They quicky summoned the driver to their office to explain himself and then gave me a report on the matter.
Customer input seemed to be taken quite seriously.
However, it seems the licensing framework does seem centred around drivers' criminal convictions, so the police would have to be involved in serious matters.
The cat is out of the bag. Nobody is going back to taxis.
Baloney. The market size of people willing to pay taxi rates for transportation is much smaller that the market sizes currently implied by Uber and Lyft's valuation. Before Uber and Lyft, most people I know would only take taxis very occasionally, for special occasions or emergencies. Once Uber and Lyft started offering such good rates they would use ride sharing much more often.
Consider all the places where you needed a taxi but wouldnt know how to hail one -- Uber/Lyft expanded the market here.
I was recently in Taiwan and needed a ride, but could not describe the address to a driver who did not speak English. Uber to the rescue -- again the market got expanded.
It isnt all about cost.
Not having to deal with (local) cash or a constantly “broken” credit card machine are also pluses.
Then you may require the actual receipt for your expense. Sometimes the Corp wants more than a credit card invoice for their accounting.
The only place I've seen acceptance be a problem is San Francisco (although I've certainly heard it's a problem in other American cities). I can't speak to other cities but in San Francisco the cabbies are required to pay pretty hefty fees for credit card usage. But Uber and Lyft take a big chunk of the pie and leave no cash option so there's that.
I've been to a couple cities where credit cards were not accepted as a general rule (cabbies didn't even have the equipment). But in cities where I've used a card I've asked and generally been told they'd never do anything that ridiculous. Of course I typically have a strong preference for public transit so cab rides are the exception rather than the rule for me.
As for accounting, merchants already get a category assigned to them by their credit card processor. Generally there's enough specificity that something like a few cab rides shouldn't need much more clarification (although receipts may be required if you cross a threshold or exhibit some suspicious pattern).
Now Uber and Lyft has made it harder to embezzle from my job :(
The only time I've been in a situation where I needed to take a taxi but didn't speak a common language was in Paris. I simply showed the driver the address as written and he got us there with no problems whatsoever. Granted Paris is pretty easy that way as rides (both taxi and Uber) from the airport are fixed price.
Alternatively I bet just pulling up the location on a mapping app would be enough. Of course in most countries I've been to, the public transit infrastructure was good enough that I never wanted to bother with a taxi of any sort.
Kinda sucks to see as I think the idea of the service is good.
Not sure if I agree. The convenience of the Uber/Lyft app's is still superior to a taxi service in most cases. The only time I'll take a cab is if it happens to be right in front of me and I'm in a hurry.
Virtually all of the cab companies still around now have mobile apps and many of them have all the features that Uber/Lyft have (card payment via app, car-tracking, etc).
It's still a win for the consumer, even if you're using old school cab companies.
However, I also have to acknowledge that I think I'm an outlier, because I have many friends (most of whom could easily afford it) who complain about prices every time this topic comes up. I think that as a society we'd be better off if people could truly internalize the truth of "you get what you pay for," and stop buying solely based on price, but that's not the world we live in.
(1) BMW and Daimler will invest $1B in their new joint venture (https://www.your-now.com/) that brings their mobility services under one roof.
As for a ~30 second call resulting in a success story, that does sound pretty good indeed.
Let me tell you what my decades of taxi ordering experience in Estonia looks like. I call a taxi company [1], wait about a minute, nobody even picks up the phone. I try another company. I finally get someone to pick up, I tell them where I am, and they proceed to tell me that they have no taxis available. I have to call a new company. Eventually when the 5th company promises to send a taxi, there's a greater than 10% chance that they never show up. Sometimes I call the taxi company and they say the driver went on a break. Other times they say the driver picked up someone else on the way to my location. Sometimes the company has no clue whatsoever why the taxi didn't arrive.
With this old system, whenever I was in a rush, the most time-optimal plan was to run to the closest taxi stop and physically find a taxi.
The arrival of Uber & friends has mostly removed this nonsense. It's all so much more reliable. Although not 100%, sometimes when I'm ordering from a suburb, the driver will call me and ask if I'm willing to pay extra in cash for them to come out. If I say no, they cancel the order.
--
[1] All these calls are to reasonably priced taxi companies, similar to Uber pricing. If I were willing to pay 3x price, there are plenty of premium taxi companies who will come and roll out the red carpet in exchange for your wallet.
I don't mind cash but I rarely have it on me.
Even if rates went up to what cabs were (still cheaper in SF in my experience), I wouldn't switch back to cabs. I'd still user Uber/Lyft for the convenience and higher quality product.
Are those stories very uncommon, or does the cab market in SF etc. manage to be even less quality?
Round here, a cab is at worst an 8 year old Toyota Prius, at best a new Mercedes or a Tesla, and the cab companies all have apps that let you book rides and see where the car picking you up is right now.
The blitzscaling strategy might in fact work but it would effectively be an end to democracy. We would basically have a marketplace of ALL monopolies.
It just doesn't scale.
ie, core business prints money.
I will say though, the huge benefit now is their rewards have a "price protection" [1] for some tiers that allow for a cap on that ride price, so I think it can no longer go above $10.99 or something. That has helped a ton from it getting higher. But that's only available for some of the higher tiers in their rewards program, I believe.
[1] https://help.uber.com/riders/article/price-protection-on-a-r...
Also, as I mentioned in another comment, it's just rides to work in the morning. I take public transportation home after work.
I keep track of all my numbers. For the 86 months I had my last car, I paid an average of $236/mo.
This includes purchase price (subtracting out the amount I sold it for). Insurance. Taxes/fees. Gas. Auto insurance. Repairs and maintenance. Silly things like car washes.
Of course, I didn't buy a brand new car, or even a recent car. And bought a reliable brand so repairs were low. My insurance was not just liability. All apartments I lived in had parking, as did my work. The types of apartments that have expensive parking are the type that have high rents anyway, so I save in both by not living there.
Excluded is the gas for road trips, but I think that's fair as I doubt you used Lyft/Uber for road trips.
So for less than what you're paying a month, I got to have a car, and got to drive anywhere I wanted to - not just work.
It's quite affordable starting at ~$350/mo, so I am curious to see how people will accept it.
I'm not sure whether you're referring to driving under the influence or merely about parking. If the latter: In most cities in the US, these are mostly non-issues. So I disagree with your use of "most". Although I've used Lyft in the last few years for various reasons, only once did I use it because I was worried about not finding parking. For other occasions, I used public transit. But seriously - probably less than once a year do I need to find alternate transportation because I'm worried about parking.
(BTW, I forgot to add parking to the above estimate. I spent on average $6.03 a month on it).
... for someone living in a bubble completely disconnected from the planet Earth, where they think that a $400/mo parking spot is 'normal'.
Sure, there's a few million people like you out there. Not enough to make Uber break even, though.
It's great that you get free parking, but have you considered that you're living in a bubble too? 6 out of 7 people globally don't even own cars!
But I'm also a wealthy techie who happens to live within spitting distance of a booming downtown. 90% of the people living in my metro area (Seattle) do not pay $150/month for parking (And I'd wager that 99.9% do not pay $400/month for parking).
... And most of those people have commutes of >4 miles. The problem with taxis is that you pay by the mile. You'd be an idiot to drive yourself to work, if you live 2 miles from work, and have to pay through the nose for parking. You'd be an idiot not to drive yourself to work, if you live 15 miles from work, your bus system sucks, and your parking is cheap or free. [1]
Doing 15 miles/day in a taxi costs nearly 3x that of doing 5 miles/day in a taxi. Doing 15 miles/day in a car is pocket change, compared to doing 5 miles/day in a car (Or 0 miles/day). Most of your costs with a car are fixed. Most of your costs with a taxi are distance-based.
[1] And if we're going to get into a discussion about how the world should value the cost of parking spaces, I will happily point out that what we should have is good bus services, not private chauffeurs.
A lot, but typically not most - I drive about 12k km per year (16 km commute 2-3 days per week) and over the past six years my fixed costs have been around $7k. My variable costs have averaged $0.26/km for about $16k total. (All CAD)
You can see my numbers here for my Civic.
https://news.ycombinator.com/item?id=20650989
Mine was 8 years old when I bought it, but with low miles (about 60K). So I paid a bit of a premium - almost as much as the 2014 Civic on that page. I kept it till it was at 144K miles. Effective cost to own was under $300/mo.
Comparing the 2014 numbers with mine:
Insurance is almost the same.
Repairs + Maintenance was less than a third of their estimate. I didn't skimp at all on this, BTW. I'd be worried if a 5 year old Civic has that many repairs!
No financing - paid in cash. Even the 2014 one is a little over $10K. You can just save and pay cash.
Their estimate requires a lot more in fuel costs. Mine is about two thirds of their estimate. This can be highly variable (e.g. if you have a long commute).
For example, let's say you bought your car for 10k, then sold it 7.1 years later for 9k. You have 1k of depreciation. You also have $6,300 at 7%(a typical target rate) in lost income from not keeping that money in a productive asset for those years.
In my case it came down to $242/mo vs anywhere from $360 to $480/mo with Uber. It's not clear to me that had I invested the purchase price the 7% return would be enough to make up the difference of $120-240/mo. Certainly not in the first year. I'd have to do the math to see when the breakeven point would be where that initial investment is yielding more than the extra cost of using Uber.
There's also the fact that 7% is the market's return, which is over a 30 year span. On a 10 year span, the rate of return is highly volatile, and could even be negative (on the flip side, could be a lot more than 7%).
I just ran the numbers, BTW. With my purchase price, invested at 7%, I break even after 7 years (just about the time I owned it) - assuming Uber is the upper bound of $480/mo. At the $360/mo cost I'd break even after 3-4 years.
I didn't take into account the sale price, so that would make the breakeven point a little farther.
Getting out of fidi at 5pm can sometimes be slow w/ pool (20+ min wait), especially if the driver gets stuck in traffic e.g. on bush leading to market because of some rando accident on 101. Taking an uber at any other time or location has mostly been fine for me (5 min wait times tops), and it's not that uncommon to have 5 min wait times even out of fidi at 5pm.
Then it was changed to $5. Then it was changed to $6, or instead you could UberPool for $2. Then they added a 2 minute waiting period for an UberPool. They then also changed the flat fare altogether and instead your ride pass came with something like 50% off all rides, with a maximum $6 discount.
It's obvious what would happen. At least my friends and I got it while the getting was good.
By charging $4.00 more than the cost, you’re freeing yourself up to do other things during that time. Is your time really not worth $4.00?
I took a Lyft a month ago during peak times and it was $40, so it's still significantly cheaper for me.
This is particularly important for industries with large network effects like ridesharing.
What's been the alternative? Regular taxis? Aren't they just as expensive?
To answer your question: I bike, use my car or use electrical scooters. I still use Uber but when I really have to (maybe once every two weeks)
If I go somewhere where it's a pain to park occasionally I will use Uber instead.
Similarly, if I go out I could make a choice of being very conscientious about how much I drink (and thus drive) or take an uber and not worry about being too buzzed.
My issue was always summoning the taxi. I was generally operating in secondary markets like Las Vegas off-strip, San Diego, or Pittsburgh. You couldn't schedule your trip to the airport because you never knew when the stupid taxi would show up.
While I hate many things about Uber/Lyft/ridesharing, they changed the customer service expectation of the whole field. Even if the prices go back to taxi levels, that's a massive improvement.
I think you are confusing "monopoly" and "barrier to entry". "Monopoly" would imply some state where every person using your system makes it harder on your competitors. If, however, your system needs to reach a minimum level to be useful, but doesn't have a feedback loop above that--you have a "barrier to entry"-a fixed cost that must be paid on entry to the space, but doesn't automatically get bigger when your competitor adds customers.
AirBnB doesn't really have a monopoly but they do have a barrier to entry--they perpetuate mostly by continuing to turn a blind eye to the violations of law. If someone stood up a site and used VC money to reimburse listers in New York and San Francisco, AirBnB would lose most of their revenue and you'd have an Uber/Lyft duality. The barrier to entry is that they are already in the space and there doesn't seem to be enough money floating in the space once laws start getting actually enforced for VC's to be willing to throw money into the ring.
Uber and Lyft also have a barrier to entry--a network of drivers. I can pop open the Uber application and know that there is probably a driver within 5-10 minutes of me. Nobody other than Uber or Lyft has that coverage so I'm not going to use another service. Could someone else build that network? Yes, they could--that's a fixed cost that must be surmounted, but once on the other side of that cost adding more drivers or riders doesn't really have an effect that makes it harder on your competitors.
You will note that I picked a specific use case: going to the airport.
For anyone who flies (and lots of people fly for one off events--so you aren't automatically "well-off" just because you have a plane ticket), transportation to the airport is particularly painful because you have a fixed time deadline.
Most of the options really suck--ridesharing is actually the most cost effective of the bunch.
If you take your own car, you have expensive parking and get the joy of the shuttle from long-term parking (often longer than a ridesharing ride). If you order a shuttle, it will be slow and have multiple people and tends not to be well time controlled. If you call a taxi, it may not show up as you don't have tracking or the ability to penalize them. Limos work well but are ferociously expensive if you can't split the cost.
There's also (gasp) public transit (and bike share).
I took my first Uber in 2011. It was amazing. Expensive, to be sure, but the service was amazing. Black Sedan, extremely professional, shows up wherever you want, drops you off wherever you want, never really had to look at GPS. Just amazing.
It was so good I figured I'd never need car again. But it was expensive, so I used it sparingly. I'd take public transit or walk most of the time, but when I needed to get somewhere that didn't go or I needed to get somewhere fast, Uber was there.
Now it's a joke. A total joke. The service is shit. The base tier has people picking you up in minivans that rattle like they are about to fall apart and the people can barely drive… if they pick you up at all. There's like a 50/50 chance it will take 15 minutes for a pickup because the driver will go in the completely wrong direction and then cancel the ride. The "premium" service tiers come with fancier cars, but most driver still have no idea where they are going.
It was good when it was small. It was good when they only had professional drivers with carrier passenger permits and commercial insurance. It made sense. It was good for everyone. It was good when they actually had "drivers", not random people struggling to make minimum wage.
I also try to avoid it.
There are also still plenty of black car services around if you are concerned about loss of quality in more affordable offerings (where did you think the tradeoff was going to be for a more affordable solution? Purely scale?)
I didn't think there was going to be a tradeoff. There was never supposed to be. The idea that random people would drive others around was never part of Uber's business plan, that's why it was called "Uber" to begin with. It was never part of anyone's business plan—it was illegal.
Lyft came along and just started hiring random people with no passenger carrier permit and no insurance, and then Uber had to compete with that nonsense and that nonsense somehow just became legal because "it's an app" was a valid defense and the CPUC went along with it because it became too big to ignore or outright ban.
> It's just a random guy with a more expensive car.
The big one is they are required to be commercially registered and commercially insured. At least here in Chicago it's usually the private chauffeur's with a livery license plate in sedan/limo. I'm guessing they do Uber black on the side.
Anyway, yes they are "just random guys" just like any other Uber driver but they've had to jump through extra hoops which affects who does it. I'm not saying that causes a better selection but there is specific difference between the two, other than just requiring a better car.