
Confession: I Don’t Think Uber Is Actually a Great Business (Yet) - julianozen
https://finnscave.com/2016/04/11/dont-think-uber-actually-great-business/
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koenigdavidmj
Uber's value is this:

1\. Same interface in any city. I don't need to figure out what the taxi phone
number is (or what they are in case of multiple companies).

2\. I can get a car somewhere other than downtown.

3\. I can pay with credit, without fear that a driver will (best case) lie
that the credit card machine is not working, until I say I don't have cash, or
(worst case) kidnap me and take me to an ATM.

4\. No silly medallion limits, so I never need to wait for long, even at
closing time.

They really don't need to do the Ponzi scheme thing, hemorrhaging money and
leaving the VC with the bill. Plenty of people will gladly pay more than a cab
for the above benefits. In that sense, taxis are not really a competitor.

~~~
a13n
These are consumer benefits, what does this have to do with Uber being a great
business?

~~~
koenigdavidmj
Right now, Uber's business model is throw so much VC money at everything that
everybody else goes out of business, and hope the taxis die before you run out
of VC money.

~~~
emilsedgh
So Uber's short/mid term plan is to put all taxis out of business by lowering
prices using VC money and their long term plan is to use autopilot cars to
leave all drivers jobless.

And the other day there was an engineer from Uber commenting how ethical the
company was.

I'm sure their engineering team is very ethical and responsible. But their
business model and plan is actually very questionable. It's like they are
hiding the highly questionable business ethics behind the good engineering
ethics.

Or is there a point I'm missing?

~~~
ithinkinstereo
Don't forget the whole dodging regulations thing. This aspect of the "sharing"
economy I find the most disgusting.

Ethics goes out of the window in the pursuit of profit.

~~~
CamperBob2
BS. The "ethics" went out the window when the taxi cartels captured the
regulators in the first place.

Don't want people to play a crooked game? Don't set one up.

~~~
ithinkinstereo
That's a shortsighted view. Similar to saying that the Airplane cartel
captured the regulators and are preventing indie airlines from starting up...

Regulations exist for many reasons, not all are designed to act as a barrier
for new entrants. Consumer safety springs to mind...

~~~
CamperBob2
Have to agree to disagree on this one. Comparing taxi medallions to the FAR is
enough of a stretch that I don't see a further basis for discussion.

~~~
ithinkinstereo
Yes the comparison is ridiculous, but so is your complete dismissal of taxi
regulations. If you can't see that, then I agree that there is no further
basis for discussion.

Plus acknowledging that regulations do provide some benefit is reasonable.
Regulations ensure that: * Taxis are regularly maintained * Pricing is
standardized, transparent, with rules to prevent gouging during "surge"
periods * Background checks for drivers * Drivers are qualified (have to pass
various tests to get licensed)

On a more philosophical level, I think taxis serve a public utility function,
similar to busses and subways. In this sense, some government oversight makes
sense.

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edblarney
Uber definitely has some advantages vis-a-vis competitors, because there is a
brand and networking effect at play.

Everyone knows about Uber, nobody knows anything about that 'local startup'.

The real competitor is obviously regular cabs. There is always a cab when I
need one in Montreal, I don't care about Uber really.

The bit about 'regional profitiability' is valid. I'm suspicious that Uber is
running profitably in the US. That said, I'll bet the absolutely could if they
wanted to ... but they spend a lot on aggressive tactics/marketing.

If they had to 'stop growth' and 'just be a US' company right now - they'd
have to lay off, downround etc.. Sure - they'd have screwed over later
investors, but that's the point no?

The loser in all of this is the later stage dumb money. Mostly everyone else
wins.

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Animats
The real question is whether Uber can ever make money without subsidizing
rides with investor capital. At some point, they have to raise prices. This
make them vulnerable to competition.

The good news is that if Uber goes under, it's easy to replace them. Uber and
Lyft pulled out of Austin TX last May over required fingerprinting of drivers.
Ten competitors sprang up to replace Uber and Lyft. They're doing fine.[1]

[1] [http://www.curbed.com/2016/12/7/13828514/uber-lyft-ride-
aust...](http://www.curbed.com/2016/12/7/13828514/uber-lyft-ride-austin-
rideshare-get-me)

~~~
HillRat
Curbed is ... not the best experience I've had in ride-hailing. To be honest,
it's easier and more convenient for me to have the office call a cab for those
relatively few times when I'm in Austin. They may have ironed out some of the
quirks of their platform since then (scheduled cabs being called out
immediately, an attempt to get a ride to the airport being denied because the
app decided I was trying to be dropped off on the tarmac itself), but there's
no killer reason yet for me to try it out again.

Having said that, it's definitely true that there are basically no meaningful
barriers to entry beyond mindshare (after all, every Uber driver is also
running Lyft, and likewise for the drivers -- and Lyft's better driver rates
are also why I have to use Lyft when I leave for the airport at 3 AM).

Things like UberEATS may provide some stickiness, but I'm far from sold that
their basic economics are going to work in the long run, let alone keep them
in the market pole position.

~~~
sulam
I'm pretty sure UberEATS must be a horrible customer experience based on the
random shit I see happening at registers in places that I get food from. Stuff
like the driver having no idea what the customer has ordered and just taking
any old order the people behind the cash register are willing to give them.
Since both ends of this transaction don't qualify as the sharpest tools in the
shed, it's basically the blind leading the blind.

I get that it makes sense from Uber's point of view -- increasing driver
utilization and smoothing out the supply side of the relationship is probably
great for their unit economics. But they actually have to execute it well if
they expect people like me to use it.

~~~
smm2000
I use UberEATS multiple times a week and every time experience is very good.
They deliver fast, no tipping and so far all orders were correct.

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beambot
Reminds me of Facebook six years back: "There's no way they're worth $33B"
[1]. Now they're worth 10X, publicly traded, and printing money. Respectfully,
even professional prognosticators (ie. VCs) get this shit wrong 9 times out of
10... so lamenting all the ways it could "fail to be a great business" isn't
really that insightful (in the probabilistic priors sense).

TL;DR: You could be right (and frequently will be), and you could be
spectacularly wrong. But we're just Monday-quarterbacking while they're trying
to make the future bad-ass with magical "autonomous" cars (whether human
drivers or computerized). That's cool in my book; I wish them the best of
luck!

[1] [https://signalvnoise.com/posts/2585-facebook-is-not-
worth-33...](https://signalvnoise.com/posts/2585-facebook-is-not-
worth-33000000000)

~~~
TylerE
How long is it going to last though? I expect FB to face some very hard
questions about it's ad business (click farming, bots, etc) in the next 12-24
months.

~~~
a13n
Really? I don't.

Companies aren't blindly paying FB billions of dollars for ads without
verifying they actually deliver a return... Clearly it's working, that's the
reason so many companies pay for them.

Sure, they could probably get better at managing "click farming, bots, etc",
but despite these things, advertising on FB has proven incredibly valuable and
there's no clear indicator that'll change soon. If anything it'll just grow
more valuable across a larger user base, hence their lofty P/E ratio (implying
growth).

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jasonlingx
Uber is overvalued.

It's not rocket science, easily copied, little customer loyalty and consumers
will switch quickly to whoever offers the better and cheaper service.

The end game here is autonomous vehicles and I'm not sure they are even in the
game.

~~~
ndirish1842
Uber is already running autonomous car tests with customers[1]. They have an
entire division devoted to self driving technology[2].

[1]
[https://techcrunch.com/2016/09/14/1386711/](https://techcrunch.com/2016/09/14/1386711/)
[2] [https://www.uber.com/info/atc/](https://www.uber.com/info/atc/)

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makomk
The BBC ran an interesting article the other day asking if Uber were getting
too big to fail, pointing to the way state-subsidised Uber is replacing public
transport in some areas and worrying about what their lack of profitability
means for this:
[http://www.bbc.co.uk/news/technology-38252405](http://www.bbc.co.uk/news/technology-38252405)

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nhorob67
How could Uber have negative gross margin? I have a hard time believing that.

I guess it depends on what they include in COGS.

~~~
aarongolliver
They pay drivers more than they charge users. It's pretty simple.

Over 75% of my Uber rides are heavily subsidized in some way:

\- pools where no one else is picked up.

\- 25% off coupon for 10 rides (I almost always have one of these)

\- 50% off coupon for 5 rides (I get like once a month, and have one
currently)

