
Why Uber Might Well Be Worth $18 Billion - JumpCrisscross
http://dealbook.nytimes.com/2014/06/09/how-uber-pulls-in-billions-all-via-iphone/?_php=true&_type=blogs&emc=edit_dlbkam_20140610&nl=business&nlid=65508833&_r=0
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sshconnection
My uber bill for 2014 is almost $2000 so far, and it's only June. I know that
SF is not the rest of the country, but it has absolutely changed the way I get
around.

That said, think about the possibilities that could come if one of their major
backers (Google) continues to push forward with self driving vehicles. They
will have excellent real time traffic data reported back through each vehicle
on Waze, and a super efficient dispatch system. They could run 24/7 with
electric driverless vehicles with crazy low operating costs. It could turn the
entire industry on its head.

The economics would shift so drastically it wouldn't just be Uber vs taxies,
it would be Uber vs does it make sense at all to even own your own vehicle.
The automated vehicles could have utilization figures that are unheard of
today. Why would you buy your own vehicle when you could have an automated
Uber pick you up in 3 minutes for dirt cheap?

I think that time will come, probably sooner than we realize. And when it
does, Uber will be positioned as the default dispatch gateway.

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nyrulez
Am I the only one who thinks Uber prices are ridiculous compared to the yellow
taxi ? I am fairly well to do, but am shocked by how no one flinches at the
fare structure of Uber compared to yellow cab (which might be a tad bit more
inconvenient in NYC but not that much to justify paying 2x-3x the price!). I
feel I am really missing something here or maybe just underestimate the
ability of people to spend vs. save.

If I spent $2000 on cab fare so far, I would probably freak out a bit.

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brackin
Uber is 30% less than taxi's in SF. I think in NY it is also cheaper than
taxi's. Your data might be a year behind, when it used to be more expensive.

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untog
Uber doesn't make it easy to know. Over the weekend I took an NYC taxi one way
in my journey, it cost $26. I tried to get a fare estimate for an UberX for
the way back and it said "$23 - $37". That's a huge window - and they're not
telling me what affects it.

And we haven't even started on surge pricing. Uber sells itself as cheaper
than a taxi, but in many ways (in NYC) it is not.

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mcherm
Thought experiment:

Say I spent 1 billion dollars paying someone to create a new Uber app and the
necessary infrastructure. I'm quite confident that for 1 BILLION DOLLARS that
could be recreated.

Then say I spent 16 billion dollars on advertising. With world advertising
budget of around 500 billion per year, that means that 3 out of every hundred
TV ads would be for my new company. 3 out of every hundred online banners. 3
out of every hundred posters on the side of a bus. And that's world-wide (if I
focused just on the US with a market around $150B it would be nearly 10% of
all ads everywhere).

It would be the most talked-about company anywhere. I think this company would
blow Uber away. And it is still a BILLION dollars cheaper.

That is the trouble with these absurdly high valuations -- to compare fairly
you have to consider what ELSE could be done with that money, and multiple
billions of dollars could do an awful lot.

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tomp
Better yet, reduce the margin (Uber has a 20% margin, so e.g. offer 10%),
funding the company with the other $16B until it becomes profitable. I assume
it would take you a lot less than $16B.

That's what I think is missing with Uber's business plan: network effect.
There is literally nothing preventing another company entering the market and
undercutting Uber's prices, benefiting both customer and taxi drivers. I.e.
there's no way Uber's margins can stay so high.

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opendais
Getting a critical mass of drivers _is_ Uber's network effect.

However, when we are talking about $1 billion in funding that can be ripped
apart pretty easily.

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illumen
Contacting those drivers is as easy as using Uber to book a cab. That is how
some countries are fining them, and their drivers for breaking laws.

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brucehart
I think Uber's value comes from the fact that they will eventually expand
beyond taxi service. They could leverage their network of UberX drivers to
disrupt courier and delivery services. Imagine being able to order food from a
grocery or restaurant web site that is tied into Uber's system. Uber would
alert a nearby driver to stop and pick up your food and deliver it to your
house. They could even smartly aggregate the driving, picking up something for
you at one restaurant and picking up something from another nearby restaurant
for your neighbor.

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Touche
I guess I don't understand why if those things were possible why UPS wouldn't
already be doing it? What is Uber's secret sauce that would make them be able
to solve that problem?

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drewinglis
UPS is a shipping company first and a technology company second. Uber is a
technology company first and a (taxi|courier|etc) company second. It's a
difference in mentality.

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Touche
What specifically is the different mentality that gives Uber an advantage? Is
this a technology problem, and if so how?

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malandrew
What people fail to take into account is the self-driving car future where
Uber takes 100% of the profits (since there is no driver). It will start
taking a chunk of the people driving themselves market as well when Uber
becomes more convenient and cheaper (removing the human allows them to be more
competitive with every day driving).

To get to this point however does require it to start operating its own fleet
(unless small regional companies form to manage the fleet and just loan out
their self driving cars to uber). Either way Uber is in a good position. If it
manages its own fleet, it can better negotiate the price of each car than any
individual can. It will also have more data than anyone else on how those
vehicles operate and can then buy it's own insurance for its entire fleet,
cutting costs there. If the alternative occurs, then Uber will own the buy
side of the market and have most of the leverage relative to local companies
that manage their own fleet.

There are a lot of ways things can pan out, but being the most tech focused of
these companies with the best engineers of any of these types of companies,
puts it in the best position to own the self-driving car future. The only
company better positioned is probably google.

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CPLX
This doesn't entirely make sense to me. One of the absolutely beautiful things
about the more successful "sharing economy" companies is the degree to which
they've been able to provide a highly capital intensive product/service (room
accommodations, auto transportation) without having the associated capital
costs and risks.

The cost of capital acquisition and debt service is a massive barrier to rapid
growth and thus multiples/valuation. If a main attribute of Uber is that they
run a taxi fleet and its workforce while offloading the expense of owning and
maintaining one -- much like Airbnb is a lodging chain that doesn't have to
bankroll any real estate -- then that's kind of the point of the model.

The idea that changing that fundamental business advantage is the "real" goal
seems unpersuasive to me. People who drive cars are likely to be more
efficient economically than a self-driving computer for decades at least, if
not longer.

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Spooky23
I have lots of issues with Uber, but as they expand, there's tons of
potential. Taxis in many places are lowbrow affairs with business dominated by
drunks and Medicaid cab rides.

To me, the prospect of sitting in half-dried vomit in the back of a 10 year
old former police cruiser isn't very appealing. Uber makes it approachable for
people like me -- I'd rather have a pleasant ride to the airport or train
station than deal with parking or inconveniencing my wife for rides.

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beartime
in 5 years that will seem like peanuts

