And very few can scale it to spend $0.50 to make $1.00. We aren't talking about a company selling a product for half what they pay. They are investing overwhelming amounts of money into growth.
> If this was their actual business model, they might actually be able to turn a buck.
Yes, just oversaturate the market with drivers and not enough passengers and you'll for sure make tons of money, constantly dealing with overages and shortages since you aren't managing supply in any way.
They're subsidizing the cost of rides. Lyft and Uber are already an extremely expensive transportation option. If the costs start to approach traditional taxi-cabs, then the default hypothesis should be that the market opportunity shrinks down to whatever the size of the taxi market was pre-ridesharing. There's a reason nobody gave a shit about the taxi market pre-ridesharing.
I’m not sure that’s quite true. App-enabled ride hailing is a much better service in many cities than taxis were pre-Uber. That in itself probably increases the size of the market.
But I do expect you end up with pricing similar to taxis.
Fair caveat. I'll just re-iterate that taxis are really fucking expensive. So expensive, IMO, that cost becomes the most significant factor in utilization.
Definitionally, only a small chunk of the population can afford to hire other people to perform services for them. The miracle of industrialization was figuring out how to make physical goods with extreme efficiency. Part of that was by reducing the amount of materials used. But mostly it was about reducing the amount of labor that went into manufacturing an object. Henry Ford's autobiography is a revelation on this topic. But ride-sharing is fundamentally about utilizing 100% of another human being's time to take you from one place to another. That can work in several situations: 1) you're in the top several percent of earners, or 2) you only utilize it for occasional trips. But those situations don't come close to covering the vast majority of transportation that takes place.
Hence everyone pinning ride-sharing's hope on self driving cars. But, uh, then you're just an auto rental company. Last I checked, those were not great businesses. And they certainly don't enjoy network effects that can take hold when you control a two-sided market, which is what's driving the current ride-sharing marketshare death march. So it's this weird thing where the opportunity sucks until self driving cars are a reality, but then the opportunity transforms into a car rental company, where you're basically deploying and maintaining equipment in order to chase single digit margins.
Anyway, I'll end my rant there. As you can see, I'm not a fan of ride-sharing business models.
I don't disagree with a thing you say. I'd just add that super-short-term rentals that are mostly available when you want them aren't going to be super-cheap either. You're taking a minimum wage driver out of the equation. That's all.
You do have to ask expensive relative to what though. I was at an event in SF a few weeks back and ended up staying with friends rather than staying at a hotel. Which saved something like $2K and was pretty easy given Lyft--and still would have been a bargain at 2x. (Local Muni was under construction.)
And very few can scale it to spend $0.50 to make $1.00. We aren't talking about a company selling a product for half what they pay. They are investing overwhelming amounts of money into growth.
> If this was their actual business model, they might actually be able to turn a buck.
Yes, just oversaturate the market with drivers and not enough passengers and you'll for sure make tons of money, constantly dealing with overages and shortages since you aren't managing supply in any way.