I see no reason to think that those two companies couldn't be quite profitable in their core businesses in their established cities. (I think they already are.)
That said, their valuations in the market are comically/insanely/unjustifiably high, but that's quite different from saying they "add no value".
They are providing value and I'm a casual user myself. However the consumer price right now is arguably unsustainable against the stated quote above. To survive both of them are going to have to raise prices
Anyway, drivers make more than enough. After glancing at Uber’s books, it looks like they spent literally a billion dollars on advertising. They also do a a lot of research. Uber could easily run its ride sharing service with room for profit if it wanted to cut back in other areas.
Ride sharing is totally economically viable as a business and it is better than traditional dispatch in almost every way. Companies like Uber aren’t going anywhere. To say that Uber is worthless is flat out wrong. Overvalued or levered or invested-in, yes maybe. But ride sharing is solid. The only thing that could change it is self driving cars.
I don't have any data but this wouldn't surprise me in the least.
You're taking a bunch of people who really aren't that interested in running a business, just in making ends meet. It's not surprising that they won't do the kind of critical analysis that running a profitable business entails.
My first ever Uber ride was in an almost brand new BMW. Really nice car, but I have no idea how you can make money driving Uber with a vehicle that expensive. As a side gig for extra cash a couple hours a day in a high-density area? I can see that. But doing it full time with all the additional wear and tear on the vehicle? No way.
Judging from the comments I see on /r/freelance, I believe many freelancers/gig workers would prefer to be employees because they really don't enjoy doing the work that they are.
Look, you don’t need a paper or a PhD to understand this:
When I was driving, I got paid roughly 60c per mile and then got more for time, a one time fee and tips. But baseline 60c per mile. It costs 20c to 25c per mile to drive a Toyota Corolla. Yes, that includes all expenses. It’s the cost of insurance and gas and the cost of buying a new car when the old one is at end of life. Nobody is losing money doing this. It isn’t rocket science.
Which very likely is the vast majority of drivers. Subtract those and we're back to ordinary cab, pizza delivery levels of service. Probably less.
To know whether they could fall back to "just" competing for riders and only operate their core business is something that is not determinable from their released financials. How much engineering is true R&D (self-driving and the like) vs what would be required to run their core ride hailing platform? How much of their marketing spend is in established cities ("Coca Cola" type ad spend) and how much is to launch new cities or incentives to balance the development of the 2-sided market in new cities ("priming the pump" type of spend)?
I think Uber is a constellation of [small] profit-making businesses (most cities that have reached scale) and [large] loss-making businesses (select geographies and R&D efforts).
Goes off to see just how prevalent real ridesharing is on the platforms
Usually you ride with at least one other person, and it’s not unusual to have 3-4 passengers if it’s a third row suv.
I enjoy shitting on Uber also, but there is a grain of genuine innovation in the mountain of crap.
Expanding further, How about a taxi-app you and I could sit down and hack out? How much value-add is there in an Uber or Lyft vs what we could do?
That may be why there aren't an increasing number of Uber and Lyft drivers here, but the taxi companies are expanding.
I have never seen a non-app taxi service do this, and it's a real genuine technology enabled value add. Is it 50 billion bucks worth? Probably not. But it isn't 0 either.
> I have never seen a non-app taxi service do this
What do you mean by a non-app taxi service? All of the taxi companies here have apps that work pretty much the same as Uber and Lyft's.
That's true, and this isn't an argument for the bad things they do, but they did force the taxi industry forward a few decades. Prior to Uber/Lyft, taxis in most areas were outright hostile. I had called to schedule a taxi ride the day before and had them no-show. It was so common for taxis to feign their credit card machine didn't work that it was outlawed (but still done)--they preferred cash to avoid reporting and fees. Hailing taxis in most cities isn't permitted. Minimum distance requirements have caused me problems (been refused or been treated hostilely even when offered to overpay or overtip). Those things are never an issue anymore.
In addition, they've also made it much easier to track down lost items left behind or to dispute incorrect fares or taking longer routes.
The incentives in place with taxis alone didn't address these things.
Those things, in addition to having consistency when traveling between cities and countries, sounds like a reason to have stickiness to one service. McDonalds is popular even though it's not a great meal and people could eat anywhere.
McDonald's is popular, at least this is what I was told in business courses, because people like familiarity and they know when they get a meal at a McDonald's it's going to be mostly the same everywhere. Uber doesn't really enjoy that. They do enjoy that it is a unified app and service no matter where you are, they have that going for them for a certainty, but they do not have control over their drivers to the level at which McDonald's has control over their franchisees. That's down to the fact their drivers are independent contractors, although it likely couldn't work any other way. It might be moot since the service is the same, getting from point A to B, so the part people want stays the same.
I would almost be inclined to see it as Uber being more valuable for their management of driver reputations than the software they provide, really. They set a standard, and hold drivers somewhat accountable to that standard, which is something that a more 'open' solution would make very difficult or impossible to do.
Like McDonalds, at least for travelers (or, well, me) having the app already installed and setup with a form of payment is huge. I've visited cities, like Austin, when they didn't have Lift/Uber and figuring out their "local service" was rough. You've landed at an airport and likely don't have great service. To seek and download and register a new app is a big burden. It's also why using a credit card internationally is much less hassle than getting local currency.
"Apps" and "services" are ubiquitous, but incumbents are pretty terrible at them. Large organizations like Apple, Playstation, or Obamacare have had rocky launches of services--they had more incentives to polish things later. Often those services would go down completely Christmas morning. Many apps like my local bank or library, have terrible apps. That's how I imagine legacy or regional taxis responding to Uber.
It's been over a decade and a lot of those features weren't that novel at the time. I've heard of a few cities internally having decent apps, but it hasn't been that wide spread. Maybe that will change?
Uber is a taxi dispatcher and provides a rating system that provides a vastly improved product to the end user. Seriously Uber is so much better than taxis. You can hail it from your phone, track its arrival in real time, know the fare before you book it. It arrives in 10-20% of the time of a dispatched taxi, costs less, and has much better drivers on average both in terms of skill/not being aggressive, not being assholes, English, and cleanliness.
Uber freight is frankly just a good idea. They already have a huge fleet of drivers and a lot of the tech backend in place to start doing last mile delivery. Lots of value add in that, and in combining last mile delivery with concurrent user transportation.
Uber also has a lot more international exposure than Lyft.
The only issue I have with them as an investor is in Uber eats. It’s costing too much money to subsidize, has too much competition, and food delivery just isn’t something I think can work in the US.
But regardless, when you look at Uber’s core product, I think you would have to have either forgotten about taxis or never have taken Ubers/taxis to begin with to think it’s not a vastly better product.
Yes, and yes, but (at least where I live), the Uber/Lyft "experience" is not superior to the taxis at all.
Where I live, the taxi companies have their own apps that you can use if you prefer (complete with being able to see where the cab is in realtime), and when you call, you'll usually get a cab within 15 minutes.
Aside from price, there literally isn't anything that Uber or Lyft does that the cab companies don't do at least equally well.
I used (15y+ ago) to go to work and back by taxi every day for years. Recently (last 2-3y) I got taxi on occasionally; also living in a different area. No real difference with app based ones except for the payment methods. That's it, no need to pay anything for app-based ones (not uber) in the taxi, immediately. That makes the ride shorter and I don't need to care if the taxi will be equipped with a POS terminal as I seldom carry cash.
Instead, you often had to place an actual voice phone call -- or multiple calls, since different companies had different dispatchers. You would get no feedback on when your taxi might arrive -- or even if it was. I've answered plenty of panicked phone calls from friends whose prearranged taxis didn't arrive and were desperate to get to an airport before their flight.
If the taxi companies had acted professionally about it, Uber might not have been able to take off. As it was, using Uber was simply a better experience than taking a taxi -- except perhaps right in the middle of the most taxi-heavy cities, where you could stick out an arm. It wasn't so much about price as about just knowing that the ride was coming, and not really caring who precisely provided it. The taxi companies were not competing on anything I cared about.
The actual car-sharing aspect of their service is of dubious merit, and I prefer Lyft to Uber anywhere I can. But I'll take either to having to actually phone a dispatcher, or having to download Waave in New York and myTaxi in London and god only knows what in Cinncinnati.
There is a lot of value in having only one or two major players in this space. I often travel and use Lyft or Uber to get around. If you have to Google 3 companies every time your plane lands in a new city and create a new account and add your credit card, that is a tremendous hassle.
Really, all people want from a Taxi is an easy, reliable way to summon transport and take you to wherever. Everyone hates calling a taxi company on the phone, speaking to a surly dispatcher, giving an address verbally and then waiting for an indeterminate amount of time for the taxi to show up-- and then you had to have cash to pay.
By the time the Taxi companies figured that out, they were already gutted and in a downward spiral because of Uber's brutal, calculated competitive practices.
There's always the thread of competition for Uber. Ironically, the thread from the very market they disrupted! I'm guessing Taxis 2.0 won't have medallions to worry about anymore, just the same regulations as any other ride sharing firm, with only one car.
But hey, I'll take subsidised rides from Uber for as long as they're offering them!
They definitely are, but I think the point is that those technical problems aren’t core to the service. The value that Uber provides to you is a platform for independent, cheaper taxis – the routing algorithms and ML add to that, but the technology isn’t core to the product or the value of it.
Uber and Lyft are insanely better than that.
Imagine being a tourist in a new medium to small city and having to deal with the local taxi company. Sure you're gonna get an ok experience at some, even most, but a good portion are going to suck ass and often have no recourse. With uber/lyft I have a GPS-backed history of my route and metrics down to wait time to use as evidence and I've been refunded with no question.
Imagine trying to do that with a taxi driver, yelling at each other in a cab at 2 am, calling the taxi company who will tell u to fuck off, or calling the city and filing a case that is pending for 4 months.
I eventually punted and had my wife drive me to the closest hotel with a cab stand. But that meant she had to get up and drive me around at 4 AM just because the cab company was unreliable.
Now with Uber not only is the car there within minutes but the charge against my corporate card is automatically sent to my corporate expense system. So no from my perspective Uber is far better! And this is despite the uber app wanting to spy on users between and after use. But that's what location permissions are for. Or just uninstalling the app entirely when not in use.
Nevertheless globally it triumphed.
Kidding, I'm kidding. Sort of.
Now they squeeze drivers harder and harder for bigger and bigger percentages. Yet they are losing money faster and faster.
The problem is they’ve hired armies of very talented people, each one-upping the next on initiatives to screw drivers a little worse, or create some lame promotion, and pretty soon you have a ruthless company that is also drowning in expenses and headcount.
The technology also isn’t special enough that it alone can support the massive value of Ubers stock.
Just my 2 cents here.
Meanwhile, Oracle made $3.8 billion of net income in 2018.
The other day on HN's frontpage was an article ("Software architecture is overrated") in which the author mentioned something that made me shudder:
"Rewriting the Uber app was a project that a few hundred engineers worked simultaneously on, porting existing functionality to a new architecture."
I keep not understanding how it is possible that companies whose core business is very far from IT (e.g. taxi and ride sharing for Uber, or television for Netflix) can be considered high-tech companies and take pride in investing inordinate amounts of money on engineering. What is the point? What is Netflix doing in the company of Facebook, Apple, Amazon and Google?