6 ms·

So what's the model? Put the taxis out of business and then jack up the fares to what the taxis were? Who's winning, then, exactly? Not the consumer...

danieltillett 11y ago
In theory if they can lower the costs substantially through innovation over the current taxi model they can grow the market out of private car usage. This would mean all parties (except car manufacturers) will benefit.
- friendzis 11y ago
  In transportation business major costs are vehicle depreciation/maintenance/consumables (fuel, insurance, tires, etc), wages and you can include domain specific expenses (insurance, driver health chek-ups). * You can't reduce DS expenses. You can offload them to drivers, but that will still be reflected in prices * You can reduce wage cost by eliminating administrative load by having tools (apps, backends) do the job. Considering the size of Uber they are just transfering wages from operators to engineers. * You can't reduce wehicle depreciation. You can reduce maintenance costs by having own workshop. Taxi companies might have that, for Uber that would be next to impossible due to practical reasons. You can reduce operating costs by buying fuel/insurance/etc in bulk. Agin, easy for cabs, difficult for Uber (not impossible though). The only place I see Uber can compete is having innovative algorithms route the cars by adjusting for projected demand. Unless they have huge army of dedicated drivers, drivers driving for multiple companies kind of defeats that advantage. currently Uber does compete by exploiting legal frameworks and not labeling their drivers as professionals and their service as transportation. This is not a major factor in operating costs though.
  - prostoalex 11y ago
    I am not sure how much of an edge one can gain by doing demand prediction through algorithms. In large markets the patterns are fairly trivial (big game ended, everybody goes home; it's 5 pm in financial district, people are leaving work; busy time at the airport, bunch of flights arriving at once) and known to all participants.
    - friendzis 11y ago
      My point was not about (officially or not) scheduled spikes in traffic. These are known for all parties in advance. I was talking more about organic traffic - Random Joe hailing a cab just because. And cabs generally just drive around expecting to catch the Random Joe wasting time/vehicle/fuel. Now if you can predict temporal/geographical density of Random Joes hailing a cab - well, you have an edge there simply by increasing utilisation rate. Is this even possible? Have no idea.
  - danieltillett 11y ago
    You noticed I said in theory - what you have raised is the practice :) Personally I think a lot of Uber business model is hidden cost shifting onto the driver and society. Drivers are underestimating the true cost of being a Uber driver and society is losing out via inadequate insurance and tax avoidance. The drivers are not taking out the correct insurance and a lot of them are not declaring their income or collecting sales tax. I guess as long as it is all done on an app then it must be cool and OK.
  - whatusername 11y ago
    The valuation for Uber has got to be based on #2. Specifically that you can drive down wage costs by having a fleet of self driving cars. And that the current app/business model is just to get the app installed onto as many phones as possible.
    - danieltillett 11y ago
      You mean like how all the horse and buggy companies became highly successful car manufacturers? I can see the Uber logic - we will sell buggies now since we don’t have the technology to make cars and when the technology eventually arrives we will be able sell cars because we have such a great buggy customer network.
    - normloman 11y ago
      Self driving cars aren't coming tomorrow. They are years away. Maybe a decade. How long can uber coast on VC money before that happens? And then how do they guarantee dominance in the self-driving taxi market? Basing their value solely on this shoot-the-moon project is problematic.
- brc 11y ago
  Car manufacturers will benefit. What matters is passenger miles driven, not total number of unique car sales. If you open up a new pocket of driving demand because it's easier to get a lift, then the total passenger miles driven goes up. Even more so if it is a pickup/dropoff model with 'empty miles'. More miles driven->Cars worn out faster->more sales. More sales of likely generic cars less obsessed with expensive annual styling tweaks. More sales -> fewer models -> longer model runs = more profit. I'd say the car companies are happy.
  - danieltillett 11y ago
    Car companies would not be happy if fewer people decide to not own a car and just decide to ride share everywhere. More miles in this case mean few cars sold.
jfoster 11y ago
It's actually build a better service, give each user subsidized (or free) rides so they get to experience how much better the new service is, then stop handing out free rides like candy.
- mattmanser 11y ago
  You just said the same thing, but framed as a positive. Use VC money to put taxis out of business then jack up the price and let the service level plummet as cheap immigrants become the drivers.
  - ectoplasm 11y ago
    Out of thousands of rides, 90% of the time I get an immigrant cab driver. I find they're perfectly capable.
    - phpmal 11y ago
      You are viewing it as a business that's flush with VC cash and assuming it will continue. When cable TV was installed in the UK - thanks to US investment - they dug up almost every pavement in towns and cities nationwide, call centres were local to their customers, the technicians were actual skilled employees who worked in teams of several people. Jump forward a decade or two. They are deeply in debt. Call centres are outsourced and often abroad. Technicians work for contractors and have nothing invested in the business they represent. If you live a few meters away from a cabled street then there's virtually no chance that they will hook you up.
  - jfoster 11y ago
    What I mean is that they typically give each user their first few rides for free. It's much closer to being a free trial than it is to being a sudden price hike.
  - jedrek 11y ago
    Uber doesn't have to put taxis out of business, it's growing the market - getting a lot more people using taxi-like services. Both people who aren't willing to shell out how much cabs charge in their artificially restricted markets and people who've had shitty experiences with cabs in the past. Not to mention how poor taxi service is in the vast majority of US cities. I personally use Uber because I hate calling a cab company, finding out it does or doesn't have a cab to send, figuring out the address I need it to come to, getting a very general estimate of when it'll be there (8-15 minutes), etc. With uber I drop the pin in the exact spot I want it, I know the minute my cab is there. If cab companies had an app like that, they'd have my business.
rorykoehler 11y ago
If they do that someone else will out compete them.
- visakanv 11y ago
  I wonder if it'll eventually make sense to have free driverless cars that serve you with ads. That would be interesting.
  - rorykoehler 11y ago
    This has already been proposed by Google.
  - greenyoda 11y ago
    I can see how an ad could pay for a visit to a web site, but how can you get an advertiser to pay enough for ads so that they pay for a few miles worth of power for a car (let's assume that it's an electric vehicle), plus a few miles worth of depreciation and maintenance? The IRS currently allows a deduction of 57.5 cents per mile for business use of a vehicle. That's a ballpark figure for what the fuel and depreciation costs per mile. I doubt that an electric car is that much cheaper per mile than a gas vehicle, since the battery is very expensive and needs to be replaced after some number of charge/discharge cycles. For a car that's used as a taxi 24 hours a day, you probably have to recharge daily, leading to frequent battery replacement. (A taxi can easily drive hundreds of miles every day - one round trip from midtown Manhattan to JFK airport is around 30 miles). Even an electric self-driving vehicle requires periodic replacement of tires, shocks, etc. And a vehicle used by the public would probably require at least a daily cleaning of the interior. Plus, you're legally required to carry liability insurance (for damage you cause to other vehicles, people or property). Adding up all these expenses, it doesn't seem possible to break even by selling ads.

danieltillett 11y ago

In theory if they can lower the costs substantially through innovation over the current taxi model they can grow the market out of private car usage. This would mean all parties (except car manufacturers) will benefit.

friendzis 11y ago
In transportation business major costs are vehicle depreciation/maintenance/consumables (fuel, insurance, tires, etc), wages and you can include domain specific expenses (insurance, driver health chek-ups). * You can't reduce DS expenses. You can offload them to drivers, but that will still be reflected in prices * You can reduce wage cost by eliminating administrative load by having tools (apps, backends) do the job. Considering the size of Uber they are just transfering wages from operators to engineers. * You can't reduce wehicle depreciation. You can reduce maintenance costs by having own workshop. Taxi companies might have that, for Uber that would be next to impossible due to practical reasons. You can reduce operating costs by buying fuel/insurance/etc in bulk. Agin, easy for cabs, difficult for Uber (not impossible though). The only place I see Uber can compete is having innovative algorithms route the cars by adjusting for projected demand. Unless they have huge army of dedicated drivers, drivers driving for multiple companies kind of defeats that advantage. currently Uber does compete by exploiting legal frameworks and not labeling their drivers as professionals and their service as transportation. This is not a major factor in operating costs though.
- prostoalex 11y ago
  I am not sure how much of an edge one can gain by doing demand prediction through algorithms. In large markets the patterns are fairly trivial (big game ended, everybody goes home; it's 5 pm in financial district, people are leaving work; busy time at the airport, bunch of flights arriving at once) and known to all participants.
  - friendzis 11y ago
    My point was not about (officially or not) scheduled spikes in traffic. These are known for all parties in advance. I was talking more about organic traffic - Random Joe hailing a cab just because. And cabs generally just drive around expecting to catch the Random Joe wasting time/vehicle/fuel. Now if you can predict temporal/geographical density of Random Joes hailing a cab - well, you have an edge there simply by increasing utilisation rate. Is this even possible? Have no idea.
- danieltillett 11y ago
  You noticed I said in theory - what you have raised is the practice :) Personally I think a lot of Uber business model is hidden cost shifting onto the driver and society. Drivers are underestimating the true cost of being a Uber driver and society is losing out via inadequate insurance and tax avoidance. The drivers are not taking out the correct insurance and a lot of them are not declaring their income or collecting sales tax. I guess as long as it is all done on an app then it must be cool and OK.
- whatusername 11y ago
  The valuation for Uber has got to be based on #2. Specifically that you can drive down wage costs by having a fleet of self driving cars. And that the current app/business model is just to get the app installed onto as many phones as possible.
  - danieltillett 11y ago
    You mean like how all the horse and buggy companies became highly successful car manufacturers? I can see the Uber logic - we will sell buggies now since we don’t have the technology to make cars and when the technology eventually arrives we will be able sell cars because we have such a great buggy customer network.
  - normloman 11y ago
    Self driving cars aren't coming tomorrow. They are years away. Maybe a decade. How long can uber coast on VC money before that happens? And then how do they guarantee dominance in the self-driving taxi market? Basing their value solely on this shoot-the-moon project is problematic.
brc 11y ago
Car manufacturers will benefit. What matters is passenger miles driven, not total number of unique car sales. If you open up a new pocket of driving demand because it's easier to get a lift, then the total passenger miles driven goes up. Even more so if it is a pickup/dropoff model with 'empty miles'. More miles driven->Cars worn out faster->more sales. More sales of likely generic cars less obsessed with expensive annual styling tweaks. More sales -> fewer models -> longer model runs = more profit. I'd say the car companies are happy.
- danieltillett 11y ago
  Car companies would not be happy if fewer people decide to not own a car and just decide to ride share everywhere. More miles in this case mean few cars sold.

jfoster 11y ago

It's actually build a better service, give each user subsidized (or free) rides so they get to experience how much better the new service is, then stop handing out free rides like candy.

mattmanser 11y ago
You just said the same thing, but framed as a positive. Use VC money to put taxis out of business then jack up the price and let the service level plummet as cheap immigrants become the drivers.
- ectoplasm 11y ago
  Out of thousands of rides, 90% of the time I get an immigrant cab driver. I find they're perfectly capable.
  - phpmal 11y ago
    You are viewing it as a business that's flush with VC cash and assuming it will continue. When cable TV was installed in the UK - thanks to US investment - they dug up almost every pavement in towns and cities nationwide, call centres were local to their customers, the technicians were actual skilled employees who worked in teams of several people. Jump forward a decade or two. They are deeply in debt. Call centres are outsourced and often abroad. Technicians work for contractors and have nothing invested in the business they represent. If you live a few meters away from a cabled street then there's virtually no chance that they will hook you up.
- jfoster 11y ago
  What I mean is that they typically give each user their first few rides for free. It's much closer to being a free trial than it is to being a sudden price hike.
- jedrek 11y ago
  Uber doesn't have to put taxis out of business, it's growing the market - getting a lot more people using taxi-like services. Both people who aren't willing to shell out how much cabs charge in their artificially restricted markets and people who've had shitty experiences with cabs in the past. Not to mention how poor taxi service is in the vast majority of US cities. I personally use Uber because I hate calling a cab company, finding out it does or doesn't have a cab to send, figuring out the address I need it to come to, getting a very general estimate of when it'll be there (8-15 minutes), etc. With uber I drop the pin in the exact spot I want it, I know the minute my cab is there. If cab companies had an app like that, they'd have my business.

rorykoehler 11y ago

If they do that someone else will out compete them.

visakanv 11y ago
I wonder if it'll eventually make sense to have free driverless cars that serve you with ads. That would be interesting.
- rorykoehler 11y ago
  This has already been proposed by Google.
- greenyoda 11y ago
  I can see how an ad could pay for a visit to a web site, but how can you get an advertiser to pay enough for ads so that they pay for a few miles worth of power for a car (let's assume that it's an electric vehicle), plus a few miles worth of depreciation and maintenance? The IRS currently allows a deduction of 57.5 cents per mile for business use of a vehicle. That's a ballpark figure for what the fuel and depreciation costs per mile. I doubt that an electric car is that much cheaper per mile than a gas vehicle, since the battery is very expensive and needs to be replaced after some number of charge/discharge cycles. For a car that's used as a taxi 24 hours a day, you probably have to recharge daily, leading to frequent battery replacement. (A taxi can easily drive hundreds of miles every day - one round trip from midtown Manhattan to JFK airport is around 30 miles). Even an electric self-driving vehicle requires periodic replacement of tires, shocks, etc. And a vehicle used by the public would probably require at least a daily cleaning of the interior. Plus, you're legally required to carry liability insurance (for damage you cause to other vehicles, people or property). Adding up all these expenses, it doesn't seem possible to break even by selling ads.