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> Uber, valued at about $69 billion, is the most valuable American car company by some margin, worth more than General Motors and Fiat Chrysler combined. Can s

by pault 10y ago

> Uber, valued at about $69 billion, is the most valuable American car company by some margin, worth more than General Motors and Fiat Chrysler combined. Can someone explain this to me? What competitive edge does Uber have that would stop literally any well-funded company from entering their market as a competitor? I know they have pervasive brand awareness and a large driver network but does that really justify a $69B valuation? What's to stop consumers and drivers from jumping ship en masse?

TheSpiceIsLife 10y ago
Hang on, Uber isn't a car company. The other two manufacture cars, Uber manufactures, well, nothing.
- CN7R 10y ago
  I would argue that a lot of new companies like Uber and AirBnb are information brokers -- they provide a service of connecting demand (consumers) to a previously untapped supply (merchants). The economic value they have comes from 'creating' a market and being first in it (brand recognition), which gives them a competitive edge over newcomers. In addition, from investors, they have a 'war chest' which allows them to make the barriers to entry harder. Some of these companies, I think, have realized that they are too dependent on the will of their suppliers; so now, they're actually manufacturing or creating something tied solely to the company. For example, Uber investing in self-driving cars.
- majewsky 10y ago
  Last time I looked, Uber manufactured lawsuits and policy debates. :)
imron 10y ago
> What competitive edge does Uber have > I know they have pervasive brand awareness and a large driver network Look what happened to Uber in China where a local competitor had pervasive brand awareness and a large driver network before Uber got established there. Uber bled cash, and bled some more cash, and bled some more cash while trying to build market share, and then finally gave up and sold their business to their competitor. That's basically what's stopping a well-funded company from entering the market as a competitor, an aversion to bleeding cash to build market share which they might not ever be able to do.
- ethanbond 10y ago
  Well no because Uber is still bleeding cash pretty much everywhere and this relies on the assumption someone with more cash won't come along and/or investors won't come knocking for their now-ashen cash back.
  - Fricken 10y ago
    They've been spending like mad on growth, but underneath that is a real company. Uber is on track to draw 4 billion in revenue in 2016, more than double 2015. Uber is the next big tech giant, they've still got plenty room left to scale.
    - ethanbond 10y ago
      A real company how? They don't own anything. Everyone I know in NYC has between 2-4 ridesharing apps installed and they choose whichever one is fastest/cheapest. For a while that was Uber, but as they run out of money and have to start turning a profit, you can guarantee that won't last long. And by "that won't last long," I mean that era has seemingly already passed. The quality degradations in the past few months alone in NYC have been serious enough for me to default to Juno whenever possible. I'm not saying Juno is sustainable either (I don't know), but so long as any ridesharing app is willing to burn investor capital at a loss, I'm willing to benefit from said loss. I have no allegiance to Uber and I doubt anyone else does either.
- jacques_chester 10y ago
  I continue to take the view that the introduction of self-driving cars will lead to Uber being brutally cut down by disintermediation. An AirBNB for self-driving cars will be as cheap or cheaper to operate: no overhead for managing or paying drivers, no need to invest your own capital upfront to buy cars or loan money for cars. You just connect car owners to people who want to rent their car for 30 minutes. Even better: No need to subsidise fares to undercut competitors, just let your owners pick whatever price they like. Most of them will underprice for wear and tear, just as they already do, at no cost to the company making the connections between owners and riders. Meanwhile, Uber can't really ignore depreciation or wear and tear, even though it tries to place them at arm's length through loans to drivers. The economies of scale in such a market are weakened. Sure, you can buy a giant fleet of vehicles at a discount. But your competitors don't need to and will never need to. And if your competitors have massive piles of their own cash, which they don't need hype to acquire, you're looking at a fairly brutal car-wreck. Lyft won't kill Uber. Google Lifts will.
TulliusCicero 10y ago
Your comment sounds like another case of "how hard could copying this multi-national juggernaut actually be??", ala https://news.ycombinator.com/item?id=12626314 https://news.ycombinator.com/item?id=12626314 Copying Uber at a small scale with a limited feature set is feasible, just like making a little boutique search engine to compete with Google is feasible. But where do you go from there? Seriously competing means you need to do better than them, and with Uber already have advantages of scale and brand, what's your angle?
- justinlardinois 10y ago
  When did your parent talk about copying Uber?
  - TulliusCicero 10y ago
    Pretty much the whole thing? > Can someone explain this to me? What competitive edge does Uber have that would stop literally any well-funded company from entering their market as a competitor?
    - deleted 10y ago
      [deleted]
    - justinlardinois 10y ago
      Looks like I misread.
- CPLX 10y ago
  That analogy doesn't hold. When I search I need to search the whole internet. Google will generally be able to deliver the best search results for all searches in all places all the time. That will never be true for transportation, taxi and car services will always have an aspect that is permanently fragmented. As long as it's possible for a small group to compete with uber even on the margins, Uber will never have monopoly pricing power. Someone can always start a small company to take people to the airport, pick up executives, etc. Anecdotally, most serious travelers I know in NYC have reverted back to using car services to do airport trips, since it's a much more predictable experience than Uber. As long as that's the case Uber will never reap the windfall profits that accrue to a monopoly. Which makes me seriously wonder why they would burn such remarkable amounts of money thinking they can establish one.
buzzybee 10y ago
The valuation is based on momentum and direction, with funny numbers applied to the assets and market share to reach such conclusions. The services they've offered as a startup can only be construed as a sample of whatever the massive organization they're building promises: some kind of broader marketplace that they are going to capture via the cab service. This is, of course, massively risky and commits tremendous resources in a very short time. There is no good way of evaluating how this will go, because(as is typical in this generation of tech companies) the KPIs might be the wrong ones for a sustainable business and this gets figured out too late to change course. But that's what the investors were sold on, and that's what they're going to build until the day the cash runs out.
kefka 10y ago
I was going to comment to you this text, but figured it probably deserved a Tell HN: kind of treatment. Maybe someone can run with it :) https://news.ycombinator.com/item?id=12759649 https://news.ycombinator.com/item?id=12759649 Tl;Dr: Uberkiller focusing on Hitchhiking, proof of identity, and set-your-own-rates. Skims from % of paid transactions.
rb808 10y ago
nobody can explain it - hence the article.
andyzweb 10y ago
There is a feature in Excel called "Goal Seek..." Valuations rely heavily on this feature.

by pault 10y ago

TheSpiceIsLife 10y ago

Hang on, Uber isn't a car company. The other two manufacture cars, Uber manufactures, well, nothing.

CN7R 10y ago
I would argue that a lot of new companies like Uber and AirBnb are information brokers -- they provide a service of connecting demand (consumers) to a previously untapped supply (merchants). The economic value they have comes from 'creating' a market and being first in it (brand recognition), which gives them a competitive edge over newcomers. In addition, from investors, they have a 'war chest' which allows them to make the barriers to entry harder. Some of these companies, I think, have realized that they are too dependent on the will of their suppliers; so now, they're actually manufacturing or creating something tied solely to the company. For example, Uber investing in self-driving cars.
majewsky 10y ago
Last time I looked, Uber manufactured lawsuits and policy debates. :)

imron 10y ago

> What competitive edge does Uber have > I know they have pervasive brand awareness and a large driver network Look what happened to Uber in China where a local competitor had pervasive brand awareness and a large driver network before Uber got established there. Uber bled cash, and bled some more cash, and bled some more cash while trying to build market share, and then finally gave up and sold their business to their competitor. That's basically what's stopping a well-funded company from entering the market as a competitor, an aversion to bleeding cash to build market share which they might not ever be able to do.

ethanbond 10y ago
Well no because Uber is still bleeding cash pretty much everywhere and this relies on the assumption someone with more cash won't come along and/or investors won't come knocking for their now-ashen cash back.
- Fricken 10y ago
  They've been spending like mad on growth, but underneath that is a real company. Uber is on track to draw 4 billion in revenue in 2016, more than double 2015. Uber is the next big tech giant, they've still got plenty room left to scale.
  - ethanbond 10y ago
    A real company how? They don't own anything. Everyone I know in NYC has between 2-4 ridesharing apps installed and they choose whichever one is fastest/cheapest. For a while that was Uber, but as they run out of money and have to start turning a profit, you can guarantee that won't last long. And by "that won't last long," I mean that era has seemingly already passed. The quality degradations in the past few months alone in NYC have been serious enough for me to default to Juno whenever possible. I'm not saying Juno is sustainable either (I don't know), but so long as any ridesharing app is willing to burn investor capital at a loss, I'm willing to benefit from said loss. I have no allegiance to Uber and I doubt anyone else does either.
jacques_chester 10y ago
I continue to take the view that the introduction of self-driving cars will lead to Uber being brutally cut down by disintermediation. An AirBNB for self-driving cars will be as cheap or cheaper to operate: no overhead for managing or paying drivers, no need to invest your own capital upfront to buy cars or loan money for cars. You just connect car owners to people who want to rent their car for 30 minutes. Even better: No need to subsidise fares to undercut competitors, just let your owners pick whatever price they like. Most of them will underprice for wear and tear, just as they already do, at no cost to the company making the connections between owners and riders. Meanwhile, Uber can't really ignore depreciation or wear and tear, even though it tries to place them at arm's length through loans to drivers. The economies of scale in such a market are weakened. Sure, you can buy a giant fleet of vehicles at a discount. But your competitors don't need to and will never need to. And if your competitors have massive piles of their own cash, which they don't need hype to acquire, you're looking at a fairly brutal car-wreck. Lyft won't kill Uber. Google Lifts will.

TulliusCicero 10y ago

Your comment sounds like another case of "how hard could copying this multi-national juggernaut actually be??", ala https://news.ycombinator.com/item?id=12626314 https://news.ycombinator.com/item?id=12626314 Copying Uber at a small scale with a limited feature set is feasible, just like making a little boutique search engine to compete with Google is feasible. But where do you go from there? Seriously competing means you need to do better than them, and with Uber already have advantages of scale and brand, what's your angle?

justinlardinois 10y ago
When did your parent talk about copying Uber?
- TulliusCicero 10y ago
  Pretty much the whole thing? > Can someone explain this to me? What competitive edge does Uber have that would stop literally any well-funded company from entering their market as a competitor?
  - deleted 10y ago
    [deleted]
  - justinlardinois 10y ago
    Looks like I misread.
CPLX 10y ago
That analogy doesn't hold. When I search I need to search the whole internet. Google will generally be able to deliver the best search results for all searches in all places all the time. That will never be true for transportation, taxi and car services will always have an aspect that is permanently fragmented. As long as it's possible for a small group to compete with uber even on the margins, Uber will never have monopoly pricing power. Someone can always start a small company to take people to the airport, pick up executives, etc. Anecdotally, most serious travelers I know in NYC have reverted back to using car services to do airport trips, since it's a much more predictable experience than Uber. As long as that's the case Uber will never reap the windfall profits that accrue to a monopoly. Which makes me seriously wonder why they would burn such remarkable amounts of money thinking they can establish one.

buzzybee 10y ago

The valuation is based on momentum and direction, with funny numbers applied to the assets and market share to reach such conclusions. The services they've offered as a startup can only be construed as a sample of whatever the massive organization they're building promises: some kind of broader marketplace that they are going to capture via the cab service. This is, of course, massively risky and commits tremendous resources in a very short time. There is no good way of evaluating how this will go, because(as is typical in this generation of tech companies) the KPIs might be the wrong ones for a sustainable business and this gets figured out too late to change course. But that's what the investors were sold on, and that's what they're going to build until the day the cash runs out.

kefka 10y ago

I was going to comment to you this text, but figured it probably deserved a Tell HN: kind of treatment. Maybe someone can run with it :) https://news.ycombinator.com/item?id=12759649 https://news.ycombinator.com/item?id=12759649 Tl;Dr: Uberkiller focusing on Hitchhiking, proof of identity, and set-your-own-rates. Skims from % of paid transactions.

rb808 10y ago

nobody can explain it - hence the article.

andyzweb 10y ago

There is a feature in Excel called "Goal Seek..." Valuations rely heavily on this feature.