6 ms·

How is Uber meant to make money? Is the idea to push prices up once (and if) the alternatives die?

by temp 10y ago

kowdermeister 10y ago
Yes. Meanwhile they prepare for the transition to the era of driverless cars. Once you dominate the market you can penetrate into markets like pacakge delivery and other industries where moving stuff is still profitable.
- trome 10y ago
  Amazon and others are trying this with food delivery, package handling, etc, and either the industry is smaller than the newcomers think it is (food delivery) or the industry is already so low cost that it can't be scaled well unless you have a certain amount of volume consistently transiting your infrastructure, which Amazon and DHL have been unable to hit nearly anywhere. DHL at this point is just for same day business deliveries (where they have done an excellent job too!) and Amazon is just trying to break even on this being their own shipping company business, which is not going very well.
  - seanp2k2 10y ago
    And in the mean time, us consumers get to take advantage of ridiculous free same-day shipping on low-ish cost items, get cheap taxi rides in many places, etc etc.
- nihonde 10y ago
  I see this argument a lot, but Uber is spending a lot to effectively lower the barrier of entry/switching by eliminating legal restrictions and changing people's expectation of car services. If I were at Uber, I'd be very worried about customers and/or drivers switching allegiances en masse.
- prostoalex 10y ago
  They've tried http://money.cnn.com/2014/08/19/technology/innovationnation/uber-corner-store/index.html http://money.cnn.com/2014/08/19/technology/innovationnation/... https://www.insideretail.com.au/blog/2014/08/26/uber-delivers-shopping/ https://www.insideretail.com.au/blog/2014/08/26/uber-deliver... Seeing how those articles are from 2014 and we're not currently reading glowing reviews of direct-from-store Uber deliveries, my guess is that their unit economics didn't work out.
- soufron 10y ago
  How do you dominate a market that is : * with a very low entry cost since anyone car develop the same software that you do now that it's been tested and proven * extremely highly regulated so you're highly dependent on government's good will * live in a world where competition is a religion
  - kowdermeister 10y ago
    > with a very low entry cost since anyone car develop the same software that you do now that it's been tested and proven Cloning the current state of UBER is a really hard task. Anyone cloning them must invest in building brand, convincing drivers and building everything else. Not trivial and all + very expensive to do. UBER is much more than a few UI widgets in a native app. They have 8000 engineers. Do you think they sit all day around and play Doom? > extremely highly regulated so you're highly dependent on government's good will True, but they seem to get away with it in most countries. Many old businesses were unregulated for a time being 100 years ago. > live in a world where competition is a religion Still, close-to-monopolies exists. Google currently dominates search in world where competition is religion.
    - kowdermeister 10y ago
      Edit: 2000 engineers and 8000 repos http://highscalability.com/blog/2016/10/12/lessons-learned-from-scaling-uber-to-2000-engineers-1000-ser.html http://highscalability.com/blog/2016/10/12/lessons-learned-f...
byoung2 10y ago
The biggest cost is labor, so if they could theoretically shift to self-driving cars soon, fares would pay for more than 100% of ride cost. What that timeframe is would be the $69 billion question. Given that self driving car technology is in its infancy, and will likely require a driver to be ready to take over, they can't ditch drivers anytime soon (unless they make passengers serve as backup drivers?).
- auggierose 10y ago
  Betting that big on driverless cars sounds like madness to me. But then again, maybe that's why it is the right thing to do?
- OliverJones 10y ago
  "Labor," huh? Uber's "laborers" also carry the capital cost, operating cost, and risk of the transportation service they provide. They own their vehicles and pay for fuel, maintenance, and insurance. Who covers those costs when no drivers are in the mix? Somebody has to pay for that stuff. It's still true that a big chunk of uber's success in big cities comes from dodging regulations and medallion costs. In other words, they are gypsy cabs with a slick app.
  - VLM 10y ago
    "In other words, they are gypsy cabs with a slick app." My question is how do you lose money doing that? Ignore expensive regulations and licensing, automate the heck out of the backend, should make piles of money not lose. Maybe the losses are some form of hollywood accounting to keep the fire off the whole "ignore regulations" aspect of the business model.
    - i__believe 10y ago
      Hire too many expensive engineers?
- peteboyd 10y ago
  Let's say driverless cars happen in the next five to ten years. I see two scenarios happening - neither do I need uber. First scenario is my local car at my house becomes driverless. I can simply call my car to pick me up from anywhere. It can return home and wait (or go and pick up others as it's own on demand taxi). I now don't need uber at all - even though I use them now. So that is not a good scenario. Second scenario is I am traveling and need a car/taxi as my local car is at home. If so, why would not other people in that city simply allow for their cars to pick me up while they are not in use. Every driverless car is now a taxi. Basically all that is needed is an app and some service where owners subscribe and let their cars be used as a taxi. Perhaps uber controls the app and service as the dominant leader. But I bet there will be a lot of competition in that area with car rental companies, manufacturers, local cab companies, individuals and uber all competing. I suppose the third scenario is that many people do not own a car in the future and we just subscribe to a car service. Perhaps in that area uber is the choice. But perhaps the manuacturers roll their own service too that you subscribe for a time share of a car.
elmar 10y ago
with flying cars #UberElevate https://www.uber.com/elevate.pdf https://www.uber.com/elevate.pdf

How is Uber meant to make money? Is the idea to push prices up once (and if) the alternatives die?

by temp 10y ago

How is Uber meant to make money? Is the idea to push prices up once (and if) the alternatives die?

Yes. Meanwhile they prepare for the transition to the era of driverless cars. Once you dominate the market you can penetrate into markets like pacakge delivery and other industries where moving stuff is still profitable.

trome 10y ago
Amazon and others are trying this with food delivery, package handling, etc, and either the industry is smaller than the newcomers think it is (food delivery) or the industry is already so low cost that it can't be scaled well unless you have a certain amount of volume consistently transiting your infrastructure, which Amazon and DHL have been unable to hit nearly anywhere. DHL at this point is just for same day business deliveries (where they have done an excellent job too!) and Amazon is just trying to break even on this being their own shipping company business, which is not going very well.
- seanp2k2 10y ago
  And in the mean time, us consumers get to take advantage of ridiculous free same-day shipping on low-ish cost items, get cheap taxi rides in many places, etc etc.
nihonde 10y ago
I see this argument a lot, but Uber is spending a lot to effectively lower the barrier of entry/switching by eliminating legal restrictions and changing people's expectation of car services. If I were at Uber, I'd be very worried about customers and/or drivers switching allegiances en masse.
prostoalex 10y ago
They've tried http://money.cnn.com/2014/08/19/technology/innovationnation/uber-corner-store/index.html http://money.cnn.com/2014/08/19/technology/innovationnation/... https://www.insideretail.com.au/blog/2014/08/26/uber-delivers-shopping/ https://www.insideretail.com.au/blog/2014/08/26/uber-deliver... Seeing how those articles are from 2014 and we're not currently reading glowing reviews of direct-from-store Uber deliveries, my guess is that their unit economics didn't work out.
soufron 10y ago
How do you dominate a market that is : * with a very low entry cost since anyone car develop the same software that you do now that it's been tested and proven * extremely highly regulated so you're highly dependent on government's good will * live in a world where competition is a religion
- kowdermeister 10y ago
  > with a very low entry cost since anyone car develop the same software that you do now that it's been tested and proven Cloning the current state of UBER is a really hard task. Anyone cloning them must invest in building brand, convincing drivers and building everything else. Not trivial and all + very expensive to do. UBER is much more than a few UI widgets in a native app. They have 8000 engineers. Do you think they sit all day around and play Doom? > extremely highly regulated so you're highly dependent on government's good will True, but they seem to get away with it in most countries. Many old businesses were unregulated for a time being 100 years ago. > live in a world where competition is a religion Still, close-to-monopolies exists. Google currently dominates search in world where competition is religion.
  - kowdermeister 10y ago
    Edit: 2000 engineers and 8000 repos http://highscalability.com/blog/2016/10/12/lessons-learned-from-scaling-uber-to-2000-engineers-1000-ser.html http://highscalability.com/blog/2016/10/12/lessons-learned-f...

byoung2 10y ago

The biggest cost is labor, so if they could theoretically shift to self-driving cars soon, fares would pay for more than 100% of ride cost. What that timeframe is would be the $69 billion question. Given that self driving car technology is in its infancy, and will likely require a driver to be ready to take over, they can't ditch drivers anytime soon (unless they make passengers serve as backup drivers?).

auggierose 10y ago
Betting that big on driverless cars sounds like madness to me. But then again, maybe that's why it is the right thing to do?
OliverJones 10y ago
"Labor," huh? Uber's "laborers" also carry the capital cost, operating cost, and risk of the transportation service they provide. They own their vehicles and pay for fuel, maintenance, and insurance. Who covers those costs when no drivers are in the mix? Somebody has to pay for that stuff. It's still true that a big chunk of uber's success in big cities comes from dodging regulations and medallion costs. In other words, they are gypsy cabs with a slick app.
- VLM 10y ago
  "In other words, they are gypsy cabs with a slick app." My question is how do you lose money doing that? Ignore expensive regulations and licensing, automate the heck out of the backend, should make piles of money not lose. Maybe the losses are some form of hollywood accounting to keep the fire off the whole "ignore regulations" aspect of the business model.
  - i__believe 10y ago
    Hire too many expensive engineers?
peteboyd 10y ago
Let's say driverless cars happen in the next five to ten years. I see two scenarios happening - neither do I need uber. First scenario is my local car at my house becomes driverless. I can simply call my car to pick me up from anywhere. It can return home and wait (or go and pick up others as it's own on demand taxi). I now don't need uber at all - even though I use them now. So that is not a good scenario. Second scenario is I am traveling and need a car/taxi as my local car is at home. If so, why would not other people in that city simply allow for their cars to pick me up while they are not in use. Every driverless car is now a taxi. Basically all that is needed is an app and some service where owners subscribe and let their cars be used as a taxi. Perhaps uber controls the app and service as the dominant leader. But I bet there will be a lot of competition in that area with car rental companies, manufacturers, local cab companies, individuals and uber all competing. I suppose the third scenario is that many people do not own a car in the future and we just subscribe to a car service. Perhaps in that area uber is the choice. But perhaps the manuacturers roll their own service too that you subscribe for a time share of a car.

elmar 10y ago

with flying cars #UberElevate https://www.uber.com/elevate.pdf https://www.uber.com/elevate.pdf