15 ms·

Lyft Loses $600M in 2016 as Revenue Rises to $700M

153 points by rayuela 10y ago

hkmurakami 10y ago
>The company aims to become profitable by 2018, the people said. This would appear to reflect a difference in philosophy from Uber [1]. "This will be a monopoly market and we must gain market share now at all costs" vs "This will be a market with multiple big players". [1] Of course, Lyft does not have the warchest to pursue a strategy that aligns with the first philosophy, so you could say that they must adopt this line through necessity.
- prostoalex 10y ago
  It seems like in reality such monopolies are limited geographically. Being the leading transportation service in Barcelona doesn't really get you any discounts or brownie points in Beijing or Cleveland. In theory such economies of scale would result in various supply-side margin improvements for the operators (cheaper gas, cheaper car washes, cheaper tires, cheaper insurance, all due to bulk purchasing power) but so far we have not seen that happening either.
  - toomuchtodo 10y ago
    Or maybe it's a commodity race to the bottom in each market? Witness how many entrants came into Austin when Uber and Lyft refused to follow new regulations enacted by the city. [1] You'll argue network effect or mindshare. I'll argue people will hop off a plane and search "<city> rideshare" on the app/play store for the app (you can buy ads for you app in the App Store now, no?). [1] http://kxan.com/2016/06/02/travelers-guide-ridesharing-apps-offer-rides-from-austin-airport/ http://kxan.com/2016/06/02/travelers-guide-ridesharing-apps-...
  - manmal 10y ago
    Synergistic effects will only kick into effect once they own or at least maintain their fleet, which will take another couple of years. Here in Austria, Uber is still a small niche and it's unthinkable that Uber will be more than a cheaper version of MyTaxi (https://de.mytaxi.com/index.html https://de.mytaxi.com/index.html) within the next years. If legislation allows self-driving cars, that will of course change quickly.
    - prostoalex 10y ago
      > once they own or at least maintain their fleet This is a very different value proposition for investors. Instead of a high-tech company, they now own a fleet of cars parked in a bunch of (owned, leased) garages with mechanics and car washers on staff. What intrinsic advantage does such company have over old-school taxi shop? What barriers are there to discourage someone else from also owning a bunch of similar cars parked in similar garages maintained by similar mechanics and washed by similar car washers?
  - semi-extrinsic 10y ago
    Bulk purchasing power does not mean anything when the people you buy from in all your different locations are not the same. Not even for gasoline, which is the simplest commodity of the bunch, will you find the same companies selling to you in the US as in Europe as in the Middle East as in China as in India. Can anyone point out a single thing that Uber buys locally that they can get from the same vendor in more than a handful of countries?
  - edblarney 10y ago
    "It seems like in reality such monopolies are limited geographically." Yes - they will be won 'city by city'. It's entirely possible that Lyft gets Houston, Uber gets Dallas - i.e. once the critical mass is established, it's hard to push out the incumbent. The funny thing is, they are all planning on 'self driving cars' and at that point, I see so many shifts in the landscape. The advantage of Uber was the drivers - willing to put in extra time full/part to pick up the slack from taxis etc.. But with 'self driving' I'm not sure if there is a natural monopoly. So many other massive, massive entities would be interested and could make a play: automotive companies, car rental agencies etc. etc..
    - FabHK 10y ago
      There is a natural monopoly. The biggest supplier will most likely have a taxi for you nearby, so will most likely have the shortest wait time. Then, they will have the highest utilisation, and therefore the lowest cost. This is incidentally precisely why I think they should be regulated like utilities. You could have independent ride-offering firms providing cars (with or without drivers, and possibly at different service/comfort levels), and independent apps providing billing and possibly extra services, but they all have to go through one network regulated as a utility (so that you could e.g. hail a Lyft car through the Uber app). I think that would avoid monopolies and give maximum benefit to riders and drivers.
      - laingc 10y ago
        That's not a natural monopoly. The capital costs are nowhere near on the order of magnitude required to block new VC-backed companies from entering the market. Your comparison to utilities aptly demonstrates this point: to introduce a new transportation service, you would need to fund software and digital infrastructure, as well as physical vehicles (self-driving, most likely). That is well within the realm of a funded company to achieve. No digging up roads to lay new water pipes, creating new easements and installations for electric power lines, or any of the other substantial barriers to entry that existing markets for public utilities present. Even setting that aside, your suggested solution to what is, in my view, a non-problem, is to introduce exactly the kind of regulations that have resulted in the abysmal service and high cost of existing taxi firms. In order for firms to be incentivised to create these new business models - and let's be clear, the Uber/Lyft model is very much a new and revolutionary model in this industry - there needs to be the just reward for their investment. This is the incentive that creates new value. If you regulate that value away, you will be left with a new tier of lacklustre taxi 2.0 offerings.
  - JumpCrisscross 10y ago
    > Being the leading transportation service in Barcelona doesn't really get you any discounts or brownie points in Beijing or Cleveland It wins you brand loyalty with travellers. I've come to expect Uber just works, everywhere. Sometimes Lyft or Juno or Careem or Hola are marginally better somewhere, but they aren't minimally competent almost everywhere, and that's a big difference. That said, I agree with you. Few foreign governments will permit an American company to see where their citizens are, where they're going and with whom they are meeting for how long.
    - AlexandrB 10y ago
      > Few foreign governments will permit an American company to see where their citizens are, where they're going and with whom they are meeting for how long. I'm not sure why Americans permit this either.
    - matt4077 10y ago
      > Few foreign governments will permit an American company to see where their citizens are, where they're going and with whom they are meeting for how long. Of course they will. See Google, Facebook and hundreds of others. The EU –to use an obvious example– also doesn't discriminate non-EU companies but only requires them to implement the same safeguards expected from EU companies. But I just don't see how "data" even plays any major role in the future of Uber. It's ultimately a commodity dominated by the costs of a driver's time. Cost/risk of switching is low. Barriers to entry are almost nonexistent. When Uber eventually goes Under, net effect will have been the transfer of a few million passengers from a to b, and a few billion dollars from whoever owns stock when the ride ends to the drivers (and possibly earlier investors who had the good sense to see it as the ponzi scheme it is).
  - spangry 10y ago
    However, they will earn monopoly rents in those local markets. These rents will be used by Uber to cross-subsidise their 'tougher' markets that they've bypassed for the moment (either due to incumbents with bigger bankrolls or more insistent regulators). Put less delicately, they'll use monopoly profits in other local markets to prop up their predatory prices until their local competitors go bankrupt. At this point they'll start charging the monopolist profit-maximising price.
abalone 10y ago
Basic question here, but what happens when the war's over and the subsidies end? Prices jump by several dollars a ride? Or is there some kind of economy of scale or lower overhead that the winner enjoys?
- hkmurakami 10y ago
  If they own their own fleet, they can negotiate all sorts of things. Think of the prices Walmart gets for the exact same good they sell, vs say, Safeway. One analogue is rental car companies getting steep discounts: https://www.bostonglobe.com/business/2016/05/18/sees-sales-tumbling-automaker-shuns-rental-car-market/p4Nt4qBhMH5OpCwzdAzopL/story.html https://www.bostonglobe.com/business/2016/05/18/sees-sales-t... Operational efficiency is another. Southwest Airlines iirc was (one of) the first discount airline by virtue of their superior aircraft turnaround times. If a rideshare company can dramatically increase the ratio of time carrying a passenger (or multiple) vs carrying none, they can spread their fixed costs (or even the variable ones, if carrying multiple passengers) over a larger denominator.
  - toomuchtodo 10y ago
    If Uber or Lyft have to own their own fleet, they are (pardon me) screwed. It blows their cost model away with how much capital is required, as they currently hoist the extensive depreciation on drivers who own their own vehicles. Not a lot of VCs jumping into Fedex or UPS type businesses when you actually have to invest in a transportation network. Tesla Network might pull it off with their customers footing the capital costs (instead of Tesla needing to go into the markets to scoop up another few billion dollars in credit lines).
    - eaurouge 10y ago
      That's not true. Driver's share of a car's annual revenue is necessarily greater, actually significantly greater than annual depreciation on the car. With autonomous cars, the driver's share goes to Uber, as does cost of depreciation. But that cost is only a small fraction of the additional revenue coming to Uber. In fact, I'd go as far as to say that, at current ride rates, Uber/Lyft would be able to replace/refurbish autonomous cars on an annual basis. Of course, rates will fall with autonomous cars, but not below the cost of depreciation.
ChuckMcM 10y ago
Back in the 80's when all the Semiconductor companies were losing money, Andy Grove of Intel stated that because Intel was losing less money than everyone else, it must be the largest semiconductor company. If Lyft can become profitable while Uber isn't that will change the market dynamics tremendously.
- wslh 10y ago
  But Andy Grove made a strategic shift to stop losing money, he didn't continue with the same business.
  - Inthenameofmine 10y ago
    You mean their Intel's switch from RAM to CPUs? I have a feeling that something similar might end up happening here too. RAM was too much commoditized and cost-driven. CPUs were more IP driven. Finding a route from A to B with the right driver at a lower cost is cost driven as well. The self-driving car business will most likely have a very different cost structure. Just the other day I talked to the owner of a taxi company, going through their cost structure. We concluded that, if taxes are included, 90% of their costs can be reduced on a per-trip basis. It was his opinion that it would make the most sense that the future is some sort of public-private partnership model where the cars are owned by the city, but operated by some SaaS company, in order to get rid of taxes and further reduce costs. Without that tax reduction, he said we would see a similar situation as airplane ticket costs in the EU vs US (3-10x price difference due to taxes). Cities with 5-10x lower individual transport costs would actually have a competitive advantage. In the US this problem should be compounded as cities aren't as much cities as big villages with people thinly spread out. Thos cost reductions become even more important. It feels like Uber & Lyft are spending money on the wrong problem atm. This is just a transitionary stage in the transportation world.
    - wslh 10y ago
      > You mean their Intel's switch from RAM to CPUs? Yes, and, like you, I think Uber & Lyft are wasting money in the wrong problem while the innovation landscape is quickly changing towards self-driving things.
danieltillett 10y ago
Is there anyone pursuing the lowest cost per mile ride share strategy? Things like choosing a common car type, low fuel cost, centralized servicing, etc (i.e. Taxi) combined with the improved customer service and security that Uber and Lyft offer? One would think it would be a winner.
- astrange 10y ago
  That would literally be a taxi app, so Flywheel. (Haven't tried it.) Literal ride sharing like UberPool is the only actual cost advantage of apps over taxis, and if you picked the right vehicles for that you'd have a kind of bus/jitney system. Sounds good to me.
  - CalRobert 10y ago
    It's long forgotten, but literal ride sharing is how Lyft got started. They were called Zimride at the time, and it connected people genuinely going places (a bit like craigslist ride shares) who wanted others to chip in towards expenses. Lyft was released as an app to make finding a ride on Zimride easier, and quickly eclipsed Zimride.
- dx034 10y ago
  Labour costs are much more important here. Utilizing an older car to 90% is cheaper than utilizing a new car with only 60%. That's where the advantage of larger players with good technology and data analysis lies, as they'll know when and where cars are needed. Still, uber doesn't even pay when drivers don't have a ride, and they still lose a lot. I don't think you can be any cheaper than the subsidized Uber. And I don't think you can save much regarding servicing. You already get very good prices with a few cars, or just with one if you carefully choose the garage. There is not much discount that you could get. Most costs will be gasoline, where discounts even for huge amounts are very small. So small that I know of several very large fleet operators in Europe which abandoned their own gas stations and instead had a contract with some gas stations to get a minor discount there.
- Dwolb 10y ago
  Via in Chicago seems to be the Southwest of ride sharing. Via is like Uber Pool, but more direct. While waiting, you only have less than a minute to hop in the car. Also the car only goes down major thoroughfares and moves only forward while in the car. This has the effect of lowering cost per mile because the biggest input cost (labor) is reduced. To me Via is more of a private, optimized bus system and an example of what Uber Pool could have been. Where I am Uber Pool is so hit or miss (really awesome because no one else gets in or awful because we crossed a major traffic intersection and have to back track two busy blocks to pick up a new passenger) that I avoid it.
rdslw 10y ago
So Lyft spends 1 billion 300m, in a quest to monopoly. How can I short them? /honest question/
- calvinlh 10y ago
  You can't, they're a private company. Can't short Uber either.
  - mamon 10y ago
    Ok, but who owns them? If the investors are some hedge/mutual funds that invested significant (more than, say, 5%) share of their total capital in Uber or Lyft then you probably can short those funds instead.
    - wayn3 10y ago
      sure you can, but lyft is very likely already written off. meaning you can short the fund (probably not because those funds are private, as well) but the lyft losses are already priced into their "stock price". edit: maybe its more obvious in a different industry: assuming a hurricane wrecks florida. now you want to profit from shorting that event, so you short disaster insurance providers because you know they will have to pay for the damages. but the public market was faster. the losses are already priced into the stock, although those losses havent been realized yet. you can short it all you want, but you will be "too late" with your "unique insight".
      - mamon 10y ago
        What you are saying might be right in principle: markets usually factors in risk in current prices. However, it seems to me that technological startups, like Uber, but also Airbnb, Twitter, etc. are market's blind spot. There is a lot of hype in media, everybody is seeking new unicorn to invest in, so it might be the case that all the funds managers are still in denial about the true worth of technology companies. It wouldn't be uprecedented, in fact current market situation looks a lot like just before dot-com bubble bust: 8 years of bull market, and a lot of money invested in companies without viable business model, like Uber.
soufron 10y ago
I can't tell if it's a lot, or not... ... but wouldn't it be a hint that there is a market for a cool P2P share riding system?
- JeremyBanks 10y ago
  It seems to indicate the opposite, if you can't compete for customers without running a massive deficit.
FabHK 10y ago
It's really quite an achievement - Lyft and Uber screw traditionally taxi companies, they screw their drivers, and they screw their investors, too. Sign me up.
- Narkov 10y ago
  At least riders seem to win?!
  - gjm11 10y ago
    Right up to the point at which the traditional taxi companies go out of business, the new ones' VCs stop subsidizing them, and prices go up to higher than the taxi fares would have been if Uber and Lyft had never existed.
    - FabHK 10y ago
      That's what I suspect... So, for now we customers enjoy the convenience, and then we'll be screwed, too.
  - Tiktaalik 10y ago
    Maybe in the short term, but riders may be losers in the long term too. At the moment the future of "ridesharing" with autonomous cars seems to be becoming a distraction from actually expanding public rapid transit infrastructure that everyone would benefit from. You now have people and city councillors questioning "well why do we need to spend all this money on this light rail line when autonomous car sharing is going to make this all irrelevant in a few years anyway?" Of course it remains to be seen whether autonomous cars are going to even exist in a few years let alone what positive or negative impacts they'll have on the transportation system.
matt4077 10y ago
Lyft & Uber must be largest top-down wealth redistribution schemes currently operating.
- motoboi 10y ago
  Probably Brazil had the biggest one from 2002 to 2015
cflewis 10y ago
Honest question: Lyft has just started up in my area. Uber appears to be done with the shady nonsense that dogged them at the beginning. Why do I choose Lyft over Uber?
- joncalhoun 10y ago
  What you get with each company varies from city to city so it is hard to know exactly what your experience will be with Lyft, especially if they are just starting out in your area as drivers might be a little harder to find at first. On top of this, there isn't really much one company does that the other doesn't. Lyft line in SF is great, but I believe Uber has something similar there so it's not very unique. That said, the biggest reasons I would support Lyft are: 1. Lyft doesn't appear to be run by immoral people. One of the reasons I would be hesitant to work at Uber and don't want Uber to monopolize the industry is that they have shown that they are willing to do shady things that hurt others to achieve their goals. I would hate to see another Comcast come to power where we are all stuck with them despite hating them. Right now Uber gets away with not being hated mostly because people paint taxi companies as even worse, but if those go away I wouldn't be shocked if Uber suddenly doesn't look like the saviour we thought it was. 2. Having competition and alternatives helps you as a consumer. If drivers find a way to game the Uber surge pricing (I read about this happening but I'm unclear how true it is) to cause fake surges then having other options for a ride means you aren't stuck paying 3x the normal fare because all the drivers shut off their Uber apps to drive up surge pricing. You may not choose Lyft over Uber every time. You might not even choose Lyft for your next 10 rides as finding drivers in a new city may be tricky, but I would at least suggest you install both apps and give Lyft a try.
- ryanx435 10y ago
  The drivers for lyft and uber are literally the same people in my town. Lyft is often several dollars cheaper per ride than uber. There really isnt a difference between them other than cost
- 0xfaded 10y ago
  Personally I use Lyft because whilst the behaviour uber engaged (engages?) in has clearly worked very well for them, I would like to make it very slightly less profitable behaviour with my dollar vote. I know I know, this is overly idealistic. From a consumer perspective they are indistinguishable, however talking to the drivers each has a different pay structure (e.g. I think after XX rides lyft drivers keep all of their fares). Obviously there are various sweeteners from either sides, but many of the drivers who exclusively drive for lyft formally drove for uber and said they felt better treated both by the company and the customers. My favourite was a guy who bought his car through uber finance with the intention to drive for lyft. I'm guessing there was little love lost there.
hodder 10y ago
It is hard to think of a business in which I couldn't make 700m in revenue given I burn 600m in losses. Clearly prices are going to go up.
- phamilton 10y ago
  Buy $13 widgets and sell them for $7 on eBay. Repeat 100 million times.
- fullshark 10y ago
  Actually I don't think it's that easy. I guess you could buy goods and sell them at 80% of the price you paid but even that would have a ton of overhead to reach 700 m in revenue.
thomasthomas 10y ago
do ride sharing companies become airlines or cereals? Over the years, we've tried to figure out why the competition in some markets gets sort of rational from the investor's point of view so that the shareholders do well, and in other markets, there's destructive competition that destroys shareholder wealth. It's easy to understand why air travel is so unprofitable.... Munger: If it's a pure commodity like airline seats, you can understand why no one makes any money. As we sit here, just think of what airlines have given to the world - safe travel. greater experience, time with your loved ones, you name it. Yet, the net amount of money that's been made by the shareholders of airlines since Kitty Hawk, is now a negative figure - a substantial negative figure. Competition was so intense that, once it was unleashed by deregulation, it ravaged shareholder wealth in the airline business. But why is the cereal business so profitable? Munger: Yet, in other fields - like cereals, for example - almost all the big boys make out. If you're some kind of a medium grade cereal maker, you might make 15% on your capital. And if you're really good. you might make 40%. But why are cereals so profitable - despite the fact that it looks to me like they're competing like crazy with promotions, coupons and everything else? I don't fully understand it. Obviously, there's a brand identity factor in cereals that doesn't exist in airlines. That must be the main factor that accounts for it. Maybe it boils down to individual psychology.... Munger: And maybe the cereal makers by and large have learned to be less crazy about fighting for market share - because if you get even one person who's hell-bent on gaining market share.... For example, if I were Kellogg and I decided that I had to have 60% of the market, I think I could take most of the profit out of cereals. I'd ruin Kellogg in the process. But I think I could do it. In some businesses, the participants behave like a demented Kellogg. In other businesses, they don't. Unfortunately, I do not have a perfect model for predicting how that's going to happen. http://www.valueplays.net/wp-content/uploads/The-Best-of-Charlie-Munger-1994-2011.pdf http://www.valueplays.net/wp-content/uploads/The-Best-of-Cha...
- stale2002 10y ago
  Ugh, so the answer why other industries have so much profit is because of oligopolistic collaboration.
  - SamReidHughes 10y ago
npx 10y ago
Speaking only for myself, I'm not surprised at all about this. I use Lyft exclusively, the app is much better than Uber and I've had much better experiences with the drivers (possibly just by chance). I'm eagerly awaiting the day when we have fully autonomous self-driving electric cars and fares fall through the floor. It seems that this should be much cheaper than the current system of drivers and gasoline powered cars, although time will tell if the savings are passed on to customers. It's very exciting to me. I don't like to drive.
- deleted 10y ago
  [deleted]
didibus 10y ago
Isn't the perfect economy one where all business's have the minimal possible margins? Like if all the business just cut even? I know that's not ideal for someone looking to make a lot of money out of their business or investment, but isn't it ideal for the overall economy?
jasonwilk 10y ago
To me these losses could be completely justified. It's a simple calculation of two companies (Uber and Lyft) who perceive customer LTV to be huge so they are tripling down on acquiring customers, drivers, etc. The only way I see this as a disaster scenario is if rides are operating at a negative margin in hopes automation will eventually solve that problem as it's not clear either of these companies will even win the automation race.
awinter-py 10y ago
Talked to a yellow cab driver about this last week. His perspective is that uber's market share and the resulting price power lets them set the market price for rides below what constitutes a living wage for a driver. Uber is simultaneously lower rates & raising the margin they take from the driver. This means drivers are loaning uber money out of their savings to operate a money-losing business. Only question is whether drivers will run out of savings before uber can roll out driverless.

153 points by rayuela 10y ago

>The company aims to become profitable by 2018, the people said. This would appear to reflect a difference in philosophy from Uber [1]. "This will be a monopoly market and we must gain market share now at all costs" vs "This will be a market with multiple big players". [1] Of course, Lyft does not have the warchest to pursue a strategy that aligns with the first philosophy, so you could say that they must adopt this line through necessity.

prostoalex 10y ago
It seems like in reality such monopolies are limited geographically. Being the leading transportation service in Barcelona doesn't really get you any discounts or brownie points in Beijing or Cleveland. In theory such economies of scale would result in various supply-side margin improvements for the operators (cheaper gas, cheaper car washes, cheaper tires, cheaper insurance, all due to bulk purchasing power) but so far we have not seen that happening either.
- toomuchtodo 10y ago
  Or maybe it's a commodity race to the bottom in each market? Witness how many entrants came into Austin when Uber and Lyft refused to follow new regulations enacted by the city. [1] You'll argue network effect or mindshare. I'll argue people will hop off a plane and search "<city> rideshare" on the app/play store for the app (you can buy ads for you app in the App Store now, no?). [1] http://kxan.com/2016/06/02/travelers-guide-ridesharing-apps-offer-rides-from-austin-airport/ http://kxan.com/2016/06/02/travelers-guide-ridesharing-apps-...
- manmal 10y ago
  Synergistic effects will only kick into effect once they own or at least maintain their fleet, which will take another couple of years. Here in Austria, Uber is still a small niche and it's unthinkable that Uber will be more than a cheaper version of MyTaxi (https://de.mytaxi.com/index.html https://de.mytaxi.com/index.html) within the next years. If legislation allows self-driving cars, that will of course change quickly.
  - prostoalex 10y ago
    > once they own or at least maintain their fleet This is a very different value proposition for investors. Instead of a high-tech company, they now own a fleet of cars parked in a bunch of (owned, leased) garages with mechanics and car washers on staff. What intrinsic advantage does such company have over old-school taxi shop? What barriers are there to discourage someone else from also owning a bunch of similar cars parked in similar garages maintained by similar mechanics and washed by similar car washers?
- semi-extrinsic 10y ago
  Bulk purchasing power does not mean anything when the people you buy from in all your different locations are not the same. Not even for gasoline, which is the simplest commodity of the bunch, will you find the same companies selling to you in the US as in Europe as in the Middle East as in China as in India. Can anyone point out a single thing that Uber buys locally that they can get from the same vendor in more than a handful of countries?
- edblarney 10y ago
  "It seems like in reality such monopolies are limited geographically." Yes - they will be won 'city by city'. It's entirely possible that Lyft gets Houston, Uber gets Dallas - i.e. once the critical mass is established, it's hard to push out the incumbent. The funny thing is, they are all planning on 'self driving cars' and at that point, I see so many shifts in the landscape. The advantage of Uber was the drivers - willing to put in extra time full/part to pick up the slack from taxis etc.. But with 'self driving' I'm not sure if there is a natural monopoly. So many other massive, massive entities would be interested and could make a play: automotive companies, car rental agencies etc. etc..
  - FabHK 10y ago
    There is a natural monopoly. The biggest supplier will most likely have a taxi for you nearby, so will most likely have the shortest wait time. Then, they will have the highest utilisation, and therefore the lowest cost. This is incidentally precisely why I think they should be regulated like utilities. You could have independent ride-offering firms providing cars (with or without drivers, and possibly at different service/comfort levels), and independent apps providing billing and possibly extra services, but they all have to go through one network regulated as a utility (so that you could e.g. hail a Lyft car through the Uber app). I think that would avoid monopolies and give maximum benefit to riders and drivers.
    - laingc 10y ago
      That's not a natural monopoly. The capital costs are nowhere near on the order of magnitude required to block new VC-backed companies from entering the market. Your comparison to utilities aptly demonstrates this point: to introduce a new transportation service, you would need to fund software and digital infrastructure, as well as physical vehicles (self-driving, most likely). That is well within the realm of a funded company to achieve. No digging up roads to lay new water pipes, creating new easements and installations for electric power lines, or any of the other substantial barriers to entry that existing markets for public utilities present. Even setting that aside, your suggested solution to what is, in my view, a non-problem, is to introduce exactly the kind of regulations that have resulted in the abysmal service and high cost of existing taxi firms. In order for firms to be incentivised to create these new business models - and let's be clear, the Uber/Lyft model is very much a new and revolutionary model in this industry - there needs to be the just reward for their investment. This is the incentive that creates new value. If you regulate that value away, you will be left with a new tier of lacklustre taxi 2.0 offerings.
- JumpCrisscross 10y ago
  > Being the leading transportation service in Barcelona doesn't really get you any discounts or brownie points in Beijing or Cleveland It wins you brand loyalty with travellers. I've come to expect Uber just works, everywhere. Sometimes Lyft or Juno or Careem or Hola are marginally better somewhere, but they aren't minimally competent almost everywhere, and that's a big difference. That said, I agree with you. Few foreign governments will permit an American company to see where their citizens are, where they're going and with whom they are meeting for how long.
  - AlexandrB 10y ago
    > Few foreign governments will permit an American company to see where their citizens are, where they're going and with whom they are meeting for how long. I'm not sure why Americans permit this either.
  - matt4077 10y ago
    > Few foreign governments will permit an American company to see where their citizens are, where they're going and with whom they are meeting for how long. Of course they will. See Google, Facebook and hundreds of others. The EU –to use an obvious example– also doesn't discriminate non-EU companies but only requires them to implement the same safeguards expected from EU companies. But I just don't see how "data" even plays any major role in the future of Uber. It's ultimately a commodity dominated by the costs of a driver's time. Cost/risk of switching is low. Barriers to entry are almost nonexistent. When Uber eventually goes Under, net effect will have been the transfer of a few million passengers from a to b, and a few billion dollars from whoever owns stock when the ride ends to the drivers (and possibly earlier investors who had the good sense to see it as the ponzi scheme it is).
- spangry 10y ago
  However, they will earn monopoly rents in those local markets. These rents will be used by Uber to cross-subsidise their 'tougher' markets that they've bypassed for the moment (either due to incumbents with bigger bankrolls or more insistent regulators). Put less delicately, they'll use monopoly profits in other local markets to prop up their predatory prices until their local competitors go bankrupt. At this point they'll start charging the monopolist profit-maximising price.

abalone 10y ago

Basic question here, but what happens when the war's over and the subsidies end? Prices jump by several dollars a ride? Or is there some kind of economy of scale or lower overhead that the winner enjoys?

hkmurakami 10y ago
If they own their own fleet, they can negotiate all sorts of things. Think of the prices Walmart gets for the exact same good they sell, vs say, Safeway. One analogue is rental car companies getting steep discounts: https://www.bostonglobe.com/business/2016/05/18/sees-sales-tumbling-automaker-shuns-rental-car-market/p4Nt4qBhMH5OpCwzdAzopL/story.html https://www.bostonglobe.com/business/2016/05/18/sees-sales-t... Operational efficiency is another. Southwest Airlines iirc was (one of) the first discount airline by virtue of their superior aircraft turnaround times. If a rideshare company can dramatically increase the ratio of time carrying a passenger (or multiple) vs carrying none, they can spread their fixed costs (or even the variable ones, if carrying multiple passengers) over a larger denominator.
- toomuchtodo 10y ago
  If Uber or Lyft have to own their own fleet, they are (pardon me) screwed. It blows their cost model away with how much capital is required, as they currently hoist the extensive depreciation on drivers who own their own vehicles. Not a lot of VCs jumping into Fedex or UPS type businesses when you actually have to invest in a transportation network. Tesla Network might pull it off with their customers footing the capital costs (instead of Tesla needing to go into the markets to scoop up another few billion dollars in credit lines).
  - eaurouge 10y ago
    That's not true. Driver's share of a car's annual revenue is necessarily greater, actually significantly greater than annual depreciation on the car. With autonomous cars, the driver's share goes to Uber, as does cost of depreciation. But that cost is only a small fraction of the additional revenue coming to Uber. In fact, I'd go as far as to say that, at current ride rates, Uber/Lyft would be able to replace/refurbish autonomous cars on an annual basis. Of course, rates will fall with autonomous cars, but not below the cost of depreciation.

ChuckMcM 10y ago

Back in the 80's when all the Semiconductor companies were losing money, Andy Grove of Intel stated that because Intel was losing less money than everyone else, it must be the largest semiconductor company. If Lyft can become profitable while Uber isn't that will change the market dynamics tremendously.

wslh 10y ago
But Andy Grove made a strategic shift to stop losing money, he didn't continue with the same business.
- Inthenameofmine 10y ago
  You mean their Intel's switch from RAM to CPUs? I have a feeling that something similar might end up happening here too. RAM was too much commoditized and cost-driven. CPUs were more IP driven. Finding a route from A to B with the right driver at a lower cost is cost driven as well. The self-driving car business will most likely have a very different cost structure. Just the other day I talked to the owner of a taxi company, going through their cost structure. We concluded that, if taxes are included, 90% of their costs can be reduced on a per-trip basis. It was his opinion that it would make the most sense that the future is some sort of public-private partnership model where the cars are owned by the city, but operated by some SaaS company, in order to get rid of taxes and further reduce costs. Without that tax reduction, he said we would see a similar situation as airplane ticket costs in the EU vs US (3-10x price difference due to taxes). Cities with 5-10x lower individual transport costs would actually have a competitive advantage. In the US this problem should be compounded as cities aren't as much cities as big villages with people thinly spread out. Thos cost reductions become even more important. It feels like Uber & Lyft are spending money on the wrong problem atm. This is just a transitionary stage in the transportation world.
  - wslh 10y ago
    > You mean their Intel's switch from RAM to CPUs? Yes, and, like you, I think Uber & Lyft are wasting money in the wrong problem while the innovation landscape is quickly changing towards self-driving things.

danieltillett 10y ago

Is there anyone pursuing the lowest cost per mile ride share strategy? Things like choosing a common car type, low fuel cost, centralized servicing, etc (i.e. Taxi) combined with the improved customer service and security that Uber and Lyft offer? One would think it would be a winner.

astrange 10y ago
That would literally be a taxi app, so Flywheel. (Haven't tried it.) Literal ride sharing like UberPool is the only actual cost advantage of apps over taxis, and if you picked the right vehicles for that you'd have a kind of bus/jitney system. Sounds good to me.
- CalRobert 10y ago
  It's long forgotten, but literal ride sharing is how Lyft got started. They were called Zimride at the time, and it connected people genuinely going places (a bit like craigslist ride shares) who wanted others to chip in towards expenses. Lyft was released as an app to make finding a ride on Zimride easier, and quickly eclipsed Zimride.
dx034 10y ago
Labour costs are much more important here. Utilizing an older car to 90% is cheaper than utilizing a new car with only 60%. That's where the advantage of larger players with good technology and data analysis lies, as they'll know when and where cars are needed. Still, uber doesn't even pay when drivers don't have a ride, and they still lose a lot. I don't think you can be any cheaper than the subsidized Uber. And I don't think you can save much regarding servicing. You already get very good prices with a few cars, or just with one if you carefully choose the garage. There is not much discount that you could get. Most costs will be gasoline, where discounts even for huge amounts are very small. So small that I know of several very large fleet operators in Europe which abandoned their own gas stations and instead had a contract with some gas stations to get a minor discount there.
Dwolb 10y ago
Via in Chicago seems to be the Southwest of ride sharing. Via is like Uber Pool, but more direct. While waiting, you only have less than a minute to hop in the car. Also the car only goes down major thoroughfares and moves only forward while in the car. This has the effect of lowering cost per mile because the biggest input cost (labor) is reduced. To me Via is more of a private, optimized bus system and an example of what Uber Pool could have been. Where I am Uber Pool is so hit or miss (really awesome because no one else gets in or awful because we crossed a major traffic intersection and have to back track two busy blocks to pick up a new passenger) that I avoid it.

rdslw 10y ago

So Lyft spends 1 billion 300m, in a quest to monopoly. How can I short them? /honest question/

calvinlh 10y ago
You can't, they're a private company. Can't short Uber either.
- mamon 10y ago
  Ok, but who owns them? If the investors are some hedge/mutual funds that invested significant (more than, say, 5%) share of their total capital in Uber or Lyft then you probably can short those funds instead.
  - wayn3 10y ago
    sure you can, but lyft is very likely already written off. meaning you can short the fund (probably not because those funds are private, as well) but the lyft losses are already priced into their "stock price". edit: maybe its more obvious in a different industry: assuming a hurricane wrecks florida. now you want to profit from shorting that event, so you short disaster insurance providers because you know they will have to pay for the damages. but the public market was faster. the losses are already priced into the stock, although those losses havent been realized yet. you can short it all you want, but you will be "too late" with your "unique insight".
    - mamon 10y ago
      What you are saying might be right in principle: markets usually factors in risk in current prices. However, it seems to me that technological startups, like Uber, but also Airbnb, Twitter, etc. are market's blind spot. There is a lot of hype in media, everybody is seeking new unicorn to invest in, so it might be the case that all the funds managers are still in denial about the true worth of technology companies. It wouldn't be uprecedented, in fact current market situation looks a lot like just before dot-com bubble bust: 8 years of bull market, and a lot of money invested in companies without viable business model, like Uber.

soufron 10y ago

I can't tell if it's a lot, or not... ... but wouldn't it be a hint that there is a market for a cool P2P share riding system?

JeremyBanks 10y ago
It seems to indicate the opposite, if you can't compete for customers without running a massive deficit.

FabHK 10y ago

It's really quite an achievement - Lyft and Uber screw traditionally taxi companies, they screw their drivers, and they screw their investors, too. Sign me up.

Narkov 10y ago
At least riders seem to win?!
- gjm11 10y ago
  Right up to the point at which the traditional taxi companies go out of business, the new ones' VCs stop subsidizing them, and prices go up to higher than the taxi fares would have been if Uber and Lyft had never existed.
  - FabHK 10y ago
    That's what I suspect... So, for now we customers enjoy the convenience, and then we'll be screwed, too.
- Tiktaalik 10y ago
  Maybe in the short term, but riders may be losers in the long term too. At the moment the future of "ridesharing" with autonomous cars seems to be becoming a distraction from actually expanding public rapid transit infrastructure that everyone would benefit from. You now have people and city councillors questioning "well why do we need to spend all this money on this light rail line when autonomous car sharing is going to make this all irrelevant in a few years anyway?" Of course it remains to be seen whether autonomous cars are going to even exist in a few years let alone what positive or negative impacts they'll have on the transportation system.

matt4077 10y ago

Lyft & Uber must be largest top-down wealth redistribution schemes currently operating.

motoboi 10y ago
Probably Brazil had the biggest one from 2002 to 2015

cflewis 10y ago

Honest question: Lyft has just started up in my area. Uber appears to be done with the shady nonsense that dogged them at the beginning. Why do I choose Lyft over Uber?

joncalhoun 10y ago
What you get with each company varies from city to city so it is hard to know exactly what your experience will be with Lyft, especially if they are just starting out in your area as drivers might be a little harder to find at first. On top of this, there isn't really much one company does that the other doesn't. Lyft line in SF is great, but I believe Uber has something similar there so it's not very unique. That said, the biggest reasons I would support Lyft are: 1. Lyft doesn't appear to be run by immoral people. One of the reasons I would be hesitant to work at Uber and don't want Uber to monopolize the industry is that they have shown that they are willing to do shady things that hurt others to achieve their goals. I would hate to see another Comcast come to power where we are all stuck with them despite hating them. Right now Uber gets away with not being hated mostly because people paint taxi companies as even worse, but if those go away I wouldn't be shocked if Uber suddenly doesn't look like the saviour we thought it was. 2. Having competition and alternatives helps you as a consumer. If drivers find a way to game the Uber surge pricing (I read about this happening but I'm unclear how true it is) to cause fake surges then having other options for a ride means you aren't stuck paying 3x the normal fare because all the drivers shut off their Uber apps to drive up surge pricing. You may not choose Lyft over Uber every time. You might not even choose Lyft for your next 10 rides as finding drivers in a new city may be tricky, but I would at least suggest you install both apps and give Lyft a try.
ryanx435 10y ago
The drivers for lyft and uber are literally the same people in my town. Lyft is often several dollars cheaper per ride than uber. There really isnt a difference between them other than cost
0xfaded 10y ago
Personally I use Lyft because whilst the behaviour uber engaged (engages?) in has clearly worked very well for them, I would like to make it very slightly less profitable behaviour with my dollar vote. I know I know, this is overly idealistic. From a consumer perspective they are indistinguishable, however talking to the drivers each has a different pay structure (e.g. I think after XX rides lyft drivers keep all of their fares). Obviously there are various sweeteners from either sides, but many of the drivers who exclusively drive for lyft formally drove for uber and said they felt better treated both by the company and the customers. My favourite was a guy who bought his car through uber finance with the intention to drive for lyft. I'm guessing there was little love lost there.

hodder 10y ago

It is hard to think of a business in which I couldn't make 700m in revenue given I burn 600m in losses. Clearly prices are going to go up.

phamilton 10y ago
Buy $13 widgets and sell them for $7 on eBay. Repeat 100 million times.
fullshark 10y ago
Actually I don't think it's that easy. I guess you could buy goods and sell them at 80% of the price you paid but even that would have a ton of overhead to reach 700 m in revenue.

thomasthomas 10y ago

do ride sharing companies become airlines or cereals? Over the years, we've tried to figure out why the competition in some markets gets sort of rational from the investor's point of view so that the shareholders do well, and in other markets, there's destructive competition that destroys shareholder wealth. It's easy to understand why air travel is so unprofitable.... Munger: If it's a pure commodity like airline seats, you can understand why no one makes any money. As we sit here, just think of what airlines have given to the world - safe travel. greater experience, time with your loved ones, you name it. Yet, the net amount of money that's been made by the shareholders of airlines since Kitty Hawk, is now a negative figure - a substantial negative figure. Competition was so intense that, once it was unleashed by deregulation, it ravaged shareholder wealth in the airline business. But why is the cereal business so profitable? Munger: Yet, in other fields - like cereals, for example - almost all the big boys make out. If you're some kind of a medium grade cereal maker, you might make 15% on your capital. And if you're really good. you might make 40%. But why are cereals so profitable - despite the fact that it looks to me like they're competing like crazy with promotions, coupons and everything else? I don't fully understand it. Obviously, there's a brand identity factor in cereals that doesn't exist in airlines. That must be the main factor that accounts for it. Maybe it boils down to individual psychology.... Munger: And maybe the cereal makers by and large have learned to be less crazy about fighting for market share - because if you get even one person who's hell-bent on gaining market share.... For example, if I were Kellogg and I decided that I had to have 60% of the market, I think I could take most of the profit out of cereals. I'd ruin Kellogg in the process. But I think I could do it. In some businesses, the participants behave like a demented Kellogg. In other businesses, they don't. Unfortunately, I do not have a perfect model for predicting how that's going to happen. http://www.valueplays.net/wp-content/uploads/The-Best-of-Charlie-Munger-1994-2011.pdf http://www.valueplays.net/wp-content/uploads/The-Best-of-Cha...

stale2002 10y ago
Ugh, so the answer why other industries have so much profit is because of oligopolistic collaboration.
- SamReidHughes 10y ago

npx 10y ago

Speaking only for myself, I'm not surprised at all about this. I use Lyft exclusively, the app is much better than Uber and I've had much better experiences with the drivers (possibly just by chance). I'm eagerly awaiting the day when we have fully autonomous self-driving electric cars and fares fall through the floor. It seems that this should be much cheaper than the current system of drivers and gasoline powered cars, although time will tell if the savings are passed on to customers. It's very exciting to me. I don't like to drive.

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didibus 10y ago

Isn't the perfect economy one where all business's have the minimal possible margins? Like if all the business just cut even? I know that's not ideal for someone looking to make a lot of money out of their business or investment, but isn't it ideal for the overall economy?

jasonwilk 10y ago

To me these losses could be completely justified. It's a simple calculation of two companies (Uber and Lyft) who perceive customer LTV to be huge so they are tripling down on acquiring customers, drivers, etc. The only way I see this as a disaster scenario is if rides are operating at a negative margin in hopes automation will eventually solve that problem as it's not clear either of these companies will even win the automation race.

awinter-py 10y ago

Talked to a yellow cab driver about this last week. His perspective is that uber's market share and the resulting price power lets them set the market price for rides below what constitutes a living wage for a driver. Uber is simultaneously lower rates & raising the margin they take from the driver. This means drivers are loaning uber money out of their savings to operate a money-losing business. Only question is whether drivers will run out of savings before uber can roll out driverless.