13 ms·

Uber is doomed

141 points by chirau 10y ago

adventured 10y ago
I understand why all the Uber negativity exists right now (really it existed since early on), they've earned most of it. However, not a single thing in that article does a good job of arguing why Uber is doomed. Having an emotional reaction and a strong dislike to the way a corporation behaves, isn't an argument for why it must fail. Just wanting something to be, doesn't make it so, and most of what that article does is want Uber to fail. Back in reality, once a technology company acquires the kind of market position that Uber has, they almost never end up doomed. Quite the opposite, they overwhelmingly tend to go on to dominate their market for a long time. If disliking a corporation could make it fail, Monsanto wouldn't exist, and Microsoft would have been broken into pieces by the government (the hysteria around Microsoft for example, while different from Uber, was every bit as extreme and angry in the tech world circa 1996-2000; tech people flat out hated Microsoft and its behavior with a special passion).
- deleted 10y ago
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- dandr01d 10y ago
  > Back in reality, once a technology company acquires the kind of market position that Uber has, they almost never end up doomed. Most have, though.
  - grovegames 10y ago
    It would explain how we have the big 4, and not the big 94. Some like yahoo get carved up more publicly, but they all do in the end.
  - justicezyx 10y ago
    This is an overblown statement lacks substance. If by technology company, it means doing their business through smart phone APP, then Uber is one. In this definition, this statement does not hold strongly. If it means that the company build their business around proprietary technology that few can match, Uber is not yet. It's obviously that any decent technical group can deliver a comparable service as Uber with reasonable amount of VC money. The proof is that there are many such companies across globe. Uber actually realized this, and is strategically focusing on self-driven car, which is no doubt a correct and necessary move.
    - AstralStorm 10y ago
      Except one that can be as well undercut by competitors. What goes next?
- MarkPNeyer 10y ago
  Not saying I agree with the article, but they do seem to make a more specific argument: Their argument seems to be "There's no lock in this market, and there doesn't seem to be any network effects."
- __derek__ 10y ago
  Microsoft was profitable. Uber isn't. Lacking a non-hand-wavy path to profitability and being default-dead[1] are pretty good arguments against a company's viability. [1]: http://www.paulgraham.com/aord.html http://www.paulgraham.com/aord.html
- warcher 10y ago
  The problem with Uber is their valuation. Nobody disputes there's a business here-- it's whether it's as big as it needs to be to make the math work. They could conceivably create a monopoly on ride-sharing, but if they do that and raise prices (probably to roughly taxi parity, all told), then demand basically stays at where it was for taxis, we all live slightly more convenient lives, and all Uber's investor's lose their asses because this was not the moonshot they were promised. For Uber to justify their valuation, they're going to need to invent the self-driving car, and frankly, they don't have time. There will not be a clear winner in the self-driving car market, which does not exist at this point in time, anywhere near the timeframe they're going to have to return their investment or go kick rocks.
  - coralreef 10y ago
    How does Uber achieve monopolization? What can they do that no one else can?
    - rhizome 10y ago
      Soak up all the VC attention that might go to other companies that are at least as functional.
    - warcher 10y ago
      Thus far it's been "suck up all the oxygen in the room so nobody can breathe". Remains to be seen whether they'll survive it though.
- huckyaus 10y ago
  > Having an emotional reaction and a strong dislike to the way a corporation behaves, isn't an argument for why it must fail. I agree with you here, but this is hardly the only argument presented in the article. Something has to change when investor subsidies dry up. It might be a shift to self driving vehicles, a significant fare increase, or a monopolisation of the market. His assertion (which I broadly agree with) is that none of those seem likely to be successful.
- xbmcuser 10y ago
  In some countries Uber is not the largest I know for a fact that Grab in East Asia and Careem in Pakistan and many Arab countries is the first option for many people instead of Uber. It's Market position is not because of any technology break through or advantage that can't be copied it is mostly because of discounts. Someone with larger pockets can out muscle them. With the negative publicity around Uber it could become harder for them to get more cash from investors. The next big thing will be self driving taxis where Uber won't be able to compete with car manufacturers providing the same services directly or to its competitors. Even google saw that it is hard for it to get car manufacturers on board with its self driving tech with most opting to do it on their own despite they are a few years behind in tech.
- deleted 10y ago
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- vacri 10y ago
  > However, not a single thing in that article does a good job of arguing why Uber is doomed. "rider fares only cover roughly 40 percent of a ride, with the remainder subsidized by venture capitalists" - The equations don't work when the loss-leader is also your only product. The article also talks about how Uber is also burning through the goodwill of the drivers at the moment. Sleeping in your car is not a way for a long-term employee to behave. And also the goodwill of the developers. The article seems to make point after point after point about how Uber is overextended and can't sustain itself long-term. Yes, as long as you're subsidised, you can dominate the market, but how long are VCs going to pump in 60% of every fare? What happens when Uber burns through the available workers?
mrmondo 10y ago
Still doing great here in Melbourne, Australia, I'm in one right now actually!
- temp 10y ago
  By "doing great" do you mean "profitable" or do you mean "still price dumping until everything else dies off"?
  - zamalek 10y ago
    There is no competition here in South Africa so, while they are very cheap, they are doing great in Johannesburg. That being said, I'm [hopfeully] emigrating soon and will most likely end up using Lyft.
  - megablast 10y ago
    He means he is getting a cheaper lift, nothing more.
    - mrmondo 10y ago
      Do I?
  - mrmondo 10y ago
    Sorry I should have qualified it but didn't want to be rude in the car stuck to my phone. By doing great I mean people seem to be taking more Ubers than ever before, riders as far as I have spoken to all rave about the service (Melbourne Taxi companies are nutritiously untrustworthy and poor drivers by comparison), drivers seem to have an average of between 5 and 16 months of driving with the company (I ask every ride) and out of the 300-400 odd Uber's I've probably taken I've never had a single bad experience so I have nothing to complain about. I do wish they'd put the price up about 10% though to pay the drivers a bit more, that'd seem fair.
oisino 10y ago
Having friends who have had startups that relied on contractors the death blow is being forced to treat contractors as employees. The mass market model doesn't work when you have to charge 40% more just to cover the additional costs in benefits, overtime, taxes, hr etc. link to good article of friend who experienced this in his startup https://medium.com/@kaleazy/theres-no-magic-in-venture-backed-home-care-8f5389528279#.q8mtn2qk1 https://medium.com/@kaleazy/theres-no-magic-in-venture-backe... So the real question from all this bad press will it sway states and cities to start forcing uber to make this change? If so it will definitely hamper who they can service and their valuation.
- deepsun 10y ago
  Little is known that recently FedEx was forced to convert their contractor delivery drivers to employees. The same way it may work out for Uber.
  - mc32 10y ago
    Could there be a similar path for Amazon wrhse workers to go down eventually?
    - shrewduser 10y ago
      amazon will just speed up their automation. uber can't do that as easily with cars on public roads.
      - mc32 10y ago
        Well, if they did become employees, I guess they could opt to have an election to decide on unionization or not and then have the union vote on any opportunity to automate... where they most likely would pass on that --unless AMZN undermines union cohesion by having robots pay double union dues.
- xenadu02 10y ago
  > The mass market model doesn't work when you have to charge 40% more just to cover the additional costs in benefits, overtime, taxes, hr etc. Perhaps there was no model to begin with then, no? That 40% doesn't magically disappear. The cost is borne by the "contractors" themselves. In software development that usually means charging a lot more than a salaried employee costs because you aren't guaranteed work all the time and you need to cover your own benefits. Building a business on forcing people into slavery would be profitable in some circumstances. Building a business on finding free gold coins buried in the ground would definitely be profitable. Doesn't mean you have a sustainable business.
coralreef 10y ago
I agree. Uber cannot monopolize the space because principally, there are no barriers to entry, and no network effects or switching costs for users. This means profits will simply be competed away until a perfect competition graph is achieved. I have yet to see any really solid arguments against either of those points.
- sebleon 10y ago
  To the contrary, there's huge barriers to entry in every two-sided marketplace. To retain drivers, Uber needs many passengers; and to attract passengers, they need many drivers to keep wait times low. If you don't believe me, ask Sidecar. In an autonomous-car world, there's going to be huge initial capital costs to buy the fleet.
  - Mikeb85 10y ago
    > In an autonomous-car world, there's going to be huge initial capital costs to buy the fleet. Yes and no. It'll be easy to get debt to pay for something with an obviously high return on capital.
  - kbart 10y ago
    Don't forget that they compete against traditional taxis too. For example, in my town pretty much anyone can buy a taxi license even with a single car, get a tablet with SIM card to receive orders, pay some amount to centralized call center that serves many local companies 24/7 and also provides a user app (which I like better than Uber due to it's simplicity).
    - r00fus 10y ago
      What's the app?
      - kbart 10y ago
        https://play.google.com/store/apps/details?id=lt.etaksi.android&hl=en https://play.google.com/store/apps/details?id=lt.etaksi.andr... But it's local, only useful to few towns in Lithuania. Still worth taking a look at to see how simple and functional app should be done.
sebleon 10y ago
tldr; a doom and gloom piece from someone that's never started a startup
- acjohnson55 10y ago
  If being a startup founder is necessary to analyze a startup, I guess that discredits almost all of the press. And the funders, for that matter. A far more useful response would attempt to identify at least one flaw in the author's logic.
  - sebleon 10y ago
    There's no way to prove or disprove this guys' predictions about the future. His main assertion, Uber is doomed, is not based on fact, instead it's an opinion based on publicly-available information.
dongslol 10y ago
Secretly, I think Uber is doomed, but not so much because they fail as a business, or because they maltreat their employees. They're doomed because they're not truly building the future. Uber wants to be the world's transportation infrastructure-- the default way for people to get from A to B. Their thesis is that the way to do this is to write software to hook up drivers with riders. Essentially, a taxi replacement. But this marketplace is an artifact of the fact that cars need human drivers. Without that need, the marketplace disappears. In the next year or two, Tesla will come out with gorgeous, highly efficient, self-driving cars, with fabulous software, all talking to each other on a network that Tesla totally controls. That will put them in a much more powerful position than the company that owns the software to route random cars around. When that happens, Uber will be screwed. Maybe they could build their own self-driving electric cars, but so far they're not doing too well. They're learning, like everyone else, that it's not a problem you can just throw money at. The Model 3 will cost $35,000, and allow drivers to make automated, passive income by having their car drive people around while they're at work or something. Why buy an ordinary car and drive it yourself when you can buy a slightly more expensive car and essentially collect rent? Uber riders care about two things, the experience and the price. Tesla wins on both fronts. Teslas are gorgeous, and feel like spaceships. (Take one for a test ride). And the thing about price is that with self-driving cars, with each ride you're basically paying for electricity plus a fee to the owner of the car for its depreciation. The cost becomes less about server maintenance, and more about who is better at building cars and writing car software. And by the way, you can't just have self-driving cars. If you want to win the unit-costs game, your cars have to be electric. The fact that Uber thinks of itself as a taxi replacement is a sign of their oldness. The end game for transportation can't be a taxi replacement, because it'll be unheard of for people to drive each other around. Tesla will have production limits, of course. But they demonstrate that building the future of transportation consists of (1) building cars and (2) getting them in front of people who want them, and that part 1 is by far the harder and more valuable. I've been dumping my savings into Tesla stock, and look forward to being rich in ten years.
- golergka 10y ago
  > automated, passive income by having their car drive people around while they're at work or something That's an idea I haven't heard or thought before - but it sounds great. Did Tesla say anything to that regard? I would love for it to come true, but I'd love more sources and discussion on that first... > I've been dumping my savings into Tesla stock, and look forward to being rich in ten years. Regardless of the company, if it's a major part of all your savings you're talking about, it can't be a good financial decision.
Animats 10y ago
The only thing that keeps Uber going is $3.5 billion from Saudi Arabia's sovereign wealth fund, which allows them to undercut everybody else on price. Uber is losing $800 million a quarter, and some time in 2018, they should run out of cash. It's hard to see where they could find a bigger sugar daddy. An IPO seems unlikely; they're way overvalued. This isn't going to end well.
- hkmurakami 10y ago
  Suppose a hypothetical IPO in 2018 values them at $100B. They float 10% of their shares on the public market, requiring their iBankers to place $10B worth of shares with their clients. Personally I feel like even with bad numbers, give the iBankers a juicy enough placement incentive and they will find a way to place that $10B and collect their fee/spread. Now, Uber may fail afterwards, but if they really need a public liquidity event, I think they can get it. Directors and C level folks will be able to shed some shares at IPO preceding the lockup and make out like bandits. ;)
salimmadjd 10y ago
1 - Uber has a weak network effect (drivers drive Lyft and Uber) same for consumers. 2 - Uber is not very scalable (this is why they have to burn so much money to grow) 3 - Self-driving cars will actually destroy Uber's business. Uber = Driver -> Uber -> Passenger. Self-driving cars will remove the Driver from the equation. Uber becomes a consumer facing app. Very vulnerable to Apple and Google should they ever want to get into that business. I think Google maps and Siri will become the interface to care sharing eventually as Apple/Google will have far more access to mobile experience that Uber will ever get. I had made the above points before and predicted Uber will probably go the ways of AOL. It seems like more and more people are beginning see that too.
- 1_2__3 10y ago
  Could we maybe have a sober conversation about Uber that doesn't involve self driving cars? Because I hate to tell you, but whatever reckoning is coming for Uber will come long before self driving cars are viable. I do not understand why so many HN commenters ignore the reality of self driving car tech and regulation and think it's right around the corner. It's so far away that the only relevance it has to this conversation is already in the article (and completely disagrees with your claim): if Uber is planing to rely on self driving cars they're already dead. The tech will not be ready in time for them.
  - ckastner 10y ago
    I agree that this focus on self-driving cars is very premature, but then you are left with its current business, which so far seems to be hemorrhaging money and with no change of that in sight.
    - paulddraper 10y ago
      Practical self-driving cars are already not "in sight", assuming your sight is the next ten years.
  - lz400 10y ago
    This is the truth. Counting on self driving cars at this point contributes to the conversation as much as counting on spaceships.
Kiro 10y ago
I think the impact of all the bad PR has a limited reach outside of tech circles. Among my friends no-one has even heard about any of this and Uber is more popular than ever (especially UberEats).
- kbart 10y ago
  Same here. In my town people still feel somewhat more advanced and 'cool' calling Uber instead of taxi. Funny thing is, that most of them are left wing 'justice warrior'/hipster type. I chuckle every time I see this act of irony.
  - bobwaycott 10y ago
    Perhaps if you enlighten them, you'd help people make more informed decisions. And maybe they'd care about the problems. As it is, smugly chuckling at ignorance is rather silly. If they don't know, it isn't irony.
    - pas 10y ago
      I guess the irony is that they "ought to know", given that OP associates "leftism" and hipsterism (social warriority?) with rudimentary eagerness to be up to date on current "issues".
    - ntelson1s 10y ago
      Ignorance does seem to be the willful plight of the further-leaning left at the moment, so I have to somewhat agree with him. But I get your point.
      - bobwaycott 10y ago
        Willful ignorance is endemic in America these days. I'm rather curious what specifically the further left-leaning segment of the population is willfully ignorant of at the moment. Care to share?
  - pavlov 10y ago
laser 10y ago
"amid findings that rider fares only cover roughly 40 percent of a ride, with the remainder subsidized by venture capitalists", Hard for me to make it past the first and second paragraph where false premise is laid. Addressed this about a week ago. It's amazing how false information propagates. https://news.ycombinator.com/item?id=13682428 https://news.ycombinator.com/item?id=13682428 "You can't take Uber's cut of passengers payments (~18%) and then divide by Uber's costs to say 'passengers were paying only 41% of the actual cost of their trips', as the bulk of the cost of the trip goes directly to the driver. If you take this into account the rider is actually covering about 80% of the total cost of the trip"
- aanm1988 10y ago
  Fine, but earning back 80% of your costs is still no way to make money.
  - laser 10y ago
    80% means they could be profitable if they chose to, but it would harm their growth. They're instead incentivized to raise to fuel growth given how inexpensive private money is.
robryan 10y ago
India seems like another China for Uber. Locked into a battle against a local company and I would expect losing money. Sure the cars use CNG and the drivers probably don't make much but the fares are tiny compared the western locations.
wwalser 10y ago
All of these pieces carefully avoid talking about the fact that Uber claims to have been profitable in several US cities in 2016. In places where they have had time to figure our their model, pricing and supply/demand, they appear to be capable of becoming profitable. While most people can understand pricing and supply/demand being different between cities, Uber's model actually changes in some cities as well. In some parts of the world they don't charge using credit cards because no consumers use them, in other parts their drivers don't use cars because it's impractical. I'm all for calling out companies for exhibiting abhorrent behavior toward contractors and employees. That has value and can elicit change. Doom & gloom pieces on the other hand are a dime a dozen. This one specifically I find lacking. Uber isn't losing mountains of cash because it's unsustainable. It's losing mountains of cash because it can afford to and wants to in order to continue it's absolutely astonishing growth rate. They may be bad people. You may not want to work for them. I grant those premises. I got an offer and turned it down. That said, I simply can not understand the desire to see them fall. The delta between what existed before and what they've built is vast. I'd happily pay 2x my current rate and the claim that I would _have_ to pay 5x to cover their costs is laughable.
- paulddraper 10y ago
  Really? 2x? I think 1.5x would be pushing it, considering the competition.
  - wwalser 10y ago
    My opinion (and I know this varies): * The service is superior to a cab 100% of the time. It's never worse. Ever. The margin of "better" is not small. * I use to use Uber regularly in three cities[1]. * In one, Orlando, prices from the airport are the same as a cab _but_ the only cars available from the airport are Lux, meaning they are on par with most black car services at a fraction of a black car price. * In another city, Sydney, Uber x is literally 50% of the price of a cab during "peak" hour (most nights). * In the third city, NY, Uber X is just slightly less than a cab but the delta in service level is immense. Yes, I would pay 2x. 1. I'm currently not using Uber. I think this article is doom & gloom with no value, however, I do think that Uber's leadership is transparently fully of ass hats who have no intention of cleaning up the company's culture. I'm sitting out because of the culture and leadership, not because I think they will eventually fail. I hope they fix their shit and succeed for all of the reasons I've outlined.
doener 10y ago
https://news.ycombinator.com/item?id=13752367 https://news.ycombinator.com/item?id=13752367
jv22222 10y ago
One thing I don't understand is, why can't Uber put the price up so that they are 100% covered by fares? Or at least same price as Lyft. What would be the knock on effects of that for the company? I guess my point is, isn't the convenience of always having a ride 5 mins away enough? And now thy are so ubiquitous no one could have that same level of service as them.
- lsc 10y ago
  >I guess my point is, isn't the convenience of always having a ride 5 mins away enough? And now thy are so ubiquitous no one could have that same level of service as them. the ride is always 5 minutes away because they get so many fares. They get so many fares because their prices are so low. Now, they could go to lyft rates; experimentally, lyft gets here pretty quick, too. but the point being that "5 minutes away" is a function of their critical mass, which is a function of their low price.
viach 10y ago
To succeed?
aedron 10y ago
Uber is buying revenue. It is straight out of the 90's dot-com bubble company handbook. Everything they do screams 'pump and dump'. Problem is that a lot more external parties are in on the scam than most people realize - media, politicians, other companies owned by the same VCs, and so on. All of these can help them keep up appearances of being a successful company and a promising future behemoth, even while the most basic common sense says the opposite.
chrisherd 10y ago
The general consensus seems to be, on HN atleast, that what they are doing in unsustainable - which economically it obviously is - but how many people would short Uber? As far as I see it, if venture continues to fund its expansion Ubers access to private capital from banks is almost infinite. Ride sharing might be a non-zero sum game, but I fully expect Uber to buy lyft eventually and then it becomes far easier to cherry pick any smaller upstarts when they reach a certain scale. In fact, Ubers forray into new markets would be far more economically viable by doing so. Allowing smaller companies to establish in new cities or regions before purchasing them makes a lot of sense as the business matures. Additionally, like the deal with Didi shows, there is a massive incentive to monopolise through partnership. I would imagine this is the route Uber would go should any of the large tech companies decide to establish itself as a viable competitor.
nikcub 10y ago
> A common comparison to describe Uber’s approach is Amazon, which lost money consistently over the first several years of its existence. As Horan notes, however, Amazon’s “worst losses were $1.4 billion in its fifth year of operations, but shrank rapidly thereafter, while Uber’s losses have been steadily growing and will be over $3 billion in its seventh year.” Some key differences between Uber and Amazon: 1. Amazon's loss in 2000 was $1.4B[0] on $2.7B of revenue[1]. Uber this financial year will lose ~$2.6B on $5.5B of revenue - so they're doing a little better 2. Uber's revenue is growing at more than 100% p.a while Amazon was growing at 15% p.a at that time 3. Amazon had to cut back spending to survive while Uber has $10B in the bank and ready sources of cheap additional capital if it requires it 4. Uber is growing much, much faster internationally than Amazon ever did. Amazon even today is only 15 countries while Uber is already at 81 - so they are growing more in a shorter space of time. 5. Uber's margins will eventually be a lot larger than Amazon's - there is potential there for a greater net profit margin and greater multiple. It's reported that the core business will only lose $100M this year in North America and should turn to profitable next fy. 6. In almost every metric Uber is beating Amazon at a similar stage - revenue, revenue growth, etc. 7. Uber has the benefit of remaining private for longer, no burst dotcom bubble, economic downturn or fundraising problems and founder control The comparison is definitely appropriate, tho - similar loss-leading strategies to build market share with products that don't necessarily enforce natural monopolies. You need to outspend and drive down your competition in the near-term to win the long-term. There are very few markets where Uber has lost or is losing and their model seems easier to adapt internationally than Amazon's. [0] http://www.wikinvest.com/stock/Amazon.com_(AMZN)/Data/Net_Income/2000 http://www.wikinvest.com/stock/Amazon.com_(AMZN)/Data/Net_In... [1] http://www.wikinvest.com/stock/Amazon.com_(AMZN)/Data/Revenue/2000 http://www.wikinvest.com/stock/Amazon.com_(AMZN)/Data/Revenu...
Grue3 10y ago
Once I figured out that Uber loses money on each ride, I started taking it more. I don't really like this company, and I don't think their valuation is justified, but me being literally subsidised by SV venture capitalists feels good.
paki123 10y ago
Could Travis sell Uber at this point and still come away with a ton of money?
Shorel 10y ago
As long as the current taxi service is doomed first, it all is OK. Taxis can improve their service, other companies can compete with Uber, etc. All these solutions are acceptable. Current taxi service in most cities is not acceptable. A small number of cities have good taxi service. Most cities don't.

141 points by chirau 10y ago

I understand why all the Uber negativity exists right now (really it existed since early on), they've earned most of it. However, not a single thing in that article does a good job of arguing why Uber is doomed. Having an emotional reaction and a strong dislike to the way a corporation behaves, isn't an argument for why it must fail. Just wanting something to be, doesn't make it so, and most of what that article does is want Uber to fail. Back in reality, once a technology company acquires the kind of market position that Uber has, they almost never end up doomed. Quite the opposite, they overwhelmingly tend to go on to dominate their market for a long time. If disliking a corporation could make it fail, Monsanto wouldn't exist, and Microsoft would have been broken into pieces by the government (the hysteria around Microsoft for example, while different from Uber, was every bit as extreme and angry in the tech world circa 1996-2000; tech people flat out hated Microsoft and its behavior with a special passion).

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dandr01d 10y ago
> Back in reality, once a technology company acquires the kind of market position that Uber has, they almost never end up doomed. Most have, though.
- grovegames 10y ago
  It would explain how we have the big 4, and not the big 94. Some like yahoo get carved up more publicly, but they all do in the end.
- justicezyx 10y ago
  This is an overblown statement lacks substance. If by technology company, it means doing their business through smart phone APP, then Uber is one. In this definition, this statement does not hold strongly. If it means that the company build their business around proprietary technology that few can match, Uber is not yet. It's obviously that any decent technical group can deliver a comparable service as Uber with reasonable amount of VC money. The proof is that there are many such companies across globe. Uber actually realized this, and is strategically focusing on self-driven car, which is no doubt a correct and necessary move.
  - AstralStorm 10y ago
    Except one that can be as well undercut by competitors. What goes next?
MarkPNeyer 10y ago
Not saying I agree with the article, but they do seem to make a more specific argument: Their argument seems to be "There's no lock in this market, and there doesn't seem to be any network effects."
__derek__ 10y ago
Microsoft was profitable. Uber isn't. Lacking a non-hand-wavy path to profitability and being default-dead[1] are pretty good arguments against a company's viability. [1]: http://www.paulgraham.com/aord.html http://www.paulgraham.com/aord.html
warcher 10y ago
The problem with Uber is their valuation. Nobody disputes there's a business here-- it's whether it's as big as it needs to be to make the math work. They could conceivably create a monopoly on ride-sharing, but if they do that and raise prices (probably to roughly taxi parity, all told), then demand basically stays at where it was for taxis, we all live slightly more convenient lives, and all Uber's investor's lose their asses because this was not the moonshot they were promised. For Uber to justify their valuation, they're going to need to invent the self-driving car, and frankly, they don't have time. There will not be a clear winner in the self-driving car market, which does not exist at this point in time, anywhere near the timeframe they're going to have to return their investment or go kick rocks.
- coralreef 10y ago
  How does Uber achieve monopolization? What can they do that no one else can?
  - rhizome 10y ago
    Soak up all the VC attention that might go to other companies that are at least as functional.
  - warcher 10y ago
    Thus far it's been "suck up all the oxygen in the room so nobody can breathe". Remains to be seen whether they'll survive it though.
huckyaus 10y ago
> Having an emotional reaction and a strong dislike to the way a corporation behaves, isn't an argument for why it must fail. I agree with you here, but this is hardly the only argument presented in the article. Something has to change when investor subsidies dry up. It might be a shift to self driving vehicles, a significant fare increase, or a monopolisation of the market. His assertion (which I broadly agree with) is that none of those seem likely to be successful.
xbmcuser 10y ago
In some countries Uber is not the largest I know for a fact that Grab in East Asia and Careem in Pakistan and many Arab countries is the first option for many people instead of Uber. It's Market position is not because of any technology break through or advantage that can't be copied it is mostly because of discounts. Someone with larger pockets can out muscle them. With the negative publicity around Uber it could become harder for them to get more cash from investors. The next big thing will be self driving taxis where Uber won't be able to compete with car manufacturers providing the same services directly or to its competitors. Even google saw that it is hard for it to get car manufacturers on board with its self driving tech with most opting to do it on their own despite they are a few years behind in tech.
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vacri 10y ago
> However, not a single thing in that article does a good job of arguing why Uber is doomed. "rider fares only cover roughly 40 percent of a ride, with the remainder subsidized by venture capitalists" - The equations don't work when the loss-leader is also your only product. The article also talks about how Uber is also burning through the goodwill of the drivers at the moment. Sleeping in your car is not a way for a long-term employee to behave. And also the goodwill of the developers. The article seems to make point after point after point about how Uber is overextended and can't sustain itself long-term. Yes, as long as you're subsidised, you can dominate the market, but how long are VCs going to pump in 60% of every fare? What happens when Uber burns through the available workers?

mrmondo 10y ago

Still doing great here in Melbourne, Australia, I'm in one right now actually!

temp 10y ago
By "doing great" do you mean "profitable" or do you mean "still price dumping until everything else dies off"?
- zamalek 10y ago
  There is no competition here in South Africa so, while they are very cheap, they are doing great in Johannesburg. That being said, I'm [hopfeully] emigrating soon and will most likely end up using Lyft.
- megablast 10y ago
  He means he is getting a cheaper lift, nothing more.
  - mrmondo 10y ago
    Do I?
- mrmondo 10y ago
  Sorry I should have qualified it but didn't want to be rude in the car stuck to my phone. By doing great I mean people seem to be taking more Ubers than ever before, riders as far as I have spoken to all rave about the service (Melbourne Taxi companies are nutritiously untrustworthy and poor drivers by comparison), drivers seem to have an average of between 5 and 16 months of driving with the company (I ask every ride) and out of the 300-400 odd Uber's I've probably taken I've never had a single bad experience so I have nothing to complain about. I do wish they'd put the price up about 10% though to pay the drivers a bit more, that'd seem fair.

oisino 10y ago

Having friends who have had startups that relied on contractors the death blow is being forced to treat contractors as employees. The mass market model doesn't work when you have to charge 40% more just to cover the additional costs in benefits, overtime, taxes, hr etc. link to good article of friend who experienced this in his startup https://medium.com/@kaleazy/theres-no-magic-in-venture-backed-home-care-8f5389528279#.q8mtn2qk1 https://medium.com/@kaleazy/theres-no-magic-in-venture-backe... So the real question from all this bad press will it sway states and cities to start forcing uber to make this change? If so it will definitely hamper who they can service and their valuation.

deepsun 10y ago
Little is known that recently FedEx was forced to convert their contractor delivery drivers to employees. The same way it may work out for Uber.
- mc32 10y ago
  Could there be a similar path for Amazon wrhse workers to go down eventually?
  - shrewduser 10y ago
    amazon will just speed up their automation. uber can't do that as easily with cars on public roads.
    - mc32 10y ago
      Well, if they did become employees, I guess they could opt to have an election to decide on unionization or not and then have the union vote on any opportunity to automate... where they most likely would pass on that --unless AMZN undermines union cohesion by having robots pay double union dues.
xenadu02 10y ago
> The mass market model doesn't work when you have to charge 40% more just to cover the additional costs in benefits, overtime, taxes, hr etc. Perhaps there was no model to begin with then, no? That 40% doesn't magically disappear. The cost is borne by the "contractors" themselves. In software development that usually means charging a lot more than a salaried employee costs because you aren't guaranteed work all the time and you need to cover your own benefits. Building a business on forcing people into slavery would be profitable in some circumstances. Building a business on finding free gold coins buried in the ground would definitely be profitable. Doesn't mean you have a sustainable business.

coralreef 10y ago

I agree. Uber cannot monopolize the space because principally, there are no barriers to entry, and no network effects or switching costs for users. This means profits will simply be competed away until a perfect competition graph is achieved. I have yet to see any really solid arguments against either of those points.

sebleon 10y ago
To the contrary, there's huge barriers to entry in every two-sided marketplace. To retain drivers, Uber needs many passengers; and to attract passengers, they need many drivers to keep wait times low. If you don't believe me, ask Sidecar. In an autonomous-car world, there's going to be huge initial capital costs to buy the fleet.
- Mikeb85 10y ago
  > In an autonomous-car world, there's going to be huge initial capital costs to buy the fleet. Yes and no. It'll be easy to get debt to pay for something with an obviously high return on capital.
- kbart 10y ago
  Don't forget that they compete against traditional taxis too. For example, in my town pretty much anyone can buy a taxi license even with a single car, get a tablet with SIM card to receive orders, pay some amount to centralized call center that serves many local companies 24/7 and also provides a user app (which I like better than Uber due to it's simplicity).
  - r00fus 10y ago
    What's the app?
    - kbart 10y ago
      https://play.google.com/store/apps/details?id=lt.etaksi.android&hl=en https://play.google.com/store/apps/details?id=lt.etaksi.andr... But it's local, only useful to few towns in Lithuania. Still worth taking a look at to see how simple and functional app should be done.

sebleon 10y ago

tldr; a doom and gloom piece from someone that's never started a startup

acjohnson55 10y ago
If being a startup founder is necessary to analyze a startup, I guess that discredits almost all of the press. And the funders, for that matter. A far more useful response would attempt to identify at least one flaw in the author's logic.
- sebleon 10y ago
  There's no way to prove or disprove this guys' predictions about the future. His main assertion, Uber is doomed, is not based on fact, instead it's an opinion based on publicly-available information.

dongslol 10y ago

Secretly, I think Uber is doomed, but not so much because they fail as a business, or because they maltreat their employees. They're doomed because they're not truly building the future. Uber wants to be the world's transportation infrastructure-- the default way for people to get from A to B. Their thesis is that the way to do this is to write software to hook up drivers with riders. Essentially, a taxi replacement. But this marketplace is an artifact of the fact that cars need human drivers. Without that need, the marketplace disappears. In the next year or two, Tesla will come out with gorgeous, highly efficient, self-driving cars, with fabulous software, all talking to each other on a network that Tesla totally controls. That will put them in a much more powerful position than the company that owns the software to route random cars around. When that happens, Uber will be screwed. Maybe they could build their own self-driving electric cars, but so far they're not doing too well. They're learning, like everyone else, that it's not a problem you can just throw money at. The Model 3 will cost $35,000, and allow drivers to make automated, passive income by having their car drive people around while they're at work or something. Why buy an ordinary car and drive it yourself when you can buy a slightly more expensive car and essentially collect rent? Uber riders care about two things, the experience and the price. Tesla wins on both fronts. Teslas are gorgeous, and feel like spaceships. (Take one for a test ride). And the thing about price is that with self-driving cars, with each ride you're basically paying for electricity plus a fee to the owner of the car for its depreciation. The cost becomes less about server maintenance, and more about who is better at building cars and writing car software. And by the way, you can't just have self-driving cars. If you want to win the unit-costs game, your cars have to be electric. The fact that Uber thinks of itself as a taxi replacement is a sign of their oldness. The end game for transportation can't be a taxi replacement, because it'll be unheard of for people to drive each other around. Tesla will have production limits, of course. But they demonstrate that building the future of transportation consists of (1) building cars and (2) getting them in front of people who want them, and that part 1 is by far the harder and more valuable. I've been dumping my savings into Tesla stock, and look forward to being rich in ten years.

golergka 10y ago
> automated, passive income by having their car drive people around while they're at work or something That's an idea I haven't heard or thought before - but it sounds great. Did Tesla say anything to that regard? I would love for it to come true, but I'd love more sources and discussion on that first... > I've been dumping my savings into Tesla stock, and look forward to being rich in ten years. Regardless of the company, if it's a major part of all your savings you're talking about, it can't be a good financial decision.

Animats 10y ago

The only thing that keeps Uber going is $3.5 billion from Saudi Arabia's sovereign wealth fund, which allows them to undercut everybody else on price. Uber is losing $800 million a quarter, and some time in 2018, they should run out of cash. It's hard to see where they could find a bigger sugar daddy. An IPO seems unlikely; they're way overvalued. This isn't going to end well.

hkmurakami 10y ago
Suppose a hypothetical IPO in 2018 values them at $100B. They float 10% of their shares on the public market, requiring their iBankers to place $10B worth of shares with their clients. Personally I feel like even with bad numbers, give the iBankers a juicy enough placement incentive and they will find a way to place that $10B and collect their fee/spread. Now, Uber may fail afterwards, but if they really need a public liquidity event, I think they can get it. Directors and C level folks will be able to shed some shares at IPO preceding the lockup and make out like bandits. ;)

salimmadjd 10y ago

1 - Uber has a weak network effect (drivers drive Lyft and Uber) same for consumers. 2 - Uber is not very scalable (this is why they have to burn so much money to grow) 3 - Self-driving cars will actually destroy Uber's business. Uber = Driver -> Uber -> Passenger. Self-driving cars will remove the Driver from the equation. Uber becomes a consumer facing app. Very vulnerable to Apple and Google should they ever want to get into that business. I think Google maps and Siri will become the interface to care sharing eventually as Apple/Google will have far more access to mobile experience that Uber will ever get. I had made the above points before and predicted Uber will probably go the ways of AOL. It seems like more and more people are beginning see that too.

1_2__3 10y ago
Could we maybe have a sober conversation about Uber that doesn't involve self driving cars? Because I hate to tell you, but whatever reckoning is coming for Uber will come long before self driving cars are viable. I do not understand why so many HN commenters ignore the reality of self driving car tech and regulation and think it's right around the corner. It's so far away that the only relevance it has to this conversation is already in the article (and completely disagrees with your claim): if Uber is planing to rely on self driving cars they're already dead. The tech will not be ready in time for them.
- ckastner 10y ago
  I agree that this focus on self-driving cars is very premature, but then you are left with its current business, which so far seems to be hemorrhaging money and with no change of that in sight.
  - paulddraper 10y ago
    Practical self-driving cars are already not "in sight", assuming your sight is the next ten years.
- lz400 10y ago
  This is the truth. Counting on self driving cars at this point contributes to the conversation as much as counting on spaceships.

Kiro 10y ago

I think the impact of all the bad PR has a limited reach outside of tech circles. Among my friends no-one has even heard about any of this and Uber is more popular than ever (especially UberEats).

kbart 10y ago
Same here. In my town people still feel somewhat more advanced and 'cool' calling Uber instead of taxi. Funny thing is, that most of them are left wing 'justice warrior'/hipster type. I chuckle every time I see this act of irony.
- bobwaycott 10y ago
  Perhaps if you enlighten them, you'd help people make more informed decisions. And maybe they'd care about the problems. As it is, smugly chuckling at ignorance is rather silly. If they don't know, it isn't irony.
  - pas 10y ago
    I guess the irony is that they "ought to know", given that OP associates "leftism" and hipsterism (social warriority?) with rudimentary eagerness to be up to date on current "issues".
  - ntelson1s 10y ago
    Ignorance does seem to be the willful plight of the further-leaning left at the moment, so I have to somewhat agree with him. But I get your point.
    - bobwaycott 10y ago
      Willful ignorance is endemic in America these days. I'm rather curious what specifically the further left-leaning segment of the population is willfully ignorant of at the moment. Care to share?
- pavlov 10y ago

laser 10y ago

"amid findings that rider fares only cover roughly 40 percent of a ride, with the remainder subsidized by venture capitalists", Hard for me to make it past the first and second paragraph where false premise is laid. Addressed this about a week ago. It's amazing how false information propagates. https://news.ycombinator.com/item?id=13682428 https://news.ycombinator.com/item?id=13682428 "You can't take Uber's cut of passengers payments (~18%) and then divide by Uber's costs to say 'passengers were paying only 41% of the actual cost of their trips', as the bulk of the cost of the trip goes directly to the driver. If you take this into account the rider is actually covering about 80% of the total cost of the trip"

aanm1988 10y ago
Fine, but earning back 80% of your costs is still no way to make money.
- laser 10y ago
  80% means they could be profitable if they chose to, but it would harm their growth. They're instead incentivized to raise to fuel growth given how inexpensive private money is.

robryan 10y ago

India seems like another China for Uber. Locked into a battle against a local company and I would expect losing money. Sure the cars use CNG and the drivers probably don't make much but the fares are tiny compared the western locations.

wwalser 10y ago

All of these pieces carefully avoid talking about the fact that Uber claims to have been profitable in several US cities in 2016. In places where they have had time to figure our their model, pricing and supply/demand, they appear to be capable of becoming profitable. While most people can understand pricing and supply/demand being different between cities, Uber's model actually changes in some cities as well. In some parts of the world they don't charge using credit cards because no consumers use them, in other parts their drivers don't use cars because it's impractical. I'm all for calling out companies for exhibiting abhorrent behavior toward contractors and employees. That has value and can elicit change. Doom & gloom pieces on the other hand are a dime a dozen. This one specifically I find lacking. Uber isn't losing mountains of cash because it's unsustainable. It's losing mountains of cash because it can afford to and wants to in order to continue it's absolutely astonishing growth rate. They may be bad people. You may not want to work for them. I grant those premises. I got an offer and turned it down. That said, I simply can not understand the desire to see them fall. The delta between what existed before and what they've built is vast. I'd happily pay 2x my current rate and the claim that I would _have_ to pay 5x to cover their costs is laughable.

paulddraper 10y ago
Really? 2x? I think 1.5x would be pushing it, considering the competition.
- wwalser 10y ago
  My opinion (and I know this varies): * The service is superior to a cab 100% of the time. It's never worse. Ever. The margin of "better" is not small. * I use to use Uber regularly in three cities[1]. * In one, Orlando, prices from the airport are the same as a cab _but_ the only cars available from the airport are Lux, meaning they are on par with most black car services at a fraction of a black car price. * In another city, Sydney, Uber x is literally 50% of the price of a cab during "peak" hour (most nights). * In the third city, NY, Uber X is just slightly less than a cab but the delta in service level is immense. Yes, I would pay 2x. 1. I'm currently not using Uber. I think this article is doom & gloom with no value, however, I do think that Uber's leadership is transparently fully of ass hats who have no intention of cleaning up the company's culture. I'm sitting out because of the culture and leadership, not because I think they will eventually fail. I hope they fix their shit and succeed for all of the reasons I've outlined.

doener 10y ago

https://news.ycombinator.com/item?id=13752367 https://news.ycombinator.com/item?id=13752367

jv22222 10y ago

One thing I don't understand is, why can't Uber put the price up so that they are 100% covered by fares? Or at least same price as Lyft. What would be the knock on effects of that for the company? I guess my point is, isn't the convenience of always having a ride 5 mins away enough? And now thy are so ubiquitous no one could have that same level of service as them.

lsc 10y ago
>I guess my point is, isn't the convenience of always having a ride 5 mins away enough? And now thy are so ubiquitous no one could have that same level of service as them. the ride is always 5 minutes away because they get so many fares. They get so many fares because their prices are so low. Now, they could go to lyft rates; experimentally, lyft gets here pretty quick, too. but the point being that "5 minutes away" is a function of their critical mass, which is a function of their low price.

viach 10y ago

To succeed?

aedron 10y ago

Uber is buying revenue. It is straight out of the 90's dot-com bubble company handbook. Everything they do screams 'pump and dump'. Problem is that a lot more external parties are in on the scam than most people realize - media, politicians, other companies owned by the same VCs, and so on. All of these can help them keep up appearances of being a successful company and a promising future behemoth, even while the most basic common sense says the opposite.

chrisherd 10y ago

The general consensus seems to be, on HN atleast, that what they are doing in unsustainable - which economically it obviously is - but how many people would short Uber? As far as I see it, if venture continues to fund its expansion Ubers access to private capital from banks is almost infinite. Ride sharing might be a non-zero sum game, but I fully expect Uber to buy lyft eventually and then it becomes far easier to cherry pick any smaller upstarts when they reach a certain scale. In fact, Ubers forray into new markets would be far more economically viable by doing so. Allowing smaller companies to establish in new cities or regions before purchasing them makes a lot of sense as the business matures. Additionally, like the deal with Didi shows, there is a massive incentive to monopolise through partnership. I would imagine this is the route Uber would go should any of the large tech companies decide to establish itself as a viable competitor.

nikcub 10y ago

> A common comparison to describe Uber’s approach is Amazon, which lost money consistently over the first several years of its existence. As Horan notes, however, Amazon’s “worst losses were $1.4 billion in its fifth year of operations, but shrank rapidly thereafter, while Uber’s losses have been steadily growing and will be over $3 billion in its seventh year.” Some key differences between Uber and Amazon: 1. Amazon's loss in 2000 was $1.4B[0] on $2.7B of revenue[1]. Uber this financial year will lose ~$2.6B on $5.5B of revenue - so they're doing a little better 2. Uber's revenue is growing at more than 100% p.a while Amazon was growing at 15% p.a at that time 3. Amazon had to cut back spending to survive while Uber has $10B in the bank and ready sources of cheap additional capital if it requires it 4. Uber is growing much, much faster internationally than Amazon ever did. Amazon even today is only 15 countries while Uber is already at 81 - so they are growing more in a shorter space of time. 5. Uber's margins will eventually be a lot larger than Amazon's - there is potential there for a greater net profit margin and greater multiple. It's reported that the core business will only lose $100M this year in North America and should turn to profitable next fy. 6. In almost every metric Uber is beating Amazon at a similar stage - revenue, revenue growth, etc. 7. Uber has the benefit of remaining private for longer, no burst dotcom bubble, economic downturn or fundraising problems and founder control The comparison is definitely appropriate, tho - similar loss-leading strategies to build market share with products that don't necessarily enforce natural monopolies. You need to outspend and drive down your competition in the near-term to win the long-term. There are very few markets where Uber has lost or is losing and their model seems easier to adapt internationally than Amazon's. [0] http://www.wikinvest.com/stock/Amazon.com_(AMZN)/Data/Net_Income/2000 http://www.wikinvest.com/stock/Amazon.com_(AMZN)/Data/Net_In... [1] http://www.wikinvest.com/stock/Amazon.com_(AMZN)/Data/Revenue/2000 http://www.wikinvest.com/stock/Amazon.com_(AMZN)/Data/Revenu...

Grue3 10y ago

Once I figured out that Uber loses money on each ride, I started taking it more. I don't really like this company, and I don't think their valuation is justified, but me being literally subsidised by SV venture capitalists feels good.

paki123 10y ago

Could Travis sell Uber at this point and still come away with a ton of money?

Shorel 10y ago

As long as the current taxi service is doomed first, it all is OK. Taxis can improve their service, other companies can compete with Uber, etc. All these solutions are acceptable. Current taxi service in most cities is not acceptable. A small number of cities have good taxi service. Most cities don't.