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Sales growth in commodity product that is loosing money on ever sale? I'll never understand this. Uber won't own the market. There is zero lock-in. If Lyft is

Sales growth in commodity product that is loosing money on ever sale? I'll never understand this. Uber won't own the market. There is zero lock-in. If Lyft is cheaper this week, I'm riding Lyft. I sold my car over a year ago and use a mix of ridesharing and rentals for transportation. Uber and Lyft's greatest competition in my life is a small Google product where people pick up people on their daily commute to and from work and the drivers are compensated only for gas money. Locally, there is a company that will allow you to rent an electric car for free for two hours (it has an electronic billboard on the ceiling). In the future, cheap electricity and efficient manufacturing might make a world where rides of a certain distance would be free or extremely low cost in exchange for advertising. Transportation is a commodity. For a short ride, I don't care that much about the differences, whether I'm sitting in a Toyota Corolla or Mercedes S-Class. It gets me from point A to point B. In this environment, I think the VCs pouring billions of dollars into Uber are throwing their money away subsidizing Uber's leadership in commodity market. Cheaper wins. I get to choose on each ride. There's no lock-in, there's really no reason for brand loyalty. Whatever is cheaper wins. If it's free, whomever gets here first wins. If they are both available right now, it's who has the nicer seat. This is a race to the bottom and as a customer I'm only going to remember negative experiences with the brand. Lyft is better by encouraging themed cars but, they've stopped doing that from what I've seen. There's a good chance that Lyft and Uber might face huge backlash for bait and switching drivers when they roll out driverless cars. I'm bearish on Uber in the long term.

nebabyte 9y ago
*losing, every Yeah, it's actually kind of amazing how many 'traditional' checkboxes Uber seems to miss with its 'rapid growth'. Little network effect lockin, low (ish) barrier to entry (with the hardest thing being brand recognition, with news of new/cheaper/'better' ridesharing plats potentially spreading like wildfire), opportunistic customers (and even drivers) without brand loyalty. If Kalanick implements some sort of amazing plan to pull them through despite all of that (not counting the moonshot of expediting SDCs into the market) he'll be a walking testament to the whole 'market doesn't care who you are as a person, but if you can get the job done' maxim. I'm not necessarily bearish - I'm not expecting an upset like that, but I'm not particularly invested in Uber so am more keeping an eye on it for the entertainment than anything.
- cowardlydragon 9y ago
  I'm bullish on self-driving cars, but they won't be able to do even highway driving in time to save Uber from funding collapse. If they do get urban self-driving cars that don't submarine them in liability from crashes, Google will prove IP ownership and take their lunch. Uber is an unsustainable bro-party of magic money, that will implode in the next year, based on my gut. When these things fall, the fall is fast.
deleted 9y ago
[deleted]
Yhippa 9y ago
> Uber and Lyft's greatest competition in my life is a small Google product where people pick up people on their daily commute to and from work and the drivers are compensated only for gas money. When I first heard about Uber I never thought about it as a replacement for the traditional taxi system but more of this. People on the way to their destination who can take some people there. Not some guy waiting around for the next person who needs a ride.
AndrewKemendo 9y ago
If you look at the primary ways they keep their market it looks closer to a CPG than a technology company in that it's almost 100% brand recognition and sentiment. Totally different long term business model and why they are pushing so hard for driverless cars, because that's more of a platform. I expect that they want to really be an infrastructure player more like Verizon than anything in the very long term where they have lock in through municipal or state mandate for contract vehicles and driving infrastructure. Given their less than positive relationship with governments I could see a city/state starting with autonomous buses and then moving to cars in a hub and spoke type system for public transport level fares. Uber probably would want those contracts more than anything.
- unpopularidea 9y ago
  Well they have been getting those contracts in a few municipalities. AFAIK no other player in this market has started signing up municipal governments to use ridesharing to supplement or replace other public transportation options like buses.
jacquesm 9y ago
> Sales growth in commodity product that is loosing money on ever sale? I'll never understand this. It's almost a standard by now: lose on every sale, make it up in volume. Joseph Heller had that one first I think.
- maxxxxx 9y ago
  Can you even call this a business?
  - jacquesm 9y ago
    Well, there are some examples of such loss leaders becoming successful but not in a market like this. Tesla is a good example of a company that did this.
    - monkmartinez 9y ago
      And there are people that think Tesla is doomed. You can't run losses forever and expect to keep the lights on. I don't know what is so hard to understand, it is simple math. They, Tesla, are not "successful" in any sense of the word as it relates to financial stability.
      - Denzel 9y ago
        You're conflating the basic unit economic principles of fixed vs. variable costs. And you're ignoring the breakeven point. A company that loses money on every unit sale has no breakeven point (Uber). A company that makes money on every unit sale has a breakeven point (Tesla). Because Tesla's fixed costs are very high, their breakeven point is out there, and thus they must operate at a loss for a period of time. Now this is a simplistic one product view. When you add multiple products and release timing to the model, the complexity increases. Not only does the complexity increase, we don't have enough external financial numbers to break apart the data per product. Don't get me wrong, Tesla has execution risk. But financially, I'm not at all concerned. They won't fail for lack of profitability or demand, they'll fail because they couldn't execute if anything. And... well... they've been slowly but surely derisking their execution risk as well. So we shall see.
hackuser 9y ago
> There is zero lock-in. If Lyft is cheaper this week, I'm riding Lyft. It makes sense, but I'm not sure it works out that way. Many web services have zero lock-in (not including those with a network effect such as Twitter and Facebook) and competitors are a URL away, yet the first ones to gain (mindshare? marketshare?) seem to keep it: Google search, Amazon, etc.
- greglindahl 9y ago
  Google was the first search engine? Actually, the field was crowded when Google appeared.
  - jimmywanger 9y ago
    Amazon was definitely not the first ecommerce site either.
- slackstation 9y ago
  Google has superior search results. FB/Twitter are where all my friends are. Amazon has network effects with Prime that are more than just free next day shipping. Uber takes me from point A to point B in a virtually indistinguishable way than Lyft or any of the other smaller ride sharing services. The most important thing is the transport, not the comfort, not the branding, not the "Lifestyle Experience". Maybe they will succeed because all of these people want something more out of a ride other than the ride but, for me it's cheap, reliable, fast; in that order. Everything else if fluff.
  - icebraining 9y ago
    Services like UberPool/Lyft Line do benefit from winner-takes-all effects, as the service that can keep its cars full can offer lower prices.
- sogen 9y ago
  Just a note: There were many search engines with a lot of market share before Google (i.e Lycos).
nickbauman 9y ago
> Uber and Lyft's greatest competition in my life is a small Google product where people pick up people on their daily commute to and from work and the drivers are compensated only for gas money. The Who's Driving app is great for this kind of thing.
ikeyany 9y ago
> There is zero lock-in. They're fixing this. You buy 100 flat fares that you can use over the next 6 months, then you're more or less locked in.
- slackstation 9y ago
  I tried that with Uber. It was great, everywhere I wanted to go for a month for $1.99 per ride $40. I saved a FANTASTIC amount of money that month on Uber and I used the hell out of it. As soon as it was over, I went back to checking Lyft again. I'm sure they lost even more money on me that month than normal.
petra 9y ago
There's no lock in, because Uber failed in the most important category of their business - true ride sharing, a business with strong network effect, while others(ridewithvia, ford chariot) are already succeeding with true, high-density ride-sharing, with others companies(moovex, mercedes, ..) are working on their own service. And chariot i think started in 2014, so Uber is very slow to respond, not sure why.
- pfarnsworth 9y ago
  Chariot is doing exactly the same thing as Uber, ie. subsidizing all the rides to get a low price. But they don't have the same network effects, they will go out of business soon.
  - petra 9y ago
    But chariot has network effects:more passengers = Fuller vehicles + shorter routes = lower costs and lower trip times. And I'm sure Ford did the math, they're not some VC with free money.
changdizzle 9y ago
what's the electric car company??
tedsanders 9y ago
Citation please? Is there any public information that says Uber is losing money on every sale? I'm honestly curious. In my brief searching, I haven't found much. I'd love it if someone would point me to information on Uber's finances/economics that shows their negative gross margin in developed city markets. My mental model of their finances is heavy fixed costs (~5,000 programmers) and near-zero marginal costs. The only way they are losing money on marginal rides is if they are paying drivers more than the fare. Do they? I honestly don't know.
- dllthomas 9y ago
  There have been leaks (from a while back) that show a loss in most markets (but not all). The spending involved is mostly from driver incentives, which takes some form of "paying drivers more than the fare[s they get]", but is often of the form "we will guarantee you make at least $X so long as you're online in that area during this time and accept at least y% of the requests".
  - tedsanders 9y ago
    Do you have links to these leaks? I'd like to learn more.

nebabyte 9y ago

*losing, every Yeah, it's actually kind of amazing how many 'traditional' checkboxes Uber seems to miss with its 'rapid growth'. Little network effect lockin, low (ish) barrier to entry (with the hardest thing being brand recognition, with news of new/cheaper/'better' ridesharing plats potentially spreading like wildfire), opportunistic customers (and even drivers) without brand loyalty. If Kalanick implements some sort of amazing plan to pull them through despite all of that (not counting the moonshot of expediting SDCs into the market) he'll be a walking testament to the whole 'market doesn't care who you are as a person, but if you can get the job done' maxim. I'm not necessarily bearish - I'm not expecting an upset like that, but I'm not particularly invested in Uber so am more keeping an eye on it for the entertainment than anything.

cowardlydragon 9y ago
I'm bullish on self-driving cars, but they won't be able to do even highway driving in time to save Uber from funding collapse. If they do get urban self-driving cars that don't submarine them in liability from crashes, Google will prove IP ownership and take their lunch. Uber is an unsustainable bro-party of magic money, that will implode in the next year, based on my gut. When these things fall, the fall is fast.

deleted 9y ago

[deleted]

Yhippa 9y ago

> Uber and Lyft's greatest competition in my life is a small Google product where people pick up people on their daily commute to and from work and the drivers are compensated only for gas money. When I first heard about Uber I never thought about it as a replacement for the traditional taxi system but more of this. People on the way to their destination who can take some people there. Not some guy waiting around for the next person who needs a ride.

AndrewKemendo 9y ago

If you look at the primary ways they keep their market it looks closer to a CPG than a technology company in that it's almost 100% brand recognition and sentiment. Totally different long term business model and why they are pushing so hard for driverless cars, because that's more of a platform. I expect that they want to really be an infrastructure player more like Verizon than anything in the very long term where they have lock in through municipal or state mandate for contract vehicles and driving infrastructure. Given their less than positive relationship with governments I could see a city/state starting with autonomous buses and then moving to cars in a hub and spoke type system for public transport level fares. Uber probably would want those contracts more than anything.

unpopularidea 9y ago
Well they have been getting those contracts in a few municipalities. AFAIK no other player in this market has started signing up municipal governments to use ridesharing to supplement or replace other public transportation options like buses.

jacquesm 9y ago

> Sales growth in commodity product that is loosing money on ever sale? I'll never understand this. It's almost a standard by now: lose on every sale, make it up in volume. Joseph Heller had that one first I think.

maxxxxx 9y ago
Can you even call this a business?
- jacquesm 9y ago
  Well, there are some examples of such loss leaders becoming successful but not in a market like this. Tesla is a good example of a company that did this.
  - monkmartinez 9y ago
    And there are people that think Tesla is doomed. You can't run losses forever and expect to keep the lights on. I don't know what is so hard to understand, it is simple math. They, Tesla, are not "successful" in any sense of the word as it relates to financial stability.
    - Denzel 9y ago
      You're conflating the basic unit economic principles of fixed vs. variable costs. And you're ignoring the breakeven point. A company that loses money on every unit sale has no breakeven point (Uber). A company that makes money on every unit sale has a breakeven point (Tesla). Because Tesla's fixed costs are very high, their breakeven point is out there, and thus they must operate at a loss for a period of time. Now this is a simplistic one product view. When you add multiple products and release timing to the model, the complexity increases. Not only does the complexity increase, we don't have enough external financial numbers to break apart the data per product. Don't get me wrong, Tesla has execution risk. But financially, I'm not at all concerned. They won't fail for lack of profitability or demand, they'll fail because they couldn't execute if anything. And... well... they've been slowly but surely derisking their execution risk as well. So we shall see.

hackuser 9y ago

> There is zero lock-in. If Lyft is cheaper this week, I'm riding Lyft. It makes sense, but I'm not sure it works out that way. Many web services have zero lock-in (not including those with a network effect such as Twitter and Facebook) and competitors are a URL away, yet the first ones to gain (mindshare? marketshare?) seem to keep it: Google search, Amazon, etc.

greglindahl 9y ago
Google was the first search engine? Actually, the field was crowded when Google appeared.
- jimmywanger 9y ago
  Amazon was definitely not the first ecommerce site either.
slackstation 9y ago
Google has superior search results. FB/Twitter are where all my friends are. Amazon has network effects with Prime that are more than just free next day shipping. Uber takes me from point A to point B in a virtually indistinguishable way than Lyft or any of the other smaller ride sharing services. The most important thing is the transport, not the comfort, not the branding, not the "Lifestyle Experience". Maybe they will succeed because all of these people want something more out of a ride other than the ride but, for me it's cheap, reliable, fast; in that order. Everything else if fluff.
- icebraining 9y ago
  Services like UberPool/Lyft Line do benefit from winner-takes-all effects, as the service that can keep its cars full can offer lower prices.
sogen 9y ago
Just a note: There were many search engines with a lot of market share before Google (i.e Lycos).

nickbauman 9y ago

ikeyany 9y ago

> There is zero lock-in. They're fixing this. You buy 100 flat fares that you can use over the next 6 months, then you're more or less locked in.

slackstation 9y ago
I tried that with Uber. It was great, everywhere I wanted to go for a month for $1.99 per ride $40. I saved a FANTASTIC amount of money that month on Uber and I used the hell out of it. As soon as it was over, I went back to checking Lyft again. I'm sure they lost even more money on me that month than normal.

petra 9y ago

There's no lock in, because Uber failed in the most important category of their business - true ride sharing, a business with strong network effect, while others(ridewithvia, ford chariot) are already succeeding with true, high-density ride-sharing, with others companies(moovex, mercedes, ..) are working on their own service. And chariot i think started in 2014, so Uber is very slow to respond, not sure why.

pfarnsworth 9y ago
Chariot is doing exactly the same thing as Uber, ie. subsidizing all the rides to get a low price. But they don't have the same network effects, they will go out of business soon.
- petra 9y ago
  But chariot has network effects:more passengers = Fuller vehicles + shorter routes = lower costs and lower trip times. And I'm sure Ford did the math, they're not some VC with free money.

changdizzle 9y ago

what's the electric car company??

tedsanders 9y ago

Citation please? Is there any public information that says Uber is losing money on every sale? I'm honestly curious. In my brief searching, I haven't found much. I'd love it if someone would point me to information on Uber's finances/economics that shows their negative gross margin in developed city markets. My mental model of their finances is heavy fixed costs (~5,000 programmers) and near-zero marginal costs. The only way they are losing money on marginal rides is if they are paying drivers more than the fare. Do they? I honestly don't know.

dllthomas 9y ago
There have been leaks (from a while back) that show a loss in most markets (but not all). The spending involved is mostly from driver incentives, which takes some form of "paying drivers more than the fare[s they get]", but is often of the form "we will guarantee you make at least $X so long as you're online in that area during this time and accept at least y% of the requests".
- tedsanders 9y ago
  Do you have links to these leaks? I'd like to learn more.