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True price of an Uber ride in question as investors assess firm's value
- frgtpsswrdlame 9y agoQuestion for HNers: Do you think we've seen the peak of Uber's valuation?
- Apocryphon 9y agoAnd a follow-up question: is Lyft (or other competitors) any more sustainable?
- krrrh 9y agoAs another followup, how does the valuation compare to a company like mytaxi.com? App and service seem functionally equivalent, except that pricing is done by in-taxi meter. Lots of Berlin cabs run both MyTaxi and UberTaxi. Another point of comparison is Juno in Manhattan which took a smaller cut from drivers in order to poach the best ones from Uber and Lyft. I've always felt that competition for drivers will drive the profit margin down to what's needed to support a small team of developers pretty quickly.
- warcher 9y agoThe trouble with this, and several other recent companies, isn't whether there's a business there. Cab via app? Way better. I love it. It's still an open question whether there's a 100 Billion Dollar Business. That's what they sold to investors, and since they cashed the check, that's what they must deliver. Or some hedge fund will buy the pieces for pennies on the dollar and sell them for scrap.
- to_bpr 9y ago>Do you think we've seen the peak of Uber's valuation? As an entity contracting human driven vehicles? My bet would be yes. As for its desired autonomous future? There's no telling.
- basseq 9y agoScale-able business economics hold that if $unit_profit > 0, growth is good. It sounds like $unit_profit is negative―at least in some markets. Which would be a concern for long-term growth a profitability: the old "we lose money on every sale, but make it up in volume" joke. $unit_profit = $unit_price - $unit_cost In Uber's case, the interesting question is market flexibility on price. Or, another way, can Uber increase prices while maintaining market share, and if so, by how much? In personal experience, in my market, I believe there's headroom. I never step out of an Uber thinking, "Wow, that was too expensive." (Surges notwithstanding.) Nothing will make me go back to taxis. So the alternative is Lyft or nothing at all. And I think there's room to grow.
- ProfessorLayton 9y agoI've taken Uber Pool rides where I'm the only passenger to Oakland and it was $8 for 18 miles. There's no way thats sustainable. Its too easy to open Google Maps and pick the cheaper of the two ride shares. Many times its cheaper for me to Uber somewhere than to drive + pay for parking, and I will stop if its no longer the case. I'm pretty price-insensitive in situations where I'm grabbing a few drinks with friends etc. and I leave my car at home, and I price that in as part of that evening's "fun" budget.
- godzillabrennus 9y agoGot rid of my car in 2015 since I was living in a big city and working from home. Uber and Turo have been great.
- Tepix 9y agoA large part of rest of the world has public transport for that and no need for Uber.
- ryanmarsh 9y agoA large part of the rest of the world does not have public transport for that and needs Uber.
- godzillabrennus 9y ago
- umbs 9y ago"A 2016 study by economists and Uber data experts found that when Uber alerted passengers that fares had doubled - part of Uber's older "surge pricing" scheme - ride purchases immediately fell by about 40 percent." Based on my rough calculation: 1) Say, 100 rides at $2 each = $200 2) Double the price (surging), 40% ride drop: 60 rides at $4 each = $240 Uber still made 20% gain in revenue due to price doubling, right? That's a good thing for Uber, isn't it?
- cuchoi 9y agoThere is also a value on people getting used to your service.
- erdle 9y agoespecially if you enter that market later with a better service. let the uber investors train consumer to jump in random cars while you perfect autonomous driving... save your capital for manufacturing cars... and Uber will be left with a very nice database... a pretty app... and no cars or drivers.
- clairity 9y agoyes, you've essentially calculated the elasticity of demand[1] and determined that moving up the price curve would be more profitable for uber. that's exactly the rational move for uber, in the absence of other competitive pressures. [1] https://en.wikipedia.org/wiki/Price_elasticity_of_demand https://en.wikipedia.org/wiki/Price_elasticity_of_demand
- trhway 9y ago>1) Say, 100 rides at $2 each = $200 2) Double the price (surging), 40% ride drop: 60 rides at $4 each = $240 >Uber still made 20% gain in revenue due to price doubling, right? That's a good thing for Uber, isn't it? the next big good thing would be market segmentation : those 40% at $2 while the rich 60% at $4 - the total would be $320 :)
- Animats 9y agoIn 2015, Uber passengers were paying only 41 percent of the actual cost of their trips. Uber is unusual in that, for once, it's the big investors who are the suckers.
- cs702 9y agoIt's the true COST of Uber rides that is in question, not the price. In other words, does Uber have a viable business model? Some analysts think the answer is no.[1] They argue that Uber will never be able to charge prices in excess of the level required by a traditional taxi/limo operator to be profitable, for long enough to recoup the billions of dollars the company has burned by subsidizing the price of rides. Put another way, even if Uber drives every competing taxi/limo operator out of business, as soon as the company raises prices to cover costs -- vehicle, insurance, maintenance, fuel, credit card processing, license fees, and (at least for now) labor -- new entrants (and revived old entrants) would quickly come into the market, preventing Uber from keeping prices up. [1] For example, see http://www.nakedcapitalism.com/2017/06/wheels-come-off-uber.html http://www.nakedcapitalism.com/2017/06/wheels-come-off-uber....
- mathattack 9y agoThis is why autonomous vehicles are so vital for them, no? They can undercut if they don't have to pay for drivers.
- Avshalom 9y agomaybe. if they basically 'rent' autonomous vehicles from people then so can any other competitor, if they have their own autonomous tech then they have to pay for upkeep of vehicles which may negate the difference and even then only they have an advantage for the theoretical slice of time between when they have the tech and others don't
- mulmen 9y agoIt also assumes they can make more using it for ride sharing themselves rather than licensing it to everyone.
- MaysonL 9y agoAre their autonomous vehicles ever going to be as good as Tesla's?
- vinceguidry 9y agoI'm surprised people haven't noticed the gigantic shift in Uber's ability to control prices and costs, the ability to tip your driver. It's already been a game changer in the restaurant world, where proprietors no longer have to price the cost of service into the menu. Sure, customers don't like it, but it does the job of price discrimination where it matters. I submit that the US would not be able to maintain as dynamic a restaurant ecosystem as it has without tipping. Uber's business model is not sustainable with human drivers without tipping. Eventually drivers will leave once the VC money dries up and ridership declines due to price sensitivity. Tipping is the safety valve that will allow ride markets to clear properly. Uber wanted a clean, easy user experience, right up until it becomes unsustainable. Now it is, and the only people who can keep the Uber service afloat is riders.
- gargarplex 9y agoI hate tipping for Uber drivers. It has made the rides so much more awkward, where the entire subtext of the (verbal/nonverbal) conversation becomes "what will my tip be".
- vinceguidry 9y agoThe alternative is cab service level and pricing. Just like in the restaurant field, where if they price service into the menu, the perceived pricing uptick is enough to make people think restaurant dining is unaffordable. Sure it's worked for one restaurant, but the owner does not intend to bring the practice to his other restaurants. Eventually tipping culture will crop up around ride share services and everyone will know how to be a good citizen in that space, and assholes will be free to be assholes.
- MichaelGG 9y agoI don't think so. In Central America (Guatemala), I get a lot of ex-cab drivers[1]. They say the payment on buying a small car to use for Uber is about 1/3rd of their taxi rental payment. Most of them tell me they're earning significantly more. Full time drivers earn 1-2x what a call center worker makes, which is about what a lower-end software dev makes. And all this is after Uber takes a 25% cut (big, but totally justifiable), and rides are about 1/2 the price of taxis. So the alternative is not cab service or pricing. The service can always be superior, just by not having terrible queuing and apps. The pricing should naturally be lower, as taxi companies charge way higher prices. 1: The local cab companies so hilariously mismanaged things they just invited to be destroyed.
- Y7ZCQtNo39 9y agoWhy don't they just experiment to fully determine the elasticity of demand and then -- if they determine it's not profitable -- cut their losses while they're ahead? I think the strategy of trying to maintain a monopoly to starve others out is daring. There's no guarantee fully autonomous vehicles will be the norm anytime soon enough for the business to capitalize on it. There was an article on here -- days, weeks? ago -- about how easy is it to fool the on-board cameras of autonomous vehicles. Slap some black rectangular bars on stop sign, and now all of a sudden it's recognized as a speed limit sign. I think we're farther away from Level 5 than what is led on. Which is a bit of a shame, I'd love to be in a world where I don't have to drive myself, but I'm also being realistic. Ultimately, in my mind, uber is failing at, well, failing fast. Don't dance around the worry that your business might not be profitable at the price point you need customers to accept. Otherwise, I think they're just wasting time. You need to validate product-market fit as quickly as possible...
- xapata 9y ago> fool the on-board cameras Those kinds of situations can be solved by training on adversarial examples. It's easy to fool them now, but perhaps not after they've prepared for that possibility. Some years ago, one could fool a web search engine by repeating a word dozens of times on a page. It's not so easy now.
- Y7ZCQtNo39 9y agoIf they're not training autonomous systems for these extremely simple use cases, I'd imagine there wouldn't be much confidence in what else will be missed by the "autonomous" system. Out of the infinite number of possibilities one can encounter while driving, can the systems be trained to apply common sense? You can't program an infinite number of if-then conditionals for every possibility. The system has to be able to "think" and apply reasonable interpretation, like any human would when taking in any visual or audible input and converting that into a vehicle maneuver. The data today suggests that autonomous vehicles get into less accidents per vehicle mile than human drivers, which is promising. But who knows if autonomous vehicles are being used in complex situations representative of human driving conditions: poor weather, non-highway driving, etc. If we're putting them on the 101 in sunny weather, then yes, I'd expect them to perform reasonably well and definitely better than the average human.
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- Fej 9y agoI imagine Lyft is subsidizing their rides similarly, if not to the same extent? If not, how could they be competitive? Lyft's prices in my experience are at least $1-2 above Uber for the same trip.
- murukesh_s 9y agoWouldn't the same argument apply to Amazon as well, a company currently doing very well(4th largest corp), despite not making profit for decades?