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The Naked Capitalism analysis was a joke, and there literally is no evidence supporting their conclusions. Imagine Uber issues a financial report saying they l

The Naked Capitalism analysis was a joke, and there literally is no evidence supporting their conclusions. Imagine Uber issues a financial report saying they lose $3B in a year on $2B in revenues (total spending $5B). We also know they opened over 100 new markets that year, and in new markets spend an average of over $100 each to recruit new drivers. So what’s the truth? That passengers are only paying 40% if Uber’s ride costs? Or that Uber front loaded billions in new market development costs internationally, while more mature markets like the US are already close to profitability? Naked Capitalism would have you believe the first scenario, without enough detail in Uber financial reports to give any idea which scenario is true. Some of us despise Uber so much, that unfounded speculation by NC tells them what they want to hear, so they turn off all critical thinking about it. Not only does this article ignore rapidly improving Uber financials since the NC takedown, but that booking a ride costs Uber pennies. Their share of the ride revenues is dollars. How is that not going to be super profitable once new market development costs ramp down?

graycat 9y ago
> that booking a ride costs Uber pennies. Their share of the ride revenues is dollars. How is that not going to be super profitable once new market development costs ramp down? Because Uber has no business "barrier to entry" for the ride booking: Other people can write smartphone apps that talk to the cloud or whatever also. If the money involved in the app is dollars from pennies, then others will be highly motivated to write the app. So, the taxi business can return to small, local operators who also use a smartphone app. Then the dollars Uber is getting stay with the driver and/or their local company. Uh, mostly the taxi business is a local business. To me, for a centralized company to hope to make big bucks, or even any bucks at all, in the taxi business is wack-o. For self-driving taxis, okay, for Level 3 automation, but that doesn't help much. What might help would be Level 5 automation, but IMHO that would require essentially full, real AI, and no one knows how to do that. Thus, to me, the idea that the taxi business will be affected by self-driving cars is just nonsense hype -- the media likes to have hype to get clicks.
- valuearb 9y ago
  The Taxi business used to be a local business. It used to be insular and protected from competition by cozy relationships with regulators. That’s no longer true. Uber is on hundreds of millions of phones. It’s incredibly expensive to get your apps on phones nowadays. And saying other people can write apps that talk to the cloud is a massive oversimplification, building a system that tracks tend of thousands of simultaneous transactions while giving real-time updates to drivers and riders, with 99.xx% uptime, and web/android/ios front ends, is a massively expensive effort. Lastly even if you spend hundreds of millions getting your apps on phones and building real-time infrastructure, no one is going to use your service until you acquire a massive amount of drivers in their market. Uber’s brand, which includes that massive bases of installed apps and active drivers, is a huge competitive advantage. It’s the reason 6x more riders choose Uber over Lyft every day, despite Lyft having app installs, drivers, real time software, and despite Uber itself spending the last year or so shutting on their own brand with their tawdry behavior. Even if you target Uber in a single market or small set of markets to reduce your investment costs for acquiring app installs and drivers, but now your infrastructure costs can’t be amortized over as large a base, making you a high cost competitor.
  - graycat 9y ago
    > Lastly even if you spend hundreds of millions getting your apps on phones and building real-time infrastructure, no one is going to use your service until you acquire a massive amount of drivers in their market. I don't get it: The taxi business is older than cars! Before cars we had essentially taxis pulled by horses. In parts of Asia, there were taxis pulled by people, on foot or bicycle. The times I used a taxi, I just called a phone number. Now with smartphones, people can call such a phone number while walking down a street. Answering the phone can be a person and/or computer. For the branding, etc., if you are right about the difficulty of having a computer answer the call from a smartphone, then have some company write a generic app that all taxis in the world can use. The difficulty of getting an app installed? Depends on the app! I'm still having a super tough time seeing any money in a central taxi business, computers or not, smartphones or not, etc. E.g., people have done serious, well funded, polished research on just how to do dial-a-ride for 40+ years.
kesselvon 9y ago
No one has ever shown that economies of scale exist in the taxi/ride-share industry.
- lenley 9y ago
  I think more people would agree that the economies of scale are not even close to software. And that's even in the best case with autonomous vehicles.
- valuearb 9y ago
  Having a fully automated dispatch system that requires no phone operators, and with its development/operational costs amortized over worldwide markets 100x the size of any individual taxi market is a huge increase in economy of scale.
qyv 9y ago
> but that booking a ride costs Uber pennies. Their share of the ride revenues is dollars. How is that not going to be super profitable once new market development costs ramp down? Yes, booking the ride costs pennies, but actually providing the ride costs them dollars. The question is how many dollars do they need to charge customers and pay drivers to maintain them both, and whether that calculation leaves Uber (or any other of these services) any profit. This is where the 'low barrier to entry' argument comes into play; it is so easy to enter this market combined with the fact that both drivers and customers can (and already do) swap to the service with the best financial benefit to themselves. It remains to be seen what the steady state of this equation is.
- valuearb 9y ago
  Booking rides doesn’t cost them dollars. Whatever the customer pays, Uber skins a few bucks off of and sends the rest to the driver. The entire costs of providing the actual ride falls on the driver, Iber just pays the cost of their software platform, which again, is pennies per ride. Ultimately drivers will make what the market will bear. If they don’t make enough, driver count will fall, Uber will raise rates to compensate, until equilibrium is reached. And the business will go on, every ride costing Uber a few cents to dispatch, and then still skimming a couple bucks from the amount paid the driver.
  - TheCoelacanth 9y ago
    Except that in markets they are trying to expand, they sometimes add a few bucks to what the customer pays instead of skimming a few bucks off.
    - valuearb 9y ago
      Yea, that's part of their "grow like hell" strategy. I'm guessing the new CEO is going to pull way back on that, given their massive lead.
deleted 9y ago
[deleted]

graycat 9y ago

> that booking a ride costs Uber pennies. Their share of the ride revenues is dollars. How is that not going to be super profitable once new market development costs ramp down? Because Uber has no business "barrier to entry" for the ride booking: Other people can write smartphone apps that talk to the cloud or whatever also. If the money involved in the app is dollars from pennies, then others will be highly motivated to write the app. So, the taxi business can return to small, local operators who also use a smartphone app. Then the dollars Uber is getting stay with the driver and/or their local company. Uh, mostly the taxi business is a local business. To me, for a centralized company to hope to make big bucks, or even any bucks at all, in the taxi business is wack-o. For self-driving taxis, okay, for Level 3 automation, but that doesn't help much. What might help would be Level 5 automation, but IMHO that would require essentially full, real AI, and no one knows how to do that. Thus, to me, the idea that the taxi business will be affected by self-driving cars is just nonsense hype -- the media likes to have hype to get clicks.

valuearb 9y ago
The Taxi business used to be a local business. It used to be insular and protected from competition by cozy relationships with regulators. That’s no longer true. Uber is on hundreds of millions of phones. It’s incredibly expensive to get your apps on phones nowadays. And saying other people can write apps that talk to the cloud is a massive oversimplification, building a system that tracks tend of thousands of simultaneous transactions while giving real-time updates to drivers and riders, with 99.xx% uptime, and web/android/ios front ends, is a massively expensive effort. Lastly even if you spend hundreds of millions getting your apps on phones and building real-time infrastructure, no one is going to use your service until you acquire a massive amount of drivers in their market. Uber’s brand, which includes that massive bases of installed apps and active drivers, is a huge competitive advantage. It’s the reason 6x more riders choose Uber over Lyft every day, despite Lyft having app installs, drivers, real time software, and despite Uber itself spending the last year or so shutting on their own brand with their tawdry behavior. Even if you target Uber in a single market or small set of markets to reduce your investment costs for acquiring app installs and drivers, but now your infrastructure costs can’t be amortized over as large a base, making you a high cost competitor.
- graycat 9y ago
  > Lastly even if you spend hundreds of millions getting your apps on phones and building real-time infrastructure, no one is going to use your service until you acquire a massive amount of drivers in their market. I don't get it: The taxi business is older than cars! Before cars we had essentially taxis pulled by horses. In parts of Asia, there were taxis pulled by people, on foot or bicycle. The times I used a taxi, I just called a phone number. Now with smartphones, people can call such a phone number while walking down a street. Answering the phone can be a person and/or computer. For the branding, etc., if you are right about the difficulty of having a computer answer the call from a smartphone, then have some company write a generic app that all taxis in the world can use. The difficulty of getting an app installed? Depends on the app! I'm still having a super tough time seeing any money in a central taxi business, computers or not, smartphones or not, etc. E.g., people have done serious, well funded, polished research on just how to do dial-a-ride for 40+ years.

kesselvon 9y ago

No one has ever shown that economies of scale exist in the taxi/ride-share industry.

lenley 9y ago
I think more people would agree that the economies of scale are not even close to software. And that's even in the best case with autonomous vehicles.
valuearb 9y ago
Having a fully automated dispatch system that requires no phone operators, and with its development/operational costs amortized over worldwide markets 100x the size of any individual taxi market is a huge increase in economy of scale.

qyv 9y ago

> but that booking a ride costs Uber pennies. Their share of the ride revenues is dollars. How is that not going to be super profitable once new market development costs ramp down? Yes, booking the ride costs pennies, but actually providing the ride costs them dollars. The question is how many dollars do they need to charge customers and pay drivers to maintain them both, and whether that calculation leaves Uber (or any other of these services) any profit. This is where the 'low barrier to entry' argument comes into play; it is so easy to enter this market combined with the fact that both drivers and customers can (and already do) swap to the service with the best financial benefit to themselves. It remains to be seen what the steady state of this equation is.

valuearb 9y ago
Booking rides doesn’t cost them dollars. Whatever the customer pays, Uber skins a few bucks off of and sends the rest to the driver. The entire costs of providing the actual ride falls on the driver, Iber just pays the cost of their software platform, which again, is pennies per ride. Ultimately drivers will make what the market will bear. If they don’t make enough, driver count will fall, Uber will raise rates to compensate, until equilibrium is reached. And the business will go on, every ride costing Uber a few cents to dispatch, and then still skimming a couple bucks from the amount paid the driver.
- TheCoelacanth 9y ago
  Except that in markets they are trying to expand, they sometimes add a few bucks to what the customer pays instead of skimming a few bucks off.
  - valuearb 9y ago
    Yea, that's part of their "grow like hell" strategy. I'm guessing the new CEO is going to pull way back on that, given their massive lead.

deleted 9y ago

[deleted]