12 ms·

The idea is to drag the entire ride hailing industry underwater long enough to drown out competitors, and the trick is to do this without drowning themselves in

by ihsw2 9y ago

The idea is to drag the entire ride hailing industry underwater long enough to drown out competitors, and the trick is to do this without drowning themselves in the process. This is the nature of "predatory" pricing. There is something to be said for volume and if a couple competitors die in the process then Uber's volume can only go up. Unfortunately their competitors have found a variety of ways to keep from being dragged down (eg: regulatory support of municipal taxi orgs) or ways to keep oxygen expenditure stable (eg: controlled expenditures through higher pricing and "friendlier" demeanor).

bob_theslob646 9y ago
Is that really the idea? Do you know how large the ride hailing market is? I am almost positive the point of subsidizing the price of the rides is to get you addicted/ build up a habit or get you comfortable using the service. I think they are aware of the competition and are comfortable owning 60+% versus trying to get 80%+. Their revenue is growing which is still wild despite bad press. >Unfortunately their competitors have found a variety of ways to keep from being dragged down Not a bad point but it is highly dependent on the market. In the US, Uber is 4x Lyft in market share. A common problem drivers cite is that Lyft pays better, but the volume of Uber riders is much much larger. I am not a fan of Uber, just extremely bitter at poor journalism, hence , I stopped reading at the first paragraph.
- alasdair_ 9y ago
  >Their revenue is growing which is still wild despite bad press. Not really. The revenue for a company selling dollar bills for 80c each will keep increasing until all the cash is gone as well.
  - bob_theslob646 9y ago
    >Not really. The revenue for a company selling dollar bills for 80c each will keep increasing until all the cash is gone as well. The rides that I have taken are not subsidized. Maybe it's not statistically significant but I have yet to see the subsidy in the major cities that I have traveled in. SoftBank obviously sees something in them. Who knows. I don't disagree with what you said.
    - hrasyid 9y ago
      > The rides that I have taken are not subsidized. Maybe it's not statistically significant but I have yet to see the subsidy in the major cities that I have traveled in. How do you know that?
      - bob_theslob646 9y ago
        The prices are higher per mile this year.( I have kept all my digital receipts for business travel purposes) How do you know they are subsidized?
        hrasyid 9y ago
        Because the drivers told me that they keep 100% and then Uber pay them bonuses on top of that.
- semi-extrinsic 9y ago
  > I think they are aware of the competition and are comfortable owning 60+% versus trying to get 80%+. While in reality, their overall share of the ride-hailing + taxi market in the US is ~25% as of August 2017, and far less in Europe and Asia.
  - bob_theslob646 9y ago
    >While in reality, their overall share of the ride-hailing + taxi market in the US is ~25% as of August 2017, and far less in Europe and Asia. You don't know what you are talking about. https://www.google.com/amp/s/www.recode.net/platform/amp/2017/8/31/16227670/uber-lyft-market-share-deleteuber-decline-users https://www.google.com/amp/s/www.recode.net/platform/amp/201... >That week, Uber’s market share dropped 5 percentage points compared with the previous week, from 81 percent to 76 percent, according to Second Measure data. Lyft’s market share gained about the same amount that week. Other ride-sharing companies, including Gett and Juno, saw a nominal increase that week.
    - rconti 9y ago
      I'm assuming the difference is the +taxi component in the calculations.
misun78 9y ago
"controlled expenditures through higher pricing and "friendlier" demeanor" - Assuming this refers to Lyft, Lyft's expenses compared dollar to dollar are on-par if not worse than Ubers - https://techcrunch.com/2017/11/14/unpacking-lyfts-projected-financials/ https://techcrunch.com/2017/11/14/unpacking-lyfts-projected-... As long as Uber can keep the cost per ride lower than other competitors, it just needs to wait for the burn to end faster on the competitors side before turning break-even.
- JumpCrisscross 9y ago
  > As long as Uber can keep the cost per ride lower than other competitors, it just needs to wait for the burn to end faster on the competitors side before turning break-even Uber have joined loss leading with scale, a combination that works if one has access to an endless spigot of money. The scandals have impacted Uber's fundraising. Time for eyes to match stomach. I predict, in addition to lay-offs, we'll soon see more Didi-style hand-offs of offshore ride-sharing markets. Southeast Asia to Grab et al seems reasonable. Disclaimer: this is not investment advice. Do not buy or sell anything based on this Internet comment.
  - njj023 9y ago
    And hence the potential Softbank deal, who can broker these mergers across the various asian markets. This is also why Softbank is so keen on investing in Uber over Lyft. With Lyft, the best Softbank can muster is a parternship of equals amongst disparate localized companies, which is nothing but a mess in the end. Uber allows them true mergers where one side absorbs another and both come out with a net value-add. An Uber with one or more majority regions along with stakes across the globe can be a massive massive company. Also Disclaimer: this is not investment advice. Do not buy or sell anything based on this Internet comment.
- philsnow 9y ago
  even if lyft's burn-to-revenue ratio is higher, their burn is still lower that uber's, and it's going to cost a lot fewer incremental dollars to prop up lyft's burn than uber's for a few years. some interested parties (waymo/alphabet) might be happy to foot that bill.
wpietri 9y ago
Even if they manage to kill their competition -- and I'm not expecting they will -- I don't understand what their endgame is. I don't see what their moat is. Ridesharing companies are not hard or expensive to start. They'll have a hard time extracting monopoly rents, and there isn't much of an economy of scale they can reap. And once autonomous cars become part of the picture, I think they're in an even worse position. Suddenly they're not competing just against would-be moguls. Now they're up against the car companies, who have strong brands, deep pockets, and the ability to make cars at cost. Imagine, for example, BMW extending their leasing business to on-demand car use. We also have existing car rental companies that will be eager to get in on the action. And that's not counting the zillion other outfits with strong brands and a taste for expansion. Apple, for example. Virgin. Amazon. I just don't see how this ends well for them. At best, I think 10 years from now they'll be the next Groupon: the hot startup everybody everybody loved but now nobody talks much about and is trading at a fraction of their peak valuation.
- djsumdog 9y ago
  > Ridesharing companies are not hard or expensive to start. There is a lot of work that goes into the infrastructure behind companies like Uber and Lyft. You need good engineers that build products that are reliable and well tested, to work 24/7. It is a hard problem. A lot of the smaller city taxi companies that have apps contract to larger vendors as well.
  - gaius 9y ago
    You need good engineers that build products that are reliable and well tested, to work 24/7 So did newspapers - the very definition of mission-critical computing is the the paper HAS to hit the stands the next morning. Didn't save them from half-arsed competitors running glorified blogs...
  - ams6110 9y ago
    The backend systems can be SaaS. Amazon could do it. Anyone can then buy a local franchise for that backend service in their area. Or it could be offered whitelabel.
  - 9y ago
busterarm 9y ago
I'm somewhat reminded of Jack Tramiel's pricing scheme in the mid-late 80s with Commodore. Great, popular machines beating everyone on price until they couldn't afford to anymore. They didn't capture the market and they failed.
- kjksf 9y ago
  They did capture the market. Commodore 64 was a profitable bestseller. Tramiel left Commodore while it was still very successful, founded new company, bought Atari and tried to replicate Commodore 64 success with Atari ST. Commodore failed because they failed to transition from Commodore 64 to a better specced machines, despite having a technological marvel at their hands (Commodore Amiga).
  - busterarm 9y ago
    Yeah but it's also well documented how the pricing strategy he chose left the company unable to adapt at that critical time you mentioned.
harshgupta 9y ago
Currently the biggest drag on their expenditure is drivers. Their golden bullet is making an efficient transition to self-driving, all while maintaining a leading position

by ihsw2 9y ago

bob_theslob646 9y ago

Is that really the idea? Do you know how large the ride hailing market is? I am almost positive the point of subsidizing the price of the rides is to get you addicted/ build up a habit or get you comfortable using the service. I think they are aware of the competition and are comfortable owning 60+% versus trying to get 80%+. Their revenue is growing which is still wild despite bad press. >Unfortunately their competitors have found a variety of ways to keep from being dragged down Not a bad point but it is highly dependent on the market. In the US, Uber is 4x Lyft in market share. A common problem drivers cite is that Lyft pays better, but the volume of Uber riders is much much larger. I am not a fan of Uber, just extremely bitter at poor journalism, hence , I stopped reading at the first paragraph.

alasdair_ 9y ago
>Their revenue is growing which is still wild despite bad press. Not really. The revenue for a company selling dollar bills for 80c each will keep increasing until all the cash is gone as well.
- bob_theslob646 9y ago
  >Not really. The revenue for a company selling dollar bills for 80c each will keep increasing until all the cash is gone as well. The rides that I have taken are not subsidized. Maybe it's not statistically significant but I have yet to see the subsidy in the major cities that I have traveled in. SoftBank obviously sees something in them. Who knows. I don't disagree with what you said.
  - hrasyid 9y ago
    > The rides that I have taken are not subsidized. Maybe it's not statistically significant but I have yet to see the subsidy in the major cities that I have traveled in. How do you know that?
    - bob_theslob646 9y ago
      The prices are higher per mile this year.( I have kept all my digital receipts for business travel purposes) How do you know they are subsidized?
      - hrasyid 9y ago
        Because the drivers told me that they keep 100% and then Uber pay them bonuses on top of that.
semi-extrinsic 9y ago
> I think they are aware of the competition and are comfortable owning 60+% versus trying to get 80%+. While in reality, their overall share of the ride-hailing + taxi market in the US is ~25% as of August 2017, and far less in Europe and Asia.
- bob_theslob646 9y ago
  >While in reality, their overall share of the ride-hailing + taxi market in the US is ~25% as of August 2017, and far less in Europe and Asia. You don't know what you are talking about. https://www.google.com/amp/s/www.recode.net/platform/amp/2017/8/31/16227670/uber-lyft-market-share-deleteuber-decline-users https://www.google.com/amp/s/www.recode.net/platform/amp/201... >That week, Uber’s market share dropped 5 percentage points compared with the previous week, from 81 percent to 76 percent, according to Second Measure data. Lyft’s market share gained about the same amount that week. Other ride-sharing companies, including Gett and Juno, saw a nominal increase that week.
  - rconti 9y ago
    I'm assuming the difference is the +taxi component in the calculations.

misun78 9y ago

"controlled expenditures through higher pricing and "friendlier" demeanor" - Assuming this refers to Lyft, Lyft's expenses compared dollar to dollar are on-par if not worse than Ubers - https://techcrunch.com/2017/11/14/unpacking-lyfts-projected-financials/ https://techcrunch.com/2017/11/14/unpacking-lyfts-projected-... As long as Uber can keep the cost per ride lower than other competitors, it just needs to wait for the burn to end faster on the competitors side before turning break-even.

JumpCrisscross 9y ago
> As long as Uber can keep the cost per ride lower than other competitors, it just needs to wait for the burn to end faster on the competitors side before turning break-even Uber have joined loss leading with scale, a combination that works if one has access to an endless spigot of money. The scandals have impacted Uber's fundraising. Time for eyes to match stomach. I predict, in addition to lay-offs, we'll soon see more Didi-style hand-offs of offshore ride-sharing markets. Southeast Asia to Grab et al seems reasonable. Disclaimer: this is not investment advice. Do not buy or sell anything based on this Internet comment.
- njj023 9y ago
  And hence the potential Softbank deal, who can broker these mergers across the various asian markets. This is also why Softbank is so keen on investing in Uber over Lyft. With Lyft, the best Softbank can muster is a parternship of equals amongst disparate localized companies, which is nothing but a mess in the end. Uber allows them true mergers where one side absorbs another and both come out with a net value-add. An Uber with one or more majority regions along with stakes across the globe can be a massive massive company. Also Disclaimer: this is not investment advice. Do not buy or sell anything based on this Internet comment.
philsnow 9y ago
even if lyft's burn-to-revenue ratio is higher, their burn is still lower that uber's, and it's going to cost a lot fewer incremental dollars to prop up lyft's burn than uber's for a few years. some interested parties (waymo/alphabet) might be happy to foot that bill.

wpietri 9y ago

Even if they manage to kill their competition -- and I'm not expecting they will -- I don't understand what their endgame is. I don't see what their moat is. Ridesharing companies are not hard or expensive to start. They'll have a hard time extracting monopoly rents, and there isn't much of an economy of scale they can reap. And once autonomous cars become part of the picture, I think they're in an even worse position. Suddenly they're not competing just against would-be moguls. Now they're up against the car companies, who have strong brands, deep pockets, and the ability to make cars at cost. Imagine, for example, BMW extending their leasing business to on-demand car use. We also have existing car rental companies that will be eager to get in on the action. And that's not counting the zillion other outfits with strong brands and a taste for expansion. Apple, for example. Virgin. Amazon. I just don't see how this ends well for them. At best, I think 10 years from now they'll be the next Groupon: the hot startup everybody everybody loved but now nobody talks much about and is trading at a fraction of their peak valuation.

djsumdog 9y ago
> Ridesharing companies are not hard or expensive to start. There is a lot of work that goes into the infrastructure behind companies like Uber and Lyft. You need good engineers that build products that are reliable and well tested, to work 24/7. It is a hard problem. A lot of the smaller city taxi companies that have apps contract to larger vendors as well.
- gaius 9y ago
  You need good engineers that build products that are reliable and well tested, to work 24/7 So did newspapers - the very definition of mission-critical computing is the the paper HAS to hit the stands the next morning. Didn't save them from half-arsed competitors running glorified blogs...
- ams6110 9y ago
  The backend systems can be SaaS. Amazon could do it. Anyone can then buy a local franchise for that backend service in their area. Or it could be offered whitelabel.
- 9y ago

busterarm 9y ago

I'm somewhat reminded of Jack Tramiel's pricing scheme in the mid-late 80s with Commodore. Great, popular machines beating everyone on price until they couldn't afford to anymore. They didn't capture the market and they failed.

kjksf 9y ago
They did capture the market. Commodore 64 was a profitable bestseller. Tramiel left Commodore while it was still very successful, founded new company, bought Atari and tried to replicate Commodore 64 success with Atari ST. Commodore failed because they failed to transition from Commodore 64 to a better specced machines, despite having a technological marvel at their hands (Commodore Amiga).
- busterarm 9y ago
  Yeah but it's also well documented how the pricing strategy he chose left the company unable to adapt at that critical time you mentioned.

harshgupta 9y ago

Currently the biggest drag on their expenditure is drivers. Their golden bullet is making an efficient transition to self-driving, all while maintaining a leading position