4 ms·

> But most of the growth seems to be coming from underpriced rides. When the price normalisation happens Uber might not be a good service anymore. This point k

> But most of the growth seems to be coming from underpriced rides. When the price normalisation happens Uber might not be a good service anymore. This point keeps getting made, but their cut is ~25%. The driver is getting ~75%. For it to be fundamentally unsustainable, it'd have to be impossible to run the entirely administrative / virtual side of the business on 25%, which is difficult to believe.

dralley 9y ago
They lost 4.5 billion last year.
- moduspol 9y ago
  Does that imply it's fundamentally impossible to run the SaaS side of Uber's app (routing, payments, users, etc.) for 25% of the cost of every ride? Or does it imply they're likely spending a lot of money on development, expansion, and breaking into new markets (like Uber Eats)?
- deleted 9y ago
  [deleted]
thisisit 9y ago
So, you are saying as a SaaS platform Uber's ride pricing will not affect their profitability? It might be true if Uber was simply a marketplace bringing together drivers and riders through their platform. Both could then agree on a price and Uber collecting 25% irrespective of the agreed price. Something like ebay. That is not true for Uber or any other ride platform. Not only Uber brings two parties together it also sets the pricing terms. So today if drivers want a higher price or rider wants to a pay a lower price, neither can do that and have to abide by Uber's rule. So, when someone says the rides are underpriced that means Uber is setting pricing terms which are lower than existing market. A $20 Uber ride might be actually worth $30. Drivers put up with a lowered cut because a. Lot of people do this for extra cash on the side. and b. Uber's incentive schemes - do x ride and get extra money. So drivers are happy. While as a customer, I pay significantly lower which make me happy. While Uber foots the $10 difference for the sake of building an audience. But, with price corrections things might change.
- moduspol 9y ago
  > So, you are saying as a SaaS platform Uber's ride pricing will not affect their profitability? No. I'm saying other factors affect their profitability, and that it's very difficult to believe that a company that weren't spending dramatically in other areas couldn't be profitable by just running the SaaS platform for a 25% cut. The rest of your post suggests a misunderstanding of how markets work. If they're getting drivers voluntarily choosing to work for them for the rates they're paying (including in competitive markets), that rate can't be too far from the market rate. So the only way the prices could be subsidized is if the rest of the cost of the ride can't be done in the ~25% they're charging... but of course it can. That's a huge cut for administrative costs, accepting payments, and running a SaaS app. For someone to compete with Uber, they'll have to offer better service (which will be tough) or better prices (which will be lower). There's no reason to believe some bubble is going to pop and Uber prices will increase dramatically overnight. People have been saying this for years but I don't see how it's any more than wishful thinking.
elvirs 9y ago
Ubers cut is 30-45 percent range actually

dralley 9y ago

They lost 4.5 billion last year.

moduspol 9y ago
Does that imply it's fundamentally impossible to run the SaaS side of Uber's app (routing, payments, users, etc.) for 25% of the cost of every ride? Or does it imply they're likely spending a lot of money on development, expansion, and breaking into new markets (like Uber Eats)?
deleted 9y ago
[deleted]

thisisit 9y ago

So, you are saying as a SaaS platform Uber's ride pricing will not affect their profitability? It might be true if Uber was simply a marketplace bringing together drivers and riders through their platform. Both could then agree on a price and Uber collecting 25% irrespective of the agreed price. Something like ebay. That is not true for Uber or any other ride platform. Not only Uber brings two parties together it also sets the pricing terms. So today if drivers want a higher price or rider wants to a pay a lower price, neither can do that and have to abide by Uber's rule. So, when someone says the rides are underpriced that means Uber is setting pricing terms which are lower than existing market. A $20 Uber ride might be actually worth $30. Drivers put up with a lowered cut because a. Lot of people do this for extra cash on the side. and b. Uber's incentive schemes - do x ride and get extra money. So drivers are happy. While as a customer, I pay significantly lower which make me happy. While Uber foots the $10 difference for the sake of building an audience. But, with price corrections things might change.

moduspol 9y ago
> So, you are saying as a SaaS platform Uber's ride pricing will not affect their profitability? No. I'm saying other factors affect their profitability, and that it's very difficult to believe that a company that weren't spending dramatically in other areas couldn't be profitable by just running the SaaS platform for a 25% cut. The rest of your post suggests a misunderstanding of how markets work. If they're getting drivers voluntarily choosing to work for them for the rates they're paying (including in competitive markets), that rate can't be too far from the market rate. So the only way the prices could be subsidized is if the rest of the cost of the ride can't be done in the ~25% they're charging... but of course it can. That's a huge cut for administrative costs, accepting payments, and running a SaaS app. For someone to compete with Uber, they'll have to offer better service (which will be tough) or better prices (which will be lower). There's no reason to believe some bubble is going to pop and Uber prices will increase dramatically overnight. People have been saying this for years but I don't see how it's any more than wishful thinking.

elvirs 9y ago

Ubers cut is 30-45 percent range actually