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When starting out in a city, these companies often have a chicken & egg problem around getting to critical mass. To solve this, they must offer guaranteed mini
by aeternus 8y ago
When starting out in a city, these companies often have a chicken & egg problem around getting to critical mass.
To solve this, they must offer guaranteed minimums to drivers to maintain an available network even with low ridership. Without that, passengers are unlikely to find an available ride and will easily give up on the app.
Those guaranteed minimums are expensive, but are true one-time costs. They are no longer needed once the network is established.
- morningmoon 8y agoTheir sales and marketing is 25% of their expenses, and it’s not clear to me how much of that is driver incentives. Even if they cut all driver incentives and marketing they’re still in the hole.
- aeternus 8y agoIt looks like sales and marketing only includes driver incentive's due to driver referrals. Referrals are likely a low number compared to the 'guaranteed minimum' incentives used in new markets. Looks like the other driver incentives may not be included in revenue? >This four percentage point improvement in Revenue as a Percentage of Bookings was driven by greater efficiency and effectiveness of driver incentives, which contributed approximately two percentage points, increased service fees and commissions, which contributed approximately one percentage point and revenue from the Select Express Drive Partner program, which contributed approximately one percentage point.
- morningmoon 8y agoLooks like the other driver incentives may not be included in revenue? Revenue is money they take in. If they pay drivers a minimum it will be an expense. I’m assuming under “cost of revenue” or “sales and marketing”, since they don’t categorize drivers as employees but contractors.