6 ms·

> It takes tremendous capital expenditure to build that network, and it will take tremendous capital expenditure to neutralize it. Does it, though? Every drive

> It takes tremendous capital expenditure to build that network, and it will take tremendous capital expenditure to neutralize it. Does it, though? Every driver I've talked to basically drives for "all of them". Several told me they try to find whatever apps are local for driving and they setup those alone with Uber and Lyft and simply take whatever pays the most / is more frequent. Uber's software and network are solid but I don't think there is a whole lot of loyalty there. Anyone who can drive a wedge into a spot in their business could slowly erode it, IMO. Now, they're too big to die quickly or anything like that. But it doesn't seem impossible at all to me.

bradhe 8y ago
> literally drives for "all of them". But how many have they _stopped_ driving for?
- IMTDb 8y ago
  None, they just drive less of A and more of B until they barely have any customer for A anymore until A dies.
inverse_pi 8y ago
it's economically unreasonable to drive for more than one apps simultaneously. Now, it could be economically reasonable to drive for more than one apps at many points in the past. If Lyft and Uber are so easily exchangeable, why is Lyft is still a minority in the US while spending more money? There's something more interesting here.
- freeone3000 8y ago
  It's not unreasonable, people do it all the time. Look at the window stickers in a rideshare, if they've got one they've got four, all around Seattle.
  - inverse_pi 8y ago
    like i said it's reasonable to drive for all at different points in the past but it's unreasonable to drive for all 4 at the same time. Think about it, incentive-wise, if you complete 50 trips you got $x , if you complete 100 trips you got $2x. If you only got 50 trips in you, why are you splitting them between two apps 25 trips each and got $0 incentive?
    - swiftcoder 8y ago
      Almost every driver I ride with is switching between the Lyft and Uber apps to see which one is offering better rates/destinations. The incentives appear to be insufficient to offset rate disparity in this market - unclear if that holds true everywhere.
    - thelock85 8y ago
      I'm not at all well-versed in statistics, but it seems that without enough extra cash to consistently one-up the competition in terms of incentive structures, a ride share company could not make the driver's choice of which app to use a non-random event. So yes, a driver wouldn't necessarily choose all four at once, but they also wouldn't consistently pick one.
    - IMTDb 8y ago
      It's a well known fact that the biggest factor in taxi revenues is how much paid miles/km you can do per day. The single biggest factor to increase your revenues is increasing that number. So unless the incentives are massive, a driver will always look for the next ride by any means necessary. It's nearly never worth it to "wait for a better option".
      - wbl 8y ago
        How many paid miles you do a day. Deadheading is not good.
fossuser 8y ago
Agreed - Facebook has a network effect/moat because a new service that's better in every way is useless if your friends aren't on it. Getting the network to migrate is hard and when this does happen FB is quick to buy the threat (Instagram, WhatsApp) or compete and kill them (Snap). Nobody holds an allegiance to Lyft or Uber - they pick whichever is currently a better deal for both driving and riding. Uber's recent loyalty program is the first thing that slightly moves this in favor of continuing to use Uber, but it's only a little incentive. Large swings in price still favor switching. Their only moat comes from being able to undercut competitors with VC money in any market they appear in until the competitor is dead and Uber can then raise prices to be profitable. It's probably a winner take all market. A SDC competitor would be a threat, but I'd be both impressed and surprised if Google could pull that off.
- coryfklein 8y ago
  FWIW, I have a loyalty to Lyft and will use its service even if Uber is a bit cheaper, but that's because I'm a techie that is aware of all the shady shit Uber has done.
  - brianpgordon 8y ago
    I do this as a rider, but I suspect it's different when you're a driver and your livelihood depends on it.
- jfim 8y ago
  Uber actually has one moat: their international presence. Other networks don't have it. If you're a business traveler, you can Uber out of most airports without having to install the local application, and business customers are less price sensitive than local customers in general. Definitely agree with your point about nobody having an allegiance for local rides, and it's not clear if Uber can defend against hyper local upstarts at scale.
  - munk-a 8y ago
    Except it isn't everywhere, so their moat isn't complete and is eroded by the fact that you need to rely on local transport options in a lot of areas - I don't think this really counts much as a strength of theirs, and I think their current attempts to operate in so many markets and their reliance on a lack of enforcement/laws that can change may make this more of a liability for the company.
holler 8y ago
maybe the drivers use every app, but as a user when I am traveling I only use one (uber)
afarah 8y ago
Here in Brazil my experience has been the same: drivers use all apps. I just don't see how Uber can maintain said network on the long run and still be profitable, not something I'd put my money in. What Uber is doing would generally be described as predatory pricing on other sectors. On sufficiently unregulated markets such is Uber's it's extremely risky, no anti-trust legislation is needed to trump it, just a continuously low entry barrier, including lax regulation. For a more concrete, though only related example (rather than speculation as to Uber's future) see Dow's history.
panarky 8y ago
> Does it, though? It absolutely takes tremendous capital expenditure to build the network. Uber has an accumulated deficit of $20 billion precisely because they subsidized both drivers and riders to build the two-sided network. It doesn't have to be winner-take-all. A duopoly in most medium to large cities is perfectly viable. But you won't see dozens of competitors because the drivers and riders would wait too long for a match in a sparse network. Unless the ride-share commodity can be differentiated some other way, it would take large subsidies for a long time to make much of a dent in Uber.
- eye900 8y ago
  > It absolutely takes tremendous capital expenditure to build > the network. I always think some Uber drivers shall copy Uber and run a non-profit version of Uber to compete on pricing. What can prevent this?
  - thelock85 8y ago
    Have you seen RideAustin? https://rideaustin.com https://rideaustin.com
    - mckenna 8y ago
      Love it. That's how it should be. Drivers should get max possible cut of the fares while the network operator works as a non-profit. 100B pump/dump is a scam. Think about all the indices-tracking-ETFs/Funds that will pick up this overpriced stock(our hard earned 401ks). Sigh. Silicon Valley should not have pumped up what was originally a good idea. This has a high chance of ending badly
      - deleted 8y ago
        [deleted]
      - mruts 8y ago
        What funds are those specifically? Certainly not the S&P 500. The Russell 3000, but they don’t have a choice. The point of investing is deciding what you believe in (financially speaking)! If you don’t like Uber, make some money on it! You can’t short in an IRA, or sell naked options, but you can sell futures or buy put options. All of these would express a bearish sentiment on Uber. So don’t feel like you sre being screwed, go make some alpha! For the record I agree with you, and will short Uber the day it IPOs. I’ve already made some good money on shorting Lyft and expect I’ll do well on the same strat with Uber.
maxxxxx 8y ago
"Every driver I've talked to basically drives for "all of them". Several told me they try to find whatever apps are local for driving and they setup those alone with Uber and Lyft and simply take whatever pays the most / is more frequent." I heard the same from drivers. It's the ultimate replaceable commodity. Drivers jump ship on an instant and so do I as user. I don't care if it's Lyft, Uber or anybody else.
albertshin 8y ago
For the drivers, Uber (and Lyft) tie some hurdle rates (rides/week or hours driven etc) to cash bonuses reward their loyalty. It seems like they have some status levels as well (e.g. Uber Diamond Pro) that I guess probably leads to better economics / bargaining power for the driver. So on margin drivers will specialize in one type of service especially in consistently high demand areas (i.e. cities). Unclear which one is better but on surface it seems Uber has more of these in place than Lyft IMO. For the riders, Uber Rewards and Uber Cash (that actually forces you to reload if you have below whatever your current ride costs) also make the product quite sticky and make the rider less inclined to take other options on margin. Small economic tools like these that exploit our psychological biases (e.g. loss aversion, gamification) may go a long way in protecting the moat in this commoditized, competitive environment, and Uber seems to be ahead so far. (Of course, whichever player comes out with SDCs wins the whole pie)
btmiller 8y ago
Is there a valid comparison between Uber and a company like Amazon? Amazon's loss leader strategy paid off and they're doing well now, so can Uber "become profitable whenever they want to" and be fine?
- cheerlessbog 8y ago
  Huge barriers to entry to compete with Amazon (warehouses, tech). Thus no serious direct competitor. Few barriers to entry in ride business (just another app)
- ithinkinstereo 8y ago
  Amazon was CF positive and invested it's cash heavily in capital assets (warehouse, etc.). Uber invested (burned) its money on subsidies. Not really a comparable.
- mrnobody_67 8y ago
  Amazon burned less than $100m... it was funded off of positive cashflow... inventory was shipped and paid for by customers, before Amazon had to pay the vendor. It was/is a marvellously capital efficient business.

bradhe 8y ago

> literally drives for "all of them". But how many have they _stopped_ driving for?

IMTDb 8y ago
None, they just drive less of A and more of B until they barely have any customer for A anymore until A dies.

inverse_pi 8y ago

it's economically unreasonable to drive for more than one apps simultaneously. Now, it could be economically reasonable to drive for more than one apps at many points in the past. If Lyft and Uber are so easily exchangeable, why is Lyft is still a minority in the US while spending more money? There's something more interesting here.

freeone3000 8y ago
It's not unreasonable, people do it all the time. Look at the window stickers in a rideshare, if they've got one they've got four, all around Seattle.
- inverse_pi 8y ago
  like i said it's reasonable to drive for all at different points in the past but it's unreasonable to drive for all 4 at the same time. Think about it, incentive-wise, if you complete 50 trips you got $x , if you complete 100 trips you got $2x. If you only got 50 trips in you, why are you splitting them between two apps 25 trips each and got $0 incentive?
  - swiftcoder 8y ago
    Almost every driver I ride with is switching between the Lyft and Uber apps to see which one is offering better rates/destinations. The incentives appear to be insufficient to offset rate disparity in this market - unclear if that holds true everywhere.
  - thelock85 8y ago
    I'm not at all well-versed in statistics, but it seems that without enough extra cash to consistently one-up the competition in terms of incentive structures, a ride share company could not make the driver's choice of which app to use a non-random event. So yes, a driver wouldn't necessarily choose all four at once, but they also wouldn't consistently pick one.
  - IMTDb 8y ago
    It's a well known fact that the biggest factor in taxi revenues is how much paid miles/km you can do per day. The single biggest factor to increase your revenues is increasing that number. So unless the incentives are massive, a driver will always look for the next ride by any means necessary. It's nearly never worth it to "wait for a better option".
    - wbl 8y ago
      How many paid miles you do a day. Deadheading is not good.

fossuser 8y ago

Agreed - Facebook has a network effect/moat because a new service that's better in every way is useless if your friends aren't on it. Getting the network to migrate is hard and when this does happen FB is quick to buy the threat (Instagram, WhatsApp) or compete and kill them (Snap). Nobody holds an allegiance to Lyft or Uber - they pick whichever is currently a better deal for both driving and riding. Uber's recent loyalty program is the first thing that slightly moves this in favor of continuing to use Uber, but it's only a little incentive. Large swings in price still favor switching. Their only moat comes from being able to undercut competitors with VC money in any market they appear in until the competitor is dead and Uber can then raise prices to be profitable. It's probably a winner take all market. A SDC competitor would be a threat, but I'd be both impressed and surprised if Google could pull that off.

coryfklein 8y ago
FWIW, I have a loyalty to Lyft and will use its service even if Uber is a bit cheaper, but that's because I'm a techie that is aware of all the shady shit Uber has done.
- brianpgordon 8y ago
  I do this as a rider, but I suspect it's different when you're a driver and your livelihood depends on it.
jfim 8y ago
Uber actually has one moat: their international presence. Other networks don't have it. If you're a business traveler, you can Uber out of most airports without having to install the local application, and business customers are less price sensitive than local customers in general. Definitely agree with your point about nobody having an allegiance for local rides, and it's not clear if Uber can defend against hyper local upstarts at scale.
- munk-a 8y ago
  Except it isn't everywhere, so their moat isn't complete and is eroded by the fact that you need to rely on local transport options in a lot of areas - I don't think this really counts much as a strength of theirs, and I think their current attempts to operate in so many markets and their reliance on a lack of enforcement/laws that can change may make this more of a liability for the company.

holler 8y ago

maybe the drivers use every app, but as a user when I am traveling I only use one (uber)

afarah 8y ago

Here in Brazil my experience has been the same: drivers use all apps. I just don't see how Uber can maintain said network on the long run and still be profitable, not something I'd put my money in. What Uber is doing would generally be described as predatory pricing on other sectors. On sufficiently unregulated markets such is Uber's it's extremely risky, no anti-trust legislation is needed to trump it, just a continuously low entry barrier, including lax regulation. For a more concrete, though only related example (rather than speculation as to Uber's future) see Dow's history.

panarky 8y ago

> Does it, though? It absolutely takes tremendous capital expenditure to build the network. Uber has an accumulated deficit of $20 billion precisely because they subsidized both drivers and riders to build the two-sided network. It doesn't have to be winner-take-all. A duopoly in most medium to large cities is perfectly viable. But you won't see dozens of competitors because the drivers and riders would wait too long for a match in a sparse network. Unless the ride-share commodity can be differentiated some other way, it would take large subsidies for a long time to make much of a dent in Uber.

eye900 8y ago
> It absolutely takes tremendous capital expenditure to build > the network. I always think some Uber drivers shall copy Uber and run a non-profit version of Uber to compete on pricing. What can prevent this?
- thelock85 8y ago
  Have you seen RideAustin? https://rideaustin.com https://rideaustin.com
  - mckenna 8y ago
    Love it. That's how it should be. Drivers should get max possible cut of the fares while the network operator works as a non-profit. 100B pump/dump is a scam. Think about all the indices-tracking-ETFs/Funds that will pick up this overpriced stock(our hard earned 401ks). Sigh. Silicon Valley should not have pumped up what was originally a good idea. This has a high chance of ending badly
    - deleted 8y ago
      [deleted]
    - mruts 8y ago
      What funds are those specifically? Certainly not the S&P 500. The Russell 3000, but they don’t have a choice. The point of investing is deciding what you believe in (financially speaking)! If you don’t like Uber, make some money on it! You can’t short in an IRA, or sell naked options, but you can sell futures or buy put options. All of these would express a bearish sentiment on Uber. So don’t feel like you sre being screwed, go make some alpha! For the record I agree with you, and will short Uber the day it IPOs. I’ve already made some good money on shorting Lyft and expect I’ll do well on the same strat with Uber.

maxxxxx 8y ago

"Every driver I've talked to basically drives for "all of them". Several told me they try to find whatever apps are local for driving and they setup those alone with Uber and Lyft and simply take whatever pays the most / is more frequent." I heard the same from drivers. It's the ultimate replaceable commodity. Drivers jump ship on an instant and so do I as user. I don't care if it's Lyft, Uber or anybody else.

albertshin 8y ago

For the drivers, Uber (and Lyft) tie some hurdle rates (rides/week or hours driven etc) to cash bonuses reward their loyalty. It seems like they have some status levels as well (e.g. Uber Diamond Pro) that I guess probably leads to better economics / bargaining power for the driver. So on margin drivers will specialize in one type of service especially in consistently high demand areas (i.e. cities). Unclear which one is better but on surface it seems Uber has more of these in place than Lyft IMO. For the riders, Uber Rewards and Uber Cash (that actually forces you to reload if you have below whatever your current ride costs) also make the product quite sticky and make the rider less inclined to take other options on margin. Small economic tools like these that exploit our psychological biases (e.g. loss aversion, gamification) may go a long way in protecting the moat in this commoditized, competitive environment, and Uber seems to be ahead so far. (Of course, whichever player comes out with SDCs wins the whole pie)

btmiller 8y ago

Is there a valid comparison between Uber and a company like Amazon? Amazon's loss leader strategy paid off and they're doing well now, so can Uber "become profitable whenever they want to" and be fine?

cheerlessbog 8y ago
Huge barriers to entry to compete with Amazon (warehouses, tech). Thus no serious direct competitor. Few barriers to entry in ride business (just another app)
ithinkinstereo 8y ago
Amazon was CF positive and invested it's cash heavily in capital assets (warehouse, etc.). Uber invested (burned) its money on subsidies. Not really a comparable.
mrnobody_67 8y ago
Amazon burned less than $100m... it was funded off of positive cashflow... inventory was shipped and paid for by customers, before Amazon had to pay the vendor. It was/is a marvellously capital efficient business.