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There is literally no way for a mass-market taxi service to make money unless they have a monopoly, or some unexpected disruptive technology comes along that gi

There is literally no way for a mass-market taxi service to make money unless they have a monopoly, or some unexpected disruptive technology comes along that gives one company an unassailable advantage in lowering costs. The Uber app was the original innovation, but it's not particularly innovative anymore. Besides Lyft, traditional taxi companies have similar apps in some markets. Skirting regulation and good labor practices were also supposed to help, but that can't last once you become competitive with the establishment. Self-driving cars were supposed to lower labor costs, but that's not going to be a thing for decades if it ever works. But even if it does, it won't be an exclusive technology. They won't be able to make any more profit from it. If their costs go down, so will everyone else's and they won't be able to undercut the competition without continuing to lose money.

prolepunk 8y ago
If self-driving technology is mature enough to be used and there are several implementations to choose from, what stops care manufacturers to go after that market directly and undercutting everyone else? * They have industrial facilities to build cars * They have dealership networks to repair cars * They have capital or can borrow easily to do it I can even argue that all that stops car manufacturers from operating this are government regulations -- taxi medallions as well as anti-monopoly laws. Once Uber, lyft and the like undercut those regulations, someone else can undercut them.
- ghaff 8y ago
  The same thing that largely keeps them from operating dealers (yes, now there are laws and contracts, but it was the manufacturers who wanted dealers in the first place) and rental car companies. Although there are legal impediments, companies often want to focus on a specific part of the value chain rather than having to own the whole thing.
  - Pamar 8y ago
    Car2Go is a subsidiary of Daimler, though. And I suppose that being able to produce a large number of cars (all identical models and setups, all the same colour etc.) is something that an automotive company can easily leverage.
  - tjohns 8y ago
    Silvercar was recently acquired by Audi, so that's an example of a auto manufacturer running an car rental business.
    - ghaff 8y ago
      That's why I said largely. I think one or more of the US manufacturers may have investments in rental car companies as well. But I'll still argue the basic point; companies often don't want to own the whole chain. (Auto manufacturers also use a lot of upstream suppliers as well rather than designing and building many of their components.)
    - atmosx 8y ago
      All auto manufacturers have stakes to ride hailing apps if not outright owning one or more of them.
- _Microft 8y ago
  That's Tesla's plan and the reason why they want to forbid to use their full self-driving system for providing rides to third party taxi services.
- kickopotomus 8y ago
  As a sibling comment noted, that is Telsa's plan. I believe GM is wanting to do something similar with Cruise. However, I feel that both of those companies are still way behind Waymo in terms of R&D. Personally, I think that Waymo is the one to watch. If they get their first, they already have the ride hailing infrastructure/user network in place (Google Maps) and may even license the tech out to auto manufacturers.
  - natch 8y ago
    Regardless of who is standing in a few years, as a customer I will choose to ride in a Tesla whenever possible for a few reasons. 1) safety 2) fun 3) support the transition to sustainable transport 4) if FSD is part of the equation by then I think Tesla is going to have the best implementation, based on their overwhelmingly massive lead in real data.
- bluGill 8y ago
  Vertical integration like this is generally considered bad in business. Sure it is possible, but it is better for car companies to work on making a better car than split their attention and risk not paying enough attention to either...
ghaff 8y ago
People are willing to pay to get driven around for relatively short distances on-demand so I'm not sure why that's an inherently unprofitable business. I assume many taxi companies and black car companies make money. What's probably true is that they probably have to raise prices and deal with decreased volumes in at least many markets to do so--and probably grow more organically. And it won't be the kind of profitability that's expected from VC-funded companies.
- harryh 8y ago
  I can imagine that running a taxi company might be a lot like running an airline (a notoriously money losing business). Four out of five of Porter's five forces are working against you: - relatively easy for new entrants to enter the market - lots of consumer substitutes - lots of customer buying power - lots of competition
  - jandrese 8y ago
    This is the conundrum of creating a better marketplace. An optimal market has 0 profit opportunities. In order to make money the market must be flawed in some way. Luckily in the real world perfect markets don't exist, but in certain sectors technology has made life difficult for people who had previously had a solid reliable income with the old inefficient system.
    - benj111 8y ago
      "An optimal market has 0 profit opportunities" That doesn't quite right to me. A market with the smallest profit opportunity of a selection (say worse that government bonds) wouldn't see investment to correct that inefficiency. Zero may be 'best' case, practically speaking though no one's going to arbitrage an opportunity, that's less than the opportunity cost. So it seems to me the optimal market would a profit opportunity somewhere between being the 2nd best profit opportunity and zero profit opportunity, depending what you set the opportunity cost at.
      - 8y ago
TuringNYC 8y ago
>> There is literally no way for a mass-market taxi service to make money unless they have a monopoly, or some unexpected disruptive technology comes along that gives one company an unassailable advantage in lowering costs. I dont understand this comment. Traditional taxis made money for generations, why cant Uber? If anything, Uber has more advantages. EVEN: Traditional taxis had the "rent" of medallions. Uber has the rent of Corporate HQ costs. DRAWBACK: Uber gets raw deals in some cities because the local Taxi commission has sweetheart deals with the city (Case in point: NYC, NYC TLC, and Mayor DeBlasio: https://www.nytimes.com/2012/07/18/nyregion/de-blasio-reaps-big-donations-from-taxi-industry-he-aided.html https://www.nytimes.com/2012/07/18/nyregion/de-blasio-reaps-...) BENEFIT: More efficiency, less wasted miles w/o riders. BENEFIT: Group rides are highly efficient. BENEFIT: National/international scale BENEFIT: National/international scale to get better loan rates, prices, and even self-loan to drivers. This isnt to say they dont have to raise prices, but I dont see how they can never make money.
- bryanlarsen 8y ago
  Taxis made money because the medallion situation limited competition, and because fare prices were fixed by the city at levels that ensured a profit.
  - TuringNYC 8y ago
    I see your point, in theory, but the increasing medallion investment/rent just lowered profit further and further until the profit to drivers was some very low wage. The driver is not usually the medallion owner, and hence the rent for the medallion goes elsewhere. The driver just ends up with the metered fare net of medallion costs. Similarly, Uber leads to a sort of perfect competition equilibrium (https://en.wikipedia.org/wiki/Perfect_competition https://en.wikipedia.org/wiki/Perfect_competition) where drivers keep entering the marketplace until wages drop to some low wage, but not below that (because below that, drivers start to leave the marketplace, thus decreasing supply and increasing the equilibrium price point.)
    - jfim 8y ago
parksy 8y ago
But in a way, that's the beauty of disruptive use of technology. Without the innovation of the Uber app, the traditional taxi cartels would have no incentive to improve their services and the fact that they have been forced to do so in order to compete benefits the consumer. They're not quite there yet, and are still catching up. The next logical step is a lift aggregation service that creates a marketplace. I want a lift from x to y to z. Bid on me.
- Skunkleton 8y ago
  As it stands the price you pay for a ride in an uber is unfairly low. Driving it even lower would be irresponsible.
  - rubicon33 8y ago
    Call me a snob, but Uber's criteria for what qualifies as an acceptable car has dramatically declined to the point where even Taxis are sometimes "nicer". Combine that with the fact that the drivers often don't know the neighborhood and rely exclusively on GPS (so tend to be worse drivers than a taxi). I'm left feeling like the fare - strictly from the perspective of a consumer - is actually too high.
    - mlindner 8y ago
      That's when Uber Black is an option. Which is around what traditional taxis used to cost.
    - cbhl 8y ago
      What are your thoughts on Uber Select / Uber Black / Lyft Lux / Lyft Lux Black?
      - rubicon33 8y ago
        Definitely a fan of the Select and Black options. In fact, I've been using them more and more. The price - while higher - feels more aligned with what I would consider to be "good value". Ranked in order of importance for me are: - A competent + safe driver, preferably someone who knows the area. - A nice, clean, comfortable ride. - A driver who doesn't talk to me. All 3 of these are markedly improved in both the Select and Black options. Given I don't take Uber that often, I can justify the expense. If it was something I relied upon on a more regular basis I just don't think I could justify using Select/Black.
pbreit 8y ago
Uber had $940 million in Contribution Profit in 2018. It prints money on non-pool rides in mature markets.
- Marazan 8y ago
  What does that mean?
  - pbreit 8y ago
    Uber revenues minus cost to operate Uber car service = $940 million in 2018.
- benj111 8y ago
  If I make a widget for $100 (50/50 fixed, variable) and sell it for $90, I've covered the variable costs. But If I only have one line, all those fixed costs are attributable to that one line, so its still not making a profit. If you had multiple lines and one line that wasn't making a profit, but was making a contribution to fixed costs, it maybe better overall to keep that line in place. That isn't what we seem to be talking about here, but it depends how 'fixed' the fixed costs are.
grey-area 8y ago
Self-driving cars are already here (Phoenix, Arizona). That and falling electric car prices will be the key advantage. Uber won’t be the one to benefit though, as the other companies at the cutting edge are too savvy to let them (Waymo, Tesla). It is very hard to get right and I think will give those companies an advantage for years.
jsloss 8y ago
I'm not sure about the future profitability of this space, but I think you're disregarding a few key points. 1. The innovation was less the app and more solving supply problems. No app will be able to change that for the taxi business. 2. Competitive advantage in this space is having more drivers and less wait time. That drives folks to use one provider over another. The lock in isn't the tech, but the availability of rides. You're right that the lock in or network effect in the ride sharing space is very different than other big tech cos (FB, Netflix, AMZN etc) in that they're localized, and should result in more competition. The bet investors are making is that the market will shake out with one category leader, a runner up and virtually no competition beyond that. Should be interesting to watch.
- bobthepanda 8y ago
  1. The regulations that Uber skirted around and then loosened up to provide more drivers can also be used by other companies. The gates are open, but not only to Uber. 2. Drivers and customers are fickle. My market used to be mostly Uber and is now mostly Lyft because all the drivers hate Uber. When Uber and Lyft run out of cash to blow on subsidies, they don't really have much of a selling point. The problem with Uber's business model is that the main cost is the driver, who is not going to go anywhere anytime soon. It's no Amazon, where they have efficiencies of scale in logistics, datacenters, etc.; you don't get economies of scale by being bigger in the taxi business. It seems more like Moviepass.
  - jsloss 8y ago
    All great points. I guess we'll see where the chips land.
  - repolfx 8y ago
    Are you sure there are no economies of scale? Everyone I know uses Uber exclusively for taxis now and it's partly because whenever they travel Uber works great, but using local taxis is a pain. The "taxis are local" argument is right some of the time but many people use taxis primarily when travelling, and that's a market that really only Uber and Lyft can automate with any degree of success. I don't want 50 half-baked taxi apps on my phone.
WhompingWindows 8y ago
Your last point is the most salient. Solving autonomy is a much harder problem than making an app. Anyone who solves autonomy can easily make their own app, or can partner with any upstart in the ride-hailing world, who would be desperate to get that autonomy software. Hard to see how Uber or Lyft truly profits unless they're the ones who own the autonomy code.
alkonaut 8y ago
Are you saying in any city with an un-regulated taxi market means all taxi companies operate at a loss? That doesn’t sound right (Stockholm, Sweden for example would be a counterexample). Perhaps I misunderstood “mass market”?
amvalo 8y ago
Pooling is a nice cost saving innovation.
petra 8y ago
UBER won't be a monopoly. But UBER and Lyft could offer lower costs than taxis, because of cheap labor, no medalions, and less empty rides they could offer their drivers. So it's basically a UBER/Lyft duopoly, after the growing phase. And Duopolies are good businesses to be in.
- dwild 8y ago
  > because of cheap labor, no medalions, and less empty rides they could offer their drivers. You forget that dispatcher already take a pretty big cut already and I don't know where you live, but here in Montreal, we have a bunch of them that are all profitable. Sure dispatcher started to makes apps, but they only cover a tiny market (thus the apps is more expensive to develop per ride than Uber) and plenty of their clients prefer calling, thus an human operator (which Uber doesn't has to pay for). Our government also decided a few years ago to force them to accept credit/debit card. One of my friend worked for one of the operator that rented terminal to taxis. They were profitable too. If Uber can't make money by being much more efficient in MULTIPLE already profitable business and that's WORLDWIDE, there's something pretty wrong.
sonnyblarney 8y ago
Yes, there is literally a way to make money. Assuming you can get everyone to adhere to regulations etc.. Then Uber could be seen as a marketplace connecting drivers and riders - and there is material value in that. And it doesn't have to be a lot for Uber to make money. Not $100B valuation money, but money. And there are de-facto network effects, brand etc. that play into that. Lyft and Uber might not be worth their valuation, but there's value add there.
YeahSureWhyNot 8y ago
The disruption of taxi/rental business is going to come way before from self driving cars becomes perfect. most people know how to and prefer to drive especially if its not long distance inside dense urban areas. the real use case will be the fact that self driving car will drive itself at its own pace to nearest suitable pick up point, where u can get behind the wheel and drive it where u need to go, then leave it there for it to figure out how to drive itself to next customer who needs it. half of the population prefers to drive the car themselves or their partner rather than share that tiny space with a stranger and be driven around. this completely solves the liability issue and pr nightmares that will come from 'killed by/because of self driving car' news.
menzoic 8y ago
What about UberEats?
harryf 8y ago
> The Uber app was the original innovation No it wasn't. There were a ton of taxi related apps and startups before Uber and nothing about Uber's app was particularly impressive IP-wise - it's basically just distance search. What Uber did that was unusual for a tech startup was to invest in lobbying - https://www.theverge.com/2014/12/14/7390395/uber-lobbying-steamroller https://www.theverge.com/2014/12/14/7390395/uber-lobbying-st... - it allowed them to play across regulated markets where no one else had before.
- Anderkent 8y ago
  There were a ton of taxi related apps but none of them did what Uber did; at least in London. There were apps where you could book a taxi, telling them when and where to pick you up, but if you expected anyone to show up in the next 5 minutes you were crazy. And they were twice as expensive as uber, of course.
- kelnos 8y ago
  My impression was the the previous tax-related apps just connected riders with the existing establishment taxi companies. They didn't have much in the realm of enforcing accountability or reliability. It was nearly the same as calling the taxi dispatcher yourself and hoping a taxi would show up, except an app would do it for you.
- standardUser 8y ago
  In San Francisco there was nothing before Uber and similar companies started operating. You called a phone number (I used to have it memorized) and some surly individual would bark at you and then maybe a taxi would come in 40 minutes or maybe not. Later, the driver would explain the credit card machine was broken and you'd need to pay in cash.
therealx 8y ago
Do people actually use the taxi uber like apps? I ask everyone I make rideshare smalltalk with and no one has ever even said they'd installed it (small, poor sample size, I know.)
nospitate 8y ago
You are just fundamentally wrong. There is a cost associated with operating the “dispatch,” operating the car and paying the employees/contractors. Take that cost, distribute it over the number of rides you expect to give to your customers and then add a little on top. The question is whether or not the customers will engage in that transaction or is the cost too high? Uber has plenty of fat to cut. If it were running efficiently, there is no possible way it would go out of business. You think Uber will raise their prices 10 percent and then everyone will decide to give up ride-sharing? Uber is the most efficient method of doing taxis. It succeeds by default. I don’t understand how you can possibly think that Uber can’t make money.
- freyr 8y ago
  There's making money, and there's making enough money to justify an $84B valuation.
  - dwild 8y ago
    > to justify an $84B valuation He wasn't arguing that the investor were going to make money out of it. He was arguing that as a dispatcher, they can be more efficient than the current dispatcher, thus can make money.
    - deleted 8y ago
      [deleted]
99_00 8y ago
A monopoly is exactly how they'll do it. If a competitor pops up they will undercut them. They've run over local governments to get their cars into the highly regulated taxi industry and basically operate under their own rules so I have no doubt they can operate anti-competitively too.
BurningFrog 8y ago
> There is literally no way for a mass-market taxi service to make money unless they have a monopoly, or some unexpected disruptive technology comes along that gives one company an unassailable advantage in lowering costs. Confident brash nonsensical statement with no factual argument to back it up. The fact that it is voted top comment on HN says some unflattering things about this place.
benbristow 8y ago
I find local taxi companies have started making their own 'Uber' apps that accept card and it's fantastic. And you don't have to deal with the awful rating system Uber have. Whoever thought it was a good idea to have drivers rate their customers really doesn't understand customer service. If you're out with some friends on a night out for example, of course you're going to get a bad rating (because your friends are drunk and probably a bit rowdy) which affects you during the working day or just solo. Local taxi services are usually cheaper too as they don't do the surge pricing like Uber do. Uber have really driven me away as a customer to the local services. Also local taxis don't cancel so they can abuse the surge system.
olalonde 8y ago
You made quite a big claim in the first sentence but the rest of your comment doesn't explain it.
shafyy 8y ago
> Self-driving cars were supposed to lower labor costs, but that's not going to be a thing for decades if it ever works. Decades? Maybe half a decade until it starts rolling out in major markets. > But even if it does, it won't be an exclusive technology. Of course it will be exclusive if the developing company decides not to make it publicly available. And why should they? > If their costs go down, so will everyone else's and they won't be able to undercut the competition without continuing to lose money. This is econ 101. There will be an equilibirium price. Or do you think just because it's easy to make pizza since hundreds of years and there are probably a million pizza suppliers in the world, the price of pizza went to 0?
- speedplane 8y ago
  >> Self-driving cars were supposed to lower labor costs, but that's not going to be a thing for decades if it ever works. > Decades? Maybe half a decade until it starts rolling out in major markets. What is the evidence for this? Five years ago the same claim was made, and it hasn't happened. It's not at all clear to me that mass market self driving cars will appear in 5 years, 20 years, or 100 years.
thatoneuser 8y ago
Autonomous driving is "decades" away? How do you figure?

prolepunk 8y ago

If self-driving technology is mature enough to be used and there are several implementations to choose from, what stops care manufacturers to go after that market directly and undercutting everyone else? * They have industrial facilities to build cars * They have dealership networks to repair cars * They have capital or can borrow easily to do it I can even argue that all that stops car manufacturers from operating this are government regulations -- taxi medallions as well as anti-monopoly laws. Once Uber, lyft and the like undercut those regulations, someone else can undercut them.

ghaff 8y ago
The same thing that largely keeps them from operating dealers (yes, now there are laws and contracts, but it was the manufacturers who wanted dealers in the first place) and rental car companies. Although there are legal impediments, companies often want to focus on a specific part of the value chain rather than having to own the whole thing.
- Pamar 8y ago
  Car2Go is a subsidiary of Daimler, though. And I suppose that being able to produce a large number of cars (all identical models and setups, all the same colour etc.) is something that an automotive company can easily leverage.
- tjohns 8y ago
  Silvercar was recently acquired by Audi, so that's an example of a auto manufacturer running an car rental business.
  - ghaff 8y ago
    That's why I said largely. I think one or more of the US manufacturers may have investments in rental car companies as well. But I'll still argue the basic point; companies often don't want to own the whole chain. (Auto manufacturers also use a lot of upstream suppliers as well rather than designing and building many of their components.)
  - atmosx 8y ago
    All auto manufacturers have stakes to ride hailing apps if not outright owning one or more of them.
_Microft 8y ago
That's Tesla's plan and the reason why they want to forbid to use their full self-driving system for providing rides to third party taxi services.
kickopotomus 8y ago
As a sibling comment noted, that is Telsa's plan. I believe GM is wanting to do something similar with Cruise. However, I feel that both of those companies are still way behind Waymo in terms of R&D. Personally, I think that Waymo is the one to watch. If they get their first, they already have the ride hailing infrastructure/user network in place (Google Maps) and may even license the tech out to auto manufacturers.
- natch 8y ago
  Regardless of who is standing in a few years, as a customer I will choose to ride in a Tesla whenever possible for a few reasons. 1) safety 2) fun 3) support the transition to sustainable transport 4) if FSD is part of the equation by then I think Tesla is going to have the best implementation, based on their overwhelmingly massive lead in real data.
bluGill 8y ago
Vertical integration like this is generally considered bad in business. Sure it is possible, but it is better for car companies to work on making a better car than split their attention and risk not paying enough attention to either...

ghaff 8y ago

People are willing to pay to get driven around for relatively short distances on-demand so I'm not sure why that's an inherently unprofitable business. I assume many taxi companies and black car companies make money. What's probably true is that they probably have to raise prices and deal with decreased volumes in at least many markets to do so--and probably grow more organically. And it won't be the kind of profitability that's expected from VC-funded companies.

harryh 8y ago
I can imagine that running a taxi company might be a lot like running an airline (a notoriously money losing business). Four out of five of Porter's five forces are working against you: - relatively easy for new entrants to enter the market - lots of consumer substitutes - lots of customer buying power - lots of competition
- jandrese 8y ago
  This is the conundrum of creating a better marketplace. An optimal market has 0 profit opportunities. In order to make money the market must be flawed in some way. Luckily in the real world perfect markets don't exist, but in certain sectors technology has made life difficult for people who had previously had a solid reliable income with the old inefficient system.
  - benj111 8y ago
    "An optimal market has 0 profit opportunities" That doesn't quite right to me. A market with the smallest profit opportunity of a selection (say worse that government bonds) wouldn't see investment to correct that inefficiency. Zero may be 'best' case, practically speaking though no one's going to arbitrage an opportunity, that's less than the opportunity cost. So it seems to me the optimal market would a profit opportunity somewhere between being the 2nd best profit opportunity and zero profit opportunity, depending what you set the opportunity cost at.
    - 8y ago

TuringNYC 8y ago

>> There is literally no way for a mass-market taxi service to make money unless they have a monopoly, or some unexpected disruptive technology comes along that gives one company an unassailable advantage in lowering costs. I dont understand this comment. Traditional taxis made money for generations, why cant Uber? If anything, Uber has more advantages. EVEN: Traditional taxis had the "rent" of medallions. Uber has the rent of Corporate HQ costs. DRAWBACK: Uber gets raw deals in some cities because the local Taxi commission has sweetheart deals with the city (Case in point: NYC, NYC TLC, and Mayor DeBlasio: https://www.nytimes.com/2012/07/18/nyregion/de-blasio-reaps-big-donations-from-taxi-industry-he-aided.html https://www.nytimes.com/2012/07/18/nyregion/de-blasio-reaps-...) BENEFIT: More efficiency, less wasted miles w/o riders. BENEFIT: Group rides are highly efficient. BENEFIT: National/international scale BENEFIT: National/international scale to get better loan rates, prices, and even self-loan to drivers. This isnt to say they dont have to raise prices, but I dont see how they can never make money.

bryanlarsen 8y ago
Taxis made money because the medallion situation limited competition, and because fare prices were fixed by the city at levels that ensured a profit.
- TuringNYC 8y ago
  I see your point, in theory, but the increasing medallion investment/rent just lowered profit further and further until the profit to drivers was some very low wage. The driver is not usually the medallion owner, and hence the rent for the medallion goes elsewhere. The driver just ends up with the metered fare net of medallion costs. Similarly, Uber leads to a sort of perfect competition equilibrium (https://en.wikipedia.org/wiki/Perfect_competition https://en.wikipedia.org/wiki/Perfect_competition) where drivers keep entering the marketplace until wages drop to some low wage, but not below that (because below that, drivers start to leave the marketplace, thus decreasing supply and increasing the equilibrium price point.)
  - jfim 8y ago

parksy 8y ago

But in a way, that's the beauty of disruptive use of technology. Without the innovation of the Uber app, the traditional taxi cartels would have no incentive to improve their services and the fact that they have been forced to do so in order to compete benefits the consumer. They're not quite there yet, and are still catching up. The next logical step is a lift aggregation service that creates a marketplace. I want a lift from x to y to z. Bid on me.

Skunkleton 8y ago
As it stands the price you pay for a ride in an uber is unfairly low. Driving it even lower would be irresponsible.
- rubicon33 8y ago
  Call me a snob, but Uber's criteria for what qualifies as an acceptable car has dramatically declined to the point where even Taxis are sometimes "nicer". Combine that with the fact that the drivers often don't know the neighborhood and rely exclusively on GPS (so tend to be worse drivers than a taxi). I'm left feeling like the fare - strictly from the perspective of a consumer - is actually too high.
  - mlindner 8y ago
    That's when Uber Black is an option. Which is around what traditional taxis used to cost.
  - cbhl 8y ago
    What are your thoughts on Uber Select / Uber Black / Lyft Lux / Lyft Lux Black?
    - rubicon33 8y ago
      Definitely a fan of the Select and Black options. In fact, I've been using them more and more. The price - while higher - feels more aligned with what I would consider to be "good value". Ranked in order of importance for me are: - A competent + safe driver, preferably someone who knows the area. - A nice, clean, comfortable ride. - A driver who doesn't talk to me. All 3 of these are markedly improved in both the Select and Black options. Given I don't take Uber that often, I can justify the expense. If it was something I relied upon on a more regular basis I just don't think I could justify using Select/Black.

pbreit 8y ago

Uber had $940 million in Contribution Profit in 2018. It prints money on non-pool rides in mature markets.

Marazan 8y ago
What does that mean?
- pbreit 8y ago
  Uber revenues minus cost to operate Uber car service = $940 million in 2018.
benj111 8y ago
If I make a widget for $100 (50/50 fixed, variable) and sell it for $90, I've covered the variable costs. But If I only have one line, all those fixed costs are attributable to that one line, so its still not making a profit. If you had multiple lines and one line that wasn't making a profit, but was making a contribution to fixed costs, it maybe better overall to keep that line in place. That isn't what we seem to be talking about here, but it depends how 'fixed' the fixed costs are.

grey-area 8y ago

Self-driving cars are already here (Phoenix, Arizona). That and falling electric car prices will be the key advantage. Uber won’t be the one to benefit though, as the other companies at the cutting edge are too savvy to let them (Waymo, Tesla). It is very hard to get right and I think will give those companies an advantage for years.

jsloss 8y ago

I'm not sure about the future profitability of this space, but I think you're disregarding a few key points. 1. The innovation was less the app and more solving supply problems. No app will be able to change that for the taxi business. 2. Competitive advantage in this space is having more drivers and less wait time. That drives folks to use one provider over another. The lock in isn't the tech, but the availability of rides. You're right that the lock in or network effect in the ride sharing space is very different than other big tech cos (FB, Netflix, AMZN etc) in that they're localized, and should result in more competition. The bet investors are making is that the market will shake out with one category leader, a runner up and virtually no competition beyond that. Should be interesting to watch.

bobthepanda 8y ago
1. The regulations that Uber skirted around and then loosened up to provide more drivers can also be used by other companies. The gates are open, but not only to Uber. 2. Drivers and customers are fickle. My market used to be mostly Uber and is now mostly Lyft because all the drivers hate Uber. When Uber and Lyft run out of cash to blow on subsidies, they don't really have much of a selling point. The problem with Uber's business model is that the main cost is the driver, who is not going to go anywhere anytime soon. It's no Amazon, where they have efficiencies of scale in logistics, datacenters, etc.; you don't get economies of scale by being bigger in the taxi business. It seems more like Moviepass.
- jsloss 8y ago
  All great points. I guess we'll see where the chips land.
- repolfx 8y ago
  Are you sure there are no economies of scale? Everyone I know uses Uber exclusively for taxis now and it's partly because whenever they travel Uber works great, but using local taxis is a pain. The "taxis are local" argument is right some of the time but many people use taxis primarily when travelling, and that's a market that really only Uber and Lyft can automate with any degree of success. I don't want 50 half-baked taxi apps on my phone.

WhompingWindows 8y ago

Your last point is the most salient. Solving autonomy is a much harder problem than making an app. Anyone who solves autonomy can easily make their own app, or can partner with any upstart in the ride-hailing world, who would be desperate to get that autonomy software. Hard to see how Uber or Lyft truly profits unless they're the ones who own the autonomy code.

alkonaut 8y ago

Are you saying in any city with an un-regulated taxi market means all taxi companies operate at a loss? That doesn’t sound right (Stockholm, Sweden for example would be a counterexample). Perhaps I misunderstood “mass market”?

amvalo 8y ago

Pooling is a nice cost saving innovation.

petra 8y ago

UBER won't be a monopoly. But UBER and Lyft could offer lower costs than taxis, because of cheap labor, no medalions, and less empty rides they could offer their drivers. So it's basically a UBER/Lyft duopoly, after the growing phase. And Duopolies are good businesses to be in.

dwild 8y ago
> because of cheap labor, no medalions, and less empty rides they could offer their drivers. You forget that dispatcher already take a pretty big cut already and I don't know where you live, but here in Montreal, we have a bunch of them that are all profitable. Sure dispatcher started to makes apps, but they only cover a tiny market (thus the apps is more expensive to develop per ride than Uber) and plenty of their clients prefer calling, thus an human operator (which Uber doesn't has to pay for). Our government also decided a few years ago to force them to accept credit/debit card. One of my friend worked for one of the operator that rented terminal to taxis. They were profitable too. If Uber can't make money by being much more efficient in MULTIPLE already profitable business and that's WORLDWIDE, there's something pretty wrong.

sonnyblarney 8y ago

Yes, there is literally a way to make money. Assuming you can get everyone to adhere to regulations etc.. Then Uber could be seen as a marketplace connecting drivers and riders - and there is material value in that. And it doesn't have to be a lot for Uber to make money. Not $100B valuation money, but money. And there are de-facto network effects, brand etc. that play into that. Lyft and Uber might not be worth their valuation, but there's value add there.

YeahSureWhyNot 8y ago

The disruption of taxi/rental business is going to come way before from self driving cars becomes perfect. most people know how to and prefer to drive especially if its not long distance inside dense urban areas. the real use case will be the fact that self driving car will drive itself at its own pace to nearest suitable pick up point, where u can get behind the wheel and drive it where u need to go, then leave it there for it to figure out how to drive itself to next customer who needs it. half of the population prefers to drive the car themselves or their partner rather than share that tiny space with a stranger and be driven around. this completely solves the liability issue and pr nightmares that will come from 'killed by/because of self driving car' news.

menzoic 8y ago

What about UberEats?

harryf 8y ago

> The Uber app was the original innovation No it wasn't. There were a ton of taxi related apps and startups before Uber and nothing about Uber's app was particularly impressive IP-wise - it's basically just distance search. What Uber did that was unusual for a tech startup was to invest in lobbying - https://www.theverge.com/2014/12/14/7390395/uber-lobbying-steamroller https://www.theverge.com/2014/12/14/7390395/uber-lobbying-st... - it allowed them to play across regulated markets where no one else had before.

Anderkent 8y ago
There were a ton of taxi related apps but none of them did what Uber did; at least in London. There were apps where you could book a taxi, telling them when and where to pick you up, but if you expected anyone to show up in the next 5 minutes you were crazy. And they were twice as expensive as uber, of course.
kelnos 8y ago
My impression was the the previous tax-related apps just connected riders with the existing establishment taxi companies. They didn't have much in the realm of enforcing accountability or reliability. It was nearly the same as calling the taxi dispatcher yourself and hoping a taxi would show up, except an app would do it for you.
standardUser 8y ago
In San Francisco there was nothing before Uber and similar companies started operating. You called a phone number (I used to have it memorized) and some surly individual would bark at you and then maybe a taxi would come in 40 minutes or maybe not. Later, the driver would explain the credit card machine was broken and you'd need to pay in cash.

therealx 8y ago

Do people actually use the taxi uber like apps? I ask everyone I make rideshare smalltalk with and no one has ever even said they'd installed it (small, poor sample size, I know.)

nospitate 8y ago

You are just fundamentally wrong. There is a cost associated with operating the “dispatch,” operating the car and paying the employees/contractors. Take that cost, distribute it over the number of rides you expect to give to your customers and then add a little on top. The question is whether or not the customers will engage in that transaction or is the cost too high? Uber has plenty of fat to cut. If it were running efficiently, there is no possible way it would go out of business. You think Uber will raise their prices 10 percent and then everyone will decide to give up ride-sharing? Uber is the most efficient method of doing taxis. It succeeds by default. I don’t understand how you can possibly think that Uber can’t make money.

freyr 8y ago
There's making money, and there's making enough money to justify an $84B valuation.
- dwild 8y ago
  > to justify an $84B valuation He wasn't arguing that the investor were going to make money out of it. He was arguing that as a dispatcher, they can be more efficient than the current dispatcher, thus can make money.
  - deleted 8y ago
    [deleted]

99_00 8y ago

A monopoly is exactly how they'll do it. If a competitor pops up they will undercut them. They've run over local governments to get their cars into the highly regulated taxi industry and basically operate under their own rules so I have no doubt they can operate anti-competitively too.

BurningFrog 8y ago

> There is literally no way for a mass-market taxi service to make money unless they have a monopoly, or some unexpected disruptive technology comes along that gives one company an unassailable advantage in lowering costs. Confident brash nonsensical statement with no factual argument to back it up. The fact that it is voted top comment on HN says some unflattering things about this place.

benbristow 8y ago

I find local taxi companies have started making their own 'Uber' apps that accept card and it's fantastic. And you don't have to deal with the awful rating system Uber have. Whoever thought it was a good idea to have drivers rate their customers really doesn't understand customer service. If you're out with some friends on a night out for example, of course you're going to get a bad rating (because your friends are drunk and probably a bit rowdy) which affects you during the working day or just solo. Local taxi services are usually cheaper too as they don't do the surge pricing like Uber do. Uber have really driven me away as a customer to the local services. Also local taxis don't cancel so they can abuse the surge system.

olalonde 8y ago

You made quite a big claim in the first sentence but the rest of your comment doesn't explain it.

shafyy 8y ago

> Self-driving cars were supposed to lower labor costs, but that's not going to be a thing for decades if it ever works. Decades? Maybe half a decade until it starts rolling out in major markets. > But even if it does, it won't be an exclusive technology. Of course it will be exclusive if the developing company decides not to make it publicly available. And why should they? > If their costs go down, so will everyone else's and they won't be able to undercut the competition without continuing to lose money. This is econ 101. There will be an equilibirium price. Or do you think just because it's easy to make pizza since hundreds of years and there are probably a million pizza suppliers in the world, the price of pizza went to 0?

speedplane 8y ago
>> Self-driving cars were supposed to lower labor costs, but that's not going to be a thing for decades if it ever works. > Decades? Maybe half a decade until it starts rolling out in major markets. What is the evidence for this? Five years ago the same claim was made, and it hasn't happened. It's not at all clear to me that mass market self driving cars will appear in 5 years, 20 years, or 100 years.

thatoneuser 8y ago

Autonomous driving is "decades" away? How do you figure?