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I think driver incentives falls under marketing spend at Uber. Driver Incentives are they will pay driver $X to make $Y trips. Essentially riders are paying $5

I think driver incentives falls under marketing spend at Uber. Driver Incentives are they will pay driver $X to make $Y trips. Essentially riders are paying $5 and drivers are making $6. I believe this is where most of the money is burned at Lyft as well.

CamelCaseName 7y ago
From their S-1: >Driver incentives. Driver incentives refer to payments that we make to Drivers, which are separate from and in addition to the Driver’s portion of the fare paid by the consumer. For example, Driver incentives could include payments we make to Drivers should they choose to take advantage of an incentive offer and complete a consecutive number of trips or a cumulative number of trips on the platform over a defined period of time. Driver incentives are recorded as a reduction of revenue to the extent they are not excess Driver incentives (as defined below). >Driver referrals. Driver referrals refer to payments that we make to existing Drivers to refer new Drivers onto our platform. Driver referrals are recorded in sales and marketing expenses, as they represent the receipt of a distinct service of customer acquisition for which there is evidence of fair value. https://www.sec.gov/Archives/edgar/data/1543151/000119312519103850/d647752ds1.htm https://www.sec.gov/Archives/edgar/data/1543151/000119312519... (pp. iii)
aresant 7y ago
UBER masks this real number across many of their general line items. EG they put ~$300,000,000 of the "Driver Incentive" cost into "Cost of Revenue" line item that represents: - "Any amount paid to a driver that exceeds the revenue earned by that driver (for instance, if a driver’s earnings from a trip exceed the fare for that trip). Excess driver incentives jumped by about $300 million in 2018 from the previous year, largely due to Uber Eats." And then they stick $1,800,000,000 into "Sales & Marketing" representing: - "Discounts, promotions, refunds, and credits for customers," - - - - A popular criticism of UBER is that their unit economics are not sound - eg they can't make money at scale on a per ride basis. So this giant $2.1b glut of Driver Incentives and Customer Incentives is one of the areas to deeply study and build a position around if you'd like to be an UBER stock holder :)
- resters 7y ago
  I am not a shareholder, but I think market share is the short term goal. The incentives can be phased out as prices increase a bit after competition cools off.
  - AJ007 7y ago
    The big question is driver retention and how much Uber subsidizing drivers is required. Maybe Uber spends 0 extra, drivers drop out of the system, ride prices increase, and drivers return as riders stop using Uber, bringing it to some sort of equilibrium. Maybe not. These retention numbers, for any business that needs returning customers or service providers pretty much make or break all the customer/provider acquisition economics.
    - sprafa 7y ago
      In London Uber is unravelling already. Here Citymapper is the default transit app and Uber is just one of the options listed. The transfer cost for a customer changing app is 0. We keep saying we’re “not sure” whether Uber will have customer retention... no, of course it won’t! Unless they change their model, they’re the biggest VC folly in recent times. Just proves how overheated the market become when F/A/G acquired everything in the market that competes with them, leaving ridiculous Vc money to flow to dumb ideas like Uber.
      - ddalex 7y ago
        no VC money anylonger, now it's stock market money, i.e. our pension funds
        VRay 7y ago
        Wait, you guys get pension funds?
    - flukus 7y ago
      > The big question is driver retention and how much Uber subsidizing drivers is required. In Australia we've got drivers advertising other services directly to riders. Most of these are probably subsidizing rides to enter the market, but how long can uber continue losing money as competitors try and enter the market?

CamelCaseName 7y ago

From their S-1: >Driver incentives. Driver incentives refer to payments that we make to Drivers, which are separate from and in addition to the Driver’s portion of the fare paid by the consumer. For example, Driver incentives could include payments we make to Drivers should they choose to take advantage of an incentive offer and complete a consecutive number of trips or a cumulative number of trips on the platform over a defined period of time. Driver incentives are recorded as a reduction of revenue to the extent they are not excess Driver incentives (as defined below). >Driver referrals. Driver referrals refer to payments that we make to existing Drivers to refer new Drivers onto our platform. Driver referrals are recorded in sales and marketing expenses, as they represent the receipt of a distinct service of customer acquisition for which there is evidence of fair value. https://www.sec.gov/Archives/edgar/data/1543151/000119312519103850/d647752ds1.htm https://www.sec.gov/Archives/edgar/data/1543151/000119312519... (pp. iii)

aresant 7y ago

UBER masks this real number across many of their general line items. EG they put ~$300,000,000 of the "Driver Incentive" cost into "Cost of Revenue" line item that represents: - "Any amount paid to a driver that exceeds the revenue earned by that driver (for instance, if a driver’s earnings from a trip exceed the fare for that trip). Excess driver incentives jumped by about $300 million in 2018 from the previous year, largely due to Uber Eats." And then they stick $1,800,000,000 into "Sales & Marketing" representing: - "Discounts, promotions, refunds, and credits for customers," - - - - A popular criticism of UBER is that their unit economics are not sound - eg they can't make money at scale on a per ride basis. So this giant $2.1b glut of Driver Incentives and Customer Incentives is one of the areas to deeply study and build a position around if you'd like to be an UBER stock holder :)

resters 7y ago
I am not a shareholder, but I think market share is the short term goal. The incentives can be phased out as prices increase a bit after competition cools off.
- AJ007 7y ago
  The big question is driver retention and how much Uber subsidizing drivers is required. Maybe Uber spends 0 extra, drivers drop out of the system, ride prices increase, and drivers return as riders stop using Uber, bringing it to some sort of equilibrium. Maybe not. These retention numbers, for any business that needs returning customers or service providers pretty much make or break all the customer/provider acquisition economics.
  - sprafa 7y ago
    In London Uber is unravelling already. Here Citymapper is the default transit app and Uber is just one of the options listed. The transfer cost for a customer changing app is 0. We keep saying we’re “not sure” whether Uber will have customer retention... no, of course it won’t! Unless they change their model, they’re the biggest VC folly in recent times. Just proves how overheated the market become when F/A/G acquired everything in the market that competes with them, leaving ridiculous Vc money to flow to dumb ideas like Uber.
    - ddalex 7y ago
      no VC money anylonger, now it's stock market money, i.e. our pension funds
      - VRay 7y ago
        Wait, you guys get pension funds?
  - flukus 7y ago
    > The big question is driver retention and how much Uber subsidizing drivers is required. In Australia we've got drivers advertising other services directly to riders. Most of these are probably subsidizing rides to enter the market, but how long can uber continue losing money as competitors try and enter the market?