9 ms·

Uber And Lyft take more from drivers than they say: survey

99 points by cleansy 7y ago

amoitnga 7y ago
Even if so, how does it matter?
Ididntdothis 7y ago
Seems we are developing an economy of almighty middlemen. Apple taking 30%, these guys are also in that range. When I was contractor there were agencies that would often take 40% or more cut. There was this dream of the internet enabling the smallest players to be able to sell directly but instead we have these powerful institutions that take a huge cut out of every transaction.
- gmueckl 7y ago
  We see this because small players have a visibility problem: if they stick to their private little corner of the internet, they have to put a lot of effort into getting noticed and attracting customers. Likewise, customers also have a harder time finding good offers if they are hard to notice. Centralized market platforms (Amazon, app stores) reduce that offer on both sides by pooling both sides and making them accessible to each other. And because of the inherent networking effects, these platforms can ask a nice premium and still be attractive.
  - Ididntdothis 7y ago
    This is a really bad trend. The little guy never develops a reputation. Let's say you are the best Uber driver or the best Amazon merchant with a perfect track record. The day Uber or Amazon decide to cut you off you lose everything. You have nothing to show for. it would be better if these platforms were neutral entities that just connected sellers to buyers in an efficient way. But they try to totally control the sellers. Back to the contracting example. For a while I worked with an agency that took only a 3% cut for filing paperwork with the big company. they provided an efficient service for both buyer and seller (me). But the 30% guys are just parasites that control the market.
    - nindalf 7y ago
      > the 30% guys ... control the market. Why is that? Is it because they were providing a superior service? If they were providing an inferior service, how did they control the market?
      - moate 7y ago
        Because many of them created their market space years ago and are now so established that it's difficult for a competitor to stage a worthwhile effort to draw revenue away from them. Because they have so much money available to them they can even afford to deal with a challenger by dropping their prices/rates lower than that competitor, operating at a loss for however long it would take for that competitor to die off, and then go back to business as usual(the "Walmart" strategy).
        nkurz 7y ago
        You refer to this as the "Walmart" strategy, but I don't think that's a standard interpretation of Walmart's strategy. From what I can tell, Walmart is more focussed on the long term, contracting with supplies in ways that allow them to keep prices low enough to prevent competitors from ever entering the market. Can you find any examples of Walmart actually following the strategy you suggest?
        moate 7y ago
        https://www.investopedia.com/terms/w/walmart-effect.asp https://www.investopedia.com/terms/w/walmart-effect.asp It's generally understood that "back in the day" (whenever that was) when Walmart was going through it's greatest period of expansion that Walmart would be able to enter an area and have a negative effect on existing businesses that didn't have it's advantages (massive corporate bankroll, improved supply chain, variety of offerings, etc). Eventually those business would atrophy, often closing. At this point, the local store had established itself and was able to behave in whatever manner it wanted (raise prices, lower wages, etc) because they had essentially become the only game in town. At this point, as they are so entrenched, they probably behave in a very different way and have different needs.
  - rohit2412 7y ago
    And the platforms become middlemen. Infact, they are the definition of middlemen. What needs to happen is a standardization and commodification of different platforms. I think Elizabeth Warren has this as a part of her campaign.
    - Ididntdothis 7y ago
      "What needs to happen is a standardization and commodification of different platforms." Exactly. Right now the seller gets commodified instead of the middleman.
  - mariushn 7y ago
    Right. The biggest problem is that they make it extremely hard to compete with them. Being a marketplace, it's hard for another player to capture enough of both sides of the market to gain momentum. Buyers will just go to the big players, which can then take a hefty 20+% commission. It's a hard-to-break circle. Any ideas? Other examples: Booking.com, AirBnB
- kingraoul3 7y ago
  Lanier's local-global flip.
- jbverschoor 7y ago
  Is that any different from other industries? Marketing, processes all cost money. Every party in the chain wants something. Retail (at least used to) have 30-50% margins Want to sell ringtones? You pay the channel. Hire sales? They want a high commission. Lower if you have a big brand / marketing behind you Code/driving/“the product” is only 20% of the game. And often not the most difficult to do at a sufficient level.
javagram 7y ago
“Jalopnik also conceded that there might have been selection bias for drivers unhappy with the cut being taken out of their fares.” Inaccurate headline
kerng 7y ago
It's well known that they are in the red. The question is, if the entire business model does actually work and the good thing about capitalism is that we will see it over next 1-2 years as it's like natural selection. If drivers stick around (or self driving becomes reality), and riders are happy with pricing then both their customer bases are happy and business will flourish. Otherwise, stock will fall and they disappear.
- Ididntdothis 7y ago
  Something is going wrong if a middlemen takes such a big cut and still can’t make money.
  - kerng 7y ago
    The free market will tell us. It works well for companies like Apple, Ticketmaster, etc.. That's what I tried to highlight with my post, which seems very reasonable, so I don't understand the massive downvoting.
    - Ididntdothis 7y ago
      Looking at Ticketmaster or the Apple app store it seems that a free market will lead to monopoly behavior once players grow beyond a certain size.
      - moate 7y ago
        But that's what the consumers must have wanted. It's "free" market after all. There's no way it can be manipulated. Completely logical, always responds the way it "should" market.
      - kerng 7y ago
        Correct, if a business model works and is successful it can lead to a monopoly. And there are laws that try to tackle that. But its going off topic because Uber and Lyft are far away from that position, they hardly have a functioning business model in the first place.
frankbreetz 7y ago
How is it that Uber is losing money? They have such a huge amount of income, There is an Uber on almost every block in America. They don't pay their contractors a living wage and seems to me they have extremely little overhead. They don't have to maintain cars or even have an HR department for their employees. All they do is develop an app that does nothing special. Is it all R&D?
- creaghpatr 7y ago
  A transfer of wealth from the rich and the poor to the middle class
- polskibus 7y ago
  Buying market share via heavy discounts. They used to subsidy fares a lot, now it's ubereats that is subsidized most.
  - frankbreetz 7y ago
    Could you ELI5 for this?
    - rudolfwinestock 7y ago
      Think on how much cheaper rides are with Uber, Lyft, or any similar service, compared with an ordinary taxi cab. The reason for that is that you're splitting the fare with a venture capitalist. The reason why VCs were willing to do that was that they anticipated that Uber (in particular) would monopolize ride-sharing. After that, they intended to replace the drivers (who are still the most expensive part of the ride) with self-driving cars. I spoke with a Google employee, about two years ago, who told me that everyone in the self-driving business hoped to have some big advances ready by 2021. Turns out that autonomous vehicles are a lot harder than anticipated, so the ride-share companies have had to pivot. That explains Uber Eats. As sketchy as Uber has been, I have no sympathy for the traditional taxi cab companies. They refused to adapt in the face of a new situation staring them in the face. The New York City medallion-owners just expected to continue farming from the cab drivers with zero effort. Parasites. I spoke with a guy who had recently come to America and needed a ride. His friends couldn't drive him, for some reason, so they tried to arrange a cab. While they bickered, trying to find a cab company phone number, this guy downloaded the Uber app, punched in his credit card info, and his ride showed up before his friends had finished finding a cab company. Nevertheless, Uber is a sketchy company and desperately needs regulation.
close04 7y ago
Totally anecdotal: while travelling abroad I tried to order an Uber with my regular account and card. The process went well up to the point where I could see the price but then failed because my card was not accepted for some reason. Immediately switched to "cash" and the price displayed went down. The original price was 30% higher. The same evening I repeated the same steps with another fare and got the same outcome. I'm not sure if this was a coincidence, some local policy regarding paying cash vs. card, or Uber doing something shady. But I asked all my friends to compare the price with the driver (or pay cash, although this may be less convenient) if they ever use Uber. I've read articles before that Uber was showing the driver a lower price than the customer in order to give the driver a lower cut. If this is the case then it wouldn't work when paying cash.
- msoad 7y ago
  Also consider that prices are dynamic. They change by the second
  - close04 7y ago
    I imagine this would be the case for minor variations. But I could not reproduce such a massive difference simply by refreshing the search (the differences were always after the decimal point). Also the time of day (middle of the week, ~13:00 and same day 22:00) doesn't really suggest surge pricing would explain i, especially twice. I understand that 2 data point don't really make a reliable dataset.
- tedmcory77 7y ago
  How is this not directly fraud?
  - close04 7y ago
    There is this [0][1]. As for my example above I don't have nearly enough data to draw a conclusion. But enough for suspicion when combined with the previous links. [0] https://nakedsecurity.sophos.com/2017/04/10/uber-showing-drivers-and-riders-different-fare-estimates-says-lawsuit/ https://nakedsecurity.sophos.com/2017/04/10/uber-showing-dri... [1] https://www.theguardian.com/technology/2019/apr/18/uber-lyft-drivers-surge-pricing-wages https://www.theguardian.com/technology/2019/apr/18/uber-lyft...
acd10j 7y ago
I think Uber/Lyft provides much broader service compared to Apple/Google's 30% percent cut for App store purchase and subscriptions , What they charge for just hosting your app and providing payment gateway is outrageous.
- pequalsnp 7y ago
  You're also paying for access to sell your app to the tens of millions of people that use iOS or MacOS.
cellular 7y ago
I couldn't imagine being told to stop by getting a message on my phone from the passenger in my backseat. Very degrading.
- squeaky-clean 7y ago
  It's not really a message from the passenger. They updated their ride to include the additional stop (a feature), and are apparently allowed to do this realtime for the trip they are currently taking. For the driver this would just appear like their current destination suddenly changing, which I guess you have no option to deny except for asking them to leave your car and canceling the trip entirely. Being able to make major trip changes mid-ride is pretty crappy for the driver. I'm also surprised the multiple stop feature isn't just for simply letting someone in/out of your ride. But apparently Lyft actually encourages you to use it to stop at the store. [0] > Whether you’re picking up a friend or a bottle of vino, just add your stop into the app and your route will instantly update — making it a seamless experience for you and your driver. The person in the article was driving for Uber. The verbiage on Uber's site for this feature is more focused on passenger pickup/dropoff, but also doesn't make it clear whether you're allowed to spend time visiting a store. I found a rideguru post indicating you're limited to 3 minutes at a stop, but can't find this officially. [0] https://blog.lyft.com/posts/add-a-stop https://blog.lyft.com/posts/add-a-stop [1] https://ride.guru/lounge/p/whats-the-2-stop-rule-on-uber-is-it-the-same-with-lyft-are-we-not-allowed-to-stop-more-than-twice https://ride.guru/lounge/p/whats-the-2-stop-rule-on-uber-is-... Edit, found this on an Uber blog post. Do riders really know, Uber? Do they? > Riders know that each stop should be less than 3 minutes, so you can get back on the road as soon as possible. https://www.uber.com/blog/multiple-destinations-us/ https://www.uber.com/blog/multiple-destinations-us/
deleted 7y ago
[deleted]
bobinaz 7y ago
Unfortunate,but somewhat expected given their continual operation at a loss. I’m curious who takes more.

99 points by cleansy 7y ago

Even if so, how does it matter?

Seems we are developing an economy of almighty middlemen. Apple taking 30%, these guys are also in that range. When I was contractor there were agencies that would often take 40% or more cut. There was this dream of the internet enabling the smallest players to be able to sell directly but instead we have these powerful institutions that take a huge cut out of every transaction.

gmueckl 7y ago
We see this because small players have a visibility problem: if they stick to their private little corner of the internet, they have to put a lot of effort into getting noticed and attracting customers. Likewise, customers also have a harder time finding good offers if they are hard to notice. Centralized market platforms (Amazon, app stores) reduce that offer on both sides by pooling both sides and making them accessible to each other. And because of the inherent networking effects, these platforms can ask a nice premium and still be attractive.
- Ididntdothis 7y ago
  This is a really bad trend. The little guy never develops a reputation. Let's say you are the best Uber driver or the best Amazon merchant with a perfect track record. The day Uber or Amazon decide to cut you off you lose everything. You have nothing to show for. it would be better if these platforms were neutral entities that just connected sellers to buyers in an efficient way. But they try to totally control the sellers. Back to the contracting example. For a while I worked with an agency that took only a 3% cut for filing paperwork with the big company. they provided an efficient service for both buyer and seller (me). But the 30% guys are just parasites that control the market.
  - nindalf 7y ago
    > the 30% guys ... control the market. Why is that? Is it because they were providing a superior service? If they were providing an inferior service, how did they control the market?
    - moate 7y ago
      Because many of them created their market space years ago and are now so established that it's difficult for a competitor to stage a worthwhile effort to draw revenue away from them. Because they have so much money available to them they can even afford to deal with a challenger by dropping their prices/rates lower than that competitor, operating at a loss for however long it would take for that competitor to die off, and then go back to business as usual(the "Walmart" strategy).
      - nkurz 7y ago
        You refer to this as the "Walmart" strategy, but I don't think that's a standard interpretation of Walmart's strategy. From what I can tell, Walmart is more focussed on the long term, contracting with supplies in ways that allow them to keep prices low enough to prevent competitors from ever entering the market. Can you find any examples of Walmart actually following the strategy you suggest?
        moate 7y ago
        https://www.investopedia.com/terms/w/walmart-effect.asp https://www.investopedia.com/terms/w/walmart-effect.asp It's generally understood that "back in the day" (whenever that was) when Walmart was going through it's greatest period of expansion that Walmart would be able to enter an area and have a negative effect on existing businesses that didn't have it's advantages (massive corporate bankroll, improved supply chain, variety of offerings, etc). Eventually those business would atrophy, often closing. At this point, the local store had established itself and was able to behave in whatever manner it wanted (raise prices, lower wages, etc) because they had essentially become the only game in town. At this point, as they are so entrenched, they probably behave in a very different way and have different needs.
- rohit2412 7y ago
  And the platforms become middlemen. Infact, they are the definition of middlemen. What needs to happen is a standardization and commodification of different platforms. I think Elizabeth Warren has this as a part of her campaign.
  - Ididntdothis 7y ago
    "What needs to happen is a standardization and commodification of different platforms." Exactly. Right now the seller gets commodified instead of the middleman.
- mariushn 7y ago
  Right. The biggest problem is that they make it extremely hard to compete with them. Being a marketplace, it's hard for another player to capture enough of both sides of the market to gain momentum. Buyers will just go to the big players, which can then take a hefty 20+% commission. It's a hard-to-break circle. Any ideas? Other examples: Booking.com, AirBnB
kingraoul3 7y ago
Lanier's local-global flip.
jbverschoor 7y ago
Is that any different from other industries? Marketing, processes all cost money. Every party in the chain wants something. Retail (at least used to) have 30-50% margins Want to sell ringtones? You pay the channel. Hire sales? They want a high commission. Lower if you have a big brand / marketing behind you Code/driving/“the product” is only 20% of the game. And often not the most difficult to do at a sufficient level.

javagram 7y ago

“Jalopnik also conceded that there might have been selection bias for drivers unhappy with the cut being taken out of their fares.” Inaccurate headline

kerng 7y ago

It's well known that they are in the red. The question is, if the entire business model does actually work and the good thing about capitalism is that we will see it over next 1-2 years as it's like natural selection. If drivers stick around (or self driving becomes reality), and riders are happy with pricing then both their customer bases are happy and business will flourish. Otherwise, stock will fall and they disappear.

Ididntdothis 7y ago
Something is going wrong if a middlemen takes such a big cut and still can’t make money.
- kerng 7y ago
  The free market will tell us. It works well for companies like Apple, Ticketmaster, etc.. That's what I tried to highlight with my post, which seems very reasonable, so I don't understand the massive downvoting.
  - Ididntdothis 7y ago
    Looking at Ticketmaster or the Apple app store it seems that a free market will lead to monopoly behavior once players grow beyond a certain size.
    - moate 7y ago
      But that's what the consumers must have wanted. It's "free" market after all. There's no way it can be manipulated. Completely logical, always responds the way it "should" market.
    - kerng 7y ago
      Correct, if a business model works and is successful it can lead to a monopoly. And there are laws that try to tackle that. But its going off topic because Uber and Lyft are far away from that position, they hardly have a functioning business model in the first place.

frankbreetz 7y ago

How is it that Uber is losing money? They have such a huge amount of income, There is an Uber on almost every block in America. They don't pay their contractors a living wage and seems to me they have extremely little overhead. They don't have to maintain cars or even have an HR department for their employees. All they do is develop an app that does nothing special. Is it all R&D?

creaghpatr 7y ago
A transfer of wealth from the rich and the poor to the middle class
polskibus 7y ago
Buying market share via heavy discounts. They used to subsidy fares a lot, now it's ubereats that is subsidized most.
- frankbreetz 7y ago
  Could you ELI5 for this?
  - rudolfwinestock 7y ago
    Think on how much cheaper rides are with Uber, Lyft, or any similar service, compared with an ordinary taxi cab. The reason for that is that you're splitting the fare with a venture capitalist. The reason why VCs were willing to do that was that they anticipated that Uber (in particular) would monopolize ride-sharing. After that, they intended to replace the drivers (who are still the most expensive part of the ride) with self-driving cars. I spoke with a Google employee, about two years ago, who told me that everyone in the self-driving business hoped to have some big advances ready by 2021. Turns out that autonomous vehicles are a lot harder than anticipated, so the ride-share companies have had to pivot. That explains Uber Eats. As sketchy as Uber has been, I have no sympathy for the traditional taxi cab companies. They refused to adapt in the face of a new situation staring them in the face. The New York City medallion-owners just expected to continue farming from the cab drivers with zero effort. Parasites. I spoke with a guy who had recently come to America and needed a ride. His friends couldn't drive him, for some reason, so they tried to arrange a cab. While they bickered, trying to find a cab company phone number, this guy downloaded the Uber app, punched in his credit card info, and his ride showed up before his friends had finished finding a cab company. Nevertheless, Uber is a sketchy company and desperately needs regulation.

close04 7y ago

Totally anecdotal: while travelling abroad I tried to order an Uber with my regular account and card. The process went well up to the point where I could see the price but then failed because my card was not accepted for some reason. Immediately switched to "cash" and the price displayed went down. The original price was 30% higher. The same evening I repeated the same steps with another fare and got the same outcome. I'm not sure if this was a coincidence, some local policy regarding paying cash vs. card, or Uber doing something shady. But I asked all my friends to compare the price with the driver (or pay cash, although this may be less convenient) if they ever use Uber. I've read articles before that Uber was showing the driver a lower price than the customer in order to give the driver a lower cut. If this is the case then it wouldn't work when paying cash.

msoad 7y ago
Also consider that prices are dynamic. They change by the second
- close04 7y ago
  I imagine this would be the case for minor variations. But I could not reproduce such a massive difference simply by refreshing the search (the differences were always after the decimal point). Also the time of day (middle of the week, ~13:00 and same day 22:00) doesn't really suggest surge pricing would explain i, especially twice. I understand that 2 data point don't really make a reliable dataset.
tedmcory77 7y ago
How is this not directly fraud?
- close04 7y ago
  There is this [0][1]. As for my example above I don't have nearly enough data to draw a conclusion. But enough for suspicion when combined with the previous links. [0] https://nakedsecurity.sophos.com/2017/04/10/uber-showing-drivers-and-riders-different-fare-estimates-says-lawsuit/ https://nakedsecurity.sophos.com/2017/04/10/uber-showing-dri... [1] https://www.theguardian.com/technology/2019/apr/18/uber-lyft-drivers-surge-pricing-wages https://www.theguardian.com/technology/2019/apr/18/uber-lyft...

acd10j 7y ago

I think Uber/Lyft provides much broader service compared to Apple/Google's 30% percent cut for App store purchase and subscriptions , What they charge for just hosting your app and providing payment gateway is outrageous.

pequalsnp 7y ago
You're also paying for access to sell your app to the tens of millions of people that use iOS or MacOS.

cellular 7y ago

I couldn't imagine being told to stop by getting a message on my phone from the passenger in my backseat. Very degrading.

squeaky-clean 7y ago
It's not really a message from the passenger. They updated their ride to include the additional stop (a feature), and are apparently allowed to do this realtime for the trip they are currently taking. For the driver this would just appear like their current destination suddenly changing, which I guess you have no option to deny except for asking them to leave your car and canceling the trip entirely. Being able to make major trip changes mid-ride is pretty crappy for the driver. I'm also surprised the multiple stop feature isn't just for simply letting someone in/out of your ride. But apparently Lyft actually encourages you to use it to stop at the store. [0] > Whether you’re picking up a friend or a bottle of vino, just add your stop into the app and your route will instantly update — making it a seamless experience for you and your driver. The person in the article was driving for Uber. The verbiage on Uber's site for this feature is more focused on passenger pickup/dropoff, but also doesn't make it clear whether you're allowed to spend time visiting a store. I found a rideguru post indicating you're limited to 3 minutes at a stop, but can't find this officially. [0] https://blog.lyft.com/posts/add-a-stop https://blog.lyft.com/posts/add-a-stop [1] https://ride.guru/lounge/p/whats-the-2-stop-rule-on-uber-is-it-the-same-with-lyft-are-we-not-allowed-to-stop-more-than-twice https://ride.guru/lounge/p/whats-the-2-stop-rule-on-uber-is-... Edit, found this on an Uber blog post. Do riders really know, Uber? Do they? > Riders know that each stop should be less than 3 minutes, so you can get back on the road as soon as possible. https://www.uber.com/blog/multiple-destinations-us/ https://www.uber.com/blog/multiple-destinations-us/

deleted 7y ago

[deleted]

bobinaz 7y ago

Unfortunate,but somewhat expected given their continual operation at a loss. I’m curious who takes more.