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Uber and Lyft Suggest the Days of Cheap Rides Could Be Over
- taytus 7y agoThe day cheap rides are over is the day that uber and lyft are over.
- randyrand 7y agoAnd walking everywhere will become the norm?
- taytus 7y agoNot necessarily, cheap rides are the only competitive advantage both of them have. More and more companies without the massive VC support Uber and Lyft have will pop up fragmenting the market.
- ghaff 7y agoRight now, I take them because most of the time they're more convenient than cabs. (The one common exception is departing from airports when a line of cabs is right there. I also pre-book cars to and from my home airport.) That said, absent their price advantages because of subsidies, I don't doubt a more fragmented market would probably arise.
- deathhand 7y agoJuno was a great model...
- enraged_camel 7y agoMost taxi companies were still in business the last time I checked.
- freyr 7y agoThe article was written back in August, so are we already seeing the higher prices?
- helen___keller 7y agoI feel like I've seen pretty high prices in Boston lately. On the other hand I took a trip to Las Vegas and suddenly Lyft was dirt cheap again.
- ghaff 7y agoIt seems to vary a lot. I was on a business trip to San Diego recently and airport inbound (taxi) and airport outbound (Lyft) were about the same price, albeit with the taxi ride a little shorter. OTOH, whenever I visit Raleigh, Lyft still seems about half the price of a cab.
- xeromal 7y agoYeah, the prices are pretty low here in LA too. When I go to the South to visit family, Uber is so expensive.
- pen2l 7y ago> I've noticed this. I can reliably count on Uber/Lyft to price gouge me whenever they get the chance. Yeah but come on though, the cut the driver has to take, the cost of car maintenance, the cut Uber is entitled to for giving you a reliable service of connecting you to a driver (and co-pool-riders) and making this process smooth -- compare all of that with what a taxi used to cost, it's still pretty cheap in my opinion. Well, at least in the center city where I am (5 dollars yesterday for a ~5 mile ride, not bad).
- OnlineGladiator 7y agoWhy do you assume that cost isn't being subsidized? Uber and Lyft are both still hemorrhaging money. I'm willing to bet the real cost is at least twice what you mentioned. Yesterday it cost me $30 to go 5 miles via Uber, and I chose that over Lyft's $40. Not a busy time of day so no price surging. This is in San Francisco for a frame of reference.
- rasengan 7y agoThis is untrue. Without a doubt, with autonomous vehicles, efficient energy usage, storage and harvest via non eco damaging sources like solar power, the cost of rides will get cheaper.
- helen___keller 7y agoSure but they need to stay solvent until then
- quaquaqua1 7y agoIf they don't remain solvent then theoretically the IP would be bought by a solvent corporation that wishes to fill the void. That is of course unless Uber asks way too high of a price. That's basically what happened with the Yahoo auction
- helen___keller 7y agoYes but I'm sure Uber would rather raise prices now and keep their IP so they can print money with autonomous vehicles later
- dpau 7y agoa bit optimistic i think. the algorithms are already being tuned to "whatever riders are willing to pay" while uber and lyft are incentivized to make as much money as possible.
- heavyset_go 7y agoCosts don't dictate prices.
- quotemstr 7y agoThey do indirectly. A big gap between costs and prices invites competition, which lowers prices. Part of the "play" that ride sharing companies are making is building a moat around themselves so that they'll be able to discourage competition for a while.
- throwaway857384 7y agoI'd say, once people stop dumping money into these companies and they can no longer operate at a loss, the real price of a ride/delivery will become clear.
- ghaff 7y agoIt's a reasonable working assumption that "ride share" prices end up somewhere around where taxi prices are--with the possible exception of places like London where black cabs are somewhat of a premium service relative to minicabs, etc.
- seriesf 7y agoI don’t see how the Uber model can ever approach the price of a taxi. Traditional taxis had purpose-built vehicles, shared garages, parts bought at wholesale, and cars on duty all day every day. Uber drivers have disposable Toyotas, pay individually retail prices for insurance, maintenance, and parts, and their vehicles are usually parked. The traditional model has the advantage on cost.
- ghaff 7y agoI don't necessarily disagree although I might argue, for example, that maybe Uber drivers are willing to take a smaller cut in exchange for the flexibility they have. But you make a good argument in general that there's certainly little reason to think that Uber rides should be significantly cheaper than cab rides are given a sustainable profitable business.
- sokoloff 7y agoUber/Lyft offer an option for someone who is already carrying the fixed costs of owning a depreciating vehicle to come into the market part-time and do some driving for income. They also don't have to commit to set hours. These should have the effect of increasing the supply of drivers (not to the full extent of all ride-share drivers, of course). They also don't have to front the capital cost of a medallion. Ride share prices are sensitive to market demand in near real-time rather than being set by the taxi commission (in some long-term relationship to supply/demand). Combining those effects, I can easily see ride share prices settling somewhere below taxi rates and still leaving profit for all players.
- heavyset_go 7y agoPrices have been more expensive than traditional taxis in my market for over a year now.
- justforyou 7y agoLikewise.
- deleted 7y ago[deleted]
- aabhay 7y agoThis. Clearly this has to be the stable state for these services. A taxi is naturally free to operate in a way they see fit (finding narrow strategies and routes) while an Uber is constrained by a routing system. If you find a taxi, you can expect to pay a more optimized fare considering market dynamics, while an Uber has to suffer very suboptimal requests. In cities like Vancouver, taxis seem to spend much less time idling than Ubers in SF.
- pradn 7y ago"When will these darlings of Silicon Valley begin to turn a profit?" The funny thing is criticism of these two companies has been vociferous on Hacker News since the very beginning. I'm not sure what company I'd even call a darling. Every example I can think of FAANG, Dropbox, Slack, etc all have various criticisms. Perhaps Spotify? But it's not a Silicon Valley company.
- fallat 7y agoI've been on a SharkTank binge just for fun, and one thing I notice is, every time a Silicon Valley company goes to pitch, the idea has some pretty bad problems: 1. The margin is high but the idea is easily copied 2. A ton of money has already been invested, and still not making money 3. Other things I can't remember at this moment I think SV has some sort of problem when it comes to starting businesses. Rarely something is organically growing. It's like SV people just throw money at a wall until something sticks, so it explains the thousands of failure companies. Seeing SV companies through the eyes of an investor, I'd be ultra cautious. Companies and ideas are a dime a dozen there from what I see. Until you find out each has had +$100,000 pumped into it various ways and operating at a loss. It's almost like they want to force you to think the idea is good because "look, it's existed for X years!".
- Retric 7y agoThe go big or go home mindset is useful for specific kinds of investors. If you have 100+ million your not going to notice the returns if you’re a partner at a modestly successful restaurant. Yes the odds are terrible that you happen to fund the next Google. But, the allure is the same thing that gets people to play the lottery even with negative expected returns.
- askafriend 7y agoYou shouldn’t be using SharkTank to form your view on Silicon Valley... Some of the worst companies get on there, SV or not. Think about it, why would a good company need to go on Shark Tank? They can raise from much better investors if it was a good company.
- admn2 7y agoPretty crazy with Juul, WeWork, DoorDash, and Uber / Lyft all struggling (or showing their true colors) that all the things they sought to kill are coming back. Taxis, cigarettes, picking up your own food! It's amazing to me that people were having food delivered from a half mile away.
- luckydata 7y agoThey weren’t try to kill anything, they just wanted a piece of the action.
- thdrdt 7y agoThis is because most of them start with heavy investments. But when time has come to make their own money they will discover it is not so easy as thought.
- paggle 7y agoWith the food delivery and meal kits and stuff, they were just selling that stuff for less than it costs. I provided thousands of dollars of revenue for Blue Apron style meal kits and food delivery. As soon as they charged market rate for them, I stopped.
- Barrin92 7y ago>Pretty crazy with Juul, WeWork, DoorDash, and Uber / Lyft all struggling Given that the entire value-added of a company like Uber is getting a taxi to you slightly faster it's not surprising at all. Uber didn't make cars cheaper, drivers faster or added productivity in any other way plus they have a gigantic and expensive tech overhead, so it was never at all clear to me how they're supposed to be both competitive and more profitable than a regular bunch of taxi companies. It's just like movie pass. As long as you have investors throwing money at you you can pretend that you're actually doing something but selling people a dollar for 75 cents isn't a business.
- wilde 7y agoThat’s an oversimplification. Uber’s primary innovations were social. They convinced riders that it was safe to jump into a stranger’s car, and drivers that it was safe to run an illegal taxi business. They managed to do both of these things effectively in large enough volumes to change how people think about taxis. Both of these things seem boring and normal now, but they were radical a decade ago.
- maksimum 7y ago> more precisely predict what riders might be willing to pay for a ride It's weird to me that this sort of price discrimination is legal. E.g. given this information, my incentive as a rider is to never tip (so that their algorithm doesn't identify me as "willing to pay" more). Maybe I could also make a new Lyft account every time I need a ride?
- mlyle 7y ago> > more precisely predict what riders might be willing to pay for a ride > It's weird to me that this sort of price discrimination is legal. I don't interpret this as charging different customers different prices per se. But there are different prevailing conditions with different pricing justified (other than simple congested/not congested). Knowing what your service is worth to customers so you can extract a greater fraction of this is pricing 101.
- maksimum 7y ago> I don't interpret this as charging different customers different prices per se. Based on my experience Lyft and Uber charge different prices to different customers with identical trips. I've tested this by asking friends with who I'm about to share a ride with to request the same trip as me, and compare prices. We've observed differences of 10-20%. > Knowing what your service is worth to customers so you can extract a greater fraction of this is pricing 101. Where this becomes problematic is in the age of big data. When a company can build an accurate profile of me, they can extract maximum prices from me. We need laws that mandate what definition of "profile" is allowed to be used for pricing. I'm not sure why we accept price discrimination at the individual level for airlines and Lyft/Uber. I'm pretty sure people would be outraged if Amazon started price discriminating based on your purchase history.
- ghaff 7y agoI think that statement was about riders in the collective sense. Riders are typically willing to pay more, e.g. on New Years Eve than on a random afternoon. But, in any case, dynamic pricing at both the individual and the collective level is pretty widespread these days. By and large--there are some exceptions--companies don't have to sell at a fixed price to all people at all times.
- bransonf 7y agoThis article’s a couple months old, so it misses what I think is going to be a lot more definitive against Uber/Lyft. That is, workers are starting to successfully unionize. Both companies have delayed it as long as possible, but it’s going to happen. And when it does, it will either burn more of their cash or up the customer cost.
- cheriot 7y agoWould a union be able to stop non-union drivers from signing up? It seems too easy for new workers to cross the picket line for a union to have much power here.
- bransonf 7y agoTo clarify, in many cases it’s actually states declaring Uber/Lyft as employment. They’ve managed to stay legally bound to the terms of hiring ‘contractors’ but states like CA are putting an end to this.
- 6gvONxR4sf7o 7y ago> ...the company’s upcoming pricing algorithms, which they hinted might be able to more precisely predict what riders might be willing to pay for a ride. I hate the whole idea of this. If they track you around, maybe realize you order from fancy places on uber eats, then they will raise prices on something that costs them the same. There's something that strikes me as especially awful about automating the "how much is this individual willing to pay." It's like the worst parts of searching for air fare. Yet another reason to advocate for privacy, so they can't just buy records about you to determine your price sensitivity from the rest of your life. If everything everyone bought had perfect information on what they're willing to pay, I wonder what markets would look like. Would getting a raise immediately cancel itself out?
- save_ferris 7y agoCouldn’t this technically qualify as discrimination? I vaguely remember reading about how one of the big dating apps increased prices with a user’s age, but had to revert the policy because it amounted to age discrimination. I would hope income qualifies for the same protection, but maybe not.
- pb7 7y agoIt does not. Edit: Answering the very last part of the comment; it does not have the same protections.
- jhoechtl 7y agoWhy not? Care to elaborate?
- pb7 7y agoSorry, I figured there wasn't much to elaborate on. Age is a protected class (after a certain age I believe, 40+ maybe?) but income is not. Price discrimination based on income/socio-economic class is one of the most commonly exploited things in business.
- 7y ago
- windexh8er 7y agoRideshare can be profitable for everyone just like Craigslist is. The problem is that Uber and Lyft decided they were large enterprise with a SMB profit model. You could gut 80% of either and if all you had left was drivers making good wages and the service fees for using the app to support the backend you'd be sitting in a lucrative spot. Yet both companies jumped in way too far and way too early. R&D at Uber hasn't delivered and they've continued to burn cash. WeWork, Uber, Lyft - all built on a greed model. Most drivers that I've talked to in the last few months complain how their pay stays the same or goes down and the ride prices continue to increase. These companies are like cancer: just there to take as much as they can and hopefully steamroll the real drivers that bootstrapped them into autonomous ride services. If Uber/Lyft fail someone else will come back around to pick up the key pieces that can work. But for now your "cheap rides are over" - because Uber and Lyft have decided that is the answer to the problem they've created.
- neffy 7y agoDon't know why you're getting downvoted - this is exactly the correct analysis - the only missing part of the jigsaw is the pension crisis that will get triggered, when the investors in that sector don't get the returns they've been promised.
- hdlothia 7y agoI'm fine with paying taxi prices with uber and lyft experience. The taxi experience was awful. Spotty acceptance of debit cards, racism, half truths from dispatch. They were insulated from innovation for so long
- alkonaut 7y agoIt's poor competition. In cities where there is a free taxi market Uber is just like every other taxi company (so every taxi company has apps for booking, has nice cars, has pre-payment etc). In cities with medallion systems or other artificial monopolies, you aren't going to get that.
- RaceWon 7y agoIt would not work in some areas due to the collective demographical mindset: having said that; Uber simply does not utilize a very obvious solution that would Greatly increase revenue without raising fares for riders. Insofar as what they burn on being the peeps that figure out self driving cars... I mean that's looking to hit the sweepstakes. Chances are They won't be the ones to cash in that particular ticket.
- RaceWon 7y ago> Uber simply does not utilize a very obvious solution that would Greatly increase revenue without raising fares for riders. Downvoting me??... 1) Stop making the ride App free. Charge $2.99 payable with the first ride. 2) Stop letting people sign up to drive for free. Charge $9.99 to sign up. 3) Start UberPay... sell prepaid rides for a discount then Lend that money out via Uber Credit Cards to select peeps--> like the drivers. 4) No shot I'd share this idea. This is One is The Obvious idea I mentioned in my Parent post. Cheers
- carfacts 7y ago> “We are focused on improving profitability in this market.” Seems like some kind of collusive price signalling announcement to Lyft. Eg, “we’re going to up our prices, here’s your chance to do the same”.
- paxys 7y agoHonestly, it's probably for the best. Over the last decade it has become the expectation that - at the tap of a button - a taxi will appear and take you across the city (or three blocks over) for a few bucks. People need to realize that this isn't reality. The entire industry has been subsidized by VCs and desperate drivers working below minimum wage since day 1. If, after paying drivers fairly, complying with local laws, reaching profitability etc., we find that prices are where most people can still afford to take Ubers everyday - great! If not, well, that's how things have been for ~150 years. Keep urging your city to invest in public transit and bike lanes.
- altmind 7y agoFrom what I've heard, this industry works reliably in Eastern Europe and Asia. Uber, or any company of this sort is not magical lifestyle company, its merely an app for a driver and a rider. This is easily replicated. Uber became a poster child only because the barrier to enter is so high in so many western economies. There is a ton of smaller competition elsewhere.
- bobthepanda 7y agoIt doesn't work too well in high-income countries anywhere, because cost of living is relatively high and then people don't want to pay those kinds of fares to support taxi drivers entering the industry. You don't really see this in Korea or Japan, for example. Where this kind of informal taxi arrangement happened in the US pre-Uber (e.g. New York dollar vans) it was mostly lower-income immigrant communities willing to accept a lower standard of living. It's similar to why you don't really see, for example, maids in middle class homes in high-income countries, but those are relatively common where wages are lower.
- tessting 7y agoI don't understand why it's a moral imperative that people not take advantage of the VC funding subsidy? The VCs are wealthy interests looking to find a 10-20-100x exit at the end of this. I don't care if the Saudi Royal family places an enormous bet on automation over the next 10 years. Why is it for the best that all the people who use Uber not have that? I just don't understanding cheering that one of the few subsidies that is tricking down is being phased out, and I disagree with the suggestion that any of this is driving toward the end of paying drivers more.
- gamblor956 7y agoThis policy has actually been pretty great for me. Ubers that once cost $4-5 started costing $10-$15, so I started walking and taking public transportation more. Actually ended up getting to places faster than taking Uber, since I didn't end up waiting 10-15 minutes for the Uber to work its way through traffic to me, or the extra 10-15 minutes taking an Uber would entail due to drivers missing turns or getting lost (despite having a phone providing directions right in front of their faces...).
- Invictus0 7y agoI'm having trouble articulating my thoughts about this. Here we have 2 companies losing many hundreds of millions of dollars per month, and everyone here is losing their minds that they want to raise their prices. Price discrimination is just the market side of progressive taxation: everyone agrees that the rich should pay more, but not when it comes to cab fares? If you don't like the price, don't pay it: Uber v. Lyft is a false dichotomy anyway and ignores all the other cabbies in the market.
- awinter-py 7y agoIf two companies that have been operating at a loss for N years simultaneously stop, is it price collusion? There are lots of factors here that could drive a decision to raise prices: both went public this year = increased scrutiny, moviepass & wework fiascoes = decreased tolerance for bad business models, driverless experiments have failed. But it also feels like there's a wink happening. If the DOJ / courts takeaway is 'yes it's collusion and they're getting slapped with a company-killing fine', it has interesting implications for the ability of unicorns to operate at a loss for long periods. Effectively banning negative unit economics for large companies would be a new chapter for the startup economy.
- jrobn 7y agoThis just feeds the blackmarkets for any industry. When people get wise they turn to the black market.
- bad_user 7y agoI'm from Romania and a taxi/Uber ride is somewhere between $2 and $5, which is pretty cheap compared with other countries. I used to ride with Uber and Bolt a lot, however they've been raising pricing during rush hour and I'm not stupid enough to not notice the bill at the end of the ride and these costs add up. So several months back I stopped taking car rides altogether. I walk a lot, I don't mind walking 3 Km on foot. I ride my bike to and from work, which is actually more efficient than driving a car in this city. And now in winter due to weather I also use public transportation. I also have a driver's license and own my own car. I'm not worrying about prices set dynamically. People can notice the bill and Uber is not competing just with Lift or taxis, it's competing with walking on foot, with public transport, with owning your own car and if their prices aren't reasonable, they won't survive.
- Vadoff 7y agoThe minimum wage in Romania is also €446/mo or $496/mo, so ~$2.86/hr. Compare that to the federal min wage of $7.25 or California's $12/hr.
- blhack 7y agoHere’s how I wish Uber pricing worked: When I hail a ride, I say: I’m going from A to B and am willing to pay C (which Uber can recommend to me) for it. Now if nobody responds, I increase C until they do. This way the drivers know where they are going, how much I’m paying, etc. When a driver “accepts” a ride, I see their vehicle and rating, and get to choose from the people who have accepted. And on the other end, they bid on my ride. If I offer $20, they might ask $25 instead, and it is up to me to either accept or reject that. I really want a system where the drivers are happy, the riders are happy, and everything is transparent and open for negotiation.
- esoterica 7y agoDrivers usually accept new rides while in the middle of driving though. Do you really want an army of distracted drivers on their phones participating in a complicated bidding process?
- ghaff 7y agoAnd, for those relatively unusual occasions where I do take Uber, I probably have zero interest in entering into an online bidding competition. And do you really want a system where you're trying to save a few dollars by getting a bid accepted by the most financially desperate drivers?
- blhack 7y agoUber is already finding the most financially desperate drivers and filtering for them only. They’re competing for the lowest price, but actually price is only one of the things I would like to be able to select for.
- leetcrew 7y agoI definitely don't want to bid on each individual ride, but it would be cool to have a setting in the app that lets me choose between paying more for a shorter wait or waiting longer for a cheaper ride. the driver app could have a similar setting where they can adjust the tradeoff between higher fares and inconvenient endpoints.
- grizzles 7y agoSolidarity. Noice. Didi / Ola are still subsidizing. I can't remember the exact pitch but an Uber driver pitched me the other day on a Didi deal to install the app that was insane.
- wdb 7y agoOh yeah, back to the black cabs then :)
- daemonk 7y agodoes this work both ways? can we get cheaper prices if we are not willing to pay more and when it is not very busy.
- Jedi72 7y agoHopefully this bullshit opens up a new market for digital obfustication services. Pay me $100, I will show you how to save $300/yr in Uber fees by changing your digital appearance.
- thundergolfer 7y agoOr we could just regulate these practices away and save the trouble. Man I would hate having to shop around for a service like that just so I can avoid being vulnerable to price gouging.
- lsc 7y agoinevitable. After spending the last year or two without a car at all, in part 'cause lyft and uber had started subtly raising prices, I bought a car a few months back. I mean, I was a little sad, it was really really nice being driven everywhere... but fundamentally, I'm not quite rich enough to pay market-clearing prices to get driven everywhere. My own impression was that for the last few years, softbank has been subsidizing my own luxury rides, which was really nice! but it was also obviously not sustainable. my own observation all along was that a lot of the price variation was "specials" - it used to be I could count on some discount several times a week. the biggest price increase I experienced, the one that pushed me to buy my own car, was seeing fewer of these. Interestingly, now that I have a car and only use uber/lyft when drinking or otherwise away from a car, I get more discounts and specials again. From talking to drivers, it's similar for them; a significant amount of their income consists of specials, for doing X drives in Y time period.
- useful 7y agoI think it is still a race to the bottom while you can get all rideshare prices in google maps.
- rossdavidh 7y agoI realize I'm in the minority on this, but I think both of these companies will be gone 5 years from now.
- simonblack 7y agoGee, maybe it could be a good idea to order a Taxi instead of a Uber. When the investors stop propping up Uber and Lyft, both will collapse like they've never been, leaving both investors and drivers high and dry. While the company managers laugh all the way to their banks.
- ETHisso2017 7y agoPrediction: this is going to lead to an antitrust investigation at some point. In fact, it may present a catch-22 from a pricing algo perspective: a) the algos don't collude, but simply adjust driver "supply" in particular geos across each other's platforms via surge adjustments until they act like they are colluding; or b) the algo designers try to make their algos not collude and they inadvertently use data from the other platform that is nonpublic or in a way that can be determined to harm consumer welfare. Both a) and b) create a situation where every pricing decision by the algorithm - in every city, across every driver/rider interaction - has to be done in a way that is not collusive. All the DoJ has to do is find an anomalous pricing pattern - which isn't hard - and then pin both these companies with a fine and onerous compliance regulations. Ironically enough, this may be what kills them.
- zonidjan 7y agoSurprise! Now that they've mostly killed off taxi companies, their rates will be the same as taxi companies. Who could've seen that coming? Oh wait.
- cmdshiftf4 7y agoOne could argue, and I will anecdotally, that these companies have brought a much higher standard of service into an industry renowned for providing terrible (at best) service. So if the outcome is that the price has fluctuated back to the norm, but the service provided is of a higher quality, then the consumer has won. What will be interesting to see is what consequences will arise from a corresponding drop in demand when met with the normalisation of prices to the previous mean. Especially given that you can't actively chose between the drivers available to you through these apps i.e. if there's less demand, supply will likely drop to meet demand (drivers don't want to be sitting around all evening, or just doing 1-2 gigs per night), and there's no way for the cream of the crop to come to the surface amongst their competition by way of superior service and hence selective demand / consumers. Intuitively, maybe it will result in harsher ratings from consumers (expecting better service given higher prices) which, with sufficient accumulation, may take lower quality drivers out of circulation and leave those deemed to be best in the marketplace.
- zonidjan 7y agoThey did not win based on their "higher standard of service", but based on their price, which was only possible due to their non-compliance with regulatory requirements.
- boring_twenties 7y agoThe service they provide is at least an order of magnitude better than what the taxi companies used to provide, though.
- deleted 7y ago[deleted]
- arielweisberg 7y agoIn theory if I check both Uber and Lyft the price of one or the other should be lower since they want my business to offset their fixed costs. The price I am willing to pay Is simply the lowest price I can get for the service. How rich I am has nothing do with it per se. So when does it turn into price fixing when they both independently figure out how much I am willing to pay and charge the same amount? Right now they are uncannily good at charging the same amount for the same trip. Maybe the price is already competitive?
- chrismcb 7y agoDo they feel like they've put enough taxi companies out of business that they can now raise heir rates?
- chadlavi 7y agoThey already charge more than a regular yellow cab in New York. Hopefully this price hike will inspire folks to turn back to the cheaper local option.