6 ms·

It's too bad that this whole article never touches on the basics of Uber's business model, like how much money they lose on each ride, how much funding they hav

by lacker 6y ago

It's too bad that this whole article never touches on the basics of Uber's business model, like how much money they lose on each ride, how much funding they have to ride out the current economic climate, the crazy fact that Uber Eats is now a larger part of Uber's American business than the drive-me-somewhere Uber business, and so on. I don't see how Uber's business model is doomed. If Uber and Lyft are forced to be less efficient, they will raise prices. Yes, their business would shrink. But how could they be forced out of business entirely - would people go back to using taxis?? At the very least, Uber could charge the same price as taxis and be superior to taxis because an Uber actually shows up when you want one.

arcticbull 6y ago
I recommend the Naked Capitalism series on Uber's economics. [1] It's a 23-part series that goes back years, but the most recent one I linked you from a few months ago should be a good starting point. "Uber announced a first half 2020 GAAP loss of $4.7 billion with a GAAP net margin of (-81%). Uber’s “official” full year 2019 result was a GAAP loss of $8.5 billion with a (-60%) margin, but these were based on problematic accounting that makes it impossible to evaluate Uber’s financial performance properly over time." "Uber has now lost $23.2 billion in the past four and a half years." "Nothing has happened to change the fact that after ten years, riders have always been fundamentally unwilling to pay prices that would cover Uber’s actual costs, that Uber was always less efficient than the traditional taxis it drove out of business, that its only “efficiency improvement” was to push driver compensation to minimum wage levels, and that its growth depended entirely on unsustainable predatory subsidies." Yep, that's not a good business alright. [1] https://www.nakedcapitalism.com/2020/08/hubert-horan-can-uber-ever-deliver-part-twenty-three-ubers-already-hopelessly-unprofitable-economics-take-a-major-coronavirus-hit.html https://www.nakedcapitalism.com/2020/08/hubert-horan-can-ube...
evgen 6y ago
There is nothing Uber/Lyft do that any urban taxi company cannot do just as good if not better. The taxi companies also have better economics when it comes to their fleet (you can expect states to start mandating that gig drivers be paid some additional amount for vehicle depreciation any day now...) At the end of the day Uber/Lyft will be just another taxi company, albeit with a less professional set of drivers.
- arcticbull 6y ago
  Uber and Lyft have strictly worse unit economics than taxi companies because taxi companies pool their fleet rentals and insurance -- something Uber in the existing model simply could not do. To obtain the same net revenue, Uber would have to charge more per ride than a taxi company.
- chrisseaton 6y ago
  > There is nothing Uber/Lyft do that any urban taxi company cannot do just as good if not better. Well they can't seem to manage to be come when you ask them to, to be clean, or to have a basic standard of politeness. Until recently they didn't manage to accept cards, and many seem to still greatly resent it, and they still can't manage to provide nice apps. So I'm super skeptical that they can do it as good as Uber, let alone better. It's like Uber's been so good for so long now that people have forgotten how offensively bad normal taxis are.
  - cbmuser 6y ago
    This may apply to the US, not necessarily to the rest of the world. I‘m from Europe and I‘ve never felt the need to use UBER. Taxis and public transport over here are sufficiently good.
    - chrisseaton 6y ago
      > This may apply to the US I'm not from the US. I'm from Europe. Taxis in every European city I've ever been to have been fundamentally consumer-hostile. They refuse to accept your card (illegally in some cases), their vehicles are filthy, and their customer service skills are offensive. It's like every ride I take with them is some kind of personal inconvenience for them.
    - iso1631 6y ago
      I got in a taxi at Brussels airport once. Fortunately the previous week I'd had issues with a Washington DC cab driver refusing a credit card, and had the wherewithal to check he took them before we left. He didn't. The less said about the awful black cabs in London the better. Rarely take a taxi in London, but if I have a lot of bags I will, and it's not going to be a black cab. Don't have this issue with Uber, it gives me a rough price (which is pretty accurate IME). I can count on one finger the issues I've had (driver didn't turn up at Nairobi airport, claimed he'd been arrested, had to book another one) I've had issues in Beijing with taxis - thinking back I suspect the main issue is that Uber just didn't exist in Beijing.
trimbo 6y ago
> because an Uber actually shows up when you want one. When Uber starts to face its economic reality, I predict the first thing to go will be service in my neighborhood. Uber has been subsidizing rides everywhere in the city. Which means that my neighborhood is excessively cheap given the low demand. I've paid $14 for what would cost $35 in a taxi. When Uber stops subsidizing this, it means that fewer people will use it and fewer cars will be in the area. That means drivers would have to drive an extra 10-15 minutes to get to me. That's a lot of driving time without getting paid, and drivers don't like that. That's why taxis never came to my house, pre-Uber. It still doesn't make sense at higher prices. Pre-Uber, I would pay limo services $60-$100 just to ensure someone showed up. That's not something most people would pay to use regularly. That $14 price can't jump to $60 and still get many customers. So when the cuts come, I just imagine that my neighborhood will just go back to they-don't-show level service like I used to get with Yellow Cab. And I expect to just start seeing "nothing available, sorry" in the app, resorting to arrangements with limo companies again.

by lacker 6y ago

arcticbull 6y ago

I recommend the Naked Capitalism series on Uber's economics. [1] It's a 23-part series that goes back years, but the most recent one I linked you from a few months ago should be a good starting point. "Uber announced a first half 2020 GAAP loss of $4.7 billion with a GAAP net margin of (-81%). Uber’s “official” full year 2019 result was a GAAP loss of $8.5 billion with a (-60%) margin, but these were based on problematic accounting that makes it impossible to evaluate Uber’s financial performance properly over time." "Uber has now lost $23.2 billion in the past four and a half years." "Nothing has happened to change the fact that after ten years, riders have always been fundamentally unwilling to pay prices that would cover Uber’s actual costs, that Uber was always less efficient than the traditional taxis it drove out of business, that its only “efficiency improvement” was to push driver compensation to minimum wage levels, and that its growth depended entirely on unsustainable predatory subsidies." Yep, that's not a good business alright. [1] https://www.nakedcapitalism.com/2020/08/hubert-horan-can-uber-ever-deliver-part-twenty-three-ubers-already-hopelessly-unprofitable-economics-take-a-major-coronavirus-hit.html https://www.nakedcapitalism.com/2020/08/hubert-horan-can-ube...

evgen 6y ago

There is nothing Uber/Lyft do that any urban taxi company cannot do just as good if not better. The taxi companies also have better economics when it comes to their fleet (you can expect states to start mandating that gig drivers be paid some additional amount for vehicle depreciation any day now...) At the end of the day Uber/Lyft will be just another taxi company, albeit with a less professional set of drivers.

arcticbull 6y ago
Uber and Lyft have strictly worse unit economics than taxi companies because taxi companies pool their fleet rentals and insurance -- something Uber in the existing model simply could not do. To obtain the same net revenue, Uber would have to charge more per ride than a taxi company.
chrisseaton 6y ago
> There is nothing Uber/Lyft do that any urban taxi company cannot do just as good if not better. Well they can't seem to manage to be come when you ask them to, to be clean, or to have a basic standard of politeness. Until recently they didn't manage to accept cards, and many seem to still greatly resent it, and they still can't manage to provide nice apps. So I'm super skeptical that they can do it as good as Uber, let alone better. It's like Uber's been so good for so long now that people have forgotten how offensively bad normal taxis are.
- cbmuser 6y ago
  This may apply to the US, not necessarily to the rest of the world. I‘m from Europe and I‘ve never felt the need to use UBER. Taxis and public transport over here are sufficiently good.
  - chrisseaton 6y ago
    > This may apply to the US I'm not from the US. I'm from Europe. Taxis in every European city I've ever been to have been fundamentally consumer-hostile. They refuse to accept your card (illegally in some cases), their vehicles are filthy, and their customer service skills are offensive. It's like every ride I take with them is some kind of personal inconvenience for them.
  - iso1631 6y ago
    I got in a taxi at Brussels airport once. Fortunately the previous week I'd had issues with a Washington DC cab driver refusing a credit card, and had the wherewithal to check he took them before we left. He didn't. The less said about the awful black cabs in London the better. Rarely take a taxi in London, but if I have a lot of bags I will, and it's not going to be a black cab. Don't have this issue with Uber, it gives me a rough price (which is pretty accurate IME). I can count on one finger the issues I've had (driver didn't turn up at Nairobi airport, claimed he'd been arrested, had to book another one) I've had issues in Beijing with taxis - thinking back I suspect the main issue is that Uber just didn't exist in Beijing.

trimbo 6y ago

> because an Uber actually shows up when you want one. When Uber starts to face its economic reality, I predict the first thing to go will be service in my neighborhood. Uber has been subsidizing rides everywhere in the city. Which means that my neighborhood is excessively cheap given the low demand. I've paid $14 for what would cost $35 in a taxi. When Uber stops subsidizing this, it means that fewer people will use it and fewer cars will be in the area. That means drivers would have to drive an extra 10-15 minutes to get to me. That's a lot of driving time without getting paid, and drivers don't like that. That's why taxis never came to my house, pre-Uber. It still doesn't make sense at higher prices. Pre-Uber, I would pay limo services $60-$100 just to ensure someone showed up. That's not something most people would pay to use regularly. That $14 price can't jump to $60 and still get many customers. So when the cuts come, I just imagine that my neighborhood will just go back to they-don't-show level service like I used to get with Yellow Cab. And I expect to just start seeing "nothing available, sorry" in the app, resorting to arrangements with limo companies again.