6 ms·

App provides value, global brand has some value. There is absolutely no reason for ride hailing app to get 10-20% markup per ride. I suspect that after the co

by nabla9 6y ago

App provides value, global brand has some value. There is absolutely no reason for ride hailing app to get 10-20% markup per ride. I suspect that after the competition really kicks in, Uber/Lyft must settle for 1-3% per ride or less.

aaxa 6y ago
You could say the same with Just-Eat. In Denmark, I know they have a markup up to 15%, even though they have a lot of competition. So honestly, I am a bit sceptical if we will see a much lower markup. One might hope though.
- nabla9 6y ago
  The dot-com bubble 1995-2000 included multiple delivery service companies. kozmo.com https://en.wikipedia.org/wiki/Kozmo.com https://en.wikipedia.org/wiki/Kozmo.com Webvan was once valued $4.8 billion.
  - ozim 6y ago
    So you expect that whole food delivery business will collapse? I don't see that coming because it is 2020 and we have: smartphones in every pocket, easy payments from those smartphones, it is super convenient to order via such platform, in the end lock downs basically mandate food delivery.
- vmateixeira 6y ago
  In the UK, JustEat takes 30% of the order, same as UberEats, with 0 liability - if something goes wrong with the order, including problems with delivery time, driver taking a nibble, the restaurant just doesn't get paid. Deliveroo is a bit greedier and takes 35%. It's definitely not the lack of competition... it's just that the competition doesn't behave much better compared to them.
  - deleted 6y ago
    [deleted]
  - yunohn 6y ago
    Interesting to hear that Just-Eat acts this way; Takeaway (Thuisbezorgd) has similar practices in NL. They take no liability on anything (delivery delays, food problems, missing items, etc). They have no customer care number, and take days to respond to emails. If anything goes wrong, they make you call the restaurant, and of course they redirect you back to Tkwy. In the end, you will receive no refund, none of the missing food, and have waited 1-3hrs for an order that should've taken <1hr. It's a horrible experience, but they get away with it because they have a near-monopoly. Uber Eats & Deliveroo have <25% of the restaurants on Tkwy.
- input_sh 6y ago
  Huh, where I'm from delivery companies charge by the distance, approximately 0,8 euros per kilometer. But that's definitely due to competition, there's like 6-7 competitors in a city with about 400k people.
agloeregrets 6y ago
This. I never got how Uber was still unprofitable for so long. Sure you have a bunch of Silicon Valley salaries to pay but realistically speaking, one could build an Uber/Lyft for under $1M and basically can operate with two or so devs fixing issues. Yet, they are blowing hundreds of millions of dollars yearly all over the place while shorting drivers who can’t make a living wage and are basically trading vehicle expenses down the road for payment today.
- ozim 6y ago
  I think they are blowing hundreds of millions of dollars yearly on marketing/sales people not on developers.
- ta988 6y ago
  I'm not sure you realize that a product at that scale can't run with two people. You need lawyers, service support, testers, advertisers... People that hacl the other company to sabotage their launch (if you are not aware, uber did that).
  - agloeregrets 6y ago
    I was referring to Silicon valley salaries, obviously you would need ~ 50-100 people or such. At current scale of Uber, if they charged just a penny (instead of the 20-30% they currently do) They would make 16 million dollars which could pay 100 people an average of 100K per year, they could spend $4M on infrastructure and still make $2M in profit despite being not much more than a payment processor and app provider (like square or shopify) They bill more than 200X that on average.
- n4r9 6y ago
  I subscribe to an email newsletter called BIG by Matt Stoller. It's all about US monopolies and he's very interested in exactly what you describe. His response is that both ride-hailing and delivery apps are taking a gamble on establishing a monopoly in several years time, at which point the profits will pay off the current losses.
drrotmos 6y ago
Global brand definitely provides value. Whenever I'm traveling (or rather, back when travel was possible) I always use Uber because I know that I can pay buy credit card (rather than cash) and if the driver takes a huge detour or some other common taxi scam, I can just contact Uber's customer service, and they'll refund me.
- nabla9 6y ago
  That's true, but most rides are local by wide margin. And 10-20% per ride is too much. Maybe $20 per month/car or so. It's only question of time until the margins from riding app start to go down. Someone builds competing app with similar bells and whistles and sells it to locals as a service without branding for example.
- 0xbadcafebee 6y ago
  I have often found local alternatives to Uber/Lyft, whether it be in Austin or Ireland, and their main value proposition remains: get me a car, quickly, and take my payment digitally. If I have a problem there's always credit card charge backs. I think competition is the other thing that makes them work. The local options know if they fuck customers over that they'll just jump ship to Uber/Lyft. And same is probably true for Uber/Lyft!
- lhopki01 6y ago
  >if the driver takes a huge detour or some other common taxi scam, I can just contact Uber's customer service, and they'll refund me. This often gets cited as an advantage of Uber but in my person experience I've been driven 3 sides of a square and Uber hasn't refunded me when I've complained.
pjmorris 6y ago
I've read that grocery stores operate on a ~2% profit margin. Is a high-margin business a sign of market inefficiency that will eventually be stamped out?
- gmadsen 6y ago
  Not necessarily. An extremely low profit margin is a sign of a commodities market, where there isn't really a space for innovation. For example a grocery store, so you are competing on very fine details and logistics. High margin, COULD be inefficiency, but it could just be a technological or innovation advantage. It seems ride hailing is transitioning into a commodity since innovation has dried up. The one obvious disruption would be self driving cars
  - pjmorris 6y ago
    Well, at one time, cash registers, packaged food, and stores were all technological innovations. I'm asking whether 'technological or innovation advantage' can be interpreted as a sign of temporary inefficiency that will eventually get ironed out of the system (unless maintained by force, as another commenter mentions.)
    - gmadsen 6y ago
      I guess in a world without regulations or laws? The entire economy is predicated on patent and copyright law, as western civilization has deemed it beneficial to protect innovation and reward the innovator.
- EliRivers 6y ago
  Or they've got a moat. Warren Buffet likes moats. If your potential competition is stymied by huge costs of startup or catchup, or you've got the government (be it national or local) on side to help you maintain a monopoly or cartel (I'm looking your way, numerous US internet service providers...), then your high margin can exist for a very long time. I don't know if I'd like to say "indefinitely" but with the right moats, yeah, maybe indefinitely.
mnd999 6y ago
I think this is what was (pre-pandemic) happening in London. Bolt came in, cheaper than Uber and paying the drivers (slightly) more. Uber burned a lot of cash creating the market, and to some degree on all the self-driving cab nonsense.

by nabla9 6y ago

aaxa 6y ago

You could say the same with Just-Eat. In Denmark, I know they have a markup up to 15%, even though they have a lot of competition. So honestly, I am a bit sceptical if we will see a much lower markup. One might hope though.

nabla9 6y ago
The dot-com bubble 1995-2000 included multiple delivery service companies. kozmo.com https://en.wikipedia.org/wiki/Kozmo.com https://en.wikipedia.org/wiki/Kozmo.com Webvan was once valued $4.8 billion.
- ozim 6y ago
  So you expect that whole food delivery business will collapse? I don't see that coming because it is 2020 and we have: smartphones in every pocket, easy payments from those smartphones, it is super convenient to order via such platform, in the end lock downs basically mandate food delivery.
vmateixeira 6y ago
In the UK, JustEat takes 30% of the order, same as UberEats, with 0 liability - if something goes wrong with the order, including problems with delivery time, driver taking a nibble, the restaurant just doesn't get paid. Deliveroo is a bit greedier and takes 35%. It's definitely not the lack of competition... it's just that the competition doesn't behave much better compared to them.
- deleted 6y ago
  [deleted]
- yunohn 6y ago
  Interesting to hear that Just-Eat acts this way; Takeaway (Thuisbezorgd) has similar practices in NL. They take no liability on anything (delivery delays, food problems, missing items, etc). They have no customer care number, and take days to respond to emails. If anything goes wrong, they make you call the restaurant, and of course they redirect you back to Tkwy. In the end, you will receive no refund, none of the missing food, and have waited 1-3hrs for an order that should've taken <1hr. It's a horrible experience, but they get away with it because they have a near-monopoly. Uber Eats & Deliveroo have <25% of the restaurants on Tkwy.
input_sh 6y ago
Huh, where I'm from delivery companies charge by the distance, approximately 0,8 euros per kilometer. But that's definitely due to competition, there's like 6-7 competitors in a city with about 400k people.

agloeregrets 6y ago

This. I never got how Uber was still unprofitable for so long. Sure you have a bunch of Silicon Valley salaries to pay but realistically speaking, one could build an Uber/Lyft for under $1M and basically can operate with two or so devs fixing issues. Yet, they are blowing hundreds of millions of dollars yearly all over the place while shorting drivers who can’t make a living wage and are basically trading vehicle expenses down the road for payment today.

ozim 6y ago
I think they are blowing hundreds of millions of dollars yearly on marketing/sales people not on developers.
ta988 6y ago
I'm not sure you realize that a product at that scale can't run with two people. You need lawyers, service support, testers, advertisers... People that hacl the other company to sabotage their launch (if you are not aware, uber did that).
- agloeregrets 6y ago
  I was referring to Silicon valley salaries, obviously you would need ~ 50-100 people or such. At current scale of Uber, if they charged just a penny (instead of the 20-30% they currently do) They would make 16 million dollars which could pay 100 people an average of 100K per year, they could spend $4M on infrastructure and still make $2M in profit despite being not much more than a payment processor and app provider (like square or shopify) They bill more than 200X that on average.
n4r9 6y ago
I subscribe to an email newsletter called BIG by Matt Stoller. It's all about US monopolies and he's very interested in exactly what you describe. His response is that both ride-hailing and delivery apps are taking a gamble on establishing a monopoly in several years time, at which point the profits will pay off the current losses.

drrotmos 6y ago

Global brand definitely provides value. Whenever I'm traveling (or rather, back when travel was possible) I always use Uber because I know that I can pay buy credit card (rather than cash) and if the driver takes a huge detour or some other common taxi scam, I can just contact Uber's customer service, and they'll refund me.

nabla9 6y ago
That's true, but most rides are local by wide margin. And 10-20% per ride is too much. Maybe $20 per month/car or so. It's only question of time until the margins from riding app start to go down. Someone builds competing app with similar bells and whistles and sells it to locals as a service without branding for example.
0xbadcafebee 6y ago
I have often found local alternatives to Uber/Lyft, whether it be in Austin or Ireland, and their main value proposition remains: get me a car, quickly, and take my payment digitally. If I have a problem there's always credit card charge backs. I think competition is the other thing that makes them work. The local options know if they fuck customers over that they'll just jump ship to Uber/Lyft. And same is probably true for Uber/Lyft!
lhopki01 6y ago
>if the driver takes a huge detour or some other common taxi scam, I can just contact Uber's customer service, and they'll refund me. This often gets cited as an advantage of Uber but in my person experience I've been driven 3 sides of a square and Uber hasn't refunded me when I've complained.

pjmorris 6y ago

I've read that grocery stores operate on a ~2% profit margin. Is a high-margin business a sign of market inefficiency that will eventually be stamped out?

gmadsen 6y ago
Not necessarily. An extremely low profit margin is a sign of a commodities market, where there isn't really a space for innovation. For example a grocery store, so you are competing on very fine details and logistics. High margin, COULD be inefficiency, but it could just be a technological or innovation advantage. It seems ride hailing is transitioning into a commodity since innovation has dried up. The one obvious disruption would be self driving cars
- pjmorris 6y ago
  Well, at one time, cash registers, packaged food, and stores were all technological innovations. I'm asking whether 'technological or innovation advantage' can be interpreted as a sign of temporary inefficiency that will eventually get ironed out of the system (unless maintained by force, as another commenter mentions.)
  - gmadsen 6y ago
    I guess in a world without regulations or laws? The entire economy is predicated on patent and copyright law, as western civilization has deemed it beneficial to protect innovation and reward the innovator.
EliRivers 6y ago
Or they've got a moat. Warren Buffet likes moats. If your potential competition is stymied by huge costs of startup or catchup, or you've got the government (be it national or local) on side to help you maintain a monopoly or cartel (I'm looking your way, numerous US internet service providers...), then your high margin can exist for a very long time. I don't know if I'd like to say "indefinitely" but with the right moats, yeah, maybe indefinitely.

mnd999 6y ago

I think this is what was (pre-pandemic) happening in London. Bolt came in, cheaper than Uber and paying the drivers (slightly) more. Uber burned a lot of cash creating the market, and to some degree on all the self-driving cab nonsense.