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Without questioning it, I never understood how “sharing economy” companies lose money. Are they subsidising their “partners”? My base assumption was always that

Without questioning it, I never understood how “sharing economy” companies lose money. Are they subsidising their “partners”? My base assumption was always that eg Uber passes costs and revenue to the riders. Or is it their bloated central operations, needed to justify the VC valuations?

fakedang 6y ago
Most of it is marketing, fighting legal issues and attrition of goods delivered / compensation. And also the insane discounts they have to provide to stay ahead of the competition. Airbnb is somewhat immune, since their only major competitors are old school hotels.
- rich_sasha 6y ago
  Right, so “discount” implies they subsidise drivers for the journeys? Eg Uber charges $1 per mile but driver receives $1.1 or sth? The org bloat is quite staggering for what is effectively a taxi app.
  - fakedang 6y ago
    No no. I meant that the effective cost of a ride (paying contractor + tech costs + employee costs + marketing per ride) is $1 a mile, but they give a discount that makes it effectively $0.9 a mile, and doing this on scale is effectively making them run operations at a loss unless they have market monopoly. Even a duopoly situation is unfavorable for them.
cehrlich 6y ago
I don't know if this is still true, but a few years ago Uber was losing money on every trip [1]. They also, five years ago, had 6000 employees, of which 2000 were engineers [2]. Apologies for the outdated links, there's probably more precise data out there. [1] https://nymag.com/intelligencer/2019/04/ubers-plan-to-lose-money-on-each-ride-make-it-up-in-volume.html https://nymag.com/intelligencer/2019/04/ubers-plan-to-lose-m... [2] http://highscalability.com/blog/2016/10/12/lessons-learned-from-scaling-uber-to-2000-engineers-1000-ser.html#:~:text=In%20fact%2C%20Uber%20is%20now,in%20over%208000%20git%20repositories http://highscalability.com/blog/2016/10/12/lessons-learned-f....
- rich_sasha 6y ago
  I read the top article, it’s good. The pertinent bit to my question seems to be, they do subsidise drivers. Apart from fixed costs, they have “driver incentives” to shape supply and demand. Ie give out cash to subsidise trips when needed.
johannes1234321 6y ago
As they got cheap money from investors they typically go big in expanding. This means paying lots of marketing, competing with low prices, having localized phone hotlines, be generous to customers (not suppliers!) when handling disputes, ...
keenreed 6y ago
I just had a job interview with Deliveroo. There is over 100 programmers in central office, they pay better than some banks. I dont think problem they solve is that difficult.

fakedang 6y ago

Most of it is marketing, fighting legal issues and attrition of goods delivered / compensation. And also the insane discounts they have to provide to stay ahead of the competition. Airbnb is somewhat immune, since their only major competitors are old school hotels.

rich_sasha 6y ago
Right, so “discount” implies they subsidise drivers for the journeys? Eg Uber charges $1 per mile but driver receives $1.1 or sth? The org bloat is quite staggering for what is effectively a taxi app.
- fakedang 6y ago
  No no. I meant that the effective cost of a ride (paying contractor + tech costs + employee costs + marketing per ride) is $1 a mile, but they give a discount that makes it effectively $0.9 a mile, and doing this on scale is effectively making them run operations at a loss unless they have market monopoly. Even a duopoly situation is unfavorable for them.

cehrlich 6y ago

I don't know if this is still true, but a few years ago Uber was losing money on every trip [1]. They also, five years ago, had 6000 employees, of which 2000 were engineers [2]. Apologies for the outdated links, there's probably more precise data out there. [1] https://nymag.com/intelligencer/2019/04/ubers-plan-to-lose-money-on-each-ride-make-it-up-in-volume.html https://nymag.com/intelligencer/2019/04/ubers-plan-to-lose-m... [2] http://highscalability.com/blog/2016/10/12/lessons-learned-from-scaling-uber-to-2000-engineers-1000-ser.html#:~:text=In%20fact%2C%20Uber%20is%20now,in%20over%208000%20git%20repositories http://highscalability.com/blog/2016/10/12/lessons-learned-f....

rich_sasha 6y ago
I read the top article, it’s good. The pertinent bit to my question seems to be, they do subsidise drivers. Apart from fixed costs, they have “driver incentives” to shape supply and demand. Ie give out cash to subsidise trips when needed.

johannes1234321 6y ago

As they got cheap money from investors they typically go big in expanding. This means paying lots of marketing, competing with low prices, having localized phone hotlines, be generous to customers (not suppliers!) when handling disputes, ...

keenreed 6y ago

I just had a job interview with Deliveroo. There is over 100 programmers in central office, they pay better than some banks. I dont think problem they solve is that difficult.