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So according to this, Uber is ripping off the drivers, riders and investors - with no path to profitability. So where is the money going? Is the claim that it's

So according to this, Uber is ripping off the drivers, riders and investors - with no path to profitability. So where is the money going? Is the claim that it's just so poorly managed that it's all being blown on overpriced tech salaries? Incidentally, how is it that hyperscale tech companies such as Uber and Deliveroo are struggling to turn a profit on proven business models, while charging more to both the customer and provider? Isn't tech and scale meant to make it cheaper?

disgruntledphd2 5y ago
Because money is so cheap, that investors are literally burning cash up in search of growth. Uber has never made any sense to me as a business (since 2016), and it's crazy how long it's lasted.
- reidjs 5y ago
  If you’ve ever not owned a car and lived somewhere with poor public transport, Uber makes a lot of sense. It sucked having to rely on friends, family, and especially yellow cabs. I’m not saying Uber is the best company or business model, but ride sharing makes total business sense to me.
  - nyghtly 5y ago
    Uber makes sense to riders at subsidized prices, but it stops making sense once they start charging what it actually costs to provide that service. The reason we don't take taxis everywhere is because they're expensive and infrequent. Creating an app to handle dispatch didn't magically change this reality. The hardest parts of operating a taxi service (maintaining a fleet of vehicles, hiring and retaining drivers) have not gotten any easier, except in the case of Prop 22, which is an unfair advantage for Uber compared to other transportation providers.
    - reidjs 5y ago
      Even if the prices doubled overnight it would still make sense for my main uses: an on-demand designated driver or rides to/from the airport. That said, I realize I'm financially better off than many people and would prefer to have safe, affordable, and widespread public transit.
      - MichaelZuo 5y ago
        I agree the premium Uber services will always be in demand in every big city. UberX is their loss leader to entice customers, and generate nice growth numbers.
  - Ntrails 5y ago
    I lived in all sorts of properly rural places with no public transport of any meaningful kind. If you needed a cab you phoned a minicab office and an operator would give you a time slot. The only thing changed by uber is that the minicab operator is now an app, and pricing is less predictable
    - stvswn 5y ago
      That experience isn't true in my experience. I was in college pre-Uber in an area unserved by public transportation and it was common knowledge that you cannot schedule a cab and expect them to actually come, and when they did you could expect a very tense price negotiation accompanied by indignation about where you wanted to go. To push back on taxi apologia elsewhere -- Years later I lived in Philadelphia during the cab era and the city passed a law that the cabs needed to accept credit cards, but the cabs wouldn't unlock their doors unless you promised to pay cash. Even still, they'd often ask where you wanted to go and speed away if you said the wrong thing. Around the same time, in D.C., there was a "zone system" where cab fares were set around how many zones the cab traveled through, and so every rider got used to knowing the tricks cabs would play to go out of their ways to enter and exit unnecessary zones and surprise you with a high bill. They also had the right to pick up additional passengers whether you liked it or not. In NYC it was common knowledge that you just can't expect a cab to take you to the outer boroughs.
nemothekid 5y ago
>So where is the money going? To drivers AIUI. The "fair" value a driver should make is $1. Uber is paying them $0.7 and charging the customer $0.5. That said, I'm not sure how valid OP's assessment is without also considering Lyft/Didi/Grab. If Uber's business model is ultimately untenable, every company should be in trouble
- dwater 5y ago
  Following the links to Hubert Horan's reports, it looks like Lyft is even worse financial shape: "Uber’s continuing operations had a GAAP net margin of negative 38% while Lyft’s was negative 49%." https://www.nakedcapitalism.com/2021/08/hubert-horan-can-uber-ever-deliver-part-twenty-seven-despite-staggering-losses-the-uber-propaganda-train-keeps-rolling.html https://www.nakedcapitalism.com/2021/08/hubert-horan-can-ube... I guess Doctorow doesn't want to waste space commenting on the also-rans.
majormajor 5y ago
I think the only way the argument that they're ripping off riders makes sense is if you look at it as a long-term thing: by burning money to give riders unsustainable prices for years, they sabotaged any more-realistic alternatives to improve mobility. I'm not sure I buy that, personally. I don't think riders are victims. Uber to me has always looked like a way to subsidize a bunch of cheap rides for riders with some wildly-optimistic "one day this will be profitable and we'll be the biggest name in the space" plan. Even self-driving cars didn't seem like the answer - that's a massive investment in a vandalism magnet, like the scooter companies but dozens of times more expensive (maybe running a scooter business helped them realize this?). The problem with trying to profit off "scale" with something like Uber is that the service still has to be delivered one-on-one. Things like Uber Pool are the closest they can get to scale, but suffer from a "why am I paying for this" problem as the experience suffers and the cost can't be that low (since their base rate is artificially low already).
- Eric_WVGG 5y ago
  I buy it. It's predatory capitalism, cut and dried. They're reshaping the marketplace.
  - vineyardmike 5y ago
    what marketplace? Didn't the invent it? Taxis are only available in a few places and not cheaply. I lived in Cleveland and i tried a taxi once. It was $100 to get to airport from within city limits. It was a 2 hour wait. Uber basically invented usable taxis there.
    - selimthegrim 5y ago
      You couldn’t take a cab to the Rapid?
      - vineyardmike 5y ago
        Getting into the cab at all is expensive and time consuming, the rapid just makes that a smaller portion of the trip. I did take ubers/friends to the rapid all the time.
mypalmike 5y ago
A good chunk of money has flowed among investors from greater fools to lesser fools.
Spooky23 5y ago
It costs about $0.56/mi to run a midsize car for an individual without a driver. A legitimate, licensed, insured car in livery service probably costs more like $2/mi just to operate the car and pay the driver. Think about how NYC Cabs are operated vs Uber. The cab is a fixed asset with operating expenses, and many cabs get rented 24/7 to maximize the return on asset. With Uber, the vehicle is a consumable and the business is to lease time from contractors who don’t understand accounting, and both the company and driver is losing money. I don’t think the investors are getting ripped off. They own an international network that has value, and have more money than they know what to do with!
onlyrealcuzzo 5y ago
> Is the claim that it's just so poorly managed that it's all being blown on overpriced tech salaries? I think that's the main argument. Uber had ~$17Bn revenue on ~1.44Bn trips in 2020 per quarter. That's ~$12 per trip. Salaries are >$7Bn. That's about $1 per trip. Add in the marketing and server costs - and it's close to $3 per trip - without profit. Then they're going to want a >10% profit margin (another $1). When >50% of trips are only a few miles and <$9 - that's a lot of overhead - not even including Visa's ~6% cut. The Taxi company was happy to just get a 10-20% cut. Uber needs a 40% cut to break even. As New York is showing - you don't need to spend >$14Bn per year on an app. Uber's app is pretty awesome - but riders aren't going to pay a 30% premium to use it. And driver's (of equal quality) definitely aren't going to take a 50%+ pay-cut to make up the difference.
- vineyardmike 5y ago
  > Salaries are >$7Bn Corporate salaries??
- kelnos 5y ago
  > Uber's app is pretty awesome - but riders aren't going to pay a 30% premium to use it. When the alternative is the traditional taxi experience? Hell yes I am going to pay a 30% premium to avoid that.
  - ajb92 5y ago
    What aspects of riding in a traditional taxi do you dislike most?
    - tgsovlerkhgsel 5y ago
      It boils down to the lack of a reputation system. There is little incentive for drivers to behave in a good way, because anything bad he does won't directly impact him, beyond maybe make people avoid taxis altogether (which seems unlikely, as taxis are usually a last resort when you have no other realistic options). And it doesn't take many bad apples to spoil the bunch. One of Uber's main contributions is changing this dynamic.
jareklupinski 5y ago
for a while, I thought the founders/VCs truly believed they were creating a loss-leader for an eventual network of self-driving cars, and would slowly transition the fleet from human to robot drivers, but keep prices the same to finally get to black fingers crossed

disgruntledphd2 5y ago

Because money is so cheap, that investors are literally burning cash up in search of growth. Uber has never made any sense to me as a business (since 2016), and it's crazy how long it's lasted.

reidjs 5y ago
If you’ve ever not owned a car and lived somewhere with poor public transport, Uber makes a lot of sense. It sucked having to rely on friends, family, and especially yellow cabs. I’m not saying Uber is the best company or business model, but ride sharing makes total business sense to me.
- nyghtly 5y ago
  Uber makes sense to riders at subsidized prices, but it stops making sense once they start charging what it actually costs to provide that service. The reason we don't take taxis everywhere is because they're expensive and infrequent. Creating an app to handle dispatch didn't magically change this reality. The hardest parts of operating a taxi service (maintaining a fleet of vehicles, hiring and retaining drivers) have not gotten any easier, except in the case of Prop 22, which is an unfair advantage for Uber compared to other transportation providers.
  - reidjs 5y ago
    Even if the prices doubled overnight it would still make sense for my main uses: an on-demand designated driver or rides to/from the airport. That said, I realize I'm financially better off than many people and would prefer to have safe, affordable, and widespread public transit.
    - MichaelZuo 5y ago
      I agree the premium Uber services will always be in demand in every big city. UberX is their loss leader to entice customers, and generate nice growth numbers.
- Ntrails 5y ago
  I lived in all sorts of properly rural places with no public transport of any meaningful kind. If you needed a cab you phoned a minicab office and an operator would give you a time slot. The only thing changed by uber is that the minicab operator is now an app, and pricing is less predictable
  - stvswn 5y ago
    That experience isn't true in my experience. I was in college pre-Uber in an area unserved by public transportation and it was common knowledge that you cannot schedule a cab and expect them to actually come, and when they did you could expect a very tense price negotiation accompanied by indignation about where you wanted to go. To push back on taxi apologia elsewhere -- Years later I lived in Philadelphia during the cab era and the city passed a law that the cabs needed to accept credit cards, but the cabs wouldn't unlock their doors unless you promised to pay cash. Even still, they'd often ask where you wanted to go and speed away if you said the wrong thing. Around the same time, in D.C., there was a "zone system" where cab fares were set around how many zones the cab traveled through, and so every rider got used to knowing the tricks cabs would play to go out of their ways to enter and exit unnecessary zones and surprise you with a high bill. They also had the right to pick up additional passengers whether you liked it or not. In NYC it was common knowledge that you just can't expect a cab to take you to the outer boroughs.

nemothekid 5y ago

>So where is the money going? To drivers AIUI. The "fair" value a driver should make is $1. Uber is paying them $0.7 and charging the customer $0.5. That said, I'm not sure how valid OP's assessment is without also considering Lyft/Didi/Grab. If Uber's business model is ultimately untenable, every company should be in trouble

dwater 5y ago
Following the links to Hubert Horan's reports, it looks like Lyft is even worse financial shape: "Uber’s continuing operations had a GAAP net margin of negative 38% while Lyft’s was negative 49%." https://www.nakedcapitalism.com/2021/08/hubert-horan-can-uber-ever-deliver-part-twenty-seven-despite-staggering-losses-the-uber-propaganda-train-keeps-rolling.html https://www.nakedcapitalism.com/2021/08/hubert-horan-can-ube... I guess Doctorow doesn't want to waste space commenting on the also-rans.

majormajor 5y ago

I think the only way the argument that they're ripping off riders makes sense is if you look at it as a long-term thing: by burning money to give riders unsustainable prices for years, they sabotaged any more-realistic alternatives to improve mobility. I'm not sure I buy that, personally. I don't think riders are victims. Uber to me has always looked like a way to subsidize a bunch of cheap rides for riders with some wildly-optimistic "one day this will be profitable and we'll be the biggest name in the space" plan. Even self-driving cars didn't seem like the answer - that's a massive investment in a vandalism magnet, like the scooter companies but dozens of times more expensive (maybe running a scooter business helped them realize this?). The problem with trying to profit off "scale" with something like Uber is that the service still has to be delivered one-on-one. Things like Uber Pool are the closest they can get to scale, but suffer from a "why am I paying for this" problem as the experience suffers and the cost can't be that low (since their base rate is artificially low already).

Eric_WVGG 5y ago
I buy it. It's predatory capitalism, cut and dried. They're reshaping the marketplace.
- vineyardmike 5y ago
  what marketplace? Didn't the invent it? Taxis are only available in a few places and not cheaply. I lived in Cleveland and i tried a taxi once. It was $100 to get to airport from within city limits. It was a 2 hour wait. Uber basically invented usable taxis there.
  - selimthegrim 5y ago
    You couldn’t take a cab to the Rapid?
    - vineyardmike 5y ago
      Getting into the cab at all is expensive and time consuming, the rapid just makes that a smaller portion of the trip. I did take ubers/friends to the rapid all the time.

mypalmike 5y ago

A good chunk of money has flowed among investors from greater fools to lesser fools.

Spooky23 5y ago

It costs about $0.56/mi to run a midsize car for an individual without a driver. A legitimate, licensed, insured car in livery service probably costs more like $2/mi just to operate the car and pay the driver. Think about how NYC Cabs are operated vs Uber. The cab is a fixed asset with operating expenses, and many cabs get rented 24/7 to maximize the return on asset. With Uber, the vehicle is a consumable and the business is to lease time from contractors who don’t understand accounting, and both the company and driver is losing money. I don’t think the investors are getting ripped off. They own an international network that has value, and have more money than they know what to do with!

onlyrealcuzzo 5y ago

> Is the claim that it's just so poorly managed that it's all being blown on overpriced tech salaries? I think that's the main argument. Uber had ~$17Bn revenue on ~1.44Bn trips in 2020 per quarter. That's ~$12 per trip. Salaries are >$7Bn. That's about $1 per trip. Add in the marketing and server costs - and it's close to $3 per trip - without profit. Then they're going to want a >10% profit margin (another $1). When >50% of trips are only a few miles and <$9 - that's a lot of overhead - not even including Visa's ~6% cut. The Taxi company was happy to just get a 10-20% cut. Uber needs a 40% cut to break even. As New York is showing - you don't need to spend >$14Bn per year on an app. Uber's app is pretty awesome - but riders aren't going to pay a 30% premium to use it. And driver's (of equal quality) definitely aren't going to take a 50%+ pay-cut to make up the difference.

vineyardmike 5y ago
> Salaries are >$7Bn Corporate salaries??
kelnos 5y ago
> Uber's app is pretty awesome - but riders aren't going to pay a 30% premium to use it. When the alternative is the traditional taxi experience? Hell yes I am going to pay a 30% premium to avoid that.
- ajb92 5y ago
  What aspects of riding in a traditional taxi do you dislike most?
  - tgsovlerkhgsel 5y ago
    It boils down to the lack of a reputation system. There is little incentive for drivers to behave in a good way, because anything bad he does won't directly impact him, beyond maybe make people avoid taxis altogether (which seems unlikely, as taxis are usually a last resort when you have no other realistic options). And it doesn't take many bad apples to spoil the bunch. One of Uber's main contributions is changing this dynamic.

jareklupinski 5y ago

for a while, I thought the founders/VCs truly believed they were creating a loss-leader for an eventual network of self-driving cars, and would slowly transition the fleet from human to robot drivers, but keep prices the same to finally get to black fingers crossed