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What I don't understand about the "Uber can never be profitable" argument is, why can't they just raise prices until they're no longer selling at a loss? If the

What I don't understand about the "Uber can never be profitable" argument is, why can't they just raise prices until they're no longer selling at a loss? If the answer to that is, "because then demand would die", why doesn't that apply to taxis? Taxis make money. Why can't a better (in many people's opinion) service, with better tech, do at least that well? Setting aside the other reasons to dislike Uber, there is obviously a valuable product there. I get that it has been subsidized by VC dollars in a land grab, etc., but saying it can never be profitable is saying it can never find a fair market value, and that doesn't make sense to me. What am I missing?

ceejayoz 5y ago
Sure, the "sell dollars for $0.50" company can become profitable by raising prices to $1.10 after they wipe out the competitor who was selling for $1.00, but is that a good end result?
- neonate 5y ago
  It's not, but that's a different argument.
api 5y ago
Maybe the company as it stands is so inefficient and cash burning that it can't actually compete with taxis. In that case a slimmed down Uber may be able to do so, but that would require a lot of blood to flow inside the company.
- neonate 5y ago
  If the argument is not "Uber can never be profitable" but "Uber can never be profitable without a brutal corporate reorg", that's more plausible. But it's also a much weaker claim, no? Brutal corporate reorgs are a thing and I suppose that sometimes they even work.
thebigman433 5y ago
> why doesn't that apply to taxis? Taxis make money. Wouldnt it "just" be because of the massive overhead that Uber has with the software engineers, support staff, execs, etc?
- tracedddd 5y ago
  To be honest that’s all self inflicted. It may be painful to downsize to a sustainable model but these aren’t hard costs - at least not to the extent they exist now.
  - Daishiman 5y ago
    The question is whether a sustainable model's marginal utility over the regular old taxi business is sufficiently large to justify the entire endeavor.
hash872 5y ago
They are very close to being a monopoly in the US, and are certainly a duopoly. Predatory pricing for a decade to establish market share, and then raising prices once in duopoly status, would be a slamdunk antitrust case. That's the legal reality. Plus the political one- the average Uber customer is middle to upper middle class in an urban area- i.e., the types of people that politicians actually listen to. Politically sympathetic, vote in very large numbers, have an outsized voice in the media, etc. Every media outlet in America would cover the price increase nonstop. If raising prices didn't result in an antitrust suit the very next day, I will eat my hat
- dbt00 5y ago
  The market is not "ride hailing apps", it is personal transportation. Depending on where you live, the competition is trains, busses, biking, walking, company shuttles, or even moving closer to where you want to be. If the cost of an Uber from the airport is too expensive, people won't just take cabs, they could also park in long term parking or have a friend drop them off instead.
- neonate 5y ago
  I hear you, but that's also already a different argument involving complex externalities. I'm just asking why a better service with better tech* than taxis can't ever make money, when taxis do make money. * I know not everyone agrees with this, but enough people do that it's clearer to put the argument this way.
  - hash872 5y ago
    I don't see what's the complex externality here- they can't raise prices significantly because they're legally prevented from doing so. 'The people with the guns & the legal monopoly on force forbid it' is pretty simple. To my understanding the only people making non-poverty wages in the taxi business are owners who purchased 'medallions' decades ago- aka another governmental licensing restriction. I believe they frequently lease out the cars to drivers who make minimum wage or less. I'm not sure an individual taxi is necessarily profitable on a per-car basis
  - 5y ago
majormajor 5y ago
Doesn't it apply to taxis? There weren't as many taxis as ubers, so they were more expensive and harder to get and took longer to show up. If this was a purely artificial supply constraint (medallian monopolies and abuse, say), then that would be one path to Uber profitability. If this was just a flexibility problem - where taxi driving full time as a requirement for drivers meant you couldn't hit peak demand without an unsustainable amount of idle time too - Uber could have a path there. If it was a sort of "step change" demand function, where if you make it trivially available and cheap the growth in demand will be enough to offset the lower per-ride revenue, there's another potential path there. But it's been a long time now for really none of those theories to pan out.
abdullahkhalids 5y ago
The taxi business does not extract out 30-40% of revenue away from the drivers and into the hands of software engineers who keep adding useless features to an overbloated app. (not the mention the investors and the executives)
- neonate 5y ago
  Ok, let's say Uber is executing the software side of its business badly. Is the argument then "Uber can never be profitable unless it fixes its software business" (which could be true, but is a much weaker claim)? Or is it that "The cost of operating a software business is intrinsically so high that no matter how well Uber executes, it can never be profitable?" That would be a massive counterexample to software-is-eating-the-world. Usually it works the other way - tech eating non-tech, even though engineers are expensive.
  - freeone3000 5y ago
    Does tech eat non-tech, or do a handful of heavily invested companies selling at a loss beat out people who don't do that? Looking at the top 10 companies, three are in tech, tied with American Healthcare. 2 are finance, 2 are O&G. The internet fundamentally changed how companies do business, but really, what makes Uber a tech company -- their app? They don't sell their app. Anyone can have an app nowadays. They're a taxi company with a large network and good name recognition, and that's their key benefit.
    - jonas21 5y ago
      Top 10 by what metric? By market cap the top 10 companies are [1]: 1. Apple 2. Microsoft 3. Amazon 4. Alphabet 5. Facebook 6. Tencent 7. Tesla 8. Berkshire Hathaway 9. TSMC 10. Alibaba With the exception of Berkshire Hathaway, these are all tech companies. And a fair chunk of Berkshire Hathaway's market cap is Apple stock [2]. [1] https://en.wikipedia.org/wiki/List_of_public_corporations_by_market_capitalization https://en.wikipedia.org/wiki/List_of_public_corporations_by... [2] https://markets.businessinsider.com/news/stocks/warren-buffett-90-billion-apple-stake-20-percent-berkshire-hathaway-2020-6 https://markets.businessinsider.com/news/stocks/warren-buffe...
koolba 5y ago
Because people won’t pay $25 to take a 15 min ride. They’ll just stay where they are, drive themselves, or coordinate a car pool with their friends. Uber subsidies changed leisure for many folks. When it’s $6-10 for a ride, even middle class incomes don’t even think twice about it. But when the true price of the ride must be paid, those people won’t be a part of that economy. And without those mass short rides to fill the gaps, there’s not enough “fat” rides to keep enough drivers on the road to keep the wait times low. So the product might exist, but it devolves to a taxi rate with a taxi wait, just done over an app.
- neonate 5y ago
  That may be the best argument that I've heard so far, but after thinking for a minute, it sounds not like "Uber can never be profitable", but rather "the legacy taxi market is an upper bound on how big Uber can be in the long run". Couldn't that be profitable? That's still a pretty big market, even if middle-class people are no longer using it for 10-minute rides.
  - bloodyplonker22 5y ago
    Yes, profitable, but Uber's valuation would tank if they were just scraping by on this kind of revenue with no hopes of automated driving or other things in the future to increase margins.
    - neonate 5y ago
      OK, in that case the answer is "Uber can be profitable". Probably true that their valuation would be lower but that's not the argument I hear people making.
      - bloodyplonker22 5y ago
        What happened to WeWork is almost exactly the hypothetical scenario that you are describing for Uber.
bena 5y ago
If an Uber costs the same as a taxi, it makes no difference. I think the real product is in the dispatch app. But it really only works if all the various cab companies subscribe to the same dispatch service. Every cab company having their own dispatch app doesn't work. Basically, we don't need Uber, we need DoorDash, but for cabs.
- neonate 5y ago
  > If an Uber costs the same as a taxi, it makes no difference. It does for people like me, who prefer taking an Uber to dealing with taxi drivers pretending they can't take credit cards, the stress of figuring out how much to tip, and so on. I know that not everyone feels this way, but many do, and that certainly has some value. The question is whether it has enough value for Uber to be able to eventually make a profit.
- deleted 5y ago
  [deleted]
dbt00 5y ago
Let me flip this around. Non-governmental subsidized transportation infrastructure is and always has been a race to the bottom. Taxis are mostly only profitable with extremely low overhead and only servicing high traffic areas like Manhattan or other major metropolitan areas. Uber's thousands of engineers and SF HQ disqualifies them from being low overhead anything. In the 1890s in Chicago when massive subway and interurban train networks were built out by private business, they either failed financially or succeeded only by real estate speculation around where they built their lines. Eventually all of those lines were acquired by local governments or shut down. Mass transit lines in LA, NYC and around the country followed similar trajectories. Look up the Interborough Rapid Transit Company in NY, or Charles Yerkes and Sam Insull in Chicago. These days modern suburban subdivision companies don't bother with creating mass transit, they just fund street construction and install public works lines like gas/sewer/water/electric, and let the city deal with the traffic and the inevitable deferred maintenance that clashes with their low tax philosophies.
- neonate 5y ago
  This seems to me the salient part of your comment: > Taxis are mostly only profitable with extremely low overhead and only servicing high traffic areas like Manhattan or other major metropolitan areas. Uber's thousands of engineers and SF HQ disqualifies them from being low overhead anything. If I'm understanding correctly, the argument is that taxis are basically a shit business—bad enough to break the "software is eating the world" rule because they have such low margins that you can't pay a software team (or at least, not operate a marquee SV software company) and compete. Better tech isn't enough. If that's true, that answers my question. I'm surprised if it's true, though. I didn't think the taxi business was that miserable, and I'm not sure how it squares with taxi medallions being the highest-performing investment of the 20th century (or some factoid like that which I read years ago).
  - dbt00 5y ago
    They were in Manhattan. They weren't in SF, and they certainly weren't in, say, Urbana, IL.
subsubzero 5y ago
Because taxi's don't have a bloated 'backend' corporate office where thousands of engineers are making $300-500k a a year, and a bevy of extremely elaborate offices in the most expensive parts of the world, London, SF, NY etc. They have the dispatch company which runs on a shoestring budget and the cabbies who are either owner operators or work for a cab company, they also don't have the tech that powers Uber/Lyft which allows anyone to hail a ride from their smartphone. [tradeoffs]
- ProblemFactory 5y ago
  > they also don't have the tech that powers Uber/Lyft which allows anyone to hail a ride from their smartphone Sure they do, as long as they just get an app built by a contractor and don't employ 5000 engineers building cool open-source infrastructure projects and unnecessary "growth" features. Multiple taxi companies with ~200 cars in my city each have their own smartphone apps with all the features you actually need: ordering or scheduling a ride, GPS tracking, payment with credit card or business invoice. Looks like these apps were last updated in mid & late 2020, but if it works you don't need a permanent tech team to keep the taxi business going.
  - jimbob45 5y ago
    You beat me to saying it. However, Uber could still compete by spinning off the majority of its software business (and they should!).
spywaregorilla 5y ago
A lot of it is in the weakness of the gig model. If prices rise, then demand falls. But the lower demand is, the less likely people are to try and drive, so the more expensive it becomes to do rides. A significant chunk of their "overhead" isn't engineers, but marketing to get new drivers into their system. It's not stable. Turnover is very high. Because they don't have a stable workforce, their problems compound more quickly than in other business models. Surge pricing is what happens when there's not enough drivers. If you raise the base price, and now have lower demand and fewer drivers, you'll likely need to surge on top of that increased base. You can imagine a taxi company with 20 cabs on the road has a fairly predictable supply. A gig model is always playing the odds. When there's too few drivers, Uber both misses customers and has to charge the customers extra to pay the drivers more. When there's too many drivers, Uber can probably charge less and meet all demand, but the drivers have a worse experience. This is not so bad when the overall level of activity is high, but is not good when the overall level of activity is low. That is, it's much worse to have 5 drivers and 10 riders than it is to have 55 drivers and 60 riders. tl;dr if you're charging high prices, you have a small, upper class target market. The gig model is suited to a mass market model.
webmaven 5y ago
> If the answer to that is, "because then demand would die", why doesn't that apply to taxis? Taxis make money. Taxi licenses are an artificially constrained resource, which keeps prices high. As a result, taxis are typically only conveniently available in high-demand locations (among other ills). There probably is a niche for ridehailing services as public infrastructure (or perhaps using a co-op model) running on open source software, but that excludes VC-fueld behemoths like Uber. It isn't so much that Uber can never be profitable, it is that Uber could never be profitable enough to recoup the sunk costs and operate as an attractive publicly-traded company. Plenty of companies show a profit and remain privately owned. They aren't hypergrowth companies. VCs don't invest in them, except accidentally. There are, ironically, business models that would have justified some VC investment and led to decent outcomes with a market cap around $1-5B, but they are shaped completely differently, and would have produced much more modest returns.
- alkonaut 5y ago
  > Taxi licenses are an artificially constrained resource, which keeps prices high This is only true for some markets where there is a monopoly or a medallion system. Not all markets are like that, not even all markets Uber operate in. Some of the biggest are though.
  - webmaven 5y ago
    Are you aware of any analysis on the quality/cost of taxi services in markets without an artificially constrained supply?
j4kp07 5y ago
Taxi companies are not in the ride-sharing industry. They are in the vehicle leasing industry.
leephillips 5y ago
Because they’re not taxis. When I call a real taxi company to pick me up at 4:30 in the morning for my flight, they’re going to be there. When I call Uber, who knows? My experiences were not good. I went back to taxis.
- brianwawok 5y ago
  Or in Chicago… call up taxi company at 4:30x they promise to come. Never show. Call and ask where they are, they hang up on me. No recourse, miss flight.
- burnished 5y ago
  I used to arrange rides for people to the airport as part of my job. My experience was that yellow cab was inconsistent, frequently would fail to arrive for morning pickups without notice, operators were consistently short/impatient, even events like calling for a cab and being told 10-15 minutes only to call back half an hour later to be told the same thing weren't uncommon. Luxury towncar services however did the trick. This was before Uber/Lyft of course.
  - ghaff 5y ago
    >Luxury towncar services however did the trick. This was before Uber/Lyft of course. That's what I use exclusively. Would never trust a taxi where I live and certainly not Uber/Lyft to have sufficient network to pick me up. But my company is usually paying.
BLanen 5y ago
First, it is wrong for you to assume "the technology" actually brings any systemic efficiency gains.
deft 5y ago
Uber the company has higher operating costs, and their service isn't better. The entire value proposition is "cheaper" and always has been.
- compiler-guy 5y ago
  This isn't true. "More convenient than hailing a cab" has also been a very large component of the value proposition. As has "knowing where the driver is on their way to you." Cheaper is a big part, but not all of it by a long shot.
samstave 5y ago
Before Uber was founded I lived Upper Market in SF -- and it was impossible to get a cab to come to my house. I would call and they just would never show up. I started calling and ordering multiple cabs in a shotgun approach to getting a cab. I travelled extensively and my flight was always early on Sunday Mornings (because I was crossing time zones and had to leave at such a time to consult all over) The cabs still wouldnt show up, so I made friends with a bunch of personal Black-Car Drivers in SF and had their numbers directly and would coord trips from my house to SFO before hand (17 miles) - I would pay then a set fee including tip. --- Once, I got a cab from my house to SFO and it was $65. for 17 miles, and a 30 minute wait. I was flying from SFO to LAX. My plane ticket was $99. 450 miles, @~500 miles per hour or such. $99. 6AM Sunday. no waits, no hassle. 17 miles from House to SFO, @~30 MPH, 5AM sunday. 30 minute wait. $65 dollars. (2010/2011?) --- Then Uber was born. I have never used a taxi in the greater bay area since. Fuck taxis. --- That being said - Uber & Lyft are not without faults. Uber was run by a C-Suite of douchebags. The product was valuable, but the culture was toxic. That has not changed - rather than actually being a better company, they are simply constantly attempting to cover up for the fact that they are douchebags... and thus, their platform as a business model (the drivers) is collapsing. ---- Here is the biggest PR debacle with Uber that goes un-reported: They attempted to have a lottery for a secret party night where you had to attempt to book a ride to this "party" and you may or may not be let in... and you had to keep trying and they would havea driver pick you up and deliver you to a secret party spot, with a special DJ and special drinks! YYAYAYA! Well - not so fast punk. The lottery was bullshit and had many problems where people were accpected, then the driver rejected them, and all sorts of other failures... Then, (I was one of the "lucky winners") they were able to pick people up and rather than carrying them off to some super-cool-secret-party location, they had a mediocre half-assed "party" at Harlot in San Francisco -- where after going through the gauntlet of disorganized Uber Drop-offs (the drivers were just as confused as was the inept marketing group at Uber) you were still put into a line as if it were a regular lame club in SF. They attempted to charge a cover, but backed down after people pushed back based on this "contest" to come to "secrete party" Then the special drinks? They were $12/drink... You WON this lottery to go to harlot as if it were ANY other night in SF... the inside of the party was an utter joke - the uber employees were uber-douchebags; stomping around like they were in charge of some super important event and had no time to talk to you and what not... But here was the worst part: Those fucking douchebags had ~1,000 people come to this club harlot, attempted to charge them for cover, then charged them the same price for everything as if it were any other night that one might go out, fight over getting a spot in the app lottery -- but when it came time to go home: Uber didnt plan for that! So they had 1,000 users standing on the sidewalk, EVERYONE LOOKING AT THEIR PHONE trying to schedule an Uber home... These fucking morons didnt have the forethought to make a fucking ROUND-TRIP BUTTON in the app which said "pick me up here. Drop me off there. Pick me back up and take me back home at THIS TIME." So their system crashed and all their coked-out "PR/SocialMedia" douchebags ran around unable to answer questions because they were too busy sucking their own PR dick. Fuck Uber.
bern4444 5y ago
Of course they can raise prices. But that doesn’t mean people will pay them. I’ve noticed massive increases lately in Ubers prices. So have lots of other people. In response, people take fewer Ubers. As prices go up demand will go down. Uber has massive fixed costs. Even if they maximize where supply meets demand (where they can make the most money) if it’s not enough to cover their fixed costs they won’t be profitable. Uber needs to find a way to lower their costs or grow their users (raising prices doesn’t help) to hit a profitable break even point. It’s been the VC money that has been subsidizing Uber prices for a while. That’s disappearing. Uber is also trying to expand into more spaces (Uber eats) to acquire customers. Maybe this will work but so far it’s not.
- withinboredom 5y ago
  Sure it will. I had to take a regular taxi today. I couldn't convince the driver to give me a flat rate or quote to my destination but I needed to be home and taking the train would have been over an hour. So, I got in the taxi thinking it would be around 60EUR (what an Uber usually costs). The taxi cost me over 100EUR to get home in 30 mins vs. 1 hour. I should have gotten an Uber but I was too exhausted to think of it and figured a regular taxi would be in the ballpark of an Uber. Uber can give me a price before I even request a car. No taxi can do that atm and I don't think demand would go down because prices are increased. If I knew it would have cost me 100EUR+ to be home in 30 minutes after spending all day in airports and planes, would I still have paid that much? I probably would've hesitated, but I think I'd still have pushed the button.
  - bern4444 5y ago
    > I don't think demand would go down because prices are increased. I disagree. Of course demand will go down as prices go up. It's quite literally the most basic principle of economics. Uber is not like a life saving pharmaceutical that people will pay any amount for - that is, an inelastic service. Consumers will absolutely avoid a service because it costs too much. Uber is no different. While people may still take Ubers, they'll take them less often. So Uber will still have reduced revenue. > I couldn't convince the driver to give me a flat rate or quote to my destination I'm from NYC, so granted our taxi fleet was well established well before Uber. One law established is a fixed cost to and from airports for cabs. Certainly this can be be replicated but yes, it's not something that can be immediately addressed and so Uber wins in this space (an upfront price). To respond to your general message, yes, Uber is excellent in certain circumstances. This is one of them. Though I've also seen the reverse when traveling. Hoards of people waiting for an Uber, and plenty of taxis around. As it currently stands, with prices going up, drivers' compensation going down, and Uber burning money, it's not likely sustainable. So Uber's future is at risk regardless of anyone's individual consumption
boh 5y ago
Uber is an application that helps drivers find passengers (not the other way around). They do not control the costs associated with operating a car service and so have no chance of engendering the productivity necessary to keep costs down. Their VC subsidized attack on the taxi industry has actually destroyed much of the productivity gains inherent in traditional car service companies who were able to scale car maintenance and other fees (now each individual driver has to manage their own costs). Uber's only major contribution is an easily reproducible app and considerable market manipulation which it can no longer maintain. If Uber decided to charge what their failed system actually requires for profitability, it would be uncompetitive against traditional car services that actually have the capacity to scale the costs associated with car services.
- make3 5y ago
  their moat is that their app is now everywhere, which is worth something. So many other services have easy to copy apps, but it takes years for other apps to beat them. See Facebook, instagram, etc. A good app is really worth something.
  - boh 5y ago
    Their only moat is capital which has been dwindling.
    - make3 5y ago
      so Facebook could be beat by other apps? a good, popular app is a moat, for a while at least
      - boh 5y ago
        I wouldn't assume all apps have similar competitive circumstances.
        make3 5y ago
        I wasn't either, I was saying you are discounting that apps can be a moat at all, and that you shouldn't
CalChris 5y ago
Price elasticity of demand. Uber’s market wouldn’t just shrink with higher (fair) prices; it would evaporate. Consumers are getting something for nothing and the Saudis are getting nothing for something. But the VCs and Kalenick probably did ok in this pyramid scheme. https://en.m.wikipedia.org/wiki/Price_elasticity_of_demand https://en.m.wikipedia.org/wiki/Price_elasticity_of_demand
l33tman 5y ago
I think it might be a mistake of dividing the options into two camps, Uber and all other taxi companies, by now.. There are a LOT of IT solutions any taxi company can rent that gets them a lot (or most?) of the Uber features (except the brand name). Basically all of the IT you need including apps and call-center handling can be sourced in. I guess tech is catching up with Uber and what they still have is a good brand and there is some confidence that you hopefully has a smaller risk of getting ripped off with them at least if you're a tourist in a new city.
mandevil 5y ago
(Note: what follows is a purely US viewpoint. I have no idea how these markets work in the rest of the world.) Well, the thing about Taxi's was that they were available, at some times, in downtown business districts. If you wanted a taxi south of 70th St in Manhattan, congrats! If you wanted one in the Bronx you needed to get very lucky. If you wanted one in a typical suburb you had to call someone and talk on the phone to schedule a taxi to come get you with plenty of advance notice. It's something that was so inconvenient I only remember ever doing it to go to the airport. The number of taxis was such that in a busy central business district you had a pretty good chance of catching one (presuming you didn't look too 'scary') but pretty much anywhere else you would never see one. Uber tried to change that fundamental fact of life by bringing many more drivers out there, so that it would never be more than a few minutes wait, even in the suburbs. This, of course, means much more competition for drivers. They tried to solve that by bringing many more riders out, which was where the massive subsidies come in: you can keep both sides of a two sided market coming out if they are getting big subsidies. It's when they tried to make the riders pay enough, and paid the drivers little enough, to be profitable that the drivers and riders stopped showing up. Presumably it will be profitable still in heavily trafficked areas, but the dream of Uber being a reasonable choice for transportation in suburbs of Des Moines seems like a failure.
- ylee 5y ago
  >The number of taxis was such that in a busy central business district you had a pretty good chance of catching one (presuming you didn't look too 'scary') but pretty much anywhere else you would never see one. I well remember being unable to get a taxi in 45 minutes of waiting at 19th Avenue and Judah in San Francisco's Sunset district, despite calling taxi companies' dispatch offices. Yes, it was Sunday, but it was also 2pm, and anyone who knows the area knows that 19th is a very, very busy street at all times because it is the de facto north-south route between the Golden Gate Bridge and the peninsula, in the absence of a true highway. Now no one ever thinks of not being able to get a rideshare regardless of time or place, as long as the area isn't completely rural.
pbreit 5y ago
Uber's Rides business has been EBITDA positive since the IPO.
- karpierz 5y ago
  It turns out if you shuffle all of the subsidies and promotions out of your cost center, it's pretty easy to show a profit.
- gizmondo 5y ago
  Do you mean "adjusted" EBITDA or the real one?
  - pbreit 5y ago
    When splitting out a segment it’s adjusted. Over $1 billion in past 4 quarters. Rides prints money.
tootie 5y ago
A local taxi service doesn't have the overhead of paying a share of thousands of developers to scale an algorithm that a dispatcher has in their head.
Barrin92 5y ago
>why can't they just raise prices until they're no longer selling at a loss? because competition exists. Same reason your local bakery can't sell bread at 50 bucks and make their owners millionaires. In a market economy you don't get to 'set prices' at arbitrary rates until you don't make losses. Right-hailing companies have no differentiating features, there's dozens off them, they also have to compete with taxis, and if Uber was to raise prices someone else would eat their marketshare until they've got the same problem and they've all competed each other into the ground. The entire flaw with the company is that building you an app that lets you hail a car isn't actually providing any surplus value to the tune of tens of billions of dollars and the only thing that keeps that illusion running is dumb Saudi money having nowhere to go
simonblack 5y ago
That old saying: "If it walks like a duck, quacks like a duck,...." is relevant here. If it costs like a taxi, looks like a taxi, pays its drivers like a taxi, it's a taxi. It's not an 'Uber' - whatever that's supposed to mean. Uber appealed to the riders because it was cheaper - now the costs are approaching taxi prices, what's the 'Uber' advantage? Uber appealed to drivers because they could earn more money than it cost to run their vehicles - with lower driver-payments, what's the 'Uber' advantage? So, if the costs are higher and the returns aren't there why drive for 'Uber' at all? Without the drivers, there's nobody to take the riders anywhere. Best to order a Taxi. At least you know that there is a taxi in the town, and it will get to you eventually. On the other hand, if no Uber driver happens to feel like driving at the moment, you could be waiting for days until your trip happens. I've always said that Uber is scam. Soaking the investors and drivers alike, while the 'management boys' skim the top and laugh all the way to the bank.
- ink_13 5y ago
  > what's the 'Uber' advantage? Pickup from a map pin, dropoff to a map pin, driver follows traffic-aware navigation the whole way (like GMaps or Waze), payment automatically handled. Cost was never why I preferred Uber/Lyft.
  - simonblack 5y ago
    Pickup from a map pin, dropoff to a map pin Traditional taxi services. "I don't know the name of it, but I'm in the big white building opposite the Night Market." driver follows traffic-aware navigation the whole way You haven't ridden in a taxi lately. I venture to say that a GPS of some description is standard in all taxis, including things like GMaps and Waze. payment automatically handled. Restriction to one form of payment. A Taxi can take cash, card, voucher, or can wait while you borrow money that you haven't got from somebody else. I still don't see any 'Uber' advantage over a plain old taxi service.
itbeho 5y ago
Wikipedia says they have 26,900 employees. https://en.m.wikipedia.org/wiki/Uber https://en.m.wikipedia.org/wiki/Uber
rrrrrrrrrrrryan 5y ago
Nobody's mentioned that you can hail a taxi by walking out into the street and waving your hand in the air. It's a fundamentally different service.
amw-zero 5y ago
You're missing the fact that they have a pretty much limitless supply of capital, and _have still not been profitable_. It's not as simple as "just raise your prices." I would think that's pretty obvious. Why wouldn't all business just do that if it were that easy?
Kihashi 5y ago
All I know is that in the midwest, before Uber, there was maybe 1 taxi company near-ish (usually from a newarby town). You couldn't just call a ride- You'd have to look up the taxi company's number, schedule days in advance, and pay somewhere between $2-4/minute. After Uber, you can get a ride even in less populated areas (almost) on demand. The price is definitely lower, but not significantly. But we went from only using a taxi to get to the airport (if you could find absolutely no one to drop you off) to being able to take one home from the bar or concert.
xyzzy21 5y ago
They can but it also will reduce their business. The problem is that the "solution to the system equation" might have a complex/imaginary solution as its only solution (i.e. the business is not viable at any product price or any company cost structure) which is actually pretty common for startups - it's one of the primary reasons why a start-up and its product can fail.

ceejayoz 5y ago

Sure, the "sell dollars for $0.50" company can become profitable by raising prices to $1.10 after they wipe out the competitor who was selling for $1.00, but is that a good end result?

neonate 5y ago
It's not, but that's a different argument.

api 5y ago

Maybe the company as it stands is so inefficient and cash burning that it can't actually compete with taxis. In that case a slimmed down Uber may be able to do so, but that would require a lot of blood to flow inside the company.

neonate 5y ago
If the argument is not "Uber can never be profitable" but "Uber can never be profitable without a brutal corporate reorg", that's more plausible. But it's also a much weaker claim, no? Brutal corporate reorgs are a thing and I suppose that sometimes they even work.

thebigman433 5y ago

> why doesn't that apply to taxis? Taxis make money. Wouldnt it "just" be because of the massive overhead that Uber has with the software engineers, support staff, execs, etc?

tracedddd 5y ago
To be honest that’s all self inflicted. It may be painful to downsize to a sustainable model but these aren’t hard costs - at least not to the extent they exist now.
- Daishiman 5y ago
  The question is whether a sustainable model's marginal utility over the regular old taxi business is sufficiently large to justify the entire endeavor.

hash872 5y ago

They are very close to being a monopoly in the US, and are certainly a duopoly. Predatory pricing for a decade to establish market share, and then raising prices once in duopoly status, would be a slamdunk antitrust case. That's the legal reality. Plus the political one- the average Uber customer is middle to upper middle class in an urban area- i.e., the types of people that politicians actually listen to. Politically sympathetic, vote in very large numbers, have an outsized voice in the media, etc. Every media outlet in America would cover the price increase nonstop. If raising prices didn't result in an antitrust suit the very next day, I will eat my hat

dbt00 5y ago
The market is not "ride hailing apps", it is personal transportation. Depending on where you live, the competition is trains, busses, biking, walking, company shuttles, or even moving closer to where you want to be. If the cost of an Uber from the airport is too expensive, people won't just take cabs, they could also park in long term parking or have a friend drop them off instead.
neonate 5y ago
I hear you, but that's also already a different argument involving complex externalities. I'm just asking why a better service with better tech* than taxis can't ever make money, when taxis do make money. * I know not everyone agrees with this, but enough people do that it's clearer to put the argument this way.
- hash872 5y ago
  I don't see what's the complex externality here- they can't raise prices significantly because they're legally prevented from doing so. 'The people with the guns & the legal monopoly on force forbid it' is pretty simple. To my understanding the only people making non-poverty wages in the taxi business are owners who purchased 'medallions' decades ago- aka another governmental licensing restriction. I believe they frequently lease out the cars to drivers who make minimum wage or less. I'm not sure an individual taxi is necessarily profitable on a per-car basis
- 5y ago

majormajor 5y ago

Doesn't it apply to taxis? There weren't as many taxis as ubers, so they were more expensive and harder to get and took longer to show up. If this was a purely artificial supply constraint (medallian monopolies and abuse, say), then that would be one path to Uber profitability. If this was just a flexibility problem - where taxi driving full time as a requirement for drivers meant you couldn't hit peak demand without an unsustainable amount of idle time too - Uber could have a path there. If it was a sort of "step change" demand function, where if you make it trivially available and cheap the growth in demand will be enough to offset the lower per-ride revenue, there's another potential path there. But it's been a long time now for really none of those theories to pan out.

abdullahkhalids 5y ago

The taxi business does not extract out 30-40% of revenue away from the drivers and into the hands of software engineers who keep adding useless features to an overbloated app. (not the mention the investors and the executives)

neonate 5y ago
Ok, let's say Uber is executing the software side of its business badly. Is the argument then "Uber can never be profitable unless it fixes its software business" (which could be true, but is a much weaker claim)? Or is it that "The cost of operating a software business is intrinsically so high that no matter how well Uber executes, it can never be profitable?" That would be a massive counterexample to software-is-eating-the-world. Usually it works the other way - tech eating non-tech, even though engineers are expensive.
- freeone3000 5y ago
  Does tech eat non-tech, or do a handful of heavily invested companies selling at a loss beat out people who don't do that? Looking at the top 10 companies, three are in tech, tied with American Healthcare. 2 are finance, 2 are O&G. The internet fundamentally changed how companies do business, but really, what makes Uber a tech company -- their app? They don't sell their app. Anyone can have an app nowadays. They're a taxi company with a large network and good name recognition, and that's their key benefit.
  - jonas21 5y ago
    Top 10 by what metric? By market cap the top 10 companies are [1]: 1. Apple 2. Microsoft 3. Amazon 4. Alphabet 5. Facebook 6. Tencent 7. Tesla 8. Berkshire Hathaway 9. TSMC 10. Alibaba With the exception of Berkshire Hathaway, these are all tech companies. And a fair chunk of Berkshire Hathaway's market cap is Apple stock [2]. [1] https://en.wikipedia.org/wiki/List_of_public_corporations_by_market_capitalization https://en.wikipedia.org/wiki/List_of_public_corporations_by... [2] https://markets.businessinsider.com/news/stocks/warren-buffett-90-billion-apple-stake-20-percent-berkshire-hathaway-2020-6 https://markets.businessinsider.com/news/stocks/warren-buffe...

koolba 5y ago

Because people won’t pay $25 to take a 15 min ride. They’ll just stay where they are, drive themselves, or coordinate a car pool with their friends. Uber subsidies changed leisure for many folks. When it’s $6-10 for a ride, even middle class incomes don’t even think twice about it. But when the true price of the ride must be paid, those people won’t be a part of that economy. And without those mass short rides to fill the gaps, there’s not enough “fat” rides to keep enough drivers on the road to keep the wait times low. So the product might exist, but it devolves to a taxi rate with a taxi wait, just done over an app.

neonate 5y ago
That may be the best argument that I've heard so far, but after thinking for a minute, it sounds not like "Uber can never be profitable", but rather "the legacy taxi market is an upper bound on how big Uber can be in the long run". Couldn't that be profitable? That's still a pretty big market, even if middle-class people are no longer using it for 10-minute rides.
- bloodyplonker22 5y ago
  Yes, profitable, but Uber's valuation would tank if they were just scraping by on this kind of revenue with no hopes of automated driving or other things in the future to increase margins.
  - neonate 5y ago
    OK, in that case the answer is "Uber can be profitable". Probably true that their valuation would be lower but that's not the argument I hear people making.
    - bloodyplonker22 5y ago
      What happened to WeWork is almost exactly the hypothetical scenario that you are describing for Uber.

bena 5y ago

If an Uber costs the same as a taxi, it makes no difference. I think the real product is in the dispatch app. But it really only works if all the various cab companies subscribe to the same dispatch service. Every cab company having their own dispatch app doesn't work. Basically, we don't need Uber, we need DoorDash, but for cabs.

neonate 5y ago
> If an Uber costs the same as a taxi, it makes no difference. It does for people like me, who prefer taking an Uber to dealing with taxi drivers pretending they can't take credit cards, the stress of figuring out how much to tip, and so on. I know that not everyone feels this way, but many do, and that certainly has some value. The question is whether it has enough value for Uber to be able to eventually make a profit.
deleted 5y ago
[deleted]

dbt00 5y ago

Let me flip this around. Non-governmental subsidized transportation infrastructure is and always has been a race to the bottom. Taxis are mostly only profitable with extremely low overhead and only servicing high traffic areas like Manhattan or other major metropolitan areas. Uber's thousands of engineers and SF HQ disqualifies them from being low overhead anything. In the 1890s in Chicago when massive subway and interurban train networks were built out by private business, they either failed financially or succeeded only by real estate speculation around where they built their lines. Eventually all of those lines were acquired by local governments or shut down. Mass transit lines in LA, NYC and around the country followed similar trajectories. Look up the Interborough Rapid Transit Company in NY, or Charles Yerkes and Sam Insull in Chicago. These days modern suburban subdivision companies don't bother with creating mass transit, they just fund street construction and install public works lines like gas/sewer/water/electric, and let the city deal with the traffic and the inevitable deferred maintenance that clashes with their low tax philosophies.

neonate 5y ago
This seems to me the salient part of your comment: > Taxis are mostly only profitable with extremely low overhead and only servicing high traffic areas like Manhattan or other major metropolitan areas. Uber's thousands of engineers and SF HQ disqualifies them from being low overhead anything. If I'm understanding correctly, the argument is that taxis are basically a shit business—bad enough to break the "software is eating the world" rule because they have such low margins that you can't pay a software team (or at least, not operate a marquee SV software company) and compete. Better tech isn't enough. If that's true, that answers my question. I'm surprised if it's true, though. I didn't think the taxi business was that miserable, and I'm not sure how it squares with taxi medallions being the highest-performing investment of the 20th century (or some factoid like that which I read years ago).
- dbt00 5y ago
  They were in Manhattan. They weren't in SF, and they certainly weren't in, say, Urbana, IL.

subsubzero 5y ago

Because taxi's don't have a bloated 'backend' corporate office where thousands of engineers are making $300-500k a a year, and a bevy of extremely elaborate offices in the most expensive parts of the world, London, SF, NY etc. They have the dispatch company which runs on a shoestring budget and the cabbies who are either owner operators or work for a cab company, they also don't have the tech that powers Uber/Lyft which allows anyone to hail a ride from their smartphone. [tradeoffs]

ProblemFactory 5y ago
> they also don't have the tech that powers Uber/Lyft which allows anyone to hail a ride from their smartphone Sure they do, as long as they just get an app built by a contractor and don't employ 5000 engineers building cool open-source infrastructure projects and unnecessary "growth" features. Multiple taxi companies with ~200 cars in my city each have their own smartphone apps with all the features you actually need: ordering or scheduling a ride, GPS tracking, payment with credit card or business invoice. Looks like these apps were last updated in mid & late 2020, but if it works you don't need a permanent tech team to keep the taxi business going.
- jimbob45 5y ago
  You beat me to saying it. However, Uber could still compete by spinning off the majority of its software business (and they should!).

spywaregorilla 5y ago

A lot of it is in the weakness of the gig model. If prices rise, then demand falls. But the lower demand is, the less likely people are to try and drive, so the more expensive it becomes to do rides. A significant chunk of their "overhead" isn't engineers, but marketing to get new drivers into their system. It's not stable. Turnover is very high. Because they don't have a stable workforce, their problems compound more quickly than in other business models. Surge pricing is what happens when there's not enough drivers. If you raise the base price, and now have lower demand and fewer drivers, you'll likely need to surge on top of that increased base. You can imagine a taxi company with 20 cabs on the road has a fairly predictable supply. A gig model is always playing the odds. When there's too few drivers, Uber both misses customers and has to charge the customers extra to pay the drivers more. When there's too many drivers, Uber can probably charge less and meet all demand, but the drivers have a worse experience. This is not so bad when the overall level of activity is high, but is not good when the overall level of activity is low. That is, it's much worse to have 5 drivers and 10 riders than it is to have 55 drivers and 60 riders. tl;dr if you're charging high prices, you have a small, upper class target market. The gig model is suited to a mass market model.

webmaven 5y ago

> If the answer to that is, "because then demand would die", why doesn't that apply to taxis? Taxis make money. Taxi licenses are an artificially constrained resource, which keeps prices high. As a result, taxis are typically only conveniently available in high-demand locations (among other ills). There probably is a niche for ridehailing services as public infrastructure (or perhaps using a co-op model) running on open source software, but that excludes VC-fueld behemoths like Uber. It isn't so much that Uber can never be profitable, it is that Uber could never be profitable enough to recoup the sunk costs and operate as an attractive publicly-traded company. Plenty of companies show a profit and remain privately owned. They aren't hypergrowth companies. VCs don't invest in them, except accidentally. There are, ironically, business models that would have justified some VC investment and led to decent outcomes with a market cap around $1-5B, but they are shaped completely differently, and would have produced much more modest returns.

alkonaut 5y ago
> Taxi licenses are an artificially constrained resource, which keeps prices high This is only true for some markets where there is a monopoly or a medallion system. Not all markets are like that, not even all markets Uber operate in. Some of the biggest are though.
- webmaven 5y ago
  Are you aware of any analysis on the quality/cost of taxi services in markets without an artificially constrained supply?

j4kp07 5y ago

Taxi companies are not in the ride-sharing industry. They are in the vehicle leasing industry.

leephillips 5y ago

Because they’re not taxis. When I call a real taxi company to pick me up at 4:30 in the morning for my flight, they’re going to be there. When I call Uber, who knows? My experiences were not good. I went back to taxis.

brianwawok 5y ago
Or in Chicago… call up taxi company at 4:30x they promise to come. Never show. Call and ask where they are, they hang up on me. No recourse, miss flight.
burnished 5y ago
I used to arrange rides for people to the airport as part of my job. My experience was that yellow cab was inconsistent, frequently would fail to arrive for morning pickups without notice, operators were consistently short/impatient, even events like calling for a cab and being told 10-15 minutes only to call back half an hour later to be told the same thing weren't uncommon. Luxury towncar services however did the trick. This was before Uber/Lyft of course.
- ghaff 5y ago
  >Luxury towncar services however did the trick. This was before Uber/Lyft of course. That's what I use exclusively. Would never trust a taxi where I live and certainly not Uber/Lyft to have sufficient network to pick me up. But my company is usually paying.

BLanen 5y ago

First, it is wrong for you to assume "the technology" actually brings any systemic efficiency gains.

deft 5y ago

Uber the company has higher operating costs, and their service isn't better. The entire value proposition is "cheaper" and always has been.

compiler-guy 5y ago
This isn't true. "More convenient than hailing a cab" has also been a very large component of the value proposition. As has "knowing where the driver is on their way to you." Cheaper is a big part, but not all of it by a long shot.

samstave 5y ago

Before Uber was founded I lived Upper Market in SF -- and it was impossible to get a cab to come to my house. I would call and they just would never show up. I started calling and ordering multiple cabs in a shotgun approach to getting a cab. I travelled extensively and my flight was always early on Sunday Mornings (because I was crossing time zones and had to leave at such a time to consult all over) The cabs still wouldnt show up, so I made friends with a bunch of personal Black-Car Drivers in SF and had their numbers directly and would coord trips from my house to SFO before hand (17 miles) - I would pay then a set fee including tip. --- Once, I got a cab from my house to SFO and it was $65. for 17 miles, and a 30 minute wait. I was flying from SFO to LAX. My plane ticket was $99. 450 miles, @~500 miles per hour or such. $99. 6AM Sunday. no waits, no hassle. 17 miles from House to SFO, @~30 MPH, 5AM sunday. 30 minute wait. $65 dollars. (2010/2011?) --- Then Uber was born. I have never used a taxi in the greater bay area since. Fuck taxis. --- That being said - Uber & Lyft are not without faults. Uber was run by a C-Suite of douchebags. The product was valuable, but the culture was toxic. That has not changed - rather than actually being a better company, they are simply constantly attempting to cover up for the fact that they are douchebags... and thus, their platform as a business model (the drivers) is collapsing. ---- Here is the biggest PR debacle with Uber that goes un-reported: They attempted to have a lottery for a secret party night where you had to attempt to book a ride to this "party" and you may or may not be let in... and you had to keep trying and they would havea driver pick you up and deliver you to a secret party spot, with a special DJ and special drinks! YYAYAYA! Well - not so fast punk. The lottery was bullshit and had many problems where people were accpected, then the driver rejected them, and all sorts of other failures... Then, (I was one of the "lucky winners") they were able to pick people up and rather than carrying them off to some super-cool-secret-party location, they had a mediocre half-assed "party" at Harlot in San Francisco -- where after going through the gauntlet of disorganized Uber Drop-offs (the drivers were just as confused as was the inept marketing group at Uber) you were still put into a line as if it were a regular lame club in SF. They attempted to charge a cover, but backed down after people pushed back based on this "contest" to come to "secrete party" Then the special drinks? They were $12/drink... You WON this lottery to go to harlot as if it were ANY other night in SF... the inside of the party was an utter joke - the uber employees were uber-douchebags; stomping around like they were in charge of some super important event and had no time to talk to you and what not... But here was the worst part: Those fucking douchebags had ~1,000 people come to this club harlot, attempted to charge them for cover, then charged them the same price for everything as if it were any other night that one might go out, fight over getting a spot in the app lottery -- but when it came time to go home: Uber didnt plan for that! So they had 1,000 users standing on the sidewalk, EVERYONE LOOKING AT THEIR PHONE trying to schedule an Uber home... These fucking morons didnt have the forethought to make a fucking ROUND-TRIP BUTTON in the app which said "pick me up here. Drop me off there. Pick me back up and take me back home at THIS TIME." So their system crashed and all their coked-out "PR/SocialMedia" douchebags ran around unable to answer questions because they were too busy sucking their own PR dick. Fuck Uber.

bern4444 5y ago

Of course they can raise prices. But that doesn’t mean people will pay them. I’ve noticed massive increases lately in Ubers prices. So have lots of other people. In response, people take fewer Ubers. As prices go up demand will go down. Uber has massive fixed costs. Even if they maximize where supply meets demand (where they can make the most money) if it’s not enough to cover their fixed costs they won’t be profitable. Uber needs to find a way to lower their costs or grow their users (raising prices doesn’t help) to hit a profitable break even point. It’s been the VC money that has been subsidizing Uber prices for a while. That’s disappearing. Uber is also trying to expand into more spaces (Uber eats) to acquire customers. Maybe this will work but so far it’s not.

withinboredom 5y ago
Sure it will. I had to take a regular taxi today. I couldn't convince the driver to give me a flat rate or quote to my destination but I needed to be home and taking the train would have been over an hour. So, I got in the taxi thinking it would be around 60EUR (what an Uber usually costs). The taxi cost me over 100EUR to get home in 30 mins vs. 1 hour. I should have gotten an Uber but I was too exhausted to think of it and figured a regular taxi would be in the ballpark of an Uber. Uber can give me a price before I even request a car. No taxi can do that atm and I don't think demand would go down because prices are increased. If I knew it would have cost me 100EUR+ to be home in 30 minutes after spending all day in airports and planes, would I still have paid that much? I probably would've hesitated, but I think I'd still have pushed the button.
- bern4444 5y ago
  > I don't think demand would go down because prices are increased. I disagree. Of course demand will go down as prices go up. It's quite literally the most basic principle of economics. Uber is not like a life saving pharmaceutical that people will pay any amount for - that is, an inelastic service. Consumers will absolutely avoid a service because it costs too much. Uber is no different. While people may still take Ubers, they'll take them less often. So Uber will still have reduced revenue. > I couldn't convince the driver to give me a flat rate or quote to my destination I'm from NYC, so granted our taxi fleet was well established well before Uber. One law established is a fixed cost to and from airports for cabs. Certainly this can be be replicated but yes, it's not something that can be immediately addressed and so Uber wins in this space (an upfront price). To respond to your general message, yes, Uber is excellent in certain circumstances. This is one of them. Though I've also seen the reverse when traveling. Hoards of people waiting for an Uber, and plenty of taxis around. As it currently stands, with prices going up, drivers' compensation going down, and Uber burning money, it's not likely sustainable. So Uber's future is at risk regardless of anyone's individual consumption

boh 5y ago

Uber is an application that helps drivers find passengers (not the other way around). They do not control the costs associated with operating a car service and so have no chance of engendering the productivity necessary to keep costs down. Their VC subsidized attack on the taxi industry has actually destroyed much of the productivity gains inherent in traditional car service companies who were able to scale car maintenance and other fees (now each individual driver has to manage their own costs). Uber's only major contribution is an easily reproducible app and considerable market manipulation which it can no longer maintain. If Uber decided to charge what their failed system actually requires for profitability, it would be uncompetitive against traditional car services that actually have the capacity to scale the costs associated with car services.

make3 5y ago
their moat is that their app is now everywhere, which is worth something. So many other services have easy to copy apps, but it takes years for other apps to beat them. See Facebook, instagram, etc. A good app is really worth something.
- boh 5y ago
  Their only moat is capital which has been dwindling.
  - make3 5y ago
    so Facebook could be beat by other apps? a good, popular app is a moat, for a while at least
    - boh 5y ago
      I wouldn't assume all apps have similar competitive circumstances.
      - make3 5y ago
        I wasn't either, I was saying you are discounting that apps can be a moat at all, and that you shouldn't

CalChris 5y ago

Price elasticity of demand. Uber’s market wouldn’t just shrink with higher (fair) prices; it would evaporate. Consumers are getting something for nothing and the Saudis are getting nothing for something. But the VCs and Kalenick probably did ok in this pyramid scheme. https://en.m.wikipedia.org/wiki/Price_elasticity_of_demand https://en.m.wikipedia.org/wiki/Price_elasticity_of_demand

l33tman 5y ago

I think it might be a mistake of dividing the options into two camps, Uber and all other taxi companies, by now.. There are a LOT of IT solutions any taxi company can rent that gets them a lot (or most?) of the Uber features (except the brand name). Basically all of the IT you need including apps and call-center handling can be sourced in. I guess tech is catching up with Uber and what they still have is a good brand and there is some confidence that you hopefully has a smaller risk of getting ripped off with them at least if you're a tourist in a new city.

mandevil 5y ago

(Note: what follows is a purely US viewpoint. I have no idea how these markets work in the rest of the world.) Well, the thing about Taxi's was that they were available, at some times, in downtown business districts. If you wanted a taxi south of 70th St in Manhattan, congrats! If you wanted one in the Bronx you needed to get very lucky. If you wanted one in a typical suburb you had to call someone and talk on the phone to schedule a taxi to come get you with plenty of advance notice. It's something that was so inconvenient I only remember ever doing it to go to the airport. The number of taxis was such that in a busy central business district you had a pretty good chance of catching one (presuming you didn't look too 'scary') but pretty much anywhere else you would never see one. Uber tried to change that fundamental fact of life by bringing many more drivers out there, so that it would never be more than a few minutes wait, even in the suburbs. This, of course, means much more competition for drivers. They tried to solve that by bringing many more riders out, which was where the massive subsidies come in: you can keep both sides of a two sided market coming out if they are getting big subsidies. It's when they tried to make the riders pay enough, and paid the drivers little enough, to be profitable that the drivers and riders stopped showing up. Presumably it will be profitable still in heavily trafficked areas, but the dream of Uber being a reasonable choice for transportation in suburbs of Des Moines seems like a failure.

ylee 5y ago
>The number of taxis was such that in a busy central business district you had a pretty good chance of catching one (presuming you didn't look too 'scary') but pretty much anywhere else you would never see one. I well remember being unable to get a taxi in 45 minutes of waiting at 19th Avenue and Judah in San Francisco's Sunset district, despite calling taxi companies' dispatch offices. Yes, it was Sunday, but it was also 2pm, and anyone who knows the area knows that 19th is a very, very busy street at all times because it is the de facto north-south route between the Golden Gate Bridge and the peninsula, in the absence of a true highway. Now no one ever thinks of not being able to get a rideshare regardless of time or place, as long as the area isn't completely rural.

pbreit 5y ago

Uber's Rides business has been EBITDA positive since the IPO.

karpierz 5y ago
It turns out if you shuffle all of the subsidies and promotions out of your cost center, it's pretty easy to show a profit.
gizmondo 5y ago
Do you mean "adjusted" EBITDA or the real one?
- pbreit 5y ago
  When splitting out a segment it’s adjusted. Over $1 billion in past 4 quarters. Rides prints money.

tootie 5y ago

A local taxi service doesn't have the overhead of paying a share of thousands of developers to scale an algorithm that a dispatcher has in their head.

Barrin92 5y ago

>why can't they just raise prices until they're no longer selling at a loss? because competition exists. Same reason your local bakery can't sell bread at 50 bucks and make their owners millionaires. In a market economy you don't get to 'set prices' at arbitrary rates until you don't make losses. Right-hailing companies have no differentiating features, there's dozens off them, they also have to compete with taxis, and if Uber was to raise prices someone else would eat their marketshare until they've got the same problem and they've all competed each other into the ground. The entire flaw with the company is that building you an app that lets you hail a car isn't actually providing any surplus value to the tune of tens of billions of dollars and the only thing that keeps that illusion running is dumb Saudi money having nowhere to go

simonblack 5y ago

That old saying: "If it walks like a duck, quacks like a duck,...." is relevant here. If it costs like a taxi, looks like a taxi, pays its drivers like a taxi, it's a taxi. It's not an 'Uber' - whatever that's supposed to mean. Uber appealed to the riders because it was cheaper - now the costs are approaching taxi prices, what's the 'Uber' advantage? Uber appealed to drivers because they could earn more money than it cost to run their vehicles - with lower driver-payments, what's the 'Uber' advantage? So, if the costs are higher and the returns aren't there why drive for 'Uber' at all? Without the drivers, there's nobody to take the riders anywhere. Best to order a Taxi. At least you know that there is a taxi in the town, and it will get to you eventually. On the other hand, if no Uber driver happens to feel like driving at the moment, you could be waiting for days until your trip happens. I've always said that Uber is scam. Soaking the investors and drivers alike, while the 'management boys' skim the top and laugh all the way to the bank.

ink_13 5y ago
> what's the 'Uber' advantage? Pickup from a map pin, dropoff to a map pin, driver follows traffic-aware navigation the whole way (like GMaps or Waze), payment automatically handled. Cost was never why I preferred Uber/Lyft.
- simonblack 5y ago
  Pickup from a map pin, dropoff to a map pin Traditional taxi services. "I don't know the name of it, but I'm in the big white building opposite the Night Market." driver follows traffic-aware navigation the whole way You haven't ridden in a taxi lately. I venture to say that a GPS of some description is standard in all taxis, including things like GMaps and Waze. payment automatically handled. Restriction to one form of payment. A Taxi can take cash, card, voucher, or can wait while you borrow money that you haven't got from somebody else. I still don't see any 'Uber' advantage over a plain old taxi service.

itbeho 5y ago

Wikipedia says they have 26,900 employees. https://en.m.wikipedia.org/wiki/Uber https://en.m.wikipedia.org/wiki/Uber

rrrrrrrrrrrryan 5y ago

Nobody's mentioned that you can hail a taxi by walking out into the street and waving your hand in the air. It's a fundamentally different service.

amw-zero 5y ago

You're missing the fact that they have a pretty much limitless supply of capital, and _have still not been profitable_. It's not as simple as "just raise your prices." I would think that's pretty obvious. Why wouldn't all business just do that if it were that easy?

Kihashi 5y ago

All I know is that in the midwest, before Uber, there was maybe 1 taxi company near-ish (usually from a newarby town). You couldn't just call a ride- You'd have to look up the taxi company's number, schedule days in advance, and pay somewhere between $2-4/minute. After Uber, you can get a ride even in less populated areas (almost) on demand. The price is definitely lower, but not significantly. But we went from only using a taxi to get to the airport (if you could find absolutely no one to drop you off) to being able to take one home from the bar or concert.

xyzzy21 5y ago

They can but it also will reduce their business. The problem is that the "solution to the system equation" might have a complex/imaginary solution as its only solution (i.e. the business is not viable at any product price or any company cost structure) which is actually pretty common for startups - it's one of the primary reasons why a start-up and its product can fail.