55 ms·

Uber and Lyft’s new road: Fewer drivers, thrifty riders and jittery investors

213 points by elsewhen 4y ago

rvz 4y ago
Totally unsurprising and still both unprofitable businesses (Lyft, and Uber) 3 years after IPO. [0] [0] https://news.ycombinator.com/item?id=21328967 https://news.ycombinator.com/item?id=21328967
karaterobot 4y ago
I would like to read an explanation for how Uber and Lyft can't be profitable when taxicab companies can be.
- SnowHill9902 4y ago
  Overhead. Taxi drivers get a return on their time. Uber needs a return on payouts which is hard money.
- MegaDeKay 4y ago
  It is in the article: "Uber and Lyft have been a crude proposition all along: Subsidize unprofitable taxi rides with venture capital money, claw for market share, and eventually figure something out that will make such taxi rides profitable despite the huge corporate structure of well-paid executives and engineers, a thing traditional taxi companies with already razor-thin margins didn’t have."
  - karaterobot 4y ago
    I read the article, but that's not the level of explanation I want. I want to know how, for example, at the scale Uber and Lyft are operating at, the salaries of executives and engineers are more than the efficiencies it seems like they would gain. On paper, you shouldn't need to add a linear amount of overhead every time move into a new city: with taxi companies, you have to add physical buildings, admin, dispatchers, service personnel, and a bunch of other costs every time. You'd think Uber and Lyft could be a lot leaner than taxi companies, even though engineers make more than dispatchers: why not?
- yuliyp 4y ago
  taxicab companies aren't spending billions of dollars a year on bubble-inflated tech salaries.
- smelendez 4y ago
  Less overhead. Maybe an office and a garage in a cheap part of town and a few dispatchers and potentially a mechanic, etc. Uber has to maintain its servers and has a massive crew of white collar workers in expensive cities writing code, maintaining the servers, designing apps, marketing, lobbying, litigating, modeling potential business models, etc.
- ashalhashim 4y ago
  Taxicab companies don’t have to pay the Bay Area salaries of engineers, data scientists, MBAs, etc. nor do they have massive advertising and marketing overhead.
d23 4y ago
Seems unsurprising. The check had to come due eventually. It’ll be interesting to see whether riders keep using it in enough volume to keep them afloat.
- walrus01 4y ago
  It'll be interesting to see in a number of cities where traditional medallion licensed yellow taxis almost entirely disappeared, and the drivers went to go be Uber or Lyft for a period of some years, how much of it reverts back to the traditional system of taxis. I can foresee something like a lot of heavily used 300,000 mile Honda Accords with all city miles on them getting sold cheap. Buyer beware.
  - tootie 4y ago
    The medallion system was completely broken before the ride apps appeared. Traditional car services were reliable and easy to reach via phone. A lot of them have still survived.
    - ghaff 4y ago
      It's more expensive but I always use a traditional car service to get to the airport. Super-reliable, comfortable, clean, good drivers. They're always pre-scheduled (which is fine for the airport) but I've never had problems with getting them to make changes when flight stuff happens.
      - jeffbee 4y ago
        What are they going to do when they can’t get parts for those Lincolns?
        ghaff 4y ago
        Why would it be any different from auto/auto part supply chains in general? (Which, yes, from personal experience are a considerable issue at the moment.)
loceng 4y ago
So does this mean it's going to begin to become cheaper to use the services of old taxi organizations, who arguably aren't going to have the shareholders to appease to to pad revenues with profits? I really think, in all cases of online platforms, that laws requiring the platform to be transparent with all costs - including how much they keep as a platform, how much they give the actual driver, how much the restaurant gets (if doing delivery) etc. would be highly beneficial, if not necessary, to not only society but also to potential investors. E.g. How sustainable are their prices, and are the billions invested simply subsidizing lower fares to outcompete based on price for a temporary time while fighting over to capture as much of a market (artificially and temporarily?) until the shareholders come knocking asking for the profit tap to get turned on?
- scarface74 4y ago
  Why? It was “transparent” from the day that Uber and Lyft went public that they weren’t profitable and losing billions . They were always Ponzi schemes and retail investors who naively believed the hype were the “biggest fools”.
  - loceng 4y ago
    It's the VC-finance industrial complex, where the incentives aren't aligned with the sources of the money. Arguably being transparent at the per-transaction level which allow everyone and their mother to then do simple math to understand that such a business model isn't sustainable - but they're not currently paying enough attention, just in a very shallow way - they see Uber or Lyft on the news plenty, maybe use the services themself - until it's too late. All of this should be educating people giving their money to institutions or stockbrokers to make sure their money and whomever they're giving the power to dictate where it goes is aligned with long-term results, and arguably not at all on per-transaction buy/sell actions. I think a lot of our problems today stem from there being such an abundance of wealth/riches that enough people could become lazy and relatively inattentive with their money, blindly trusting others without understanding the underlying mechanisms enough - and perhaps blindly believing government institutions like the SEC would protect them - instead perhaps trusting long-time existing brand names as some sort of measure of trust. Bitcoin et al are the next evolution the VC-finance industrial complex has latched onto quite successfully, so far.
walrus01 4y ago
> The fundamental problem Uber and Lyft keep running into is that most people are not willing to pay the fares it would cost to run a profitable taxi service with the overhead Uber and Lyft require [surprisedpikachu.gif]
- toomuchtodo 4y ago
  You mean this was all a scam to enrich early shareholders and incinerate $30B+ in capital!? pearl clutching intensifies
  - walrus01 4y ago
    Writing as somebody who was working in network engineering and IT/tech stuff during the dotcom 1.0 VC funded boom and crash from 1997-2002 none of this is particularly surprising. it sure has been amusing to watch, however. maybe we can pay for future uber and lyft rides in beenz and flooz
  - dotcoma 4y ago
    Yes, exactly.
  - ghaff 4y ago
    The incineration was just a byproduct. I do wonder in so many of these cases, how much is: - Completely cynical fleece the suckers - Irrational optimism that things will be different because self-driving or whatever - Fake it till you make it (which is related but slightly different)
  - IgorPartola 4y ago
    More or less, though it did move the needle forward. Now most taxi services are easier to use thanks to Uber. But they were always in the business of selling dollar bills for $0.90. Soon as they want to make a profit it turns out to be more expensive than running a local taxi service and they aren’t price competitive. In the meantime taxi services got their own apps/app integrations while maintaining their competitive advantage.
alphabettsy 4y ago
This was inevitable without automation right?
- Finnucane 4y ago
  Inevitable even with automation. As the article points out, automation would mean they'd have to actually own, maintain, insure, etc. the cars.
  - AlexandrB 4y ago
    Automation was always a form of "investor story time". Going from a software company to a logistics company that has to buy, store, and maintain a fleet of vehicles across hundreds of cities was never going to happen even if they figured out full self driving.
  - Ekaros 4y ago
    And automation doesn't solve the issue that such transportation is race to bottom. It will never be high margin business. Or even low one with marginal unit costs...
daenz 4y ago
Are traditional taxicab services still alive? How did they survive until this time?
- woodruffw 4y ago
  They're still alive (albeit damaged) in NYC, and in most large cities I've visited. The answer is simple: they don't have thousands of expensive software engineers doing god-knows-what as overhead.
  - richrichardsson 4y ago
    Or all the servers etc. They just needed a (usually tiny) little office and 1 person to answer the phone.
    - gruez 4y ago
      >They just needed a (usually tiny) little office and 1 person to answer the phone. That also makes for terrible ux. One of the things ridesharing apps got right was the ux, ie. 1. being able to hail a cab via app, and see its ETA in real time 2. being able to pay with credit card, without fear that the machine "broke" 3. a rating system to weed out bad drivers 4. after-ride support
      - woodruffw 4y ago
        All of these things can be (and are) true and it can be true that Uber and Lyft appear to have an order of magnitude more engineers than they need.
- pigtailgirl 4y ago
  -- in my city the remaining cab companies have contracts with hospitals/the city/companies - can always find a cab outside the dialysis clinic - when I asked why a driver told me the dispatch company accepts a chit from the clinic --
- bdcravens 4y ago
endisneigh 4y ago
I always figured by now there would be some sort of centralized "trust" entity, ala credit bureaus, where you can build apps on top of that using the same "trust". Supposing such a thing existed, then drivers could simply offer their own driving services by themselves. Perhaps that's the next evolution here. I used to drive a pretty boring, but predictable route in the morning and in the late afternoon. I would've loved to drive people who are near my destination both ways, but without anyway to trust them, no way. Surely someone has tried to implement this before and failed and I just don't know?
- curiousllama 4y ago
  It totally exists, it's just not a tech company https://en.wikipedia.org/wiki/Slugging https://en.wikipedia.org/wiki/Slugging
  - synu 4y ago
    That was really common at Microsoft in the late 90s (and may still be) to be able to use the HOV lanes when driving from Redmond to Seattle. It worked well because you were picking up colleagues, which sort of established a certain level of trust.
    - woodruffw 4y ago
      My understanding is that it's also still very common in DC's beltway, for similar reasons (lots of civil servants going to similar areas, living nearby each other).
    - filoleg 4y ago
      I don't know how it is now, because I've left since then. But in pre-covid times, Microsoft was pushing/advertising this carpool app they partnered with called Scoop. Similar idea, except it can include workers from other companies as well, and it isn't for making money for the driver, but just to cover the cost of gas + to be able to use the HOV lane. As a passenger, you schedule your approximate time to go to work (or from work, or both, depending on how you want to use it), and the app matches you with a driver for the next morning who is going to about the same area, but maybe a different building. So they pick you up, drop you off, and go along their merry way, and you are only out of about $5-7 or so (that was the rate for going from Seattle downtown to Redmond, which is about a factor of 6-8 cheaper than an uber/lyft was at the time). I used it as both a driver (a few times) and as a passenger (many times). Feels like a pretty great idea that worked well. If I was driving, I didn't mind a 5 minute reroute to pick up or drop off someone nearby, and those $7 + (more importantly) HOV lane access were totally worth it. I estimated that the HOV lane access alone saved me significantly more time than I lost by going out of my way to pick up/drop off the passenger. And the fact that those people are guaranteed to not be randos, but either other MSFT employees or employees of other nearby companies made it much more trustworthy for me (the app required work email to sign up). Obviously, this wasn't meant to be an uber/lyft alternative, as it is only useful for going to/from work and only during specific days/hours. And you gotta schedule/get matched with a driver the night before, you cannot just wake up and spontaneously get a ride. Which makes sense given the context, because people typically want to have their commute to work planned the night before.
scarface74 4y ago
Shocker! A product is more popular that is sold below cost and you actually need to charge more for a product than it costs to produce?
lumost 4y ago
I think we're about to see a lot of tech ideas with questionable economics come back to earth. When the cost of capital was below a single digit, "parking" money in a growth bet could vaguely make sense. After all, someday Uber would figure it out, or get AVs, or .. something? Better than leaving the money in a .01% money market for 10 years, or parking the money in something with no path for growth like industrials. This problem isn't restricted to startups however, even big tech has big expensive forays into questionable markets. Meta is building something for a few billion a year, Google has hundreds of strange an unprofitable businesses, and B2B SaaS is full of startups which may actually just be consultancies. A 10-12% cost of capital means that you either need to have a real plan to turn profit in 3 years or investors won't care. Just breaking even means an opportunity cost of 30%.
- prasadjoglekar 4y ago
  Exactly right! An unintended side effect of the artificially low cost of capital was that labor seemed expensive. All the long shot ideas that tried to "improve productivity" - whether by replacing drivers with driverless cars, or robots flipping burgers are entirely uneconomical when cost of capital goes up. Now, capital has become more expensive and labor is also more expensive. It's a perfect shitstorm for a lot of projects.
- websap 4y ago
  Comparing Meta and Google, to Lyft and Uber isn't an apples to apples comparison. The former have cash cow businesses and have captial that they can deploy to find the next $100 billion dollar business. Its essential for their long term survival to keep diversifying and reinventing themselves.
  - halJordan 4y ago
    I think that's the point. That even these well funded, relatively sovereign companies will be punished for their moonshots and that means the future will be devastating for these magical unicorns.
    - 4y ago
lordnacho 4y ago
Let's not forget that this kind of venture also destroys the business it was meant to disrupt, at least while the venture money is flowing. Uncreative distruction. Somehow it seems wrong that people can make enough money to buy an island without actually making money.
- seibelj 4y ago
  Taxi cabs pre-Uber were awful, at least in the 3 cities I used them most (NYC, Boston, Vegas). Dirty cars and often unmaintained. Regularly taken in circuitous routes to raise the meter charge. “Broken” credit card machine. Very difficult to find a taxi if you weren’t in popular areas. Calling a dispatcher for a taxi only to wait an hour and have them not show up. Having apps solved all of the above problems. I would give 0% chance of any similar improvements under the monopolistic medallion system that exists in the old regime. Uber forced innovation that was so much better the politicians folded despite intense lobbying from the old hands.
  - marcinzm 4y ago
    That however is why they were cheaper. It seems, from the article, people don't actually want to pay the premium for that better level of service.
    - uxp100 4y ago
      Which was cheaper? In my experience, in addition to being much worse in many ways (love to be called and told my cab driver is ready to pick me up when I am already boarded and sitting in a plane, after the dispatcher repeatedly told me they were 10 minutes away for an hour, and then I managed to just street hail a cab at 5 am) cabs were also about 50% more expensive. However, my local cab company got an app, it’s a piece of shit, but it shows where the cab is in a map as it comes to you, which really was the killer feature for Uber/Lyft for me. So good riddance Uber, you served a purpose for a time, but normal cabs stepped up their game just a little bit, and I have basically negative loyalty to you.
      - 4y ago
GoOnThenDoTell 4y ago
Of course they need to make money, they cant subsidise everyone forever
grej 4y ago
If you’re arriving at an airport or other high traffic area, you will almost always get a better price and timelier service by simply jumping in a standard taxi. I’d say this has been the case for at least 6-9 months.
- rzz3 4y ago
  That may be true, but I’d much rather ride in an Uber or Lyft with less timely service and a higher price, than in a nasty yellow Crown Victoria from the dawn of time itself, with that ugly, rough, stained interior that smells like cigarettes and vomit. Taxis don’t even offer phone chargers or water. IMO, Taxis would have long since died as an industry if it weren’t for governments propping them up artificially.
  - ghaff 4y ago
    That's not at all my experience in Raleigh in particular. Walk to the cab line, get in, pay with card. No fussing around with an app and waiting.
    - largbae 4y ago
      That works when you are at the first point in your trip. Now get that taxi to show up in a timely manner at your house or the house of someone you visit.
      - ghaff 4y ago
        I do usually use Lyft for the return. But I'd have no trouble using a cab or some car the hotel has contracted with for going back to the airport.
    - missedthecue 4y ago
      By "fussing with an app" you mean about three clicks?
      - 4y ago
efortis 4y ago
Increased by how much?
HappyTypist 4y ago
I just do not understand how ridesharing cannot turn a profit. Let's look at unit economics: ~25% take rate on a ride ($15 average): $3.75 take Payment processing: 2.5% + 30c = $0.68 Servers / datacenters: $0.20 (for a margin-sensitive business, you should be colo'ing your own servers, or using cheap alternatives like OVH/Hertzner) Customer support: Automate as much as possible (auto refunds up to a certain point; for lost items, connect directly to driver); assume 1 in 50 rides require manual human support with a $3 cost = $0.06 support cost per ride Fraud/refunds: Assume a 2% fraud rate that cannot be reclaimed; thus $0.30 cost for fraud. Refunds for things like driver purposefully took a longer route can be clawed from the driver. Gross COGS: $1.24 Gross profit: $2.51 What am I missing?? Marketing? Fuck marketing when you can't turn a profit. Everyone knows about Uber or Lyft already, you need to turn a profit, not waste $30 per CAC.
- seydor 4y ago
  But then Uber wouldn't be a Tech Company, they would be another lowly profitable company.
- tonyhb 4y ago
  Uber's take can average ~45% depending on the day: https://missionlocal.org/2021/07/as-rideshare-prices-skyrocket-uber-and-lyft-take-a-bigger-bite-of-the-pie/ https://missionlocal.org/2021/07/as-rideshare-prices-skyrock... I agree and am not quite sure where it's going (other than software).
  - throwoutway 4y ago
    They have nearly 30,000 employees, mostly SDEs from what I understand. Its been discussed (and rationalized) here, but I still don't understand how that many are necessary. I read somewhere else that their engineering tend to need to rewrite their software every two years to keep up with the scale, so maybe they need them? it still seems insane to me. Lyft only has 4500 employees
    - ProjectBarks 4y ago
tablespoon 4y ago
So have they hit price-parity with traditional taxis, yet?
- jesusofnazarath 4y ago
ravenstine 4y ago
I've been noticing more drivers going independent. When I landed at LAX recently and waited at the taxi area for a Lyft, there were a bunch of drivers coming up and offering people rides, but not through Uber or Lyft. I thought "why not", took one of these independent rides home, and paid the guy through Square. It wasn't a "cheap" ride, but it was cheaper than the Lyft ride I cancelled and I'm sure he made a greater profit than through a "ride share" company. That's just one example, but I've noticed this drastically increase in the last year. Whether I'm at the airport, a train station, or a bus depot, I've been seeing way more independent drivers. What's stopping more drivers from doing this? If it's the "trust" aspect that comes from Uber, then surely there's some system that can meet us halfway that doesn't apparently need large sums of VC money and high fees but at least provides trust and safety for riders.
- brtkdotse 4y ago
  I’m all for scrappy bootstrapers but the middle aged adult in me just sees a licensing and insurance nightmare.
- onlyrealcuzzo 4y ago
  Doesn't that make you an illegal taxi?
  - paulcole 4y ago
    What do you think Uber was for years and years?
    - onlyrealcuzzo 4y ago
      It's different when you're a large company with a legal team doing something not clearly illegal - than when you're a single individual doing something clearly illegal. You didn't have to have a taxi medallion to be a black car driver and pick people up at locations upon request - which, originally, is what Uber was, exactly. The whole point of a taxi medallion is to be able to pick people up off the street - which is what these independent drivers at the airport and train stops are doing.
seydor 4y ago
So they made a full circle ... back to taxis?
munificent 4y ago
My favorite feature of Uber and Lyft the last several years is that it's essentially a crowdsourced way to transfer wealth from VCs to random users. Operating every drive at a loss means the rider and drivers benefit and the person holding the bag is some VC who apparently has more money than they know what to do with. Given how many financial structures today seem to flow in the opposite direction and skim a little money from everyone to transfer it to the already-rich, it's nice seeing a system that (completely unintentionally) flows the other way.
- hotpotamus 4y ago
  I felt the same way until the IPO.
- mperham 4y ago
  The VCs made plenty of money in the IPO. It’s the shareholders who are left holding an empty bag.
  - icedchai 4y ago
    Yep. I own both UBER and LYFT stock. They have been some of my worst investments.
- robertlagrant 4y ago
  VC funds are constantly being spent like this. The main unavoidable flow in the other direction is taxes and inflation from printing money. VCs get rich, but they risk a lot of their own money doing so.
  - native_samples 4y ago
    VCs are generally not risking their own money these days. They raise funds from many other people, and sometimes that includes <gulp> pension funds.
    - astrange 4y ago
relaunched 4y ago
The broker model has a yes out in the transportation industry, before Uber and Lyft were a twinkle in someones eye. It's a low margin business and has gained efficiency through tech. Once we understand that the gross margins are probably 20%, you are scalping the drivers and no driver can exist successfully living off brokered rides alone, Uber and Lyft will price like CH Robinson.
robertlagrant 4y ago
> the current business model passes off nearly all of the costs of actually running a taxi company onto drivers who pay for their own cars, fuel, and insurance, whereas AVs would have meant both companies would be paying for those things, but that’s a moot point now I know that Vice is a meme these days, but I can't resist. Where do they think the money is going? Mostly to the fees that are paid to drivers. If those costs are baked in and they are still losing money, it's because they're paying the drivers more than they can afford. They were banking on not having to pay AV drivers wages, sick leave, pensions, have them go on strike, etc etc. Just provide customers a good service for an amount these companies could sustain. Now, that was a wild bet for sure, but not a bad one for humanity to have tried.
- woodruffw 4y ago
  > Now, that was a wild bet for sure, but not a bad one for humanity to have tried. I think there is a very literal and material sense in which it was a quite bad bet for us to have tried. How many tens thousands of people skipped medical procedures, lost birthdays and holidays with loved ones, and didn't live as well as they could have because of these companies' cynical abuse of their labor?
  - kofejnik 4y ago
    I am not convinced they treat their drivers worse than medallion taxi companies. In fact, I’m about 95% sure the reverse is true.
  - robertlagrant 4y ago
    Okay I'll bite. How many?
- zouhair 4y ago
  > but not a bad bet What was good about it? They could have worked with existing taxi companies to sell their technology to create a better market, that would have been a good bet. Betting on making everything worse and hoping to profit from it was a horrible bet. If they continue what they are doing, I can't wait for them to crash and burn. Fuck the "Gig economy".
jonthepirate 4y ago
Former Lyft engineer here. I'm convinced they will go out of business or sell the scraps to someone... however smart acquirers like Elon wouldn't go near it. Rideshare sucks.
foobaw 4y ago
I think we need to stop comparing Uber to Lyft. To me, this is more of a Lyft problem as Uber has diversified way more.
theHNAcct 4y ago
This was always the idea. I remember Jason Calacanis saying on This Week In Startups months ago that Uber is in growth mode, eventually when push comes to shove they'll increase the price to get to profitability and have the market share to stick it out.
modeless 4y ago
I recently got a ridiculous coupon code for 50% off Postmates (Uber Eats) orders, when I did a Google search for Postmates. 5 orders, up to $100 savings on each order, and the code worked on my wife's account too so we get 10 orders. For weeks I've been ordering $200 meals from fancy steakhouses and paying $100, with leftovers for days. Somehow they haven't stopped subsidizing their customers yet. The code is FEAST if anyone cares to try it. Probably expired by now. It doesn't seem to work on Uber Eats, only Postmates.com on desktop web.
- lumost 4y ago
  If they stop subsidizing, then revenue growth may slow, stop, or turn negative. If the latter happened to Uber/Lyft for even a quarter, they may struggle to continue operations. After all, what's worse than a business losing billions of dollars? A shrinking business losing billions of dollars.
- 0x53 4y ago
  Wow, just looked this up and this is insane. Guess I’m gonna be eating out for a bit. Thanks for the tip
- dymk 4y ago
  The FEAST code has a few things to note, as the actual discount doesn't come out to 50% off. Which is fine, just have the right expectations before using it. - It's for delivery only - Discount applies only to the food - The service, delivery, "temporary local fee", and "temporary fuel surcharge" stay the same To test this, I put together a $67 order of Thai food, which had $17.88 of fees added onto it, coming out to $84.88. With the coupon, it's $51.38. If I was to order it directly from the restaurant (so I'm only paying tax), it's $74.79. So it's not horrible, $84.88 (no coupon) to $51.38 (with coupon) is a 39% discount. And 31% off compared to ordering directly from the restaurant.
  - modeless 4y ago
    This is all true. But if you max out the discount (which is easy if you have a large family and/or want lots of leftovers and/or like fancy restaurants) then it's still a screaming deal and way cheaper even than eating in at the restaurant. I can't believe the code is still going...
ergocoder 4y ago
Western countries have such a weird problem A seemingly boring business seems unviable. For example, food is expensive, and we have to tip, but restaurant is tough business, and the servers don't make enough for living. Like why the heck is this not viable?
- alar44 4y ago
  Well, that's just not true. I'm in the Midwest and a server at a decent restaurant can pull in $300/night in tips.
  - ergocoder 4y ago
    I have been told that we tip because servers can't make a living. If we don't tip, we are killing them. Why do we tip 20% again? It seems like we can tip 5% and the servers would still make bank.
- deleted 4y ago
  [deleted]
gsibble 4y ago
I've had over 10,000 Uber rides, all black, some SUV since 2011. I would have no problem if they just focused on the higher end of the market where there's profit to be made. I never thought their going down market was a good idea.
- hiq 4y ago
  > I've had over 10,000 Uber rides, all black, some SUV since 2011 10000/11/365 = 2.5 per day, is this your main means of transportation?
  - cyberlurker 4y ago
    Some people have their company/firm pay for the rides. Why not take it as the main means of transportation?
  - gsibble 4y ago
    Yes, and most/many were corporate reimbursed. I lived in SF for 10 years without a car.
- kilroy123 4y ago
  Why so many???
  - Sebguer 4y ago
    Why not, if your company's paying for it? It's just another way of extracting wealth from VCs.
    - puranjay 4y ago
      Smart. I’ve adopted the same stance - I aggressively use whatever app/service offers me steep discounts and cashbacks with no intention of ever being a long term customer once the discounts dry up.
lukifer 4y ago
The P2P transportation market is an ideal one for a workers' cooperative. The fact that Uber and Lyft are running at a loss (...for now) does not make them any less rent-seeking in their business model. https://drivers.coop/ https://drivers.coop/ https://ridefair.io/ https://ridefair.io/
- tested23 4y ago
- ceeplusplus 4y ago
  From the jobs page of the first link for a software engineer position: "The position is salaried up to $72,000 a year depending on geography. Fixed-term contracts are available." Sorry, but you're not buying competitive talent with 72k/year salary. Uber can squeeze out tons of marginal efficiencies via better routing/matching, price discrimination, and surge algorithms. Implementing those algorithms means hiring good talent, especially in ML. Having a fancy frontend is only 10% of the picture if you want drivers to have good utilization.
  - endisneigh 4y ago
    > edit: and the second link advertises using Postgres, which will never scale past the size of a single US state to be fair depending on the exact implementation details you probably could do everything you need, including management using Spanner and BigTable.
  - hackernewds 4y ago
    this assumes Uber can only hire silicon valley engineers. $72k is plenty money in a cheap gas/food/rent no state tax city like Dallas
    - briandear 4y ago
      $72k for Texas lol. I don’t know a single Silicon Valley quality engineer working for that anywhere in the US.
slaw 4y ago
At markets where Uber has competition. I know Brazil and Mexico. DiDi pays driver more and charges client less. So DiDi takes less cut than Uber and is still profitable.
tunesmith 4y ago
I wonder how much of this transfers to the music industry. It's much more complicated than the taxi industry, but in broad strokes, VC-subsidized companies basically undercut the combination of record publishers and musicians, setting the price and revenue-per-listen to levels much lower than they would have been without subsidization. But it's also been happening for longer, so I think that it's more like as-if all the taxi drivers had already been driven out of the business and the taxis junked. With taxis, you know if there are no rides available, but with music, you don't really realize all the great music that isn't being written.
- matthewdgreen 4y ago
  > but with music, you don't really realize all the great music that isn't being written. Musicians have long complained that their share of record sales was negligible in the old system, at least until they became large and established acts. The money (such as it is) has always been in touring and merchandise.
rossdavidh 4y ago
Here's my question: how much will this hurt AWS? Oh, Uber and Lyft alone won't, of course, even though IIRC their IPO's revealed staggering AWS bills. But, there are a lot of goofy ideas out there masquerading as companies, and the VC spigot just turned off. That spigot was pushing VC money, via a very complex system of middlemen, to AWS. If AWS has half their customers disappear, what does that do to Amazon's bottom line?
- moralestapia 4y ago
  >If AWS has half their customers disappear Nah, they're not even 1% of AWS. Plus AWS is profitable AF.
  - hackernewds 4y ago
    if 0.01% users are 1% of their revenue, that's a huge concerning consolidation. AWS IS indeed in this situation when the full discretionary spending sector struggles. AWS might be super high margins, but it does not exist in a vacuum. AWS cross subsidization powers AMZN retail to be able to run at a <1% margin.
    - moralestapia 4y ago
      Could you elaborate? I don't seem to grasp your point. >AWS cross subsidization powers AMZN retail to be able to run at a <1% margin. I've never truly understood that number, how come they have such low margins where most of the products I see there have a 10-20% markup (at least) vs. the same product in classic "offline" retailers (costco, walmart, etc...)? "But they send it to your home", yeah but they charge you for that too.
      - Spivak 4y ago
        Because in my area Amazon (including amortized cost of prime) is always cheaper and this includes wholesale clubs like Costco and GFS. Like if you need something right now the usual story is to go to a physical store and have them price match Amazon for a 10-30% discount. If I could save money by not shopping on Amazon it would be a no-brainer but it isn’t. Like I’m paying less for the conscience of having it shipped to me.
dang 4y ago
Url changed from https://www.vice.com/en/article/m7vmpb/uber-and-lyft-are-out-of-ideas-jacking-up-prices-in-desperation-for-profit https://www.vice.com/en/article/m7vmpb/uber-and-lyft-are-out..., which points to this.
neonate 4y ago
https://archive.ph/bt3bA https://archive.ph/bt3bA
black_13 4y ago
1vuio0pswjnm7 4y ago
25. Uber and Lyft Are Out of Ideas, Jacking Up Prices in Desperation for Profit (vice.com) 127 points by elsewhen 2 hours ago | flag | hide | 179 comments Above is what I saw on the HN front page minutes ago. Then I started reading the comments thread and suddenly the submitted article has changed. It is now pointing to WSJ instead of VICE. Looks like the original VICE article has even been scrubbed from HN entirely. https://news.ycombinator.com/from?site=vice.com https://news.ycombinator.com/from?site=vice.com Below is the original article. https://www.vice.com/en/article/m7vmpb/uber-and-lyft-are-out-of-ideas-jacking-up-prices-in-desperation-for-profit https://www.vice.com/en/article/m7vmpb/uber-and-lyft-are-out...
- beeboop 4y ago
  weird
- B1FF_PSUVM 4y ago
  "[...] eventually figure something out that will make such taxi rides profitable despite the huge corporate structure of well-paid executives and engineers, a thing traditional taxi companies with already razor-thin margins didn’t have." There we go, the punch ... "[...] a sensible business with an obvious if limited market and profit potential. It is also an idea that has already existed, once run by a plucky startup that focused exclusively on Black Car services from experienced, fully licensed and insured drivers paid a living wage. You may have heard of it. It was called Uber." ... and the knockout.
- deleted 4y ago
  [deleted]
- pvg 4y ago
  The WSJ article is the original source which is what the guidelines ask people to post.
- radley 4y ago
  That's because the Vice article talks about the WSJ article. Often, HN moderators will point to the original source, particularly when the following article tends to be click-baity.
FunnyBadger 4y ago
I can proudly say that I've NEVER ONCE used these NeoSlavery services and never will.
outside1234 4y ago
Uber is just a dumpster fire. I scheduled an airport ride with them and each driver continuously just kept canceling it when they saw where it was going. Can't imagine how bad it is for someone going to a lower level neighborhood. Can't count on it anymore - going back to manually calling taxis.
formerkrogemp 4y ago
I love threads like this. It assured me of job security in accounting y'all. Thanks for giving me confidence in strange quarters.
nr2x 4y ago
“I’m not loyal,” said Sergio Avedian, who has driven for seven apps, including Uber and Lyft, and writes about his experience on The RideShare Guy blog for drivers. “Nobody is loyal.”
faangiq 4y ago
Uber and Lyft already dumped their bags on your 401k.
slotrans 4y ago
These companies were always net value destroyers. Consumers being subsidized from the pockets of investors was nice while it lasted, but it doesn't make for a sustainable business. Once they go to zero we'll wonder how it ever even appeared to make sense.
- puranjay 4y ago
  Look at initial funding rounds of a hot new startup these days. Especially in areas like web3. There will often be participation from dozens of VCs and angels, mostly random names and funds that came up a couple of years ago. There is really way too much cheap and dumb money sloshing around the tech industry. Money that cheap can’t create long term value - it just creates zombie companies and bad operational habits.
throw__away7391 4y ago
There's a talk a couple years old now by an Uber engineer called something like "what I wish I knew before scaling to 10k microservices", I haven't watched it in a while but when I saw it I remember thinking "these people are absolutely insane". I've since heard some crazy stories about things like new services being built because people would rather build a new service than talk to the devs that owned the existing one. I don't know if this is true or not or how widespread this was, but the impression I get is that Uber has massively over-built in an effort to look more like a "tech" company rather than a "taxi" company to investors. We have a couple of local companies in NY with their own ride-sharing apps. They aren't as polished as Uber, but they do work and the companies that built them have about 1% the staff of Uber.
- sokoloff 4y ago
  If Uber is covering 200x the market globally as a local NY company that has 1% the staff, it seems like Uber is more efficient on a sales/employee basis. I doubt NY is 1% of the phone-hailed taxi market globally.
  - throw__away7391 4y ago
    Well sure...but the thing about software that's different from say taxis or commercial real estate is that once you build a product the marginal cost to scale it up is close to zero. This is what drives the valuation multipliers of growing tech companies. If your software requires 10x the engineers to support 10x the usage I'd say such valuations are not justified.
    - monocasa 4y ago
      Particularly something like Uber where there's a natural sharding that can happen at about the scale a regular taxi business would service anyway. There's some overhead in when payment methods start changing, and complying with local laws in a new metro, but it's pretty damn close pure geo sharding.
  - sbierwagen 4y ago
DeathArrow 4y ago
I don't use Uber. In my country we have a taxi app which can be used by any taxi driver. So I do have the benefits of Uber - using an app, having a larger pool of drivers to pick from, paying the ride through the app, without any of the downsides of using Uber. The taxi drivers follow local regulations, they have the proper permit to transport people (this requires checking), I don't see ridicoluos price surges and price hikes at rush hours, taxi companies don't evade local taxes like Uber does, the money remain in the local economy, drivers have wages, social insurance, health insurance and pension funds.
DeathArrow 4y ago
After Uber and Lyft will fall, I can see a better model coming up. An open source base for a riding/taxi app for which local companies can add their own modules for billing to comply with local regulations. It would be the WordPress of ride sharing / taxi apps.
puranjay 4y ago
Here in India, its increasingly starting to feel that both Ola and Uber are slowly abandoning the market. Service quality has gone down drastically and Ola seems more interested in making (unsafe) electric scooters In their heyday, you’d drive around and find that 30-40% of cars on the road were Uber/Ola taxis (cabs here have different colored number plates). Now, its around 5-10%
kkrbalam 4y ago
In third world countries like India, Uber and Lyft cannot compete with it’s street smart drives. Drivers call you and ask you to cancel the trip and pay them in cash to take you to the destination. They use Uber/Lyft marketing, tracking, and status but give zero dollars in revenue back.
- kkrbalam 4y ago
  I have a first hand experience of this, not hypothetical.

213 points by elsewhen 4y ago

rvz 4y ago

Totally unsurprising and still both unprofitable businesses (Lyft, and Uber) 3 years after IPO. [0] [0] https://news.ycombinator.com/item?id=21328967 https://news.ycombinator.com/item?id=21328967

karaterobot 4y ago

I would like to read an explanation for how Uber and Lyft can't be profitable when taxicab companies can be.

SnowHill9902 4y ago
Overhead. Taxi drivers get a return on their time. Uber needs a return on payouts which is hard money.
MegaDeKay 4y ago
It is in the article: "Uber and Lyft have been a crude proposition all along: Subsidize unprofitable taxi rides with venture capital money, claw for market share, and eventually figure something out that will make such taxi rides profitable despite the huge corporate structure of well-paid executives and engineers, a thing traditional taxi companies with already razor-thin margins didn’t have."
- karaterobot 4y ago
  I read the article, but that's not the level of explanation I want. I want to know how, for example, at the scale Uber and Lyft are operating at, the salaries of executives and engineers are more than the efficiencies it seems like they would gain. On paper, you shouldn't need to add a linear amount of overhead every time move into a new city: with taxi companies, you have to add physical buildings, admin, dispatchers, service personnel, and a bunch of other costs every time. You'd think Uber and Lyft could be a lot leaner than taxi companies, even though engineers make more than dispatchers: why not?
yuliyp 4y ago
taxicab companies aren't spending billions of dollars a year on bubble-inflated tech salaries.
smelendez 4y ago
Less overhead. Maybe an office and a garage in a cheap part of town and a few dispatchers and potentially a mechanic, etc. Uber has to maintain its servers and has a massive crew of white collar workers in expensive cities writing code, maintaining the servers, designing apps, marketing, lobbying, litigating, modeling potential business models, etc.
ashalhashim 4y ago
Taxicab companies don’t have to pay the Bay Area salaries of engineers, data scientists, MBAs, etc. nor do they have massive advertising and marketing overhead.

d23 4y ago

Seems unsurprising. The check had to come due eventually. It’ll be interesting to see whether riders keep using it in enough volume to keep them afloat.

walrus01 4y ago
It'll be interesting to see in a number of cities where traditional medallion licensed yellow taxis almost entirely disappeared, and the drivers went to go be Uber or Lyft for a period of some years, how much of it reverts back to the traditional system of taxis. I can foresee something like a lot of heavily used 300,000 mile Honda Accords with all city miles on them getting sold cheap. Buyer beware.
- tootie 4y ago
  The medallion system was completely broken before the ride apps appeared. Traditional car services were reliable and easy to reach via phone. A lot of them have still survived.
  - ghaff 4y ago
    It's more expensive but I always use a traditional car service to get to the airport. Super-reliable, comfortable, clean, good drivers. They're always pre-scheduled (which is fine for the airport) but I've never had problems with getting them to make changes when flight stuff happens.
    - jeffbee 4y ago
      What are they going to do when they can’t get parts for those Lincolns?
      - ghaff 4y ago
        Why would it be any different from auto/auto part supply chains in general? (Which, yes, from personal experience are a considerable issue at the moment.)

loceng 4y ago

So does this mean it's going to begin to become cheaper to use the services of old taxi organizations, who arguably aren't going to have the shareholders to appease to to pad revenues with profits? I really think, in all cases of online platforms, that laws requiring the platform to be transparent with all costs - including how much they keep as a platform, how much they give the actual driver, how much the restaurant gets (if doing delivery) etc. would be highly beneficial, if not necessary, to not only society but also to potential investors. E.g. How sustainable are their prices, and are the billions invested simply subsidizing lower fares to outcompete based on price for a temporary time while fighting over to capture as much of a market (artificially and temporarily?) until the shareholders come knocking asking for the profit tap to get turned on?

scarface74 4y ago
Why? It was “transparent” from the day that Uber and Lyft went public that they weren’t profitable and losing billions . They were always Ponzi schemes and retail investors who naively believed the hype were the “biggest fools”.
- loceng 4y ago
  It's the VC-finance industrial complex, where the incentives aren't aligned with the sources of the money. Arguably being transparent at the per-transaction level which allow everyone and their mother to then do simple math to understand that such a business model isn't sustainable - but they're not currently paying enough attention, just in a very shallow way - they see Uber or Lyft on the news plenty, maybe use the services themself - until it's too late. All of this should be educating people giving their money to institutions or stockbrokers to make sure their money and whomever they're giving the power to dictate where it goes is aligned with long-term results, and arguably not at all on per-transaction buy/sell actions. I think a lot of our problems today stem from there being such an abundance of wealth/riches that enough people could become lazy and relatively inattentive with their money, blindly trusting others without understanding the underlying mechanisms enough - and perhaps blindly believing government institutions like the SEC would protect them - instead perhaps trusting long-time existing brand names as some sort of measure of trust. Bitcoin et al are the next evolution the VC-finance industrial complex has latched onto quite successfully, so far.

walrus01 4y ago

> The fundamental problem Uber and Lyft keep running into is that most people are not willing to pay the fares it would cost to run a profitable taxi service with the overhead Uber and Lyft require [surprisedpikachu.gif]

toomuchtodo 4y ago
You mean this was all a scam to enrich early shareholders and incinerate $30B+ in capital!? pearl clutching intensifies
- walrus01 4y ago
  Writing as somebody who was working in network engineering and IT/tech stuff during the dotcom 1.0 VC funded boom and crash from 1997-2002 none of this is particularly surprising. it sure has been amusing to watch, however. maybe we can pay for future uber and lyft rides in beenz and flooz
- dotcoma 4y ago
  Yes, exactly.
- ghaff 4y ago
  The incineration was just a byproduct. I do wonder in so many of these cases, how much is: - Completely cynical fleece the suckers - Irrational optimism that things will be different because self-driving or whatever - Fake it till you make it (which is related but slightly different)
- IgorPartola 4y ago
  More or less, though it did move the needle forward. Now most taxi services are easier to use thanks to Uber. But they were always in the business of selling dollar bills for $0.90. Soon as they want to make a profit it turns out to be more expensive than running a local taxi service and they aren’t price competitive. In the meantime taxi services got their own apps/app integrations while maintaining their competitive advantage.

alphabettsy 4y ago

This was inevitable without automation right?

Finnucane 4y ago
Inevitable even with automation. As the article points out, automation would mean they'd have to actually own, maintain, insure, etc. the cars.
- AlexandrB 4y ago
  Automation was always a form of "investor story time". Going from a software company to a logistics company that has to buy, store, and maintain a fleet of vehicles across hundreds of cities was never going to happen even if they figured out full self driving.
- Ekaros 4y ago
  And automation doesn't solve the issue that such transportation is race to bottom. It will never be high margin business. Or even low one with marginal unit costs...

daenz 4y ago

Are traditional taxicab services still alive? How did they survive until this time?

woodruffw 4y ago
They're still alive (albeit damaged) in NYC, and in most large cities I've visited. The answer is simple: they don't have thousands of expensive software engineers doing god-knows-what as overhead.
- richrichardsson 4y ago
  Or all the servers etc. They just needed a (usually tiny) little office and 1 person to answer the phone.
  - gruez 4y ago
    >They just needed a (usually tiny) little office and 1 person to answer the phone. That also makes for terrible ux. One of the things ridesharing apps got right was the ux, ie. 1. being able to hail a cab via app, and see its ETA in real time 2. being able to pay with credit card, without fear that the machine "broke" 3. a rating system to weed out bad drivers 4. after-ride support
    - woodruffw 4y ago
      All of these things can be (and are) true and it can be true that Uber and Lyft appear to have an order of magnitude more engineers than they need.
pigtailgirl 4y ago
-- in my city the remaining cab companies have contracts with hospitals/the city/companies - can always find a cab outside the dialysis clinic - when I asked why a driver told me the dispatch company accepts a chit from the clinic --
bdcravens 4y ago

endisneigh 4y ago

I always figured by now there would be some sort of centralized "trust" entity, ala credit bureaus, where you can build apps on top of that using the same "trust". Supposing such a thing existed, then drivers could simply offer their own driving services by themselves. Perhaps that's the next evolution here. I used to drive a pretty boring, but predictable route in the morning and in the late afternoon. I would've loved to drive people who are near my destination both ways, but without anyway to trust them, no way. Surely someone has tried to implement this before and failed and I just don't know?

curiousllama 4y ago
It totally exists, it's just not a tech company https://en.wikipedia.org/wiki/Slugging https://en.wikipedia.org/wiki/Slugging
- synu 4y ago
  That was really common at Microsoft in the late 90s (and may still be) to be able to use the HOV lanes when driving from Redmond to Seattle. It worked well because you were picking up colleagues, which sort of established a certain level of trust.
  - woodruffw 4y ago
    My understanding is that it's also still very common in DC's beltway, for similar reasons (lots of civil servants going to similar areas, living nearby each other).
  - filoleg 4y ago
    I don't know how it is now, because I've left since then. But in pre-covid times, Microsoft was pushing/advertising this carpool app they partnered with called Scoop. Similar idea, except it can include workers from other companies as well, and it isn't for making money for the driver, but just to cover the cost of gas + to be able to use the HOV lane. As a passenger, you schedule your approximate time to go to work (or from work, or both, depending on how you want to use it), and the app matches you with a driver for the next morning who is going to about the same area, but maybe a different building. So they pick you up, drop you off, and go along their merry way, and you are only out of about $5-7 or so (that was the rate for going from Seattle downtown to Redmond, which is about a factor of 6-8 cheaper than an uber/lyft was at the time). I used it as both a driver (a few times) and as a passenger (many times). Feels like a pretty great idea that worked well. If I was driving, I didn't mind a 5 minute reroute to pick up or drop off someone nearby, and those $7 + (more importantly) HOV lane access were totally worth it. I estimated that the HOV lane access alone saved me significantly more time than I lost by going out of my way to pick up/drop off the passenger. And the fact that those people are guaranteed to not be randos, but either other MSFT employees or employees of other nearby companies made it much more trustworthy for me (the app required work email to sign up). Obviously, this wasn't meant to be an uber/lyft alternative, as it is only useful for going to/from work and only during specific days/hours. And you gotta schedule/get matched with a driver the night before, you cannot just wake up and spontaneously get a ride. Which makes sense given the context, because people typically want to have their commute to work planned the night before.

scarface74 4y ago

Shocker! A product is more popular that is sold below cost and you actually need to charge more for a product than it costs to produce?

lumost 4y ago

I think we're about to see a lot of tech ideas with questionable economics come back to earth. When the cost of capital was below a single digit, "parking" money in a growth bet could vaguely make sense. After all, someday Uber would figure it out, or get AVs, or .. something? Better than leaving the money in a .01% money market for 10 years, or parking the money in something with no path for growth like industrials. This problem isn't restricted to startups however, even big tech has big expensive forays into questionable markets. Meta is building something for a few billion a year, Google has hundreds of strange an unprofitable businesses, and B2B SaaS is full of startups which may actually just be consultancies. A 10-12% cost of capital means that you either need to have a real plan to turn profit in 3 years or investors won't care. Just breaking even means an opportunity cost of 30%.

prasadjoglekar 4y ago
Exactly right! An unintended side effect of the artificially low cost of capital was that labor seemed expensive. All the long shot ideas that tried to "improve productivity" - whether by replacing drivers with driverless cars, or robots flipping burgers are entirely uneconomical when cost of capital goes up. Now, capital has become more expensive and labor is also more expensive. It's a perfect shitstorm for a lot of projects.
websap 4y ago
Comparing Meta and Google, to Lyft and Uber isn't an apples to apples comparison. The former have cash cow businesses and have captial that they can deploy to find the next $100 billion dollar business. Its essential for their long term survival to keep diversifying and reinventing themselves.
- halJordan 4y ago
  I think that's the point. That even these well funded, relatively sovereign companies will be punished for their moonshots and that means the future will be devastating for these magical unicorns.
  - 4y ago

lordnacho 4y ago

Let's not forget that this kind of venture also destroys the business it was meant to disrupt, at least while the venture money is flowing. Uncreative distruction. Somehow it seems wrong that people can make enough money to buy an island without actually making money.

seibelj 4y ago
Taxi cabs pre-Uber were awful, at least in the 3 cities I used them most (NYC, Boston, Vegas). Dirty cars and often unmaintained. Regularly taken in circuitous routes to raise the meter charge. “Broken” credit card machine. Very difficult to find a taxi if you weren’t in popular areas. Calling a dispatcher for a taxi only to wait an hour and have them not show up. Having apps solved all of the above problems. I would give 0% chance of any similar improvements under the monopolistic medallion system that exists in the old regime. Uber forced innovation that was so much better the politicians folded despite intense lobbying from the old hands.
- marcinzm 4y ago
  That however is why they were cheaper. It seems, from the article, people don't actually want to pay the premium for that better level of service.
  - uxp100 4y ago
    Which was cheaper? In my experience, in addition to being much worse in many ways (love to be called and told my cab driver is ready to pick me up when I am already boarded and sitting in a plane, after the dispatcher repeatedly told me they were 10 minutes away for an hour, and then I managed to just street hail a cab at 5 am) cabs were also about 50% more expensive. However, my local cab company got an app, it’s a piece of shit, but it shows where the cab is in a map as it comes to you, which really was the killer feature for Uber/Lyft for me. So good riddance Uber, you served a purpose for a time, but normal cabs stepped up their game just a little bit, and I have basically negative loyalty to you.
    - 4y ago

GoOnThenDoTell 4y ago

Of course they need to make money, they cant subsidise everyone forever

grej 4y ago

If you’re arriving at an airport or other high traffic area, you will almost always get a better price and timelier service by simply jumping in a standard taxi. I’d say this has been the case for at least 6-9 months.

rzz3 4y ago
That may be true, but I’d much rather ride in an Uber or Lyft with less timely service and a higher price, than in a nasty yellow Crown Victoria from the dawn of time itself, with that ugly, rough, stained interior that smells like cigarettes and vomit. Taxis don’t even offer phone chargers or water. IMO, Taxis would have long since died as an industry if it weren’t for governments propping them up artificially.
- ghaff 4y ago
  That's not at all my experience in Raleigh in particular. Walk to the cab line, get in, pay with card. No fussing around with an app and waiting.
  - largbae 4y ago
    That works when you are at the first point in your trip. Now get that taxi to show up in a timely manner at your house or the house of someone you visit.
    - ghaff 4y ago
      I do usually use Lyft for the return. But I'd have no trouble using a cab or some car the hotel has contracted with for going back to the airport.
  - missedthecue 4y ago
    By "fussing with an app" you mean about three clicks?
    - 4y ago

efortis 4y ago

Increased by how much?

HappyTypist 4y ago

I just do not understand how ridesharing cannot turn a profit. Let's look at unit economics: ~25% take rate on a ride ($15 average): $3.75 take Payment processing: 2.5% + 30c = $0.68 Servers / datacenters: $0.20 (for a margin-sensitive business, you should be colo'ing your own servers, or using cheap alternatives like OVH/Hertzner) Customer support: Automate as much as possible (auto refunds up to a certain point; for lost items, connect directly to driver); assume 1 in 50 rides require manual human support with a $3 cost = $0.06 support cost per ride Fraud/refunds: Assume a 2% fraud rate that cannot be reclaimed; thus $0.30 cost for fraud. Refunds for things like driver purposefully took a longer route can be clawed from the driver. Gross COGS: $1.24 Gross profit: $2.51 What am I missing?? Marketing? Fuck marketing when you can't turn a profit. Everyone knows about Uber or Lyft already, you need to turn a profit, not waste $30 per CAC.

seydor 4y ago
But then Uber wouldn't be a Tech Company, they would be another lowly profitable company.
tonyhb 4y ago
Uber's take can average ~45% depending on the day: https://missionlocal.org/2021/07/as-rideshare-prices-skyrocket-uber-and-lyft-take-a-bigger-bite-of-the-pie/ https://missionlocal.org/2021/07/as-rideshare-prices-skyrock... I agree and am not quite sure where it's going (other than software).
- throwoutway 4y ago
  They have nearly 30,000 employees, mostly SDEs from what I understand. Its been discussed (and rationalized) here, but I still don't understand how that many are necessary. I read somewhere else that their engineering tend to need to rewrite their software every two years to keep up with the scale, so maybe they need them? it still seems insane to me. Lyft only has 4500 employees
  - ProjectBarks 4y ago

tablespoon 4y ago

So have they hit price-parity with traditional taxis, yet?

jesusofnazarath 4y ago

ravenstine 4y ago

I've been noticing more drivers going independent. When I landed at LAX recently and waited at the taxi area for a Lyft, there were a bunch of drivers coming up and offering people rides, but not through Uber or Lyft. I thought "why not", took one of these independent rides home, and paid the guy through Square. It wasn't a "cheap" ride, but it was cheaper than the Lyft ride I cancelled and I'm sure he made a greater profit than through a "ride share" company. That's just one example, but I've noticed this drastically increase in the last year. Whether I'm at the airport, a train station, or a bus depot, I've been seeing way more independent drivers. What's stopping more drivers from doing this? If it's the "trust" aspect that comes from Uber, then surely there's some system that can meet us halfway that doesn't apparently need large sums of VC money and high fees but at least provides trust and safety for riders.

brtkdotse 4y ago
I’m all for scrappy bootstrapers but the middle aged adult in me just sees a licensing and insurance nightmare.
onlyrealcuzzo 4y ago
Doesn't that make you an illegal taxi?
- paulcole 4y ago
  What do you think Uber was for years and years?
  - onlyrealcuzzo 4y ago
    It's different when you're a large company with a legal team doing something not clearly illegal - than when you're a single individual doing something clearly illegal. You didn't have to have a taxi medallion to be a black car driver and pick people up at locations upon request - which, originally, is what Uber was, exactly. The whole point of a taxi medallion is to be able to pick people up off the street - which is what these independent drivers at the airport and train stops are doing.

seydor 4y ago

So they made a full circle ... back to taxis?

munificent 4y ago

My favorite feature of Uber and Lyft the last several years is that it's essentially a crowdsourced way to transfer wealth from VCs to random users. Operating every drive at a loss means the rider and drivers benefit and the person holding the bag is some VC who apparently has more money than they know what to do with. Given how many financial structures today seem to flow in the opposite direction and skim a little money from everyone to transfer it to the already-rich, it's nice seeing a system that (completely unintentionally) flows the other way.

hotpotamus 4y ago
I felt the same way until the IPO.
mperham 4y ago
The VCs made plenty of money in the IPO. It’s the shareholders who are left holding an empty bag.
- icedchai 4y ago
  Yep. I own both UBER and LYFT stock. They have been some of my worst investments.
robertlagrant 4y ago
VC funds are constantly being spent like this. The main unavoidable flow in the other direction is taxes and inflation from printing money. VCs get rich, but they risk a lot of their own money doing so.
- native_samples 4y ago
  VCs are generally not risking their own money these days. They raise funds from many other people, and sometimes that includes <gulp> pension funds.
  - astrange 4y ago

relaunched 4y ago

The broker model has a yes out in the transportation industry, before Uber and Lyft were a twinkle in someones eye. It's a low margin business and has gained efficiency through tech. Once we understand that the gross margins are probably 20%, you are scalping the drivers and no driver can exist successfully living off brokered rides alone, Uber and Lyft will price like CH Robinson.

robertlagrant 4y ago

> the current business model passes off nearly all of the costs of actually running a taxi company onto drivers who pay for their own cars, fuel, and insurance, whereas AVs would have meant both companies would be paying for those things, but that’s a moot point now I know that Vice is a meme these days, but I can't resist. Where do they think the money is going? Mostly to the fees that are paid to drivers. If those costs are baked in and they are still losing money, it's because they're paying the drivers more than they can afford. They were banking on not having to pay AV drivers wages, sick leave, pensions, have them go on strike, etc etc. Just provide customers a good service for an amount these companies could sustain. Now, that was a wild bet for sure, but not a bad one for humanity to have tried.

woodruffw 4y ago
> Now, that was a wild bet for sure, but not a bad one for humanity to have tried. I think there is a very literal and material sense in which it was a quite bad bet for us to have tried. How many tens thousands of people skipped medical procedures, lost birthdays and holidays with loved ones, and didn't live as well as they could have because of these companies' cynical abuse of their labor?
- kofejnik 4y ago
  I am not convinced they treat their drivers worse than medallion taxi companies. In fact, I’m about 95% sure the reverse is true.
- robertlagrant 4y ago
  Okay I'll bite. How many?
zouhair 4y ago
> but not a bad bet What was good about it? They could have worked with existing taxi companies to sell their technology to create a better market, that would have been a good bet. Betting on making everything worse and hoping to profit from it was a horrible bet. If they continue what they are doing, I can't wait for them to crash and burn. Fuck the "Gig economy".

jonthepirate 4y ago

Former Lyft engineer here. I'm convinced they will go out of business or sell the scraps to someone... however smart acquirers like Elon wouldn't go near it. Rideshare sucks.

foobaw 4y ago

I think we need to stop comparing Uber to Lyft. To me, this is more of a Lyft problem as Uber has diversified way more.

theHNAcct 4y ago

This was always the idea. I remember Jason Calacanis saying on This Week In Startups months ago that Uber is in growth mode, eventually when push comes to shove they'll increase the price to get to profitability and have the market share to stick it out.

modeless 4y ago

I recently got a ridiculous coupon code for 50% off Postmates (Uber Eats) orders, when I did a Google search for Postmates. 5 orders, up to $100 savings on each order, and the code worked on my wife's account too so we get 10 orders. For weeks I've been ordering $200 meals from fancy steakhouses and paying $100, with leftovers for days. Somehow they haven't stopped subsidizing their customers yet. The code is FEAST if anyone cares to try it. Probably expired by now. It doesn't seem to work on Uber Eats, only Postmates.com on desktop web.

lumost 4y ago
If they stop subsidizing, then revenue growth may slow, stop, or turn negative. If the latter happened to Uber/Lyft for even a quarter, they may struggle to continue operations. After all, what's worse than a business losing billions of dollars? A shrinking business losing billions of dollars.
0x53 4y ago
Wow, just looked this up and this is insane. Guess I’m gonna be eating out for a bit. Thanks for the tip
dymk 4y ago
The FEAST code has a few things to note, as the actual discount doesn't come out to 50% off. Which is fine, just have the right expectations before using it. - It's for delivery only - Discount applies only to the food - The service, delivery, "temporary local fee", and "temporary fuel surcharge" stay the same To test this, I put together a $67 order of Thai food, which had $17.88 of fees added onto it, coming out to $84.88. With the coupon, it's $51.38. If I was to order it directly from the restaurant (so I'm only paying tax), it's $74.79. So it's not horrible, $84.88 (no coupon) to $51.38 (with coupon) is a 39% discount. And 31% off compared to ordering directly from the restaurant.
- modeless 4y ago
  This is all true. But if you max out the discount (which is easy if you have a large family and/or want lots of leftovers and/or like fancy restaurants) then it's still a screaming deal and way cheaper even than eating in at the restaurant. I can't believe the code is still going...

ergocoder 4y ago

Western countries have such a weird problem A seemingly boring business seems unviable. For example, food is expensive, and we have to tip, but restaurant is tough business, and the servers don't make enough for living. Like why the heck is this not viable?

alar44 4y ago
Well, that's just not true. I'm in the Midwest and a server at a decent restaurant can pull in $300/night in tips.
- ergocoder 4y ago
  I have been told that we tip because servers can't make a living. If we don't tip, we are killing them. Why do we tip 20% again? It seems like we can tip 5% and the servers would still make bank.
deleted 4y ago
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gsibble 4y ago

I've had over 10,000 Uber rides, all black, some SUV since 2011. I would have no problem if they just focused on the higher end of the market where there's profit to be made. I never thought their going down market was a good idea.

hiq 4y ago
> I've had over 10,000 Uber rides, all black, some SUV since 2011 10000/11/365 = 2.5 per day, is this your main means of transportation?
- cyberlurker 4y ago
  Some people have their company/firm pay for the rides. Why not take it as the main means of transportation?
- gsibble 4y ago
  Yes, and most/many were corporate reimbursed. I lived in SF for 10 years without a car.
kilroy123 4y ago
Why so many???
- Sebguer 4y ago
  Why not, if your company's paying for it? It's just another way of extracting wealth from VCs.
  - puranjay 4y ago
    Smart. I’ve adopted the same stance - I aggressively use whatever app/service offers me steep discounts and cashbacks with no intention of ever being a long term customer once the discounts dry up.

lukifer 4y ago

The P2P transportation market is an ideal one for a workers' cooperative. The fact that Uber and Lyft are running at a loss (...for now) does not make them any less rent-seeking in their business model. https://drivers.coop/ https://drivers.coop/ https://ridefair.io/ https://ridefair.io/

tested23 4y ago
ceeplusplus 4y ago
From the jobs page of the first link for a software engineer position: "The position is salaried up to $72,000 a year depending on geography. Fixed-term contracts are available." Sorry, but you're not buying competitive talent with 72k/year salary. Uber can squeeze out tons of marginal efficiencies via better routing/matching, price discrimination, and surge algorithms. Implementing those algorithms means hiring good talent, especially in ML. Having a fancy frontend is only 10% of the picture if you want drivers to have good utilization.
- endisneigh 4y ago
  > edit: and the second link advertises using Postgres, which will never scale past the size of a single US state to be fair depending on the exact implementation details you probably could do everything you need, including management using Spanner and BigTable.
- hackernewds 4y ago
  this assumes Uber can only hire silicon valley engineers. $72k is plenty money in a cheap gas/food/rent no state tax city like Dallas
  - briandear 4y ago
    $72k for Texas lol. I don’t know a single Silicon Valley quality engineer working for that anywhere in the US.

slaw 4y ago

At markets where Uber has competition. I know Brazil and Mexico. DiDi pays driver more and charges client less. So DiDi takes less cut than Uber and is still profitable.

tunesmith 4y ago

I wonder how much of this transfers to the music industry. It's much more complicated than the taxi industry, but in broad strokes, VC-subsidized companies basically undercut the combination of record publishers and musicians, setting the price and revenue-per-listen to levels much lower than they would have been without subsidization. But it's also been happening for longer, so I think that it's more like as-if all the taxi drivers had already been driven out of the business and the taxis junked. With taxis, you know if there are no rides available, but with music, you don't really realize all the great music that isn't being written.

matthewdgreen 4y ago
> but with music, you don't really realize all the great music that isn't being written. Musicians have long complained that their share of record sales was negligible in the old system, at least until they became large and established acts. The money (such as it is) has always been in touring and merchandise.

rossdavidh 4y ago

Here's my question: how much will this hurt AWS? Oh, Uber and Lyft alone won't, of course, even though IIRC their IPO's revealed staggering AWS bills. But, there are a lot of goofy ideas out there masquerading as companies, and the VC spigot just turned off. That spigot was pushing VC money, via a very complex system of middlemen, to AWS. If AWS has half their customers disappear, what does that do to Amazon's bottom line?

moralestapia 4y ago
>If AWS has half their customers disappear Nah, they're not even 1% of AWS. Plus AWS is profitable AF.
- hackernewds 4y ago
  if 0.01% users are 1% of their revenue, that's a huge concerning consolidation. AWS IS indeed in this situation when the full discretionary spending sector struggles. AWS might be super high margins, but it does not exist in a vacuum. AWS cross subsidization powers AMZN retail to be able to run at a <1% margin.
  - moralestapia 4y ago
    Could you elaborate? I don't seem to grasp your point. >AWS cross subsidization powers AMZN retail to be able to run at a <1% margin. I've never truly understood that number, how come they have such low margins where most of the products I see there have a 10-20% markup (at least) vs. the same product in classic "offline" retailers (costco, walmart, etc...)? "But they send it to your home", yeah but they charge you for that too.
    - Spivak 4y ago
      Because in my area Amazon (including amortized cost of prime) is always cheaper and this includes wholesale clubs like Costco and GFS. Like if you need something right now the usual story is to go to a physical store and have them price match Amazon for a 10-30% discount. If I could save money by not shopping on Amazon it would be a no-brainer but it isn’t. Like I’m paying less for the conscience of having it shipped to me.

dang 4y ago

Url changed from https://www.vice.com/en/article/m7vmpb/uber-and-lyft-are-out-of-ideas-jacking-up-prices-in-desperation-for-profit https://www.vice.com/en/article/m7vmpb/uber-and-lyft-are-out..., which points to this.

neonate 4y ago

https://archive.ph/bt3bA https://archive.ph/bt3bA

black_13 4y ago

1vuio0pswjnm7 4y ago

25. Uber and Lyft Are Out of Ideas, Jacking Up Prices in Desperation for Profit (vice.com) 127 points by elsewhen 2 hours ago | flag | hide | 179 comments Above is what I saw on the HN front page minutes ago. Then I started reading the comments thread and suddenly the submitted article has changed. It is now pointing to WSJ instead of VICE. Looks like the original VICE article has even been scrubbed from HN entirely. https://news.ycombinator.com/from?site=vice.com https://news.ycombinator.com/from?site=vice.com Below is the original article. https://www.vice.com/en/article/m7vmpb/uber-and-lyft-are-out-of-ideas-jacking-up-prices-in-desperation-for-profit https://www.vice.com/en/article/m7vmpb/uber-and-lyft-are-out...

beeboop 4y ago
weird
B1FF_PSUVM 4y ago
"[...] eventually figure something out that will make such taxi rides profitable despite the huge corporate structure of well-paid executives and engineers, a thing traditional taxi companies with already razor-thin margins didn’t have." There we go, the punch ... "[...] a sensible business with an obvious if limited market and profit potential. It is also an idea that has already existed, once run by a plucky startup that focused exclusively on Black Car services from experienced, fully licensed and insured drivers paid a living wage. You may have heard of it. It was called Uber." ... and the knockout.
deleted 4y ago
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pvg 4y ago
The WSJ article is the original source which is what the guidelines ask people to post.
radley 4y ago
That's because the Vice article talks about the WSJ article. Often, HN moderators will point to the original source, particularly when the following article tends to be click-baity.

FunnyBadger 4y ago

I can proudly say that I've NEVER ONCE used these NeoSlavery services and never will.

outside1234 4y ago

Uber is just a dumpster fire. I scheduled an airport ride with them and each driver continuously just kept canceling it when they saw where it was going. Can't imagine how bad it is for someone going to a lower level neighborhood. Can't count on it anymore - going back to manually calling taxis.

formerkrogemp 4y ago

I love threads like this. It assured me of job security in accounting y'all. Thanks for giving me confidence in strange quarters.

nr2x 4y ago

“I’m not loyal,” said Sergio Avedian, who has driven for seven apps, including Uber and Lyft, and writes about his experience on The RideShare Guy blog for drivers. “Nobody is loyal.”

faangiq 4y ago

Uber and Lyft already dumped their bags on your 401k.

slotrans 4y ago

These companies were always net value destroyers. Consumers being subsidized from the pockets of investors was nice while it lasted, but it doesn't make for a sustainable business. Once they go to zero we'll wonder how it ever even appeared to make sense.

puranjay 4y ago
Look at initial funding rounds of a hot new startup these days. Especially in areas like web3. There will often be participation from dozens of VCs and angels, mostly random names and funds that came up a couple of years ago. There is really way too much cheap and dumb money sloshing around the tech industry. Money that cheap can’t create long term value - it just creates zombie companies and bad operational habits.

throw__away7391 4y ago

There's a talk a couple years old now by an Uber engineer called something like "what I wish I knew before scaling to 10k microservices", I haven't watched it in a while but when I saw it I remember thinking "these people are absolutely insane". I've since heard some crazy stories about things like new services being built because people would rather build a new service than talk to the devs that owned the existing one. I don't know if this is true or not or how widespread this was, but the impression I get is that Uber has massively over-built in an effort to look more like a "tech" company rather than a "taxi" company to investors. We have a couple of local companies in NY with their own ride-sharing apps. They aren't as polished as Uber, but they do work and the companies that built them have about 1% the staff of Uber.

sokoloff 4y ago
If Uber is covering 200x the market globally as a local NY company that has 1% the staff, it seems like Uber is more efficient on a sales/employee basis. I doubt NY is 1% of the phone-hailed taxi market globally.
- throw__away7391 4y ago
  Well sure...but the thing about software that's different from say taxis or commercial real estate is that once you build a product the marginal cost to scale it up is close to zero. This is what drives the valuation multipliers of growing tech companies. If your software requires 10x the engineers to support 10x the usage I'd say such valuations are not justified.
  - monocasa 4y ago
    Particularly something like Uber where there's a natural sharding that can happen at about the scale a regular taxi business would service anyway. There's some overhead in when payment methods start changing, and complying with local laws in a new metro, but it's pretty damn close pure geo sharding.
- sbierwagen 4y ago

DeathArrow 4y ago

I don't use Uber. In my country we have a taxi app which can be used by any taxi driver. So I do have the benefits of Uber - using an app, having a larger pool of drivers to pick from, paying the ride through the app, without any of the downsides of using Uber. The taxi drivers follow local regulations, they have the proper permit to transport people (this requires checking), I don't see ridicoluos price surges and price hikes at rush hours, taxi companies don't evade local taxes like Uber does, the money remain in the local economy, drivers have wages, social insurance, health insurance and pension funds.

DeathArrow 4y ago

After Uber and Lyft will fall, I can see a better model coming up. An open source base for a riding/taxi app for which local companies can add their own modules for billing to comply with local regulations. It would be the WordPress of ride sharing / taxi apps.

puranjay 4y ago

Here in India, its increasingly starting to feel that both Ola and Uber are slowly abandoning the market. Service quality has gone down drastically and Ola seems more interested in making (unsafe) electric scooters In their heyday, you’d drive around and find that 30-40% of cars on the road were Uber/Ola taxis (cabs here have different colored number plates). Now, its around 5-10%

kkrbalam 4y ago

In third world countries like India, Uber and Lyft cannot compete with it’s street smart drives. Drivers call you and ask you to cancel the trip and pay them in cash to take you to the destination. They use Uber/Lyft marketing, tracking, and status but give zero dollars in revenue back.

kkrbalam 4y ago
I have a first hand experience of this, not hypothetical.