6 ms·

In Search of Uber’s Unicorn

83 points by aetherson 12y ago

deleted 12y ago
[deleted]
jordanpg 12y ago
Unless I'm missing something, the claim that becoming a taxi driver can become a well-salaried, middle-class job for a significant number of people is patent nonsense. There is a reason that taxis look the way they do and are driven by the people who currently drive them, and regulations and licensing is only a small part of that. Uber might disrupt the taxi industry, maybe for the better, but once equilibrium is reached, incomes for drivers will have shifted to the right slightly, at best. It's hard for me to understand what the long play is for Uber's investors. Given the sheer volume of demand for rides, the relative ease of copying this service, and the number of cars owned by Americans, I don't see how their large revenues can be anything other than temporary. I think the investors are playing the short game.
- deleted 12y ago
  [deleted]
  - free2rhyme214 12y ago
    Exactly.
- JumpCrisscross 12y ago
  > Given the sheer volume of demand for rides, the relative ease of copying this service, and the number of cars owned by Americans, I don't see how their large revenues can be anything other than temporary. I think the investors are playing the short game. The long game is in capitalizing on (a) network effects and (b) the effects of changing technology on consumer behavior and market structure. Start with network effects. I live in New York. There are many transportation options. Like my tendency to default to a "top of my wallet" credit card, I tend to fire up Uber first. Other options are considered if Uber disappoints. It seldom does; Uber remains at the top of my "stack". This leads to me demanding several rides a day more from Uber than from its competitors. That, in turn, makes Uber marginally more attractive to drivers. The technology is easy to copy, but the ecosystem is not: network effects. Let's now consider the effects of changing technology on consumer behaviour. I can walk out of the aeroport in San Francisco, Paris, Austin or Abu Dhabi and have an Uber fueled and ready. Uber has been the driving factor behind me abandoning my driver's license, and with it expectations of ever owning a car. Here's another technology: driverless cars. Driverless cars reduce fleet costs and risks, and increase scalability on the supply-side (i.e. scale is no longer limited by driver availability and quality). If I were writing Uber's strategy, everything until the availability of fully automated automobiles would be geared towards establishing a strong opening for driverless cars. The tactical phase deploys in force only after the supply side of the scaling problem has been kicked away.
  - jordanpg 12y ago
    But neither network effects nor technology will change overall number of people who need rides (demand) and the fact that driving cars is unskilled labor. If Uber pays more, taxi drivers will make rational decisions and become Uber drivers. Or Lyft drivers. Or whatever other competitor. If Uber has nicer cars or more efficient service, taxi services will adapt or go out of business. The drivers will go elsewhere, not change industries. And so on.
    - nemothekid 12y ago
      >But neither network effects nor technology will change overall number of people who need rides (demand) and the fact that driving cars is unskilled labor. This may be unrelated but I don't see how technology changes doesn't increase demand. If Uber is convenient/cheap enough that people forgo car ownership and decide to use Uber, doesn't that increase demand. Even if, in the long term, car ownership was cheaper, surely there are people who would rather spend $6 today than sign a loan for $6000.
    - JumpCrisscross 12y ago
      > But neither network effects nor technology will change overall number of people who need rides It did with me (granted, N=1). I reduced my own driving to zero and replaced it mostly with Uber. That isn't just a shift in my quantity of rides demanded, it's a shift in my demand curve. > driving cars is unskilled labor I would not have given up driving if the alternative were yellow cabs. New York taxi drivers are not knowledgeable about routes. Further, it is not uncommon for a trip to end with a debate over whether the credit card reader works. I will pay extra for even a minimally professional Uber driver over an unprofessional yellow taxi. The correlation between driver skill and rider experience is one of the problems Uber is running into when it considers scaling. That limitation is one that would be mitigated by driverless cars. > The drivers will go elsewhere, not find other jobs Network effects limit the viability of alternatives: there will be less demand on those platforms. As mentioned above, I do not believe most yellow taxi drivers would do well as Uber drivers–the supply is not fungible.
      - 12y ago
- tptacek 12y ago
  The long game as I understand it is the idea that Uber is building out a platform for real-time mobile logistics, and that transportation is the simplest and most broadly compelling example of something that would run on that platform.
- ylem 12y ago
  I have seen some taxi companies trying to add convenience--for example, I tried using TaxiMagic when I was in Denver for a conference. When it worked, it was great! I could see the car on the map as it arrived...But, the next time, I tried it during a mild snowstorm and the cab never arrived. So, I gave up on using them--but I imagine that with time, traditional cab companies will have more reliable apps. So, where will that leave Uber? I imagine that there must be a floor to what can be charged such that a driver is willing to work for the service and such that Uber can earn a profit. So, let's imagine that the market segments and that Uber wins say 80% of the market and the rest is left between competitors (I say imagine this, because as someone mentioned, there is a STRONG inertia effect. If I already have a taxi app with my information in it, then unless the price/service advantage is large, then I'm unlikely to change.). I imagine that one area that Uber will still maintain an advantage is that they will have a pretty good map in large cities of the traffic patterns (based on tracking of cabs). I imagine that that routing information could be valuable to delivery services in general. While large players like Google, Verizon, UPS, and such already have such data, there must be smaller players for whom it would be useful. Cities themselves might find it useful for traffic planning. Also, on a scarier note, Uber knows the route that its customers take. If it can link that data to demographics, then that might have some value for advertising along given routes, commercial real estate, etc.
- bernardom 12y ago
  > Given the sheer volume of demand for rides, the relative ease of copying this service, and the number of cars owned by Americans, I don't see how their large revenues can be anything other than temporary. I think part of it is a bet that individual car ownership will decrease with technology, which I think is a great bet. Not to say that investing in Uber is the best way to bet on that.
parfe 12y ago
>Median uberX Small Business Income Per Year: $90,766 (NYC); $74,191 (SF) http://blog.uber.com/uberimpact http://blog.uber.com/uberimpact Is it pretty much accepted that Uber is outright lying here? Does anyone believe there is a driver out there banking $100,000 driving a taxi? I know the company is shady but hoping they can generate enough new blood to compensate for burnout of drivers chasing the dream seems abusive.
- coldcode 12y ago
  Plus income != profit. If you buy a car and gas and insurance and maintenance and then Uber cuts the price, you might not make much at all out of that.
- aetherson 12y ago
  Well, the article claims that Uber has been unable to produce even one driver making $90,000 in NYC. Given that it's supposedly the median, they should have hundreds or thousands of drivers making it. It certainly seems damning.
- abakker 12y ago
  I have no idea how they arrive at that number. I think I read somewhere that its a hypothetical rate, assuming someone worked a given number of hours. Or else the "Data Driven" company doesn't know what the difference between Median and Maximum are? On another note, I've met quite a few UberX drivers who have financed their cars. That level of fixed costs make someone significantly less able to absorb any price cuts. Finally, what is the really Price Elasticity of Demand here? Even when the fares are at surge levels of 2x, how does often does that deter people? Sure, if its 8 blocks, I might walk it, but at a certain threshold (which I assume is the best revenue anyway) the only other alternative is some other mode of service with an almost equally high cost. My guess is that their claim that lower fares = greater ridership has a much lower coefficient than they let on.
  - aetherson 12y ago
    I think that to a large degree, Uber is competing not against taxis/other ride shares, but against "taking my own car." Most Americans -- even urban ones -- have the ability to drive themselves. And at that point you aren't competing against a firm other cost, but against a squishy composite of "parking cost + annoyance of driving myself + value of being able to drink without worrying about driving home."
shiftpgdn 12y ago
Do drivers collect the additional income during surge pricing or does the delta simply line uber's pockets? It seems like you could game the system by simply only driving during surge pricing.
- dnissley 12y ago
  I think that's the point. During times when there is a higher demand, they want to provide extra incentive for drivers to be out there. That way the supply of drivers doesn't just dry up instantly because of the swell in demand.
- baddox 12y ago
  The supposed purpose of surge pricing is to get more drivers on the street, so that implies that the drivers see some portion of the extra payment.
  - aetherson 12y ago
    It's the same 80/20 split as usual. If your fare is $11 including a $1 "safety fee," then drivers see $8. If you're in x2.0 surge and so your fare is $21, drivers see $16. For UberX.
- mmoche 12y ago
  They do, marginally. Uber takes their percentage cut on whatever the fare is at the time, surge or not.
- melvinmt 12y ago
  "It seems like you could game the system by simply only driving during surge pricing." The more drivers stay at home, the more there is surge pricing. The more drivers drive, the less there is surge pricing. Such is the game of equilibrium :)
pshin45 12y ago
This is not based on any kind of deep analysis whatsoever, but I'm starting to get the same vibe from Uber as I got from Groupon several years ago. Groupon's promise to local business owners was that offering a Groupon deal was an easy way to attract new long-term customers en masse, despite the sizable up-front loss. History showed that that did not happen for many businesses who used Groupon. Similarly, so much of Uber's marketing is targeted towards the supply side (i.e. drivers) and the promise of making more than they could at any other available job, with "flexible hours" and other dubious perks. This is just the latest article to show that that is not the case. Groupon's and Uber's business both depend on acquiring and retaining the best local businesses and drivers respectively, and as these kinds of stories keep coming to light, I wonder whether Uber will be able to retain all the drivers they acquire. Lyft has focused from the start on making their drivers happy, which is a smart way to differentiate from Uber's mercenary mindset, but I also wonder if that is enough to really differentiate itself in the eyes of drivers, at least enough to make Uber really worry. In all honesty, I am rooting for someone to beat out Uber. When I first learned about them about 2 years ago, I marveled at their business model innovation and their ability to execute. But everything I read (and personally experience) about Uber tells me that they are becoming the new Investment Bank, both philosophically and culturally.
- xorcist 12y ago
  > offering a Groupon deal was an easy way to attract new long-term customers en masse What does that even mean, at scale? If it is a money printing press for everyone involved, you have to postulate either that the entire market grows rapidly (for "local businesses", no matter what they do, in this case) or you've (at best!) created a middleman to tax all transactions in the system.
  - acchow 12y ago
    You bring up a fundamental difference between Groupon and Uber. Car riding services are actually increasing the size of the taxi riding market.
    - toomuchtodo 12y ago
jessejhernandez 12y ago
Really cool article I found it pretty informative. I think the Uber/On-Demand Taxi Service was a revolutionary idea but the question is how successful will it be in the long term, and how much power does uber truly have over controlling the price? I think they've taken a risky route and may be susceptible to failure without some type of change.
foobarqux 12y ago
Why wasn't this story deduped? https://news.ycombinator.com/item?id=8519585 https://news.ycombinator.com/item?id=8519585
bbd 12y ago
We at Sherpa has collected around 1M trips from Uber and Lyft. The average hourly rate of Uber driver is around $15 -- varies among cities. If you work 8 hours a day for 365 days, you will earn around $43,800. Of course, if you drive for 24 hours a day, you will earn as much as $131,400.

83 points by aetherson 12y ago

deleted 12y ago

[deleted]

Unless I'm missing something, the claim that becoming a taxi driver can become a well-salaried, middle-class job for a significant number of people is patent nonsense. There is a reason that taxis look the way they do and are driven by the people who currently drive them, and regulations and licensing is only a small part of that. Uber might disrupt the taxi industry, maybe for the better, but once equilibrium is reached, incomes for drivers will have shifted to the right slightly, at best. It's hard for me to understand what the long play is for Uber's investors. Given the sheer volume of demand for rides, the relative ease of copying this service, and the number of cars owned by Americans, I don't see how their large revenues can be anything other than temporary. I think the investors are playing the short game.

deleted 12y ago
[deleted]
- free2rhyme214 12y ago
  Exactly.
JumpCrisscross 12y ago
> Given the sheer volume of demand for rides, the relative ease of copying this service, and the number of cars owned by Americans, I don't see how their large revenues can be anything other than temporary. I think the investors are playing the short game. The long game is in capitalizing on (a) network effects and (b) the effects of changing technology on consumer behavior and market structure. Start with network effects. I live in New York. There are many transportation options. Like my tendency to default to a "top of my wallet" credit card, I tend to fire up Uber first. Other options are considered if Uber disappoints. It seldom does; Uber remains at the top of my "stack". This leads to me demanding several rides a day more from Uber than from its competitors. That, in turn, makes Uber marginally more attractive to drivers. The technology is easy to copy, but the ecosystem is not: network effects. Let's now consider the effects of changing technology on consumer behaviour. I can walk out of the aeroport in San Francisco, Paris, Austin or Abu Dhabi and have an Uber fueled and ready. Uber has been the driving factor behind me abandoning my driver's license, and with it expectations of ever owning a car. Here's another technology: driverless cars. Driverless cars reduce fleet costs and risks, and increase scalability on the supply-side (i.e. scale is no longer limited by driver availability and quality). If I were writing Uber's strategy, everything until the availability of fully automated automobiles would be geared towards establishing a strong opening for driverless cars. The tactical phase deploys in force only after the supply side of the scaling problem has been kicked away.
- jordanpg 12y ago
  But neither network effects nor technology will change overall number of people who need rides (demand) and the fact that driving cars is unskilled labor. If Uber pays more, taxi drivers will make rational decisions and become Uber drivers. Or Lyft drivers. Or whatever other competitor. If Uber has nicer cars or more efficient service, taxi services will adapt or go out of business. The drivers will go elsewhere, not change industries. And so on.
  - nemothekid 12y ago
    >But neither network effects nor technology will change overall number of people who need rides (demand) and the fact that driving cars is unskilled labor. This may be unrelated but I don't see how technology changes doesn't increase demand. If Uber is convenient/cheap enough that people forgo car ownership and decide to use Uber, doesn't that increase demand. Even if, in the long term, car ownership was cheaper, surely there are people who would rather spend $6 today than sign a loan for $6000.
  - JumpCrisscross 12y ago
    > But neither network effects nor technology will change overall number of people who need rides It did with me (granted, N=1). I reduced my own driving to zero and replaced it mostly with Uber. That isn't just a shift in my quantity of rides demanded, it's a shift in my demand curve. > driving cars is unskilled labor I would not have given up driving if the alternative were yellow cabs. New York taxi drivers are not knowledgeable about routes. Further, it is not uncommon for a trip to end with a debate over whether the credit card reader works. I will pay extra for even a minimally professional Uber driver over an unprofessional yellow taxi. The correlation between driver skill and rider experience is one of the problems Uber is running into when it considers scaling. That limitation is one that would be mitigated by driverless cars. > The drivers will go elsewhere, not find other jobs Network effects limit the viability of alternatives: there will be less demand on those platforms. As mentioned above, I do not believe most yellow taxi drivers would do well as Uber drivers–the supply is not fungible.
    - 12y ago
tptacek 12y ago
The long game as I understand it is the idea that Uber is building out a platform for real-time mobile logistics, and that transportation is the simplest and most broadly compelling example of something that would run on that platform.
ylem 12y ago
I have seen some taxi companies trying to add convenience--for example, I tried using TaxiMagic when I was in Denver for a conference. When it worked, it was great! I could see the car on the map as it arrived...But, the next time, I tried it during a mild snowstorm and the cab never arrived. So, I gave up on using them--but I imagine that with time, traditional cab companies will have more reliable apps. So, where will that leave Uber? I imagine that there must be a floor to what can be charged such that a driver is willing to work for the service and such that Uber can earn a profit. So, let's imagine that the market segments and that Uber wins say 80% of the market and the rest is left between competitors (I say imagine this, because as someone mentioned, there is a STRONG inertia effect. If I already have a taxi app with my information in it, then unless the price/service advantage is large, then I'm unlikely to change.). I imagine that one area that Uber will still maintain an advantage is that they will have a pretty good map in large cities of the traffic patterns (based on tracking of cabs). I imagine that that routing information could be valuable to delivery services in general. While large players like Google, Verizon, UPS, and such already have such data, there must be smaller players for whom it would be useful. Cities themselves might find it useful for traffic planning. Also, on a scarier note, Uber knows the route that its customers take. If it can link that data to demographics, then that might have some value for advertising along given routes, commercial real estate, etc.
bernardom 12y ago
> Given the sheer volume of demand for rides, the relative ease of copying this service, and the number of cars owned by Americans, I don't see how their large revenues can be anything other than temporary. I think part of it is a bet that individual car ownership will decrease with technology, which I think is a great bet. Not to say that investing in Uber is the best way to bet on that.

parfe 12y ago

>Median uberX Small Business Income Per Year: $90,766 (NYC); $74,191 (SF) http://blog.uber.com/uberimpact http://blog.uber.com/uberimpact Is it pretty much accepted that Uber is outright lying here? Does anyone believe there is a driver out there banking $100,000 driving a taxi? I know the company is shady but hoping they can generate enough new blood to compensate for burnout of drivers chasing the dream seems abusive.

coldcode 12y ago
Plus income != profit. If you buy a car and gas and insurance and maintenance and then Uber cuts the price, you might not make much at all out of that.
aetherson 12y ago
Well, the article claims that Uber has been unable to produce even one driver making $90,000 in NYC. Given that it's supposedly the median, they should have hundreds or thousands of drivers making it. It certainly seems damning.
abakker 12y ago
I have no idea how they arrive at that number. I think I read somewhere that its a hypothetical rate, assuming someone worked a given number of hours. Or else the "Data Driven" company doesn't know what the difference between Median and Maximum are? On another note, I've met quite a few UberX drivers who have financed their cars. That level of fixed costs make someone significantly less able to absorb any price cuts. Finally, what is the really Price Elasticity of Demand here? Even when the fares are at surge levels of 2x, how does often does that deter people? Sure, if its 8 blocks, I might walk it, but at a certain threshold (which I assume is the best revenue anyway) the only other alternative is some other mode of service with an almost equally high cost. My guess is that their claim that lower fares = greater ridership has a much lower coefficient than they let on.
- aetherson 12y ago
  I think that to a large degree, Uber is competing not against taxis/other ride shares, but against "taking my own car." Most Americans -- even urban ones -- have the ability to drive themselves. And at that point you aren't competing against a firm other cost, but against a squishy composite of "parking cost + annoyance of driving myself + value of being able to drink without worrying about driving home."

shiftpgdn 12y ago

Do drivers collect the additional income during surge pricing or does the delta simply line uber's pockets? It seems like you could game the system by simply only driving during surge pricing.

dnissley 12y ago
I think that's the point. During times when there is a higher demand, they want to provide extra incentive for drivers to be out there. That way the supply of drivers doesn't just dry up instantly because of the swell in demand.
baddox 12y ago
The supposed purpose of surge pricing is to get more drivers on the street, so that implies that the drivers see some portion of the extra payment.
- aetherson 12y ago
  It's the same 80/20 split as usual. If your fare is $11 including a $1 "safety fee," then drivers see $8. If you're in x2.0 surge and so your fare is $21, drivers see $16. For UberX.
mmoche 12y ago
They do, marginally. Uber takes their percentage cut on whatever the fare is at the time, surge or not.
melvinmt 12y ago
"It seems like you could game the system by simply only driving during surge pricing." The more drivers stay at home, the more there is surge pricing. The more drivers drive, the less there is surge pricing. Such is the game of equilibrium :)

pshin45 12y ago

This is not based on any kind of deep analysis whatsoever, but I'm starting to get the same vibe from Uber as I got from Groupon several years ago. Groupon's promise to local business owners was that offering a Groupon deal was an easy way to attract new long-term customers en masse, despite the sizable up-front loss. History showed that that did not happen for many businesses who used Groupon. Similarly, so much of Uber's marketing is targeted towards the supply side (i.e. drivers) and the promise of making more than they could at any other available job, with "flexible hours" and other dubious perks. This is just the latest article to show that that is not the case. Groupon's and Uber's business both depend on acquiring and retaining the best local businesses and drivers respectively, and as these kinds of stories keep coming to light, I wonder whether Uber will be able to retain all the drivers they acquire. Lyft has focused from the start on making their drivers happy, which is a smart way to differentiate from Uber's mercenary mindset, but I also wonder if that is enough to really differentiate itself in the eyes of drivers, at least enough to make Uber really worry. In all honesty, I am rooting for someone to beat out Uber. When I first learned about them about 2 years ago, I marveled at their business model innovation and their ability to execute. But everything I read (and personally experience) about Uber tells me that they are becoming the new Investment Bank, both philosophically and culturally.

xorcist 12y ago
> offering a Groupon deal was an easy way to attract new long-term customers en masse What does that even mean, at scale? If it is a money printing press for everyone involved, you have to postulate either that the entire market grows rapidly (for "local businesses", no matter what they do, in this case) or you've (at best!) created a middleman to tax all transactions in the system.
- acchow 12y ago
  You bring up a fundamental difference between Groupon and Uber. Car riding services are actually increasing the size of the taxi riding market.
  - toomuchtodo 12y ago

jessejhernandez 12y ago

Really cool article I found it pretty informative. I think the Uber/On-Demand Taxi Service was a revolutionary idea but the question is how successful will it be in the long term, and how much power does uber truly have over controlling the price? I think they've taken a risky route and may be susceptible to failure without some type of change.

foobarqux 12y ago

Why wasn't this story deduped? https://news.ycombinator.com/item?id=8519585 https://news.ycombinator.com/item?id=8519585

bbd 12y ago

We at Sherpa has collected around 1M trips from Uber and Lyft. The average hourly rate of Uber driver is around $15 -- varies among cities. If you work 8 hours a day for 365 days, you will earn around $43,800. Of course, if you drive for 24 hours a day, you will earn as much as $131,400.