8 ms·

Uber Tests 30% Fee, Its Highest Yet

56 points by claywm 11y ago

shalmanese 11y ago
The real meat of the story is tucked towards the end of the article. Both Uber and Lyft would like to lock drivers exclusively to one service and not have them constantly price compare. Right now, basically every driver has both apps open which makes the market almost perfectly competitive with no opportunity to extract monopoly rents. However, Uber and Lyft are also deathly afraid of any move to classify workers as employees rather than contractors and one of the key tests is whether the worker is free to set their schedules and working relationships. The 30% rate is largely illusory, they're not expecting a large chunk of their workforce to pay it. Rather, it's to get them committed to Uber over Lyft while trying to avoid more onerous regulation.
- rtpg 11y ago
  Only 2 major sellers does not make a market perfectly competitive by any stretch of the imagination, but I digress. The classification point is interesting though. If there's forced lock-in to only Uber or Lyft, then I can't see there not being mass lawsuits about misclassification of workers. The status quo is already almost 50/50 in terms of the IRS classification checklist.
  - netcan 11y ago
    Perfect only exists in models. Also, you might think of it as thousands of sellers but only two buyers. In any case, competitiveness has to do with more than the number of actors. Switching costs are pretty low and information is very available. That counts for a good amount. Two buyers/sellers can be still create a competitive market in the right circumstances, with collusion being the biggest danger. Also, drivers still have the option of getting business in other ways. Generally though I agree that the market needs more players, for the employee vs sole trader debate and for competitiveness reasons.
    - eevilspock 11y ago
      > Also, you might think of it as thousands of sellers but only two buyers. The relevant terms are Oligopsony and Monopsony. https://en.wikipedia.org/wiki/Oligopsony https://en.wikipedia.org/wiki/Oligopsony
- knowaveragejoe 11y ago
  I'm confused, why would a larger cut for Uber make drivers committed to Uber over Lyft?
  - rfzabick 11y ago
    FTA: "The rate is part of a tiered fee structure, which will reward drivers by lowering the commission when they complete a certain number of rides in a week"
nlake44 11y ago
Services like Airbnb and Uber will be become commodities. There will be some service like Kayak or Expedia to find you the lowest fare in the future. These companies will have to offer an API or be undercut by competitive services. Uber and these other services better grab as much money as they can right now.
- konsptheory 11y ago
  Any predominantly Silicon-based (digital) business tends to commoditize over time and Uber or any other service is no exception.
  - nlake44 11y ago
    Yes. Nothing last forever.
  - r00fus 11y ago
    How do you explain Apple?
    - TwiztidK 11y ago
      The existence of Apple doesn't preclude the ongoing commoditization of the PC, smartphone, and tablet markets. Apple has already stopped producing servers, which are effective commodity items now.
    - konsptheory 11y ago
      Contrary to popular belief and urban myths, the market in which Apple operates is ripe for commoditization and iPod and most recently iPad sales are the best proofs now for my assertion. Forward looking, I'd be really very surprised to see Apple staying relevant in tech in the next decade as the smartphone revolution fades away and the novelty factor they enjoy or make up as well as market dominance will follow suit.
      - gress 11y ago
        The iPod and iPad markets have not commoditized.
chris_wot 11y ago
Uber can go to hell.
- victor22 11y ago
  Why is that? From my POV, it takes a Rambo-minded team to change the taxi industry. In Latin america, taxis got better (Uber) and cheaper (uberX).
  - deleted 11y ago
    [deleted]
bhouston 11y ago
Uber is only greatly cheaper during this initial period of VC-funded expansion in order to gain market share. There should be no expectation that it will remain this way after it has beaten soundly its competition and established itself.
- prostoalex 11y ago
  Its argument of lower fares bringing in more customers thus raising revenues for the drivers might play out in major markets (NY, SF, LA, DC), but doesn't seem to apply to smaller markets http://ridesharedashboard.com/2015/03/19/uber-for-the-first-time-increases-fares-in-nine-cities/ http://ridesharedashboard.com/2015/03/19/uber-for-the-first-...
  - joeguilmette 11y ago
    Here in Bangkok UberBlack is about 150% the cost of a local taxi. UberX is about 95% the cost of a local. Besides price, you'd never know the difference between an UberBlack and an UberX - both are hands down much better in every measure of quality over local taxis. I was in Budapest the other day Ubers there were about 50% the cost of local taxis, but the quality varied wildly. Some days I got a BMW driven by a guy in a suit, other days a beat up Lada with a grumpy old man who smelled. Local taxis were brand new with sharply dressed, English speaking drivers.
- feybay 11y ago
  Yep, this is an interesting pattern in a libertarian (essentially, they are ignoring laws for now) society. They will provide good service and rates until they have a monopoly and can maintain it. Then, they'll abuse the customer until a viable alternative pops up.
  - sukilot 11y ago
    And this is why antitrust law exists.
  - dylanjermiah 11y ago
    You assume they can get to 'monopoly'(how do you define monopoly? 80% 90% 100%?). In an actual free market that will rarely, if ever happens. When has that actually occurred? (government backed cartels don't count)
lasermike026 11y ago
I just downloaded lyft. What does that tell you?
- iamdave 11y ago
  About Uber? Absolutely nothing. About you? That you choose to use a different product. Are you looking for some kind of congratulations on your grandstanding?
  - lasermike026 11y ago
    You can choose be be obtuse or you can see that people might use an alternative if they believe service is going to decline.
braythwayt 11y ago
Uber is mercilessly commoditizing drivers and squeezing every last drop of blood from their veins. As the average income falls towards, and then through the poverty line, the number of people who say that taking an Uber is a more pleasant experience than taking a taxi will dry up. Clean, well-maintained cars and polite drivers that speak English well will become rarer and rarer. This would result in a collapse of Uber, except, of course, that the company is really betting on replacing its drivers with robots. The trick is to destroy the taxi industry before that happens. Because if self-driving taxis appeared on the market tomorrow, the existing taxi companies could make a comeback.
- minot 11y ago
  > polite drivers that speak English As a very infrequent taxi rider, as long as the driver can understand where I want to go and take me there safely, why do I care what language they speak? Am I missing something here?
  - braythwayt 11y ago
    > as long as the driver can understand where I want to go and take me there safely If you read Uber's glowing reviews, people often praise the drivers for their ability to speak English well. I conclude that some people care, whether you or I think it's important or not.
    - brudgers 11y ago
      I missed that mind and I'm glad you're back.
  - cowsandmilk 11y ago
    Regardless of your feelings, much of the initial buzz around Uber was that their drivers speak English.
  - sokoloff 11y ago
    When I travel abroad, I have to admit a strong preference for taxi drivers who speak passable English. In that case, it's a functional benefit (confidence that I've communicated my destination correctly, ability to ask where an ATM or late-night restaurant is, ability to sort out a credit card/payment issue, etc). And of course, there is an element of subsurface tribalism (people like to be with people like them) that makes people prefer a hired driver who is like them, whether that's in language/accent, skin color, or any other dimension. It's not necessarily/fully racist per-se, but it's a tiny bit down that spectrum. I suspect this is at least part of Uber's appeal-you get a driver who is "more like me" and that's comforting to many (most?).
cowsandmilk 11y ago
Many businesses try to espouse "a rising tide lifts all boats" with their employees. A growing business helps not just the investors, but all employees see upside and are motivated. Uber seems to have taken the opposite tact, where a rising tide just allows them to scrape more off the top.
DanielBMarkham 11y ago
Libertarian here. I love Uber and have had nothing but good experiences with it. I also am a fan of their business model -- once a few remaining bugs are worked out. Having said that? Crap, what a freaking mess Uber is making of things. I have talked to more than one person who had an Uber driver tell them that the company continues to push very hard to control them. I guess Uber could make the case that this was in the best interest of the users. Now that they're jacking their cut? With their actions they are creating the argument that folks will make for completely destroying the open market: major players squeezing poor drivers dry, quasi-legal and highly questionable policies that try to prevent drivers from going anywhere they'd like, using the commercial momentum of a large company to dictate to all other players in the space about how things should be. And that's not even getting into the problems with personnel. Look, I'm a fan. But this trajectory is not good. Come on, guys. You can do better than this. If you continue kn this fashion, you're going to lose a lot of public support and goodwill.
zhte415 11y ago
It is interesting how Uber/Lyft et al are interested in the taxi market, or seem interested in it. China also has Uber/Lyft equivalents, but they just sell a smartphone service to taxi drivers (inexpensive) and unlicenced taxis (also available, but only after unlicensed taxis in the local area have not responded for a considerable amount of time). What China's Uber/Lyft/etc are after is micro-payments. A micro wallet to pay for services such as taxis, and them other things too. Why reclaim receipts when it is through and authorized payment channel? Is this not on the Uber et. al. game plan, or are the markets too different?

56 points by claywm 11y ago

The real meat of the story is tucked towards the end of the article. Both Uber and Lyft would like to lock drivers exclusively to one service and not have them constantly price compare. Right now, basically every driver has both apps open which makes the market almost perfectly competitive with no opportunity to extract monopoly rents. However, Uber and Lyft are also deathly afraid of any move to classify workers as employees rather than contractors and one of the key tests is whether the worker is free to set their schedules and working relationships. The 30% rate is largely illusory, they're not expecting a large chunk of their workforce to pay it. Rather, it's to get them committed to Uber over Lyft while trying to avoid more onerous regulation.

rtpg 11y ago
Only 2 major sellers does not make a market perfectly competitive by any stretch of the imagination, but I digress. The classification point is interesting though. If there's forced lock-in to only Uber or Lyft, then I can't see there not being mass lawsuits about misclassification of workers. The status quo is already almost 50/50 in terms of the IRS classification checklist.
- netcan 11y ago
  Perfect only exists in models. Also, you might think of it as thousands of sellers but only two buyers. In any case, competitiveness has to do with more than the number of actors. Switching costs are pretty low and information is very available. That counts for a good amount. Two buyers/sellers can be still create a competitive market in the right circumstances, with collusion being the biggest danger. Also, drivers still have the option of getting business in other ways. Generally though I agree that the market needs more players, for the employee vs sole trader debate and for competitiveness reasons.
  - eevilspock 11y ago
    > Also, you might think of it as thousands of sellers but only two buyers. The relevant terms are Oligopsony and Monopsony. https://en.wikipedia.org/wiki/Oligopsony https://en.wikipedia.org/wiki/Oligopsony
knowaveragejoe 11y ago
I'm confused, why would a larger cut for Uber make drivers committed to Uber over Lyft?
- rfzabick 11y ago
  FTA: "The rate is part of a tiered fee structure, which will reward drivers by lowering the commission when they complete a certain number of rides in a week"

nlake44 11y ago

Services like Airbnb and Uber will be become commodities. There will be some service like Kayak or Expedia to find you the lowest fare in the future. These companies will have to offer an API or be undercut by competitive services. Uber and these other services better grab as much money as they can right now.

konsptheory 11y ago
Any predominantly Silicon-based (digital) business tends to commoditize over time and Uber or any other service is no exception.
- nlake44 11y ago
  Yes. Nothing last forever.
- r00fus 11y ago
  How do you explain Apple?
  - TwiztidK 11y ago
    The existence of Apple doesn't preclude the ongoing commoditization of the PC, smartphone, and tablet markets. Apple has already stopped producing servers, which are effective commodity items now.
  - konsptheory 11y ago
    Contrary to popular belief and urban myths, the market in which Apple operates is ripe for commoditization and iPod and most recently iPad sales are the best proofs now for my assertion. Forward looking, I'd be really very surprised to see Apple staying relevant in tech in the next decade as the smartphone revolution fades away and the novelty factor they enjoy or make up as well as market dominance will follow suit.
    - gress 11y ago
      The iPod and iPad markets have not commoditized.

chris_wot 11y ago

Uber can go to hell.

victor22 11y ago
Why is that? From my POV, it takes a Rambo-minded team to change the taxi industry. In Latin america, taxis got better (Uber) and cheaper (uberX).
- deleted 11y ago
  [deleted]

bhouston 11y ago

Uber is only greatly cheaper during this initial period of VC-funded expansion in order to gain market share. There should be no expectation that it will remain this way after it has beaten soundly its competition and established itself.

prostoalex 11y ago
Its argument of lower fares bringing in more customers thus raising revenues for the drivers might play out in major markets (NY, SF, LA, DC), but doesn't seem to apply to smaller markets http://ridesharedashboard.com/2015/03/19/uber-for-the-first-time-increases-fares-in-nine-cities/ http://ridesharedashboard.com/2015/03/19/uber-for-the-first-...
- joeguilmette 11y ago
  Here in Bangkok UberBlack is about 150% the cost of a local taxi. UberX is about 95% the cost of a local. Besides price, you'd never know the difference between an UberBlack and an UberX - both are hands down much better in every measure of quality over local taxis. I was in Budapest the other day Ubers there were about 50% the cost of local taxis, but the quality varied wildly. Some days I got a BMW driven by a guy in a suit, other days a beat up Lada with a grumpy old man who smelled. Local taxis were brand new with sharply dressed, English speaking drivers.
feybay 11y ago
Yep, this is an interesting pattern in a libertarian (essentially, they are ignoring laws for now) society. They will provide good service and rates until they have a monopoly and can maintain it. Then, they'll abuse the customer until a viable alternative pops up.
- sukilot 11y ago
  And this is why antitrust law exists.
- dylanjermiah 11y ago
  You assume they can get to 'monopoly'(how do you define monopoly? 80% 90% 100%?). In an actual free market that will rarely, if ever happens. When has that actually occurred? (government backed cartels don't count)

lasermike026 11y ago

I just downloaded lyft. What does that tell you?

iamdave 11y ago
About Uber? Absolutely nothing. About you? That you choose to use a different product. Are you looking for some kind of congratulations on your grandstanding?
- lasermike026 11y ago
  You can choose be be obtuse or you can see that people might use an alternative if they believe service is going to decline.

braythwayt 11y ago

Uber is mercilessly commoditizing drivers and squeezing every last drop of blood from their veins. As the average income falls towards, and then through the poverty line, the number of people who say that taking an Uber is a more pleasant experience than taking a taxi will dry up. Clean, well-maintained cars and polite drivers that speak English well will become rarer and rarer. This would result in a collapse of Uber, except, of course, that the company is really betting on replacing its drivers with robots. The trick is to destroy the taxi industry before that happens. Because if self-driving taxis appeared on the market tomorrow, the existing taxi companies could make a comeback.

minot 11y ago
> polite drivers that speak English As a very infrequent taxi rider, as long as the driver can understand where I want to go and take me there safely, why do I care what language they speak? Am I missing something here?
- braythwayt 11y ago
  > as long as the driver can understand where I want to go and take me there safely If you read Uber's glowing reviews, people often praise the drivers for their ability to speak English well. I conclude that some people care, whether you or I think it's important or not.
  - brudgers 11y ago
    I missed that mind and I'm glad you're back.
- cowsandmilk 11y ago
  Regardless of your feelings, much of the initial buzz around Uber was that their drivers speak English.
- sokoloff 11y ago
  When I travel abroad, I have to admit a strong preference for taxi drivers who speak passable English. In that case, it's a functional benefit (confidence that I've communicated my destination correctly, ability to ask where an ATM or late-night restaurant is, ability to sort out a credit card/payment issue, etc). And of course, there is an element of subsurface tribalism (people like to be with people like them) that makes people prefer a hired driver who is like them, whether that's in language/accent, skin color, or any other dimension. It's not necessarily/fully racist per-se, but it's a tiny bit down that spectrum. I suspect this is at least part of Uber's appeal-you get a driver who is "more like me" and that's comforting to many (most?).

cowsandmilk 11y ago

Many businesses try to espouse "a rising tide lifts all boats" with their employees. A growing business helps not just the investors, but all employees see upside and are motivated. Uber seems to have taken the opposite tact, where a rising tide just allows them to scrape more off the top.

DanielBMarkham 11y ago

Libertarian here. I love Uber and have had nothing but good experiences with it. I also am a fan of their business model -- once a few remaining bugs are worked out. Having said that? Crap, what a freaking mess Uber is making of things. I have talked to more than one person who had an Uber driver tell them that the company continues to push very hard to control them. I guess Uber could make the case that this was in the best interest of the users. Now that they're jacking their cut? With their actions they are creating the argument that folks will make for completely destroying the open market: major players squeezing poor drivers dry, quasi-legal and highly questionable policies that try to prevent drivers from going anywhere they'd like, using the commercial momentum of a large company to dictate to all other players in the space about how things should be. And that's not even getting into the problems with personnel. Look, I'm a fan. But this trajectory is not good. Come on, guys. You can do better than this. If you continue kn this fashion, you're going to lose a lot of public support and goodwill.

zhte415 11y ago

It is interesting how Uber/Lyft et al are interested in the taxi market, or seem interested in it. China also has Uber/Lyft equivalents, but they just sell a smartphone service to taxi drivers (inexpensive) and unlicenced taxis (also available, but only after unlicensed taxis in the local area have not responded for a considerable amount of time). What China's Uber/Lyft/etc are after is micro-payments. A micro wallet to pay for services such as taxis, and them other things too. Why reclaim receipts when it is through and authorized payment channel? Is this not on the Uber et. al. game plan, or are the markets too different?