4 ms·

It would be profitable, but assuming the situation your describe, it would primarily come down to (1) driver churn and (2) costs associated with any adverse leg

It would be profitable, but assuming the situation your describe, it would primarily come down to (1) driver churn and (2) costs associated with any adverse legal rulings/judgments. 1. Cost of recruiting drivers is relatively high - probably around $50-$100 per driver. This cost is composed of background check (probably $10-20), the ad that got them in the door ($5-10 for that click), the overhead cost of recruiting staff and onboarding staff and 1099 paperwork ($2-$5). Let's be nice and say $50 is the cost. Again, being generous, if the average ride is $20, and Uber takes 20% ($4), that means that each driver needs to perform 13 rides for Uber to make their $$ back. I don't know for sure, but anecdotally most drivers I've ridden with likely exceeded this, so I'd say they are good on this front. 2. In reading the recent CA administrative decision, the main damages were for reimbursement for mileage, at $0.56 per mile. So this means that IF a state were to determine either that (a) drivers are employees or (b) drivers are not employees but some "third-option hybrid" for whom Uber still needs to reimburse miles, this would great eat into their margins and drag profitability down.

geofft 11y ago
> Cost of recruiting drivers is relatively high - probably around $50-$100 per driver. Hrm. Instead of working from first principles, we can poke at some data. Zen99 calculates that Uber seems to be spending some $1M/year on Craigslist ads for SF drivers alone [1], and as of the end of last year, they had about 16,000 drivers in SF [2]. Assuming generously that they recruited them all that year, that's about $62 on Craiglist advertising per driver, much higher than your $5-10 estimate. There are also incentives like an unconditional $500 on your first ride [3]. In NYC, Uber also offers new drivers a free defensive driving class and doctor's examination at their offices [4], because they need those to get on the road. You will not find doctors to do exams for $2-5. I would guess total driver acquisition cost, including first-trip incentives, is much more likely to be in the $1000-2000 range, at minimum. And we still haven't gotten to long-term subsidies like uberPOOL, which is what I'm really curious about. Even a $10K driver acquisition cost could maybe be sustainable if each driver lasts over a year on average, since it's a one-time cost. But it needs to pay better than taxi wages + cost of car maintenance for the driver, and at least break even for Uber, in the steady state. [1] https://tryzen99.com/blog_posts/on-demand-is-in-demand https://tryzen99.com/blog_posts/on-demand-is-in-demand [2] http://www.washingtonpost.com/blogs/wonkblog/wp/2015/01/22/now-we-know-many-drivers-uber-has-and-how-much-money-theyre-making%E2%80%8B/ http://www.washingtonpost.com/blogs/wonkblog/wp/2015/01/22/n... [3] http://www.driveubernyc.com/try http://www.driveubernyc.com/try [4] http://www.driveubernyc.com/defensive http://www.driveubernyc.com/defensive
- joshjkim 11y ago
  you = right. I was thinking on a per unit basis, but if you think on a conversion basis your $1k-$2k makes a lot of sense, even if you start with my #s - if you assume $50-$100 per driver, and that Uber actually only converts 5% (which is generous), that means you get to the $1k-$2k.

geofft 11y ago

> Cost of recruiting drivers is relatively high - probably around $50-$100 per driver. Hrm. Instead of working from first principles, we can poke at some data. Zen99 calculates that Uber seems to be spending some $1M/year on Craigslist ads for SF drivers alone [1], and as of the end of last year, they had about 16,000 drivers in SF [2]. Assuming generously that they recruited them all that year, that's about $62 on Craiglist advertising per driver, much higher than your $5-10 estimate. There are also incentives like an unconditional $500 on your first ride [3]. In NYC, Uber also offers new drivers a free defensive driving class and doctor's examination at their offices [4], because they need those to get on the road. You will not find doctors to do exams for $2-5. I would guess total driver acquisition cost, including first-trip incentives, is much more likely to be in the $1000-2000 range, at minimum. And we still haven't gotten to long-term subsidies like uberPOOL, which is what I'm really curious about. Even a $10K driver acquisition cost could maybe be sustainable if each driver lasts over a year on average, since it's a one-time cost. But it needs to pay better than taxi wages + cost of car maintenance for the driver, and at least break even for Uber, in the steady state. [1] https://tryzen99.com/blog_posts/on-demand-is-in-demand https://tryzen99.com/blog_posts/on-demand-is-in-demand [2] http://www.washingtonpost.com/blogs/wonkblog/wp/2015/01/22/now-we-know-many-drivers-uber-has-and-how-much-money-theyre-making%E2%80%8B/ http://www.washingtonpost.com/blogs/wonkblog/wp/2015/01/22/n... [3] http://www.driveubernyc.com/try http://www.driveubernyc.com/try [4] http://www.driveubernyc.com/defensive http://www.driveubernyc.com/defensive

joshjkim 11y ago
you = right. I was thinking on a per unit basis, but if you think on a conversion basis your $1k-$2k makes a lot of sense, even if you start with my #s - if you assume $50-$100 per driver, and that Uber actually only converts 5% (which is generous), that means you get to the $1k-$2k.