People here seem to think that Uber/Lyft do not have any competitive moat. I disagree. What we seem to forget is that just because a VC can burn boatloads of money to capture ridesharing market from Uber/Lyft doesn't mean that they would. From a game theoretic POV, Uber and Lyft have signaled that they're ready to fight for survival in markets they are established in. Unless as a startup founder you can demonstrate that you can achieve lower cost structures than Uber/Lyft, no VC will fund their rapid growth (small offerings will still find a niche, assuming they don't get gobbled up). Uber/Lyft do have a VCs-will-not-race-to-the-bottom-with-them moat, and tomorrow they might as well raise their prices to turn profitable. Their biggest challenge is Waymo and SDC because if a competitor as significantly lower cost structure, all bets are off.
> no VC will fund their rapid growth (small offerings will still find a niche, assuming they don't get gobbled up
And yet Grab and Didi drove Uber out of South East Asia and China, Ola is giving Uber a run for its money in India and now GoJek in turn is challenging Grab. In my recent trip to Tokyo we were mostly advised to take regular cabs Vs Uber in contrast to a year ago. That's literally half the world where they're getting out competed.
When reasoning doesn't line up with facts, there are usually flaws in the logic. One possible flaw it turns out is that well off globe trotters or even people who frequently travel across cities in a country and would love to use the same app everywhere likely form a small % of total cab trips. Majority of trips are just local trips by an area's residents. So locally, majority just goes with whoever offers better service and relevance. Cutting Price can trump over these but by going public, bottom line became a lot more important to Uber and Lyft - so this isn't likely a viable strategy. Another possible flaw is that the compute required to support this is likely commoditized and there's not likely as much competitive advantage in data.
>>When reasoning doesn't line up with facts, there are usually flaws in the logic.
I don't think there's an opposition of facts and logic here. Grab was founded in 2012 (https://www.grab.com/sg/about/), Ola in 2011 (https://www.olacabs.com/about.html), and GoJek in 2010 (https://en.wikipedia.org/wiki/Go-Jek). All of these were entrenched players in their respective markets when Uber decided to put up a fight. Uber gave the Grab and Ola's VCs no option but to double down, if they were to save their existing investments. In this race to bottom, it was Uber who blinked first. Losing SE Asia was not an existential threat to Uber, but definitely for Grab. Media likes to talk winners and losers, but Uber did end up taking 27.5% stake in Grab just to leave the market (https://techcrunch.com/2018/04/24/grab-uber-deal-southeast-a...). However, their fight in India with Ola continues. But to my initial argument - back in 2010-2012, we thought that the network effect of social networks (like Facebook) extended to ride-sharing services too creating high barriers to entry. We know now that isn't the case. Imagine how a VC would react today to a startup founder pitching a ride-sharing idea in a market where Uber/Lyft are already entrenched, given what we have learned from Lyft IPO and Uber's SEC filing. My argument may seem counterintuitive here, but I believe that the Uber/Lyft's revealed financials is what may ultimately save them. They have successfully managed to make the ride-sharing market unattractive (at least for 10x return seeking VCs).
Apart from SDCs, there might be a market for an enterant that focuses on drivers as much as the rider experience: That could really steal drivers from Uber/Ola/Grab 'cause I hear nothing but endless list of gripes from drivers about how they are treated and how helpless they are.
I'd go back to late 2000s when Nokia's and Blackberry's stranglehold on high end phone market seemed unassailable but how it was blown away in the preceding years by a more expensive product (better app store for developers, better device for the end user).
They did not get "out competed" in china, a country where competition has nothing to do with success. Likewise in Russia. Grab is the only company to out compete Uber so far.
Ola vs Uber in India is so similar in terms of experience that I literally open the first app that's on my screen.
There is no way to differentiate in this market. The only thing that would make me switch is a guarantee of a good driver, but that would just raise the costs absurdly.
There is actually -- both the companies have certain cities where they seem to have many more drivers than the other. Due to this, when I'm in Bangalore, I prefer Uber, but when in Calcutta, I prefer Ola.
Thats bs, you only need to google "china bikesharing competition" to know what it means to compete in China. Startups in China will resort to any means, legal and illegal to bring each other down. A lot of bikesharing companies went bust because people essentially competed to the point of reducing price to wipe out the other competitor.
Even if you succeed temporarily, your competitor will clone you and your technology. Its similar in USA but in China its multiplied by the population factor in a region the same area so its more intense.
The competition also permeates downwards and creates beasts like the 996.
On the contrary, China is the most competitive country in Internet industry and Uber was beaten badly by Didi.
Actually, the success of Didi,Grab,Ola etc. vs. Uber proves that in the complex e-business, as long as there is enough market space in the local area, and you can organize a good team, you can win in the competition with foreign companies. Just like Alibaba and JD beat Amazon, Meituan beat Goupon in China.
That's BS. Yandex is an incredibly strong player in Russia in the search space and Google is not outcompeting them either. It was the case way before Putin's political ambitions became relevant.
All in all, there are many reasons to blame Russia for it's government, but that's blatantly not one of them.
Also nothing stops a “low tech” competitor from skimming local price information from a larger rival and automating their matching. The pricing has to be publicized or else how else would the drivers know?
Useful points with Grab and Go-Jek. There's a neat backstory to the founders. They used to be classmates and good friends. Last month's Fortune article offered some context - if interested, it's here: http://fortune.com/longform/grab-gojek-super-apps/.
They have a deeply inferior product, fail to catch up to Grab's breakneck innovation pace.
Also, being an Indonesian company, Go-Jek has a disorganized company culture that is not conducive to competing with a lean, well-oiled machine run by Singaporeans like Grab.
I have traveled extensively in Indonesia, and have always preferred Go-Jek over Grab, and I have a feeling I share the same with the number of drivers and riders, at least in Medan, Jakarta, Bandung, Yogyakarta, and most of Java.
I also don't think being an Indonesian company has challenged Go-Jek in any way. Traveloka, Tiket.com, and Go-Jek are one of the most prominent businesses in Indonesia, and they all look like well-oiled machines.
Grabs two co-founders were born in Malaysia and the execs are from all over the world.
Both are very successful companies but from the innovation perspective Gojek is most definitely the leader. You need only look at their offering (dozens of products built in house) in comparison to everyone else outside of china. Their food business is now bigger than the ride sharing for example, and their rollout of this was exceptional. Light-years ahead strategy wise of the rest at the time (grab/uber).
The only thing I can think of that Grab has executed on better is international expansion and the initial grab-car service was at one stage far more popular than go-car.
SDC as an acronym for self driving car seems to have become a 'thing' on HN very recently, I never noticed it until just the recent past. It's not unreasonable for someone to be ignorant of it.
Startups won't win this. Manufacturers will. They have brand, cars, and soon can license the self driving tech. How hard is it for a billion dollar company to roll out a ride hailing app? Think about where that leaves Uber. They have to buy the cars from said manufacturers. This already gives them a significantly larger cost base and let's face it, while they also have a brand it is no more powerful a draw than Mercedes or Toyota.
My personal guess is that "soon" for fully autonomous cars is not any reasonable definition of soon. Even if you accept the tech is close to okay in Arizona (I wouldn't), think about the weather and driving conditions in most of the worlds' markets for these global companies.
I agree. The other day I was driving and thinking about this, and I started noticing "how many times during this drive have I looked another human (driver or pedestrian) in the eyes in order to determine their intentions?" It was a significant number even in a 15 minute drive.
I was still thinking about it during my bike ride later in the day, and I noticed that more than a dozen times I exchanged looks and nods with drivers to ensure they had seen me and that it was safe to do something.
No self driving car is able to look a human in the eyes and determine their likely course of action. And it most certainly won't be able to signal to the human a message as complex as "I have understood your intentions".
I got bear-ish on self-driving cars when I realized that, in order to be able to drive in Bucharest, you _have to_ break the (letter of the) law fairly often[1]. Knowing when to do so requires "common sense" which is a notoriously difficult nut to crack - computer vision may be advanced enough, but it's simply not enough. I still think it will evolve in time and reach mass-market, it's just that it will take lots of time - it's not something that will have a purely-technological solution, it will likely require legal and social changes too, and those take time.
[1] E.g. Car stopped in front; do you cross the continuous line to go to the opposite lane, or just wait a bit? Or merging from a side street into a busy main road.... some drivers will let you, but which ones? If you wait until "it's safe", well, good luck.
This is another good point. There's a hardware store near to where I live where it's literally illegal (if you observe the signs) to enter or exit the parking lot of said store. Everyone just understands that someone forgot to remove a road sign saying "buses only, cars forbidden" for the lane where you enter this parking lot. But how would a computer understand this?
I’m not sure that figuring out when to break the law in your example is any harder then figuring out when turning left is legal and safe on unprotected intersection. This is not to say that it's easy, but autonomous vehicles need to solve problems exactly like that one on a regular basis.
Yes - and I was saying that I realized that solving these problems require the elusive "common sense". If we get that figured out, even just roughly, I think we'll break the barrier of general-purpose AI. I'm not sure we're close to doing that... But, maybe I'm wrong.
This argument always seems a little strange to me. I think I can count on one hand the number of times, in 14 years, I've ever made eye contact with another driver while driving, or used some kind of hand signals. And in all of those cases, if the signaling had failed, the situation would have resolved itself just fine in less than a minute anyway. Most of the time, I can't even see the other drivers through reflections on their windshields. Sure, sometimes I'll stick an arm out the window to wave my thanks when somebody lets me merge, but that's not a critical communication.
50% of the worlds population live in cities. Car ownership is more expensive and has less utility in cities too. I'm also certain that we will start retrofitting AV enabling tech into our city streets soon to speed up the process. AV's will be "good enough" for many use cases very soon.
mm. so I don't think driving in cities is easier - I mean, it's certainly harder for a human to drive in a city; I don't see any reason why it would be easier for a machine to drive in a city than in the country.
Controlled environment? well-maintained roads? this doesn't sound like any city I've spent much time in.
I'm thinking like 101 seems reasonably straightforward, modulo the occasional construction, but once you get into san Francisco, there's a lot of dodging pedestrians, cyclists, skateboarders, shopping carts, stopped delivery vehicles, etc... It doesn't look nearly as controlled, to my eyes, as 101 does further out.
Here's a thought experiment: how hard is it for a billion dollar company to roll out a simple crud app? Easy, right? Now name a single major bank with an app that is better than "barely usable". Which is easier? A crud app or a ride hailing app?
All my banks have good apps on par with the fintech startup apps I use (and actually I trust them more because they aren't moving fast and breaking things).
Same for me too - my incumbent bank's app is mostly comparable with the latest hot fintech's. The latter has nothing but a slightly more polished visual look, and that's not enough for me to trust them with my paycheck.
I use a regional bank and their app is only usable for minor day to day things. For that it's fine. But I can't do anything "serious" in it: checking account transactions are limited to only the last 2 weeks; I can't search transactions for a specific amount or merchant or date; I can't view past payments I've made for bills, etc.
For any of the above, I have to use the desktop site. These are not technical limitations either and should all be in the app if we want full parity with mobile.
Which national US bank or investment company has an app you find “barely usable”? The only one that comes to mind is Vanguard and that fits my mental model they’ve cultivated of keeping costs low on extraneous things so in a perverse way is a positive.
Chase's website is pretty crappy. I regularly have to login twice, or check the developer console to debug why I get infinite loading spinners. This is with a stock and up-to-date Chrome install on a good network.
This is one of the more ill-informed tweets. How hard is it to roll out a ride hailing up? Borderline impossible. Especially for companies that have zero competency in service, software and marketplaces.
...which is part of why Audi bought Silvercar. This gave them a well-run service company with physical locations in most metros. And they've recently added renter pickup so it's not like this is black magic.
What's more unrealistic to think is that a move to driverless cars / less car ownership would lead to the manufacturer's rolling over.
Ubers problem is that it needs to compete locally: https://thinkgrowth.org/uber-is-going-to-0-and-benchmark-kno... . A taxi company does not need to challenge Uber globally to compete with it in any given city - because most taxi rides are from local population. This is different from AirBnB - where the customers need something that can be trusted globally.
I doubt AirBnB actually has a moat either, in practice. I think I'm using the right income - AirBnB's profit margin is something like 3.5% [0]. You don't need much of a moat to defend 3.5% profit margins. JP Morgan is sitting at around 30% [1] - that is the sort of margin that needs a bit of defense.
That aside, yeah, Uber has a negative moat; I don't see why the car drivers themselves couldn't band together to make a competing app if the mother company started to take a real cut.
so, as long as investors have appetite to lose money to buy market share? you are, of course, right.
But the business cycle goes up, and the business cycle goes down. (I mean, the general trend is upwards, but if you don't think there will be big downturns inbetween, well...)
The problem is that yes, uber and lyft have dominance for as long as they are willing to run the business for less money than anyone else; This puts a pretty hard cap on how profitable they can be.
(I mean, for an example of a competitor who might be willing to do it for very little over break-even, I've talked with several people who would be interested in setting up a competitor that was operated as a driver's cooperative. I mean, even that isn't workable when uber and lift are losing money, but it would work at profit levels that uber and lyft would consider break-even; such a cooperative could work really well as a break-even business, while investors in both uber and lyft would be super disappointed with a break-even business)
Compounding this, the ridesharing space is one that is massively price sensitive. Uber and lyft are so cheap that I've gotten rid of my car, and I use them all the time.
But if they raise their rates significantly? I'm gonna go buy a honda and drive myself; They get to duke it out for driving me around when I'm drunk, but we're talking less than 5% of my rides.
I’m skeptical about a non-profit service competing with Uber and Lyft. It would take a lot of money-losing ride subsidies to get the substantial market share required to get the necessary network effects.
I'm... not sure you'd need a lot of network effects? I mean, you need a critical mass of drivers and riders, but they can be all in a small area and you can still provide a service. I mean, for the occasional user, sure, brand recognition matters; If I'm going from a strange airport to a hotel, I'm probably going to use the brand i know.
But usually? I switch from uber to lyft on my daily commute based on saving a few bucks almost every day. (right now, Lyft has some scheme where you can buy a 30-pack of $15 off coupons for $300. But they're used every time you ride lyft, so if you want to go somewhere for less than $15, you use Uber)
I mean, 90+% of my rides are areas I ride in a lot, where it would be worth my time to put a fair bit of effort into discovery.
I think that on the driver side, there's a lot of drivers with very strong locational preferences, too; If you are in SF and try to get a ride to San Jose, my experience is that 3 out of 4 uber drivers will kick you out of the car when they find out, so I think you might be able to recruit drivers that way, too.
Sounds like Uber and Lyft are both subsidizing your rides - but for a new service to get off the ground would require even more subsidies. There’s a cost to idling and waiting for someone to come along and pay you for a ride. The higher the density of riders and drivers, the lower this cost and the less subsidy required for a given price level.
True, but I believe this is approach only works well in certain cases. For shared/pooled rides, drivers are automatically assigned a chain of rides. In these circumstances probably few drivers would bother to keep another app open that hardly ever gives them any rides. It would take major subsidies to overcome that. You would need a lot of capital, and I don’t know who’s going to provide that other than investors.
The network effects are key here because you can't have competitive ETAs without having a lot of supply density and without enough demand you can't build the supply density, so aside from the incentives you are seeing Lyft and Uber using now, there are even more subsidies to build the marketplace and you have to do that city by city and neighborhood by neighborhood in the case of larger markets like NYC. There are also heavy ops costs to get a driver through the funnel and to keep them on the platform. Not saying it couldn't be done but it is not so easy for someone to come in and take marketshare.
sure, city by city and neighborhood by neighborhood... but my point is that you have a viable business, even if you only cover one city or even one neighborhood. Most of my traffic is to work and back.
Assuming that you have cheap/open source software (a big assumption) you could even setup federation. Like you and your crew setup a co-op in one area, and get a lot of riders through personal contacts. I and my friends setup a similar drivers co-op in a nearby area, and similarly use our contacts to build up a very local critical mass.
With federation, you could set it up so that if one of my drivers went to your area, say to drop off a customer, they could optionally be put on your network, either to work there, or maybe just to get customers on your network who wanted to go to my area.
I mean, you still have the huge problems of bad behavior, but I don't think uber/lyft have really addressed those problems very well, either. I think those problems are really hard, and maybe those problems would be easier to solve with a bunch of smaller but federated companies than with two large companies? Maybe not. I don't know.
I'm just saying, I think a lot of the critical mass issues could be pushed off to local leaders.
They can be fought in local markets via regulation and specialization. Global brand is expensive, a long-term liability in local politics, and doesn't get them that much in local markets because it is so easy for both drivers and customers to use multiple apps.
It’s not that Uber can’t be self-sustaining. The problem is that’s not enough to justify their insane valuation.
They titillated investors with tales about autonomous vehicles leading to skyrocketing profits. But now the hype over autonomous vehicles has faded, and it seems unlikely that fully autonomous cars will be mainstream any time soon.
$100B+ for unprofitable ride shares and lukewarm burrito delivery? If you say so.
That was my reaction. I can build a moat by selling anything below cost. But it doesn't really say much about the business viability, and what happens when you raise prices. Does demand shrink, or does another competitor with money to burn undercut you until they are out of money? Or, maybe...things work out.
It just doesn't seem to prove much beyond "subsidized pricing is popular".
ie MoviePass. As soon as a unprofitable company loses its investor backing it doesn't matter if they control the majority of the market, they are still doomed.
You don't need people to make that point, Uber agrees to it too:
The personal mobility, meal delivery, and logistics industries are highly competitive, with well-established and low-cost alternatives that have been available for decades, low barriers to entry, low switching costs, and well-capitalized competitors in nearly every major geographic region. If we are unable to compete effectively in these industries, our business and financial prospects would be adversely impacted.
Hailing cabs by phone (and later on, using the non-Uber hailing services that interact directly with cabs) never worked as well for me as Uber. Takes too long for them to get there, and the incentive for them to abandon your request and pick up a fare they find on the way is too strong.
Taxis only make sense in the very small perecent of the US where you can walk outside and hail one coming down the street.
Reminds me of a story I saw (I think on reddit) where someone had booked a cab for a 5am trip to the airport, and after it didn't show up after 30 minutes they just called an uber. They hadn't taken a cab since.
I know it can be an issue on the driver side in terms of job security, but poor customer service and behaviour is weeded out much better on ridesharing apps due to how their rating and tracking systems work.
In Germany, we have two types: Funkmietwagen (kinda "callable cabs") which can't pick up someone without being called and proper taxis which both get dispatched but can also wait at taxi ranks to pick people up (or pick someone up on their way somewhere when empty).
Neither of those would abandon someone they've been dispatched to and dispatcher estimations are usually pretty accurate.
> Takes too long for them to get there, and the incentive for them to abandon your request and pick up a fare they find on the way is too strong.
The few times I've reserved a taxi for someone the estimation was accurate and the driver very friendly. Same for the company I work for, no real issues with taxis. Company wise it's often easier to just take public transport though (quickest to/from airport).
When it comes to airports, I prefer taxis. I once got a Lyft driver at the airport who did not have enough room for all our luggage. Taxis generally will, and even if they don't, there is no charge for "canceling".
I recently arrived at an airport intending to take a Lyft/Uber out of the vicinity. Tried for 10 to 15 minutes to get a ride on either platform and it would just time out. Eventually opted for a taxi, which were immediately and readily available. Surprisingly it was also 30% cheaper in the end including tip than the quoted price on Uber at the time with surge pricing without tip.
The same thing happened on my most recent arrival back home. I am probably going to simply return to taxis at my home airport for now on.
>Most people I know hate taxis. Uber can nearly raise prices to parity with cabs.
If they are willing to let their ridership fall to just above cab ridership numbers? sure.
That's the biggest problem with the market; demand is elastic. Uber's major competitor for my transportation dollars isn't lyft; it's me going out and buying a honda and driving myself. If they charged taxi prices, I'd buy a honda, and I'd use the rideshare less than 5% of the time I use it now.
In the US, correct.
In most of Western Europe a taxi is normally a very different experience from Uber X - a nice car, nice driver, great navigation and safe trip. Yes, you're paying extra, but the comfort is also very different, especially when going from airports.
I live in the UK. Can't say I agree with you. Especially because I have a mobility impairment. The Uber drivers are always more willing to help, (I'd imagine thanks to the rating system), stop exactly where needed etc.
In London - I'd say cabs are better. In Liverpool and Manchester, I'd say on par with Uber.
Didn't have experience with Assist and Access Uber cars, so you have a better view on that.
And as much as people used to hate taxis, the tide is turning to people hating Uber/Lyft more...mainly due to trying to kill passengers, pedestrians, bicyclists at a greater rate since the drivers aren't professionals and rarely know the city they're driving in.
They don't have to be outcompeted by another similar entity, though. Their pie could get eaten by lots of small local operators, or by someone like Google with a fleet of self-driving cars.
"Uber/Lyft do have a VCs-will-not-race-to-the-bottom-with-them moat, and tomorrow they might as well raise their prices to turn profitable."
That's the multi billion $ question, if they hike prices to become profitable, will customers swallow it, or jump to local alternatives. My feeling is the latter, I don't think you get economy of scale for running a taxi business, because your biggest cost is paying local drivers.
I have several apps on my phone for calling a ride. I usually pick Uber because it's cheapest, but if there is any hint of a surcharge I scan all of the apps to pick the cheapest.
- Expected to be teh largest IPO this year in the US.
- 10th largest all time
- trying to raise around $10B
- 2018 Year Ended Revenue $11.27 billion
- 2018 Year Ended Net Income $997 million
- 2017 Year End lost $4.03 billion.
- 10 billion trips in September 2018, up from 5 billion in September 2017
- Gross Bookings From Ridesharing $41.5 billion in 2018
- Revenue From Ridesharing Products $9.2 Billion in 2018
- List under UBER, good ticker!!
- 29 banks listed as underwriting the IPO, for those of you wondering, yes that is alot. Like 20+ more than a typical IPO.
From Bloomberg:
- 2018, Uber's operating loss totaled $3.03 billion, however it technically turned a profit in 2018, generating $997 million in net income. That's thanks to a $5 billion "other income" benefit.
Other Income is defined as:
- Interest income, which consists primarily of interest earned on our cash and cash equivalents and restricted cash and cash equivalents.
- Gain on divestitures, which consists of gain on sale of divested operations.
- Unrealized gain on investments, which consists primarily of gains from fair value adjustments relating to our investments such as our investment in Didi.
- Foreign currency exchange gains (losses), net, which consist primarily of remeasurement of transactions and monetary assets and liabilities denominated in currencies other than the functional currency at the end of the period.
- Change in fair value of embedded derivatives, which consists primarily of gains and losses on embedded derivatives related to our Convertible Notes.
- Other, which consists primarily of changes in the fair value of warrants and income from forfeitures of warrants.
- Lyft now at $61/share, ouch, there just is no other way to put it. THey pulled a lot of financial engineering tricks to boost their IPO price and well the results speak for themselves:(
Biggest Surprise to me:
- Uber Eats comes in at $165 million for Q4, for comparison Ride sharing generated a total of $2.5B in net revenue, the rest being ride sharing.
- So Uber is not really all that diversified in terms of ride sharing vs other, they are essentially Lyft in more markets.
> Lyft now at $61/share, ouch, there just is no other way to put it. THey pulled a lot of financial engineering tricks to boost their IPO price and well the results speak for themselves:(
I don't understand why this is seen as a negative. An IPO is a share issuance — the higher the price per share, the more money they receive in exchange for the same percentage of the company. Post-IPO "pops" represent money left on the table, effectively a transfer to the high-dollar investors with connections to the underwriter who can buy at the issue price.
It's a good thing for Lyft-the-corporation but a bad thing for anyone who bought into the IPO.
Any sort of financial engineering tricks that goose the accounting numbers without affecting the long-term health of the business are basically a transfer payment from people who buy in at the inflated price to entities who sell at the inflated price. It's rational for the company to try to pull them; it's also rational for prospective shareholders to refuse to take the other side of the trade (at least until the price corrects to the point where the true fundamentals make it worth it). In today's markets, you can always find someone irrational.
Employees saw their share price go from $44 in June (private markets) to a range of $62-68 during the road show last month to an IPO at $72, to close today at $61.
Again, in less than a year, rose from $44 to $61 with a brief uptick to $72 in the middle.
Loss aversion tells us that gains and losses have different emotional impact. In particular, perceived losses supposedly have a strong negative impact on people. [1] If Lyft employees value their shares at the IPO price, they might be feeling a loss all the way from 72 to 61.
They are going to get hammered on taxes, though. The IPO price sets the income they are taxed on while the price in 6 months determines what they actually take home. The result is that if you’re in California and the stock price falls to 30ish, you effectively take home nothing.
Why is stocked taxed at the IPO value rather than the current value? Relatedly, what happens if you simply sell the stock? Seems to me like that would just generate income you owe taxes on.
Aliston is referring to a specific circumstance that screwed many employees during the dot-com boom. If you exercise your options, that creates a taxable event for the difference between your option strike price and the fair market value of the stock on date of exercise. If the stock price subsequently goes down a lot, you can end up with a tax bill greater than the market value of the stocks when the lock-up period ends. It was generally advantageous for employees in the rising stock environment of the dot-com bubble to exercise their options before the IPO, or shortly after. For one, it starts the long-term capital gains timer going, so you can sell for LTCG rates 6 months after the lockup ends rather than a year. Two, the difference between your option strike price and exercise price is taxed as income (usually - for NQs and ISOs over the AMT, but not ISOs in low tax brackets), but the difference between exercise price and sale price is taxed as capital gains. That created a situation where many employees had tax bills on stock worth less than the tax bill.
This situation doesn't apply when you have straight RSUs that you sell when the lockup ends. These are withheld at income tax rates when vesting, and then taxed as capital gains rate when you sell. The IPO price doesn't matter in this case.
Pigs get slaughtered. Trying to time your options on a volatile stock to avoid short-term capital gains is gambling. Same-day exercise + sell is what any financial advisor will recommend.
RSU risk is worse because it is outside of your control, unless of course you don't have RSUs. You get taxed on the vest date. Withholding is often at the 25% minimum government rate. Assuming you're in a no-sell window, any downward movement before you can sell increases your effective tax rate, potentially to over 100% in the worst case. Consider the dot-com crash case where your RSUs were worth $1M on the vest date, withholding is $250K, taxes owed are ~$370K, and your regular salary is $100K. If the stock goes to $0 before you can sell... On April 15, the government will demand a check from you for something around $120K, but all you actually took home was around $70K. An effective tax rate of around 170%!
The real issue here might be that you can only deduct $3000 per year in losses. With $1M in losses, you'll be able to carry that over for centuries!
Carried over losses can be applied against future _earnings_ though so if you make $1M and not pay any taxes on it at that point because it's being offset by your past losses. I used it to offset my gains in taxes from selling my company stock (ISOs) when I sold a rental property at a substantial loss shortly after the Great Recession. Had my taxes double checked with an accountant to make sure I did the math right and I was right to the cent.
I thought the saying was “pigs get fat, hogs get slaughtered”?
Also, with $1M in losses, one would not be limited to the $3k offset against ordinary income. Presumably one would have other gains along the way from other investments.
The quote I was paraphrasing was something like, "Bulls make money. Bears make money. Pigs (or maybe hogs?) get slaughtered."
And yes, you are correct on the other point. You would be able to avoid paying tax on your next $1M in lifetime capital gains. *disclaimer: This is not financial advice.
Employees get taxed on the value that they vest at IPO, but are locked up from selling for 6 months. The company withholds a percentage, effectively selling a portion at IPO, but it is less than the effective tax rate. I should clarify that this applies to RSUs, not options.
Edit: something similar can happen with options as mentioned, but the mechanics are slightly different.
For RSUs the withholding should be in shares - if your effective tax rate is 40% and you vest 5 shares a month, they grant you 3 shares and immediately sell 2 to cover the taxes. If your effective tax rate was 30%, they'd round up, still sell 2 of them, but remit the cash in excess of taxes to your paycheck. At least that was how my Google shares worked. A higher IPO price works to your advantage, because the refund you get for fractional shares is worth more. You're also never in the position where you have to cover the (income) taxes for RSUs with cash from the stock sale, because the taxes have already been withheld in stock. You only have to pay capital gains when you sell.
Except most companies (including Google) withhold supplementary income at 22% federal plus FICA, regardless of whether your marginal bracket is 22% or 35%+.
Usually this results in significant underwithholding on RSU for federal tax.
It's against any competently worded lockup agreement.
"“Derivatives” is sort of a vague term, and there is a persistent folk belief that they have magic powers, that any legal or financial problem can somehow be solved by doing a derivative."
It's a tough call to make. By the time options came out, puts were extremely expensive relative to calls due to shorting pressure driving up hard to borrow fees. Aside from how bearish you had to be to justify buying them, you also need a lot of capital you might not have.
Besides, any current employee is barred from trading options by the insider trading policy.
I don't think how one dresses up financials will have an impact on the stock price 6 months out; there will likely 2 quarters of earning reports (at least 1) which will dictate the price then, not what was released now.
> It's rational for the company to try to pull them
Aren't there issues with follow-on offerings? By taking the entire IPO pot for itself, the company will probably struggle to find investors if/when it needs to come back to the capital markets--which seems like an eventuality with Lyft.
Potentially, but for high-growth unprofitable companies management is usually betting that they can either use the extra money raised to fix the fundamentals of the business in time for the next capital raise, or else they need to dump their stocks on the public market and get out because there won't be a next capital raise. I'd bet that #1 is more common in the management team's head, but #2 is more common in reality.
> It's a good thing for Lyft-the-corporation but a bad thing for anyone who bought into the IPO.
Which in turn is and for the company since the new co-owners (shareholders) don't want to lose money but push the executives to "do something" (while in reality even combined most of the new shareholders don't have much voting power
While you're right in general about a pop, that doesn't really apply to Lyft. Their IPO price was $72 and they're now hovering around $60. They had an initial pop up to around $75 IIRC and then have been on a steady decline since.
Because this is a public market? One of things you expect companies to do, ethically speaking, is to provide honest information wherever possible. If Lyft used financial engineering to boost their IPO price, while they get money in loads while the average Joe loses.
Uber Eats revenue in 2018 is $1.46B which is pretty impressive
regarding other income:
> Gain on divestitures increased by $3.2 billion from 2017 to 2018. This increase was due to gains on the divestitures of our Russia/CIS and Southeast Asia operations.
Covered on page 85, basically spinoffs with other regional leaders
the problem is that you have to have constant stream of orders to justify having people who deliver on payroll. Uber basically has people who deliver and then rent them to restaurants so they never have a problem of constant load.
+1 We recently ordered food from a Chinese restaurant that insisted on their own in house app and went as far as pulling themselves off Uber eats.
We gave them the benefit of the doubt and tried the in house delivery service - food took ~2 hours to arrive, presumably because their throughput to fulfil orders was capped by the number of drivers they could afford to hire full time - it was like going back to the days of every place having delivery men.
Exploiting a business partner that is operating at a loss is a bad move when said partner is providing a significant part of your revenue. You are placing that revenue in jeopardy without good reason.
But in the McDonalds/Uber case I don't think that Uner is imortant enough to McDonalds.
How does the product/revenue work when McDonald's are all franchises - does McD corporate have a first-order incentive to worry about delivery revenue?
I think they probably know they can't do it anywhere near the "cost" that Uber eats charges. It's low value orders so not much comission (my guess) and the delivery fee doesn't cover what they pay the drivers. Plus all the bad PR of running a "gig economy" fleet.
They have 247 delivery in a lot of Asian markets - and I know first hand for at least more than 10 years in China so it's not like McD HQ don't have the business experience of launching the product...
McDelivery is the name of the global initiative and it is implemented differently in different countries. In the US, McDelivery is fulfilled by Uber Eats.
Many fast food restaurant chains deliver in South East Asia. It's a bit different because fast food is not the cheapest option there, but it's a step up from street food.
Bad idea. Overhead from running your own delivery service is high, and the profit wouldn't be more than using the existing network of delivery services. It would probably be negative.
One thought about your ticker comment - I actually prefer it when the ticker is NOT exact same as the company like UBER or LYFT. This is because I know when I google AMZN, AAPL, TSLA etc. the search engine knows I want the stock price and am specifically asking about stock. For UBER and LYFT I have to type something like ‘LYFT stock’ if I want the price, trends and news around that.
Hmm I just tried on an iPhone 8+ googling $lyft on safari and nothing I got back in the top results are stock related. Then I tried on my home desktop with DDG with FireFox and had similar results. Perhaps the behavior is tied to the “google bubble”?
- The whole calculation around "Other Income" are nothing short of financial engineering to show bottom line profitability.
- 24% of Uber's gross bookings come from 5 cities - Los Angeles, New York City, and the San Francisco Bay Area in the United States; London in the United Kingdom; and São Paulo in Brazil
- 15% rides started or were completed at an airport.
"- Lyft now at $61/share, ouch, there just is no other way to put it. THey pulled a lot of financial engineering tricks to boost their IPO price and well the results speak for themselves:("
Seems they priced it perfectly, extracted maximum value for their investors and left nothing to gain for the public.
When considering 2018 you really need to ignore the 4.9B in other income. The vast majority of that was a one time event, and then the next largest line item is unrealized gains. Not sure what the gains were on but likely something not very liquid and volatile, e.g. a start up.
It's basically a 4B loss for 2018. The numbers all around are just unreal.
That's not really surprising, is it? Dual class stock is usually issued for tech companies where the founders were able to hold onto a lot of shares until the IPO, which I think isn't the case for Uber.
I’m curious about their Treasury department. How do they manage the float bet. when users pay and when drivers are paid? How do they manage FX? A sharp treasury team is quite an asset.
So...
Step one, raise funding to run a revolutionary company.
Step two, ditch original idea for being revolutionary once funding is obtained. Use interest bearing bonds and other investments.
Step three, profit.
Feels more like Uber and Lyft reached a point where they cannot raise private capital anymore and so jumped onto the public markets to fool random investors. If they cannot be profitable now, what makes them think they will be profitable with SDCs?
I challenge the fundamental premise that SDCs will make them profitable. There is no stickiness to their business model. Moving on to another ride sharing service is frictionless today. Most people I know use both Lyft and Uber. So if tomorrow SDCs become popular and offer a cheaper rate, people will move to them in droves. Nothing stopping them. We know Uber and Lyft are way behind on SDCs compared to Google on that front. It also looks like GM and Ford could there before these two. So what makes them a good investment either in the short or long term?
Uber won't survive the wait for self driving cars, it's simply to far way, even if we take the most optimistic estimates. Uber is burning cash they do not have, trying to make self driving cars work. People seems focused on how much revenue Uber has, but Uber doesn't need revenue, they need profit to finance their R&D.
After the IPO I'd give it a year before the investors starts to demand slashing drivers pay, and cancelling the self driving car project.
Aren't most index funds, almost by definition, required to buy their shares? If Vanguard owns a piece of every listed company, they're going to buy Uber at pretty much any price, right?
They don't hold Lyft because of their dual-class share structure.
Yes, Vanguard will buy at "any price" and will buy more at a higher price -- the funds try to replicate the breakdown of the underlying indices on a market cap basis.
If it falls within fund's target they should just buy it, without thinking. That's the point of low cost ETFs.
There's even a known arbitrage opportunity with things like S&P500. When the S&P committee decides to include a new stock (and delist some other stock) you can front-run the purchases by the giants like SPY or VOO, slightly inflating the stock's value just when the ETFs buy it from you.
The purpose of an index fund is to buy the entire market, under the assumption that an active fund will not outperform the market (after costs). If you want to avoid certain companies, you should buy an actively managed fund.
There are different types of index funds. There are market capitalization weighted index funds that fit your description of buying the entire market, but there are also small cap funds, sector funds, value funds, etc. You can avoid certain companies (e.g. FAANG stocks) by buying certain indexes (e.g. a value index).
Are you kidding? True AVs will make Uber/Luft even MORE profitable because they won’t have to pay out or worry about human drivers. AVs are the end game for these companies.
They will have to pay out and worry about the cars, so this is true only if the cost of buying and maintaining the AV is less than the cost of paying a driver, and I’ve seen no evidence yet that this is or ever will be the case.
I can’t tell if you’re joking? Today the drivers buy the cars. A driverless car can’t buy itself, so some entity will have to, and if it is not Uber itself buying the car whoever did buy it will want to get paid just like today’s drivers do.
I'm not joking, and you seem to have missed the entire reason people think of self driving cars + ride-sharing services as being a game changer.
Today people drive others around for money. Tomorrow people let their cars drive people around for money. No one thinks Lyft and Uber are going to be buying the cars, people just won't need to be physically in them to make money from Uber and Lyft any more.
Just because self driving cars are a game changer doesn't mean that all (or even any) of the benefit accrues to Uber. Who holds pricing power in this scenario? The company that makes the car, the person who owns the car, the agent (Uber/Lyft/etc.), or the rider? I think there's a reasonable case to be made that the agents are the most commodity-like element. Tesla e.g. has already shown a desire to use value-based pricing to capture their share of the money-making potential of the cars they sell. Any owner will prefer to rent their car via the agent that pays them the most. Any rider will prefer to rent it through the agent that charges the least.
While I disagree, that's at least a valid argument. You should start with that instead of asserting that the capital requirements of buying up a bunch of cars will be the limiting factor.
True AV are not possible right now nor for the foreseeable future. The technology has plateaued progress has slowed after the first rounds of demo technology showcases by all the big players. New research breakthroughs are needed and more robust and cheaper sensors. Throwing more money/people at the problem doesn't solve this and betting on AVs to make Uber profitable is a very long bet.
The cost of entry into this space is much greater than I think most people realize. It's not "building an app". It's building a balanced, efficient marketplace.
This means complex matching, pricing and routing algorithms that have been developed for almost a decade. It's also about working with regulations at the city level and building a reliable labor force of contractors to supply the marketplace in every new city before the launch date.
There is so many experiments and tweaks to ensure that both supply and demand side remain properly incentivized, not to mentioned fighting deeply entrenched Taxi companies from city to city, that I'm surprised Uber and Lyft have gone to IPO so quickly, other than for cash raising.
I disagree. http://www.rideaustin.com/ was launched in Austin a couple years ago when Uber and Lyft were temporarily kicked out of the city. The app had some growing pains but now I use them whenever I can in preference to Uber and Lyft because they pay their drivers more. If Uber and Lyft suddenly went away Ride<CityName> could easily pop up all over.
Of course, Uber and Lyft right now ARE so big because of all the advantages you mention, but a lot of that is still due to boatloads of VC money that allow them to operate unprofitably.
How is that a counterexample when they started when Uber and Lyft couldn't operate? Are there examples of local services that sprouted up and had to compete with Uber and Lyft and got off the ground?
You are implying an argument I did not make. I was replying to the statement "The cost of entry into this space is much greater than I think most people realize. It's not "building an app". It's building a balanced, efficient marketplace." My point is that building a balanced, efficient marketplace is actually not that difficult. The fact that Uber and Lyft can kill the competition now by burning through multiple billions in VC funding is irrelevant to that.
In the end, I think the ride-sharing business will look a lot like the airlines: lots of people traveling, but not a particularly great business.
No one can compete with Lyft and Uber because the latter are heavily subsidized - effectively providing $2 of service for $1 of revenue. Once they run out of runway - and the self-driving pipe dream hasn’t yet materialized - we’ll see a real competitive market emerge in the ridesharing industry.
Yes, Brazil/South America have 99Taxi and Cabify, although most drivers and users have 2 or 3 apps and switch around depending on promotions, price of a specific route, etc.
Yes, they are. I don't care whether a ride service is available in one, a dozen or three hundred locations. I care about the best option in my city, and I would bet dollars to donuts that this aligns with the market majority.
A thousand local or regional competitors are just as much an existential threat to Uber as one or two big ones.
Agree, it’s definitely possible (and rather easy) for regional competitors to enter the market. I also live in Austin and when Uber and Lyft left I switched to Fasten and Ride Austin with absolutely no difference to the end user experience. If someone else came along at a significant discount to Uber and Lyft I would switch in a heartbeat. I often converse with drivers about it and they have the exact same approach. Whoever pays the most for them gets their business, whoever charges the least gets the rider business. Ride sharing is basically a commodity right now and anyone who thinks otherwise and invests accordingly is going to get burned. The only thing that is going to change that IMO is autonomous vehicles.
> Ride sharing is basically a commodity right now and anyone who thinks otherwise and invests accordingly is going to get burned. The only thing that is going to change that IMO is autonomous vehicles.
TBH, I think that the autonomous vehicles is just a further illustration of the extent to which it's a commodity. To an approximation, the product is that you got from point A to point B for $dollars in #time. If you can get that sorted out, people will barely even care if the service is provided by JohnnyCab from Total Recall.
It's exactly the same economics as govern airlines, which are famously the last place you put your money if you're trying to turn it into more money. There's some room for differentiation based on quality of service, but it's proportional to the product of the percentage of people who aren't spending their own money and the percentage of companies whose operations departments are on the ball.
You speak truth, but the weird reality that we live in seems to dictate that the first mover advantage in autonomous vehicle world suggests that the people who are able to bring this reality forward will own the space for at least a year or two. It’s an exciting time to be alive and witness this at least.
The cost of entry might be higher than other spaces but I think automating those aspects will become cheaper and easier to do over time. Actually the cost of entry being high seems like a good reason to go public "so quickly", atleast to me. I don't see any other ride sharing IPOs happening anytime soon and investors are desperate to buy into the concept of a stable active marketplace as a product.
Doesn't that strengthen the argument for the network effect? The only places there have been successful 3rd party launches are in markets without Uber or Lyft, where there is no network effect to compete against.
Those markets are also lacking tons of cash to literally buy the market. And those competitors easily develop their own network effects. It doesnt look like there is huge lock in here, of the scale of e.g. facebook. There is a case to be made that uber is replaceable.
The quarterly revenue data is more worrying - December Quarter 2018 was up only 22% over the previous year. (Page 121)
On Page 126 we see that even that revenue increase was subsidised by excess driver incentives, and netting that out the growth was only 17% year on year.
They have tightened things and their adjusted yearly EBITDA loss fell by $800m to $1.65 billion, but has this come at the expense of growth? Or has the growth simply become too expensive to chase? Or are electric mobility devices taking away the shorter distance rides?
And they had a loss of $890 million in the last quarter, and it's hard to see tangible evidence of margin improvement. (P128)
A valuation today of, say, $100 million needs to have net income of, say, $10 billion to be a very real probability relatively soon, or of one much larger later.
At, say, a 20% net margin and 40% growth $10 billion income would take 5 years. But that is a courageous assumption about the growth rate, given the above, and it also assumes significant margin improvement, which will be hard if the marketing spend continues, which itself is required for growth. And pricing is hard because increased prices simply move customers onto other platforms. This is not a winner take all market.
For the model to work Uber Eats growth needs to be maintained for a while, and that's possibility, although I suspect their margins will be sharply squeezed as big brand chains respond. (e.g with Mobi2Go and 3rd party delivery agencies they can roll their own)
Interesting S-1. I was actually kinda bearish on Uber in terms of scale for future growth/profit opportunities, compared to Lyft, but now I feel like Uber has the upper hand.
Yes, profitability is a big piece, but Uber is more diversified, in that they have other rev streams - Food Delivery and Freight, which they are ramping up (Focused on growth for now).
Also, by way of partnerships/equity, they have stakes in a lot of different market leaders in other markets/geographies. These companies are further diversified in terms of other rev streams (payments, commerce, food delivery etc).
Not sure how much of that is captured in the valuation.
SDCs (L5) are definitely a ways off in terms of becoming ubiquitous. Companies are doing fixed route or city/geo-fenced testing and for any of these companies to actually get to Uber's scale will take a long time and maybe Uber can acquire/partner with one/more of these before that happens.
Also, if we consider ride sharing as a commodity, Uber benefits from economies of scale as opposed to other competitors who may operate in smaller regions/markets so that's also going in their favor.
All of this is to say, they are definitely focusing on growth for now (which there is a lot of opportunity for), but at a certain point they could probably start becoming profitable by either reducing costs or ramping up prices (in tiny percentages) and still be better than the alternative.
We have incurred significant losses since inception, including in the United States and other major markets. We expect our operating expenses to increase significantly in the foreseeable future, and we may not achieve profitability.
Our business would be adversely affected if Drivers were classified as employees instead of independent contractors.
If we are unable to attract or maintain a critical mass of Drivers, consumers, restaurants, shippers, and carriers, whether as a result of competition or other factors, our platform will become less appealing to platform users.
We may fail to develop and successfully commercialize autonomous vehicle technologies and expect that our competitors will develop such technologies before us, and such technologies may fail to perform as expected, or may be inferior to those developed by our competitors.
eh, those are more CYA than anything. Yes, these are risks, but thats in plain sight. Its about disclosing all the ways you could fail, however obvious, to avoid a lawsuit. There are lots of scary statements like that in most financials.
Just a brief scan and it looks much healthier and diversified than Lyft. Of course far from a perfect business or anything.
Their revenue is 5X Lyft's revenue. Doesn't look good for Lyft's stock to be honest.
I wouldn't be surprised if after their first earnings release, Lyft stock goes below 40 USD.
Really? The numbers look horrible to me. Both LYFT/UBER have horrible numbers. I would prefer LYFT(@80% discount to IPO price) than UBER(@80% discount to IPO price).
Both of these stock valuations are being pumped and dumped onto public markets with clever tricks. Funny thing is, many of us won't even realize that some of our money will be invested in these stocks without our knowledge(ETFs/Funds tracking indices). Most 401ks market tracking Funds/ETFs will pick up these horrible stocks in time.
Tech wizards of silicon valley have managed to one-up wall street this time, by creating a 100B taxi app. With the 10B they raise from IPO, they will try more desperate measures to try and close the gap in price($100B-$120B) and value($25B-$35B).
I mean. Objectively speaking and valuation aside, Uber's numbers are better than Lyft's. Unlike you, I would much rather take Uber over Lyft, given how extremely siloed is Lyft's market.
1.63 billion from Uber Eats is not a minor number and definitely a contrasting number that shows that at least Uber is trying to position itself as a logistics company instead of a mobility company, which really doesn't make sense (mobility is an abstract concept that I think can't be definied as an industry).
I honestly don't like either. But a plain analysis makes Uber more attractive by far.
> ... at least Uber is trying to position itself as a logistics company instead of a mobility company, which really doesn't make sense (mobility is an abstract concept that I think can't be definied as an industry).
Logistics: conveying goods;
Mobility: conveying people;
Uber is both and more. Those sectors are too small for their ambitions -- essentially they think they are in the transportation business which encompasses logistics, mobility and more.
Surely you'll have heard of Uber Elevate [0] which is a flying taxi service to augment urban mobility and of course there is Uber Freight [1], a haulage business that was supposed to benefit from their Otto acquisition, which built self-driving trucks.
It's the case of SNAP and LYFT because they have ownership structures which don't allow mutual funds to invest in them. Uber has a normal structure; any fund that mirrors the market will purchase the stock.
> Back in 2017, the private ride-hailing company got rid of its dual-class voting structure that had enabled its previous CEO, Travis Kalanick, to make a lot of bad decisions.
What an interesting takeaway. Certainly bodes well for the average Uber investor, but really it only happened because of Travis.
If UBER gets into indices, that would be scamming hard earned 401k dollars of unsuspecting ordinary folks. Sigh... More hate for Silicon Valley when folks figure out
I'm starting to believe this is how all of these IPOs are getting funded. No sane dilligent investor would be willingly investing in these stocks. Almost entire funding therefore must come from indices which in turn are funded by unsuspecting 401K, state pension funds, educational endowments like accounts. There was a book called Modern Tycoons which had term for these accounts, something like "global river of money". Given how indices are now leveraged for automated funding of IPOs, we would soon be back to stock cherry picking it seems.
What if you short the stock by the equivalent ETF holding amount. Not sure the math is right, but assuming you have an s&p500 ETF, and s&p500 has 23.7T in market cap and Uber is 100 billion, then they represent something like 0.4% of the s&p500. So for every 10k you have invested, short by 40 dollars worth of Uber stock. If uber stock drops, your ETF drops but your shorts gain and vis-versa.
FYI I'm not even sure if what I'm saying even makes any sense or is realistic to do.
When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.
--- Warren Buffett
Expedia makes money from advertising (12%), from bookings fees, and from buying blocks of hotel rooms at a discount then selling them for higher prices to their customers (66%). [1]
All of these revenue models are something that is pretty obvious how you make money at. And all of them are very different than crowd-sourcing rides for which it is not clear that the market prices is higher than the cost of providing the ride.
To further your second point. A whole cottage industry has sprung up around AirBnB. To me this indicates that the business model for AirBnB is working. There is no similar thing happening w/ uber. Seems to just be a question of who (uber or the drivers) is going to absorb the losses.
Most importantly he hasn't had a single negative mention since he took over. the company had a couple bad things disclosed that were holdovers from the old regime, but none of it was his as far as we know. he also hasn't had any seriously positive news, but for uber no news is good news.
"We have previously received a high degree of negative media coverage around the world, which has adversely affected our brand and reputation and fueled distrust of our company. In 2017, the #DeleteUber campaign prompted hundreds of thousands of consumers to stop using our platform within days. Subsequently, our reputation was further harmed when an employee published a blog post alleging, among other things, that we had a toxic culture and that certain sexual harassment and discriminatory practices occurred in our workplace. Shortly thereafter, we had a number of highly publicized events and allegations, including investigations related to a software tool allegedly designed to evade and deceive authorities, a high-profile lawsuit filed against us by Waymo, and our disclosure of a data security breach."
Just like the WWE’s designation of their employees as contractors. SDC could make the point moot , but this is a salient workers rights issue that politicians have not picked up on.
"We have incurred significant losses since inception, including in the United States and other major markets. We expect our operating expenses to increase significantly in the foreseeable future, and we may not achieve profitability."
"We have incurred significant losses since inception and may never achieve profitability" is pretty standard in S-1s. Nothing particularly interesting in these sentences.
Zoom is a profitable company that plans to IPO this year: "Zoom has the very rare and valuable financial profile -- it's growing at over 100% a year and it's profitable" [1], they're not extinct!
> Maintaining and enhancing our brand and reputation is critical to our business prospects. We have previously received significant media coverage and negative publicity, particularly in 2017, regarding our brand and reputation, and failure to rehabilitate our brand and reputation will cause our business to suffer.
In detail, they state:
> Our brand and reputation might also be harmed by events outside of our control. For example, we faced negative press related to suicides of taxi drivers in New York City reportedly related to the impact of ridesharing on the taxi cab industry.
Yikes, I never heard about that until reading it now. I could totally see how some people may have placed the bulk of their money into a NYC Taxi medallion, which have more than halved in value since 2015. https://qph.fs.quoracdn.net/main-qimg-a9d6f8a78e9c6e899cd886...
"We have incurred significant losses since inception, including in the United States and other major markets. We expect our operating expenses to increase significantly in the foreseeable future, and we may not achieve profitability."
We have incurred significant losses since inception. We incurred operating losses of $4.0 billion and $3.0 billion in the years ended December 31, 2017 and 2018, and as of December 31, 2018, we had an accumulated deficit of $7.9 billion.
Dont mix up cash flow from financing activities with profit from sale of operational piece of the business ;). One is just a cash flow/balance sheet piece the other gets reflected in income ;)
Yeah, it's always a fun read for grumbling grognards like me. Pretty standard stuff, except I don't think I've seen a company call out its own culture as a risk factor before.
Horrible numbers! They cannot get the unit economics to work. In order to make up for that fundamental flaw, they are trying to throw a number of things at the wall(UberEats/UberFrieght/SD/Bikes/etc) and see if something sticks. Each of those other bets seems poor, thus far.
They better focus on getting their original business in shape(call a cab via an app). I would be curious to know if they tried to raise prices in any markets and what the results were. I'm sure they want to know this for themselves and their investors thus far. Has anyone seen data/insights into such experiments by Uber/Lyft/Ola/X/Y/Z?
Given that none of the ride-sharing companies are sharing insights on such experiments, I am going to conservatively assume that these companies have low/no confidence that they can raise prices. Network effects make a good moat. But demand elasticity, substitute products, and competition seem to be dominating over the network effects.
Their original business is a good one. Price and value are way out of sync. UBER at $100-120B is way overvalued. Not touching UBER/LYFT stocks with a long pole at these valuations. Overpriced by 3-4x in my view. When they fall by 70-80%, will buy some.
The real problem that I see with using Über in South America is that the service is not improving.
- The time estimations are way off
- The app doesn't know one-way roads well, although they should have a lot of training data on the routes I go on
- They allow drivers haggling for the price by forcing users to pay with cash instead of credit card.
- The app doesn't know about the road tarifs sometimes, and the driver is not allowed to ask that money from me, which makes an awkward situation
- Sometimes I'm getting 30 year old cars, which the Taxi companies filter for
I would happily pay more than the current price, but I need more reliable service, which the software could provide.
Right now Taxis with all their problems are still competition.
I’m curious to know more about ridesharing in South America, specifically the haggle portion. If the credit card was allowed it seems like it would alleviate a decent amount of the issues you named in your post. Why would they disallow credit cards? Is it a cultural problem, infrastructure problem or something else?
The other issues you mentioned seem to be tech related in that as companies that offer navigation services improve their data and services in South America the experience there should markedly improve.
I select credit card, but at some places the drivers wait 5-10 minutes, ask where I'm going and write that I should cancel the ride and they bring me for double the cash. At that point I also have to pay for cancelling the ride, and I'm also late, so I have ti accept their offer. They use the Uber messaging system and Uber doesn't catch these drivers (they should just filter for drivers that want users to cancel), although it would be very simple.
I had similar experience living in Sweden, where the market is present but ride sharing has not quite penetrated yet. For the most part (90% of the time in my experience) the ride share driver wouldn’t try to pull anything like you describe. About 10% of the time I would have an experience very similar to what you describe. Every time I was able to continue the normal transaction, however, by being firm with the driver and insisting that they continue the ride. It’s an interesting power dynamic that reflects supply and demand though, because I noticed that if you’re calling the ride at a time where there aren’t going to be a whole lot of drivers, the driver was a lot more insistent and willing to fight back on the deal set by the rideshare company.
It's very interesting, I have been feeling this in Dominican Republic, where people are screwing tourists whenever they can, but Sweden is one of the most advanced countries in the world, where I imagine that this isn't that usual behaviour from most people.
Where I stayed there were a lot of poorer people by Sweden standards. This was in Skåne, which is an area well known in Sweden for being a location where a lot of poorer immigrants reside (mostly in Malmö, where I lived). So it actually might be a better parallel to the DR than you would first imagine.
I haven’t been to the DR personally, but am well acquainted with Central America in general, having been to several countries. So I would say that this kind of behavior is not nearly as noxious or obnoxious as you might observe in Central America, but is similar enough to draw a decent parallel.
Boca Chica, Dominican Republic whenever I wanted to go to Santo Domingo (though Boca Chica is anyways a bad place to go to, any other part of DR is much nicer). Also Recife, Brazil, also far from the city center.
1. Humans aren't gonna trust SDCs easily. The way I look at it, SDCs would be used only to transport freight for a few years before people can trust it enough for ride sharing. I personally believe that companies should focus on self-driving trucking rather than self-driving cars and pivot into ride sharing after a few years of successful freight transport. People would trust the leader in the self-driving truck industry more than a top-notch but unproven tech company. Let alone cars, as simple as elevators in the buildings were operated by actual people before becoming completely autonomous.
2. Uber is not just in the USA. SDCs aren't gonna be approved everywhere, even after it becomes legal in the USA. Uber still has access to that market, but Waymo magically can't.
> I personally believe that companies should focus on self-driving trucking rather than self-driving cars and pivot into ride sharing after a few years of successful freight transport.
Really? I work in the SDC industry and I have the opposite opinion. Unless the self-driving trucks are all driving on dedicated roads (which won't happen) I would not want to share the road with them while they 'experiment'. IMO, the greatest threat is not to the occupants of the SDC but to the other vehicles, pedestrians, and bicyclists.
Especially arriving, and also departing, I think Uber with "door-to-door" service may be a better answer. Luggage above carry-on would be hard to take on multiple-stop public transportation with a walk, and especially arriving in evening after a tiring travel, I often want to get directly to my lodging and freshen up.
As a counterpoint see Heathrow Express in London. Taking taxis in London from a major airport, unless at odd hours, is almost always more expensive and slower even with checked bags.
> The Company has from time to time issued nonrecourse loans to certain employees for the exercise of stock options or for personal use. As of December 31, 2017 and 2018, the total outstanding employee loan balances were $21 million and $16 million, respectively. A total of 16 million and 10 million shares were pledged as collateral to secure the loans as of December 31, 2017 and 2018, respectively.
Is loaning 20 million dollars to employees for personal use as dodgy as it sounds?
No, it's usually negotiated as part of an options package.
"We will lend you the money to exercise your options".
Then they can pay it back once they sell the shares they received.
Yes but also portable, low-cost GPS enabled internet connected devices are a game-changer. I don't see how Uber or Lyft could exist prior to the iPhone pushing adoption of GPS.
Did the iPhone so the most to push adoption? iPhone 1 didn't have GPS but the first Android device did. The killer app on mobile phones has always been Maps. I'd give Google the most credit here.
and only 2% of the population is using it monthly right now. I hope they gradually decrease the minimum age for riders. Children can finally regain some of the mobility they have lost in the modern world. Just reducing the age from 18 to 16, would probably double their monthly active users. They should atleast allow <18 year olds with drivers licenses to be riders...
Keep in mind these numbers are Uber's cut, which is probably around 20% in most markets. So the average far is probably around $10, which seems reasonable to me, considering there are some very low cost high volume markets it serves.
Some people are excited about Uber having a more diversified business than Lyft. Uber Freight, Uber Eats, Jump bikes and e scooters are some of their offerings. However, currently the revenue they generate (or don't) is completely dwarfed by the ride hailing service. If at some point in the future these other businesses turn out to be profitable, shareholders will insist to break them out of Uber to maximize gains. Ride hailing absolutely has to be profitable for Uber to succeed post IPO. At least for the foreseeable future Uber is exactly Lyft with minor garnishing.
I wonder if anyone reading through this filing could speculate: Can Uber just raise their prices to reach profitability? If they lost $3B on $44.1B of Gross Bookings, it seems they could raise their prices by about 7% to hit breakeven. Would they really lose that much market share if they did that?
Why wouldn't both Uber and Lift simultaneously raise their prices by a few percent? Once they're both public and the VC cash injections dry up they'll both need to raise prices if they don't want to be out of business. Coke and Pepsi don't sell at a loss to try to steal each other's market share. What would cause these two public companies to run themselves into the ground if the market could absorb a 7% price increase?
I don't actually like Uber that much as a brand, and I understand that the HN groupthink is against them, but I'm not clear on why everyone seems think this is such a terrible business. Are people really going to go back to taking cabs?
I predict that Uber and Lyft will both see big drops in stock price, especially as we enter the next recession. If one or both of the companies survive the downturn, they will turn into leaner, healthy bluechip stocks that turn a stable profit, at least until the flying, self-driving, solar-powered scooters take over. IMHO anyway.
Collusion is when the parties coordinate on the price increases. If they both increase prices independently to achieve profitability, then I don't believe that to be illegal.
No. That's not how price collusion works. If Delta airlines started charging for 2nd baggage, and after their announcement United/American/Southwest follow suit, that's not a price collusion if it wasn't predetermined secretly through implicit and explicit signaling among the airlines. The other airlines had option of either increasing their margins by adding new fee, or keeping 2nd bag free and hoping to make more money with increased volume (profit = unit margin volume). They are free to choose former or latter in our capitalistic setup. If there aren't any easily available substitutes, and you don't expect some new entrant to come and distrupt you, first option becomes much more lucrative. Especially if you have negative unit margins, since with second option - negative marginshigher volumes = lots of losses
> If Delta airlines started charging for 2nd baggage, and after their announcement United/American/Southwest follow suit, that's not a price collusion if it wasn't predetermined secretly through implicit and explicit signaling among the airlines.
I understand that.
That's why I said "suspicion". Something that seems too convenient and warrants some more poking and prodding and surveillance.
It's not as though folks colluding walk around waving "I am colluding, please investigate further" placards.
The trend in their Core Platform Contribution Margin ("a useful indicator of the economics of our Core Platform", essentially ignoring all the costs apart from payments to drivers and restaurants) is not very uplifting:
"We also expect our Core Platform Contribution Margin to decline in the near term due to, among other factors, competition in Ridesharing and planned significant investments in Uber Eats, based upon our long-term growth expectations for Uber Eats. Our Uber Eats Take Rate has declined in recent periods, and may continue to decline, as we onboard large-volume restaurants at a lower service fee and restaurants with lower average basket sizes, and as we invest in more nascent and competitive markets, such as India."
I'm not an Uber-hater - but they don't offer anything unique and the valuation is insane.
Their problem is that if they rack up prices/commission to pay off their investors, then both their drivers and riders will simply switch to the next pre-IPO company that will connect them for less.
Uber in my mind is like all the other social media sites. We appreciate that they're the best thing to connect us at this time - but if something better comes along, both sides have no loyalty and will move on.
Can anybody imagine an Uber provider/rider they've met paying over the odds for an identical service because "they love the Uber brand"?
I can imagine such a person. If rider values reliability, they would always open Uber app straight away and get a ride in 5 seconds. I don't think the argument of people switching to a cheaper service actually holds true that much. People don't shop around for a ridesharing service, they open up something that they know will work and work fast.
As an IPO n00b, I have basic question: Let's say I'm a startup founder with revenues in $10M and want to raise money. Can't I just go straight to IPO instead of making VC rounds? It seems you don't need to be profitable or even have to have great outlook. Meanwhile majority of IPOs are getting magically funded anyway no matter what. On the top of it you get to even keep most of the voting shares. So what are the minimum requirements to do IPO?
There are tons of restrictions on public companies that don't apply to companies that are still private. Too many to list, but these include disclosure requirements (10-K, 10Q, 8-K...), restrictions on who can be on the board, regular independent financial audits, SOX compliance scope, CEO+CFO certifications, shareholder proposal requirements, listing requirements+fees, etc.
The restrictions are enough of a pain (especially the disclosure requirements since most companies would prefer their competitors not knowing their financial state) that it isn't uncommon to see a private company put off an IPO for a super long time.
Some reasons why a company with $10M/year in revenue may not want to IPO:
1. Due to recent regulations (introduced after the 2000 dot-com crash), the fixed cost of going IPO (SOX compliance, putting internal controls in place, audits etc) have significantly gone up.
2. The additional scrutiny and public visibility that comes from going public is a drag on management bandwidth, employee morale and attention.
3. Private money is now plentiful and cheap, so it might actually be cheaper just to take private investors than public.
4. Public markets prefer stable, predictable companies with a known well understood strategy. Consider how often Tesla is in the public eye and how they might have benefited from staying private longer given their unpredictable business and strategy.
One month before, because you get two extra pay checks.
More relevantly, because of vesting cliffs it likely makes roughly no difference, except you get to see a bunch of colleagues celebrating becoming more wealthy.
Uber is clearly losing share to Lyft:
"In 2017, our ridesharing category position in the United States and Canada was significantly impacted by adverse publicity events. Although the rate of decline in our ridesharing category position has since moderated, our ridesharing category position generally declined in 2018 in the substantial majority of the regions in which we operate, impacted in part by heavy subsidies and discounts by our competitors in various markets that we felt compelled to match or exceed in order to remain competitive."
What’s there to see? What’s their value add? They’re not going to be profitable until driverless cars are a legit thing or they pivot into something with higher margins. This IPO will make incumbent banks a cool mint and early engineers paper millionaires but will hopefully blow up and let capital into companies that actually have a chance of staying solvent without successive massive influxes of cash.
Uber is a cancer that has been amassing and burning that investment. Who knows? Lots of smart people at Uber maybe they can figure out how to turn a profit but I maintain that won’t happen until human drivers are not part of the equation or they pivot to something entirely different.
That's a long way away. The self driving technology has plateaued after the initial controlled tech demos and isn't looking likely to be useful in the general way that Uber needs any time soon. Maybe they can get it working in some very favourable routes but not enough to balance the books. Some really hard problems still exist with algos and sensors and the costs will be high for a long time. If the bet is on autonomous vehicles it's a very long bet.
No, paper millionaires. You're only an actual millionaire once you sell your stock. You become a paper millionaire when the IPO happens and you gain liquidity and price increases.
According to your logic there is no such thing as an actual millionaire. No sane person keeps a million dollars sitting in cash in a savings account, they invest it somewhere (equity, bonds, real estate, etc).
Have some dude oncall? You probably don't need more than one per city.
Or do you not expect the car to detect puke and/or a passed-out passenger? Seems like a trivial problem compared to all the recognition software that would be needed for self-driving.
Does anyone know how soon after an S-1 filing a company can issue their IPO? Is it basically up to them once they've filed or is there some vetting period at the SEC?
Will they be doing a road show next or is this something that they would have already done prior to the filing?
Is the Saudi family invested in Uber? There was a story that Uber was trying to cover up that the Prince that ordered the murder of the journalist Khashoggi - is this true? I know this is a tech forum, but I am not sure what to believe?
So 44% (4.4 billion) of their 2018 revenue was 'Other'.
Gain on divestiture 3,214
Unrealized gain on investments 1,996
If this was pure cash going into their bank account, does it mean they ran out of cash in 2018? Their working capital was 4,900 billion at the end of 2018.
people in here keep on saying that uber is not making profit. where is the source for that? i remember people saying the same thing about tesla. complete dogma. nobody seemed to understand that tesla was investing huge amounts of money into the development of other cars and expanding their factories. so what are ubers expenses? it does not pass the smell test. what is the expense that is killing them?
and people in here also dont seem to appreciate that uber can change their prices. they cant right now, but they will be able to soon. all the investor money floating around means that their competition may be able to operate in the red for extended periods of time. when the investor money dries up and everyone is surviving on profit, prices can go up. and they will go up because rideshare is the most efficient and cheapest way to do taxis -- nobody is going to come in and disrupt uber. except for driverless cars. but driverless cars arent going to happen. not anytime soon.
edit: i just looked at the chart in the document and as far as i can tell they are 3B in the red. not really sure what the units are in that chart. ok, well there are a lot of expenses where i cant tell exactly what they are, but their marketing expenses were 3B. 3 fucking billion dollars -- am i reading that correctl? thats the same amount by which they are in the red. i also see some very high numbers for management. all uber has to do is cut the fat and they will be making a nice profit.
1. Uber is unprofitable and the only way it can become profitable is to get SDC's
2. Uber is significantly (years) behind Waymo in the SDC space.
3. Waymo will launch SDC taxi services first meaning:
- When it puts in an order for SDC components no one else is going to be buying in bulk and thus it can have effectively 100% of capacity of these specialized equipment makers
- It is going to be competing with other taxi/ride share services with all the cost advantages of SDC vehicles while its competitors are paying human drivers (and have basically no fat to cut from their current pricing)
- It will be able to improve its services so when someone else does launch their service will be inferior.
4. Uber expects that its users will stick to it over the course of years in the face of significantly cheaper competition.
5. Uber expects that it is going to be able to continue to use human drivers even while it competes against those same people with its SDC's (i.e. when your employer hires your replacement but expects you to train them).
I simply can't imagine how Uber is worth anything at the moment.
If the operation doesn't make an economic profit, and if there isn't sufficient moat to defend the operation until it can become profitable, then I agree with you it's not worth anything.
But in fact, Uber does have a massive moat -- its network of drivers and riders in thousands of cities around the world. No competitor is even close.
It takes tremendous capital expenditure to build that network, and it will take tremendous capital expenditure to neutralize it.
It remains to be seen if Uber can make an economic profit, but with an operating loss of just 10% of gross revenue, it's not at all inconceivable.
> It takes tremendous capital expenditure to build that network, and it will take tremendous capital expenditure to neutralize it.
Does it, though? Every driver I've talked to basically drives for "all of them". Several told me they try to find whatever apps are local for driving and they setup those alone with Uber and Lyft and simply take whatever pays the most / is more frequent.
Uber's software and network are solid but I don't think there is a whole lot of loyalty there. Anyone who can drive a wedge into a spot in their business could slowly erode it, IMO.
Now, they're too big to die quickly or anything like that. But it doesn't seem impossible at all to me.
Agreed - Facebook has a network effect/moat because a new service that's better in every way is useless if your friends aren't on it. Getting the network to migrate is hard and when this does happen FB is quick to buy the threat (Instagram, WhatsApp) or compete and kill them (Snap).
Nobody holds an allegiance to Lyft or Uber - they pick whichever is currently a better deal for both driving and riding. Uber's recent loyalty program is the first thing that slightly moves this in favor of continuing to use Uber, but it's only a little incentive. Large swings in price still favor switching.
Their only moat comes from being able to undercut competitors with VC money in any market they appear in until the competitor is dead and Uber can then raise prices to be profitable.
It's probably a winner take all market. A SDC competitor would be a threat, but I'd be both impressed and surprised if Google could pull that off.
FWIW, I have a loyalty to Lyft and will use its service even if Uber is a bit cheaper, but that's because I'm a techie that is aware of all the shady shit Uber has done.
Uber actually has one moat: their international presence. Other networks don't have it.
If you're a business traveler, you can Uber out of most airports without having to install the local application, and business customers are less price sensitive than local customers in general.
Definitely agree with your point about nobody having an allegiance for local rides, and it's not clear if Uber can defend against hyper local upstarts at scale.
Except it isn't everywhere, so their moat isn't complete and is eroded by the fact that you need to rely on local transport options in a lot of areas - I don't think this really counts much as a strength of theirs, and I think their current attempts to operate in so many markets and their reliance on a lack of enforcement/laws that can change may make this more of a liability for the company.
> Nobody holds an allegiance to Lyft or Uber - they pick whichever is currently a better deal for both driving and riding.
That's not exactly true: I use Lyft exclusively because have anti-loyalty against Uber because of their greater level of past unscrupulous behavior and scandals.
Quick note that Facebook, unfortunately, has no real competitor for the sheer number of things it does. As soon as one comes out built for non-technical users the way Facebook is - and hopefully is a nonprofit - I’ll go running to it and encourage my friends, too.
I’d want one that’s just an online account with a single picture, name, address, phone number that lets you have friends. No posting - basically just a contact list that’s always up to date because people update themselves.
Keybase could be this.
The main way to get people in would be a focus on event scheduling relying on twilio and sms for including users that don’t have accounts.
Make it cheap but not free ($1/month for people with more than 25 contacts) and advertise no ads or tracking ever.
Convenient way to do event scheduling - some friends I know are not on FB so it’s a pain currently.
Also having up to date contacts to stay in touch. Phone numbers and addresses change and it’s hard to know when that happens (and currently most people don’t put this on FB).
It's amazing how FB has gotten so easy to use now. As one of the early users I remember FB was more cooler I'm those days because majority found it too difficult to use.
"Every driver I've talked to basically drives for "all of them". Several told me they try to find whatever apps are local for driving and they setup those alone with Uber and Lyft and simply take whatever pays the most / is more frequent."
I heard the same from drivers. It's the ultimate replaceable commodity. Drivers jump ship on an instant and so do I as user. I don't care if it's Lyft, Uber or anybody else.
Here in Brazil my experience has been the same: drivers use all apps.
I just don't see how Uber can maintain said network on the long run and still be profitable, not something I'd put my money in.
What Uber is doing would generally be described as predatory pricing on other sectors. On sufficiently unregulated markets such is Uber's it's extremely risky, no anti-trust legislation is needed to trump it, just a continuously low entry barrier, including lax regulation. For a more concrete, though only related example (rather than speculation as to Uber's future) see Dow's history.
It absolutely takes tremendous capital expenditure to build the network. Uber has an accumulated deficit of $20 billion precisely because they subsidized both drivers and riders to build the two-sided network.
It doesn't have to be winner-take-all. A duopoly in most medium to large cities is perfectly viable. But you won't see dozens of competitors because the drivers and riders would wait too long for a match in a sparse network.
Unless the ride-share commodity can be differentiated some other way, it would take large subsidies for a long time to make much of a dent in Uber.
> It absolutely takes tremendous capital expenditure to build the network.
It's like breaking trail: It's a whole lot of work for the person in front, but it's damn easy for everyone else.
Uber, being first mover, had to spend great heaping piles of money convincing people to become rideshare drivers in the first place. Because they had to sell people on the idea of driving folks for a living, and then get them to buy new cars that meet their standards, and then train them on how to be a rideshare driver, and all that fun stuff.
Everyone else just needs to convince a group of people who have already bought the car and learned how to drive it that it's in their interest to hedge their bets. Which, given how Uber has historically treated its drivers, is something that requires approximately zero convincing.
Uber is a non-profit version of Uber. They made a 10% loss last year. So a non-profit (assuming they intend to at least break even) would actually need to pay the drivers less.
I think the intent of the parent's question was to say why can't a group of drivers get together and create a ride sharing app that is jointly shared by all the drivers and just gives all the money to the drivers, hence taking no profit (rather than the more formal term 'non-profit' which has the tax implications like you say.)
Besides, companies only pay taxes on profits, so loss making companies don't pay any tax either. (And usually have some kind of ability to carry forward losses to reduce future tax bills)
Why would anyone work voluntarily for what would essentially just be a company that gave all it's profits to the drivers but expected them to work for free. Volunteers tend to work for causes they believe in for some ethical or moral reason, and while I sympathize with the drivers like I'm sure many do I doubt many would work for free so someone else can earn more.
Why would some people work for free so that drivers can earn more or riders could pay less?
Uber racked up a $20 billion cumulative deficit by subsidizing both drivers and riders.
Even if you cloned the Uber app and had people volunteer to do customer support, you'd still wind up with a service where riders pay more, or drivers earn less, or both.
That works for BlaBlaCar [0] that's true carpooling, without drivers trying to make a living on the platform. Riders pay less and drivers get paid less.
But if Uber is losing $4 billion a year at the current prices, it's hard to see how there would be a sustainable market where drivers make more and riders pay less.
Love it. That's how it should be. Drivers should get max possible cut of the fares while the network operator works as a non-profit.
100B pump/dump is a scam. Think about all the indices-tracking-ETFs/Funds that will pick up this overpriced stock(our hard earned 401ks). Sigh. Silicon Valley should not have pumped up what was originally a good idea. This has a high chance of ending badly
What funds are those specifically? Certainly not the S&P 500. The Russell 3000, but they don’t have a choice.
The point of investing is deciding what you believe in (financially speaking)! If you don’t like Uber, make some money on it! You can’t short in an IRA, or sell naked options, but you can sell futures or buy put options. All of these would express a bearish sentiment on Uber. So don’t feel like you sre being screwed, go make some alpha!
For the record I agree with you, and will short Uber the day it IPOs. I’ve already made some good money on shorting Lyft and expect I’ll do well on the same strat with Uber.
For the drivers, Uber (and Lyft) tie some hurdle rates (rides/week or hours driven etc) to cash bonuses reward their loyalty. It seems like they have some status levels as well (e.g. Uber Diamond Pro) that I guess probably leads to better economics / bargaining power for the driver. So on margin drivers will specialize in one type of service especially in consistently high demand areas (i.e. cities). Unclear which one is better but on surface it seems Uber has more of these in place than Lyft IMO.
For the riders, Uber Rewards and Uber Cash (that actually forces you to reload if you have below whatever your current ride costs) also make the product quite sticky and make the rider less inclined to take other options on margin.
Small economic tools like these that exploit our psychological biases (e.g. loss aversion, gamification) may go a long way in protecting the moat in this commoditized, competitive environment, and Uber seems to be ahead so far.
(Of course, whichever player comes out with SDCs wins the whole pie)
Is there a valid comparison between Uber and a company like Amazon? Amazon's loss leader strategy paid off and they're doing well now, so can Uber "become profitable whenever they want to" and be fine?
Amazon was CF positive and invested it's cash heavily in capital assets (warehouse, etc.). Uber invested (burned) its money on subsidies. Not really a comparable.
Amazon burned less than $100m... it was funded off of positive cashflow... inventory was shipped and paid for by customers, before Amazon had to pay the vendor. It was/is a marvellously capital efficient business.
Huge barriers to entry to compete with Amazon (warehouses, tech). Thus no serious direct competitor. Few barriers to entry in ride business (just another app)
it's economically unreasonable to drive for more than one apps simultaneously. Now, it could be economically reasonable to drive for more than one apps at many points in the past.
If Lyft and Uber are so easily exchangeable, why is Lyft is still a minority in the US while spending more money?
like i said it's reasonable to drive for all at different points in the past but it's unreasonable to drive for all 4 at the same time. Think about it, incentive-wise, if you complete 50 trips you got $x , if you complete 100 trips you got $2x. If you only got 50 trips in you, why are you splitting them between two apps 25 trips each and got $0 incentive?
Almost every driver I ride with is switching between the Lyft and Uber apps to see which one is offering better rates/destinations. The incentives appear to be insufficient to offset rate disparity in this market - unclear if that holds true everywhere.
I'm not at all well-versed in statistics, but it seems that without enough extra cash to consistently one-up the competition in terms of incentive structures, a ride share company could not make the driver's choice of which app to use a non-random event. So yes, a driver wouldn't necessarily choose all four at once, but they also wouldn't consistently pick one.
It's a well known fact that the biggest factor in taxi revenues is how much paid miles/km you can do per day. The single biggest factor to increase your revenues is increasing that number.
So unless the incentives are massive, a driver will always look for the next ride by any means necessary. It's nearly never worth it to "wait for a better option".
At least on Android, for ~75% of mobile users globally, Google Maps is more important than Uber for getting from place to place. Every Android user has Google Maps. Virtually every Android user uses Google Maps. The same is not true for Uber.
>It takes tremendous capital expenditure to build that network
What I don’t understand with the gig economy is why the gig workers organize and cut out the platforms.
Do the drivers need uber/Lyft? Do renters need Airbnb? Let these companies take on VC build the tech platform, launch, verify the market...then fuck them, leave them holding their own bag while the workers ride off in the sunset.
Besides the Founders and VCs, who wouldn’t love to wake up tomorrow morning and read about all the uber drivers organizing, launching their own platform and getting equity?
People vastly underestimate the work it takes to build Lyft/Uber because it's simple to use.
They would need someone to do all the legal/compliance work, validate drivers, handle marketing, handle payments, detect and combat fraud, resolve disputes, and the million other things you don't think about when you use the service.
It would be incredibly cool if each of these pieces could be subscribed to as a service. Especially if there was a way to expose your business surface area, domain knowledge, etc. in a way that it could "seamlessly" plug in.
That is so not true. There is no 'moat' whatsoever.
No Uber drivers are exclusive. In the US I see tons of cars with Uber AND Lyft stickers on. In SEA it was extremely common the same drivers had the Uber AND Grab app installed (before Uber gave up).
My local grocery store is just one block away from a different grocery store.
Exclusivity isn't required to defend a large network. People are creatures of habit, and it would take a big innovation in the service or massive subsidies to dismantle that network.
None of those describe a moat. Google is better than Bing. Hulu has a different offering from Netflix (and a lot of people use both). No idea what different distances of grocery stores have to do with anything.
None of those describe a 'moat'. Something like Facebook is a moat. Instagram. A messaging app. Anything where your participation increases the value of the whole offering and hence you'll be locked in, else you lose a lot of value (e.g. from all the contacts you made in the aforementioned networks)
I agree, which is why I believe Uber's biggest threat is Waymo. Waymo is uniquely positioned to absolutely demolish Uber almost overnight. They have the Google brand and financial backing. Their network of users is already in place as well (Google Maps).
> it will take tremendous capital expenditure to neutralize it.
It doesn't take tremendous concentrated capital, though. A bunch of independent regional competitors can fight for each city / country separately. Uber has a leg-up with short-term tourists, who already have their app installed, but for regular users, anyone with a decent app and some ad money can be a competitor.
> But in fact, Uber does have a massive moat -- its network of drivers and riders in thousands of cities around the world. No competitor is even close.
Given Uber's financials, this still reads to me as, "Nobody in the world can burn money anywhere near as fast as we can."
It's not inconceivable that they could get into the black, but a year-over-year adjusted EBIDTA loss that's getting larger instead of smaller, and a revenue as a percentage of gross bookings that's doing the same, says that they've got no better idea than I do of how to make that actually happen.
>But in fact, Uber does have a massive moat -- its network of drivers and riders in thousands of cities around the world. No competitor is even close.
Merely being ahead of competitors isn't a moat, it would have to be something that makes "entering into serious competition" difficult for any new entrants. Uber already lacks the monopoly power to raise prices significantly because of competition from Lyft and local providers.
TNCs do experience network effects, but it's nothing like e.g. operating systems or social networks.
No competitor can catch up without heavily subsidizing both drivers and riders. If no competitor is willing to spend billions to steal 20% of the market, then that's a pretty effective moat.
In VC parlance, a "moat" means something much more than just needing money to enter the market, but an insurmountable barrier even with a lot of money.
The network effects are the moat, and it would take a lot of money to disrupt that.
Any given market can't sustain more than a 2 or 3 rideshare services because splitting the network makes it too sparse for drivers and riders to match within a few seconds or minutes.
Uber has the #1 or #2 spot in virtually every market. That's an economic moat if I ever saw one.
A moat has nothing to do with the venture’s current rank, and network effects (as above) are much weaker, what with drivers able to drive for multiple services, the ability to start a service in niche markets (eg wingz and airport rides), and the ability of customers to get a new app and probe multiple wait lists. Austin was able to sustain an extremely fragmented market when Uber left.
I hope your read that link, which concurs that being number 1 by a large margin is not itself a moat. A patent on the key technology is a moat. The unwillingness of everyone to switch is a moat. “They’re number 1” is not a moat.
The cost of driving multiple platforms is pretty low. If the maps in my city are accurate, literally the same drivers are active on both platforms at once...
If there is significant regulation, like airport partnerships, that could be a good moat. Just like the taxis had
Yet not many people switch to Bing but so many drivers drive for both Uber and Lyft and riders who easily take whichever is cheaper between Uber and Lyft.
> But in fact, Uber does have a massive moat -- its network of drivers and riders in thousands of cities around the world. No competitor is even close.
Their platform is a commodity to both drivers and riders. I haven't met a driver who only drives for Uber. Uber provides no incentives for loyalty to drivers, like actual employment as employees. As a user, I have no loyalty to Uber, either.
The driver network is worth precisely zero as a competitive moat if (and only if) you are competing against a company with self driving cars. The customer network is a competitive edge but it is also far less sticky than having a robust network of drivers that riders can depend on.
it is not that hard to gain foot in any market. just advertise lower rates to customers and higher pay to drivers and within a week u will have more than half of all uber drivers registered on your platform too. 90% of people driving for uber also have lyft account if lyft is available in their area. uber has 0 brand loyalty. it has failed to establish itself as a safe option. its just as shitty as the next option in eyes of most riders.
Let’s say Waymo get to legit, truly market ready SDC taxi tech 3 years before Uber, and they start expanding into Uber’s markets at lower prices. This is bad for Uber, but hardly the end of their business. People won’t immediately trust SDCs, so Uber will lose market share only gradually even if their prices are higher. Plus Waymo have to scale up massively to significantly compete with Uber - that’ll take time.
If Waymo don’t make much of a dent in Uber’s market share in 3 years, Uber gets their SDC tech to market and problem solved. If they DO start making a big dent, Uber can likely raise enough money to simply drop prices to Waymo levels (with human drivers), and just bleed cash until they get the tech out to be profitable. Uber (and their investors) are well versed in this strategy.
But given that Uber is not profitable now competing with Lyft both with human drivers, why would it be profitable tomorrow competing with Waymo both with SDCs?
Even if the profit is no longer negative, it should be near zero since there is not much moat, and it's not even clear whether Uber would be able to compete at all against Waymo (better tech) or even carmakers who own the cars.
The only thing Uber has is brand recognition, but Google Maps actually has even more brand recognition and that's where Waymo is going to be unless antitrust prevents it somehow.
The conventional wisdom is that self-driving cars will be much cheaper than rideshare, and the only question is when they'll reach level-5 autonomy.
But what if they're not actually significantly cheaper?
Let's say an Uber driver who works 60 hours gets paid $1,200 gross, or $20 per hour. Could the self-driving car drive the same trips with $1,200 lower cost?
Not a chance. Because the $1,200 paid to the Uber driver isn't just for the driver's time, it's also for the reduced resale value of the car, and for fuel, and tires, and repairs.
And those costs for the self-driving car will be much higher because the self-driving vehicle will be newer, and larger, and loaded with expensive computers and lidar.
The self-driving car will also require 24/7 realtime monitoring, and customer support, and a depot staffed with technicians, and a field service team.
The IRS rate for deducting business use of a vehicle is $0.58 per mile, not including the driver's time. I'd bet the cost of an autonomous car will be well north of that.
I can see this being a case where the second mover has the advantage. Ie let Waymo struggle to find profitability, then hire away their talent and have at it.
In LA, Uber recently reduced the per minute rate from 80 cents to 60 cents. This was after increasing the rates in Sept 18. Their annoucment of the rate decline was preceded by hours until it was effective.
Prior to this week, Uber had a consecutive ride bonus for 3-rides in a row that would add $7 to 11. But the app would malfunction often or not alert you, and break the streak. Almost everyday I complained but Uber never conceded and never gave me the small bonus.
This week, the consecutive ride bonuses are gone. Replaced by a flat $185 bonus for 70 rides in 7-days to $305 for 120 rides. Previously the biggest ride bonuses would require you to drive 11 hours a day consecutively to hit. And if you did 25% or 50% you’d get 10-15% of the bonus.
My current rate is $23/hour minus roughly $5-6 for gas, depreciation, car and insurance. My rent in LA is $3000/month.
Perhaps $17-18 an hour is fair but Uber’s tactics seem incredibly malicious and ever-changing. I feel like they are exploiting drivers unnecessarily although it is nice to have income whenever I need it.
There’s also tons of bad drivers, they encourage you to use the Uber map system which is seriously flawed, doesn’t calculate traffic and is semi-dangerous. They don’t advise drivers how to do basic tips to navigate traffic.
It could be so much better but it’s weird corporate strategies mixed with bad execution. The negatively Uber generates is a serious problem for their brand and I can’t imagine they’ll exist in 10-years based on how they decide things.
I always felt SDC is the death of Uber. If you had 5 billion to invest in SDCs for a taxi service, why would you become a small investor in Uber, when you could probably build the app for $10 million and just roll your own?
Also uber could become profitable if they charged more. I've actually started taking taxi's again, since they are marginally more expensive than Ubers/Lyfts. However, if you pick them up from an airport, you don't have to wait staring at your phone for 5 minutes watching your driver just sit around in their car until they start moving.
I take Taxis from airports and from hotels for that reason (often faster than waiting for the uber to get through traffic).
The exception is SFO where Taxis cost 2x what an UberX costs.
The Taxi experience is still bad though - just yesterday in DC I had to listen to my driver 'joke' about why the Taliban should be able to fight for their country while also repeatedly pointing out and talking about women on the street.
I've had plenty of poor but not shocking Uber/Lyft rides. Its nice you can rate them and get them out of the ecosystem. However, as time goes on, the bar on Uber/Lyft's drivers will lower, the cars will get dirtier and less maintained and the costs will get higher.
The stabilization point is probably close to taxi service. I think that Uber/Lyft really solve for SF's taxi problem mostly.
So you prefer being serviced by a machine that records everything you say, do, think, than bearing an interaction with a living human being which may or may not be quite different and interest, question, amuse or revolt you? I must say i don't agree with that, anytime i would prefer a place where people authentically and actually speak their mind and act spontaneously (not considering whether or not i actually think their behavior is stupid, alienated or impolite), instead of being corporate zombies, their soul already exhausted by the system, silent and jaded, having lost faith in any kind of joy in the productive part of life we call "work".
> Men are disturbed not by things, but by the view which they take of them.
Uber drivers are also recording everything I say and do (not think, but that was hyperbole), so the question is whether I want to ride in such a machine with or without some human trying to interact with me. It depends on whether the human is cool or not. In general, no.
But aren't SDCs currently something veeery remote (e.g. even Tesla cannot currently drive autonomously even on technically "simple streets" like highways) and especially only as long as no active offensive social behaviours start to emerge (e.g. gang menbers standing in the middle of the street to stop a SDC to rob/kidnap the occupant and/or destroy the car etc...)?
I agree its very far away, except for interstate driving. I can see an SDC-only lane, with a faster top speed. Residential, taxi-cab driving is so far away. Hey, if I step in front of this car, I don't get to sue a fairly poor driver, I get to sue a mega-corp for a tonne of money cause the algorithm should have stopped.
> Hey, if I step in front of this car, I don't get to sue a fairly poor driver, I get to sue a mega-corp for a tonne of money cause the algorithm should have stopped
Haha, that's an interesting grey zone I didn't think about (I'm swiss and usually non-direct/non-physical damages cannot be claimed here if they cannot be demonstrated/proven/tested). Hat off :)
Tesla is years behind Waymo. The predominant issue facing SDCs currently is inclement weather. Lidar (which Tesla does not use) and cameras have a hard time with heavy rain and snow.
I'm not sure why you think 20% of costs are fixed and 80% are variable, or that the elasticity figures are what you suggest they are.
Realistically, Uber has a higher cost basis than a taxi because taxis cut down on insurance and fleet expenses through pooling. As such, Uber is not really able to beat them on price. There's no evidence to support the idea that people are willing to pay more than taxis to use Uber or Lyft. Customers have virtually zero loyalty and so do drivers. If Uber raised prices by 10% and Lyft didn't, wouldn't bookings decrease further? Why do you think it'd by just 20%?
Your napkin math makes sense given your numbers but we don't have any data to back them up.
Re: SDCs, didn't a leaked internal study of theirs a few years back indicate that SDCs wouldn't move their margins by more than 5%?
> I'm not sure why you think 20% of costs are fixed and 80% are variable
This was based off the "Core Platform Financial and Operating Model" chart in their S-1, which states 75% of gross revenue is attributable to driver compensation. So, I imagine 80% is the low end.
> I'm not sure why you think the elasticity figures are what you suggest they are
I'm not sure on the elasticity figures. It's a guess based on running many pricing tests for my own business in the consumer services space.
> If Uber raised prices by 10% and Lyft didn't, wouldn't bookings decrease further?
This could be solved by acquiring them for $20B (or less, now).
> Realistically, Uber has a higher cost basis than a taxi because taxis cut down on insurance and fleet expenses through pooling.
I don't have too much insight into the taxi business, but in San Francisco, Uber Pool is substantially cheaper (<50%) than taxi fares.
Again, I'm not saying my numbers are right -- only that it's plausible they can be profitable without SDC's.
The thing about Driver compensation is that it’s not just their take-home pay, it’s what they have to pay to maintain their vehicle and gas. They’re already barely making minimum-wage when you factor in these costs, at some point you can’t get more blood out of the stone. Point taken re pool though it isn’t something everyone will do.
>Realistically, Uber has a higher cost basis than a taxi because taxis cut down on insurance and fleet expenses through pooling.
But Uber's price / taxis' price is wider than Uber's revenue / Uber's costs. Uber addresses various problems with taxis:
- driver certification: the brokenness of taxi certification arguably created Uber, via unreasonable constraints on the number of taxis in many jurisdictions
- availability: Uber's surge pricing may suck, but it's more fair than random price gouging by drivers at odd times in weird places
- rider pooling: you don't have to pass a hailing rider to combine trips; there's an algorithm for that
- verification: fake taxis used to be a serious problem, but Uber (usually) gives you the license plate # of your driver
Also, with regard to fleet expenses, Uber is arguably taking advantage of decaying capital that would have gone to waste. The cost of a car is often quoted in cents per mile, but that's not quite accurate. A car that sits in a garage will eventually fail; the lifespan of a car is limited by time as well as distance. Many people weren't driving their cars as far as they could in the time that they had -- and in my experience, Uber drivers tend to drive in the machine-gentlest way they possibly can (sometimes annoyingly so -- but why wouldn't they?). The use of own cars potentially yields a significant savings over a dedicated fleet. (Likewise, Uber "pools" the cost of insurance on the taxi with the cost of insurance on the own car.)
Your thesis is supported by their financial statements. Their costs are indicative of a company focused on growth. As revenues continue to grow the can scale back marketing and administrative costs as a percentage of revenue to make profits potential. This company has a lot of potential based on the numbers alone... the real problem is the uncertainty in the market for ride and the tech
They aren't pulled out of thin air. They're best estimates. If you disagree, what do you think their unit model would transform into if they acquired lyft for $20B in stock and raised prices by 10%? Why?
you cannot really play with it like that,
users have an expectation how much something will cost and if they dont feel that its right you can drop a lot.
from my own experience price increase if just on its own of 10% can decease sales by more then 20%. and i assume uber had such ideas and has been simulating them, and I'm sure they are testing it out with smaller but not noticeable increases. let's see how that works for them.
Becoming profitable at the cost of growth. I think the market would punish that. The story of growth company is what drives high multiples to sales/profit. If that changes to a mature company analysts will start thinking about measuring by P/E.
this analysis is... insane. your numbers aren't estimations, they're just nonsense. a state of oversupplied drivers is not at equilibrium, the drivers are going to leave until they're not supplied anymore. oops, now you have to acquire drivers again.
There's a difference between making it work for a small suburb area in Phoenix some of the times and making it work everywhere all the time. And the problem with ride-sharing applications is that unless it works everywhere nobody is going to use it.
Making it work everywhere for all circumstances is hard. Like really hard. There's a difference between an intervention-free ride and an actual ride that's both safe and comfortable. You could rack up your miles per safety intervention by programming a paranoid robot that sits at a highway ramp for hours without merging.
Is it possible? Maybe. It's nice that some deep models can magically (with no theoretical explanation) recognize a pedestrian, a vehicle, a bike. But would you trust it with your life? There's no theoretical safety guarantee unlike aviation where you can actually read and understand the proofs. I mean yes it could certainly work somewhere some of the time, but believing that it will eventually work everywhere all of the time is rather naive.
I wouldn't call it naive to believe it will work eventually, if the time scale for eventually is unspecified; after all, we are an existence proof that it's at least possible. Pinning down that timescale is the tricky part though.
The assumption that SDCs are going to completely overtake the market is a huge one and is unwarranted. This puts all the cost of building and maintaining a fleet on Waymo, or whoever is first to market. While it cuts out the cost of a human driver, it's not at all clear to me that this is cheaper in net.
Furthermore, a completely robust SDC able to handle all climates and weather in which a human driver is at least nominally competent to drive is still likely a pipe dream. So this model may work well - if it works at all - for the Southern regions of the US, without coverage anywhere else.
While this is true, it's the only proposed path to Uber being profitable. They lose money on every human-driven ride and have no approach to remedy that situation. So if SDCs aren't coming any time soon, or if they aren't any cheaper than human drivers, I'm not sure that's any better for Uber's prospects...
No way are we going to be in autonomous vehicles that soon. All of the companies besides Waymo are just doing fancy lane assist and calling it self-driving. And Waymo only works in the most ideal conditions
You can't imagine any scenario under which an 11 billion dollar money printing machine which is growing and costs 11 billion + 3 billion to run can turn cash flow positive?
Uber don't get the income from the rides without the marketing so I don't get why you get to ignore that when working out if they are profitable or not.
Autonomous cars won’t be proprietary to each manufacturer or company. Once someone has perfected their system, everyone else will drop what they are doing and simply buy it like an OS. It’s all in the software; hardware required (cameras, radar, GPUs) is already cheap and ubiquitous. My money is on Tesla or comma.ai for this.
Most likely the business model for autonomous cars will be a rideshare - instead of selling the software, the company with the best software will buy cars and rent them out for rides via app. Waymo has already gone in this direction.
Also, Tesla Autopilot is a joke compared to what Waymo or even Cruise has.
>They seem to be near the bottom of the pack when it comes to self driving capability.
And yet they are the only company in the world to have shipped a workable level 2 system in mass quantities. Orders of magnitude greater than Cruise or Waymo's fleet size. That puts them miles ahead in terms of data collection, which is the real challenge.
My understanding is Tesla and comma.ai have taken a software focused approach with limited hardware. Others like waymo have taken a hardware approach with more sophisticated sensors. What makes you feel Tesla/Comma.ai will win?
Because sensors aren’t the hard part. We already have enough hardware to perform superhuman sensing but it’s meaningless without the massive amounts of mapping data and trained models to make sense of it.
I love how we just assume SDC is just fact. No mention of weather issues, privacy issues, governmental legislation slow down, infrastructure that they drive on.
The human driver still has a minute. It's not like we are talking about Semi Trucks that will primarily have to navigate interstates.
It is going to be competing with other taxi/ride share services with all the cost advantages of SDC vehicles while its competitors are paying human drivers (and have basically no fat to cut from their current pricing)
It's going to be a very long time before self-driving cars are cheaper than cheap cars with human drivers. It's very possible that Uber might reach an acceptable level of self-driving capabilities before Waymo's paid off its investment in its first crop of self-driving cars.
Huh? How much does a full time driver earn? Let's say $30000 for the sake of argument. A car that is run as a taxi or rideshare service full time will last maybe three years. So that eould mean $90000 for the driver plus around $40000 for a decent car. A mass produced self driving taxi car that costs more than $130000 seems very unlikely.
If you want to make up unrealistic numbers, sure, then unrealistically a self-driving car is cheaper.
But with a self-driving car, operational costs like registration, maintenance, fuel/charging, and insurance, would all have to come out of Waymo's pockets instead of the driver's $30,000k. If the car is being driven 24/7, then maintenance costs will be much higher because of the increased wear and tear, and insurance for self-driving cars will be magnitudes higher than it is for human (commercial) drivers. Plus, there's the maintenance costs for the self-driving tech (LIDARs, software systems, etc.) The insurance alone would likely wipe out savings from eliminating human drivers, and the combined maintenance+insurance costs definitely will for the foreseeable future.
The average Uber drives a $30k-40k car (assuming it was purchased new). So you're looking at a $100k difference in costs in acquiring the car (using your $130k price). If the SDCs only last 3 years, that means you only have 3 years to make up the $100k difference, so each SDC would have to make $33k/year more than the comparable human-driven Uber car competitor to break even (since operational costs per car will cost the same or more as paying a human drive would have). $33k/year is roughly 3000+ additional rides/year assuming $10/ride average cost. Assuming 10 rides a day based on media reports, that would require Waymo to at least double the rides each vehicle does every day. And Waymo can't just increase the price on its SDC rides, since if it makes them much more than $10/ride, people will just drive cause it's much cheaper and faster, even including gas and parking.
And remember: in all of the numbers above, Waymo is bringing the costs in-house, except for the vehicles themselves, so there's no markup. Retail costs for similarly specced SDCs cars would be much higher because each respective vendors will want their profits.
So yeah, while I don't believe Uber will achieve self-driving, I think that it's going to be a long time before self-driving cars are cheaper than human-driven cars once all costs are taken into account.
I am not sure if you read my post correctly. Was doubting my parent's point that self driving cars would be too expensive. I was trying to estimate an upper limit below which a self driving car would be cheaper than a car and a driver. So if a self driving car is cheaper than that it should automatically be economical. And I think that a car costing 130k in series is extremely expensive. That gets you a lot of hardware.
coworker, works his normal shift five days a week. will uber when he gets off work for two to three hours each day and some on weekends. his claim is over six hundred dollars a week plus he claims fifty four cents per mile on his taxes.
he seems seriously happy with the arrangement. he does mention you get into some sketchy parts of town on occasion and will turn off the app after a drop in one and go live when he is in the clear but he has yet to have an issue. he does not expect to drive forever, he is simply piling away a down payment on a home.
> the only way it can become profitable is to get SDC's
This isn’t self-evident. Their services are unit profitable in core markets. And additional revenue streams increase the geographies in which they’re organically profitable.
It's worth it until there is an alternative on the road. Eventually, most if not every company get replaced by a better one. Stock market IPOs are never about predicting what will eventually happen to a company. It is not different than say, Tesla. Everybody keeps repeating that the traditional car manufacturers will catch up with Tesla, but even till then Tesla is gonna do business. And as expected once the novelty of their products (EV and self-driving features) got somewhat out of the way, now it is being judged but the revenue and profit numbers it is pulling.
Uber facilitated 10 billion rides in 2018. I think you are severely underestimating the ease at which another service, benefitting from self-driving capabilities or not, will erode such a massive network. Value of company will be correlated with value of the network, so I can certainly see how it is indeed worth something... and actually quite a lot.
This supposes that Self driving vehicles will be possible in the near future , without a human operator, in every city that Uber operates in. I highly doubt that. At least not in the next 5 years. What is see is Waymo being deployed in select 10 major cities in certain neighborhoods.
> 1. Uber is unprofitable and the only way it can become profitable is to get SDC's
So I'm not following this closely, but why is Uber unprofitable? I mean the app worked last time I was in the US and surely can't be that expensive to develop and maintain.
Worse than that, Uber are taking money from investors and directly giving it to the drivers to subsidise the trip price for the consumer all in an effort to build market share. It's folly to think that customers are going to remain loyal to such a service once the money runs out.
> the only way it can become profitable is to get SDC's
Can't they just get out of markets that are loss leaders and continue to operate in profitable markets? Note that they should but that's always an option if profitability becomes an immediate issue.
it's a very strong brand, as much as it gets a lot of hate here for the last two years of scandals, especially in developing markets noone cares about that. With right change of management and slow but steady rate raise it can be profitable.
Uber needs SDC, alphabet doesn't. Alphabet will not risk a company ending lawsuit due to SDC...uber is more than happy to bet it all on SDC if that is the sole way to become profitable.
The only issue there is that Uber hasn’t driven out the local livery companies, and Uber’s presence forced many of them to invest in infrastructure. If the rides get too expensive, people will just go back to taxis.
that is exactly what every company in the universe does in the quarter before being offered for sale or filling public offering. always assume the first company filling is the best as possible already.
Convinced media-bias is the only reason why anyone could be "long $LYFT." They are a text-book "one trick pony" and too late for them to catch up in food delivery, international expansion, etc.
