Uber is doomed


#1

Uber is doomed


#2

I never understood how drivers made net profits above minimum wage at Uber.


#3

Friend actually does it, not full time, but he retired early and is quite bored I think. What typically happens is that he is rewarded when he reaches certain milestones or say hits 100 rides per week. He gets a bonus of $500 or more(?). Don’t remember what he told me. So imagine many drivers getting paid these bonuses. No wonder Uber is bleeding cash…

The first time I took Lyft I think I asked the driver all these questions. He did it full time as a day job and came into the Fab 7x7 from DC or somewhere. He said he netted about 50-60K, which really surprised me but who was I to disagree with him.


#4

The toxic corporate culture is impossible to clean up. That’s fully baked in. So yeah Uber is doomed.


#5

11,000 employees? Wow…


#6

Uber incentivizes drivers for doing more rides over a certain number on daily and weekly basis. This helps the drivers to pick up rides that are $6-$10 dollars in total value. Initially these incentives were very high and it attracted a lot of drivers.

Uber is expanding the taxi market. I have stopped taking rental cars in my business travels to major cities in US. I am using Uber a lot personally in situations where I would not have called a Taxi. I am personally never going back to the regular Taxi.yellow…orange… black or whatever color they are called.

The article started with the premise and was trying to make a case for it all the time. Uber burnout is for its aggressive expansion in certain overseas markets where it has to start from high driver incentives initially to attract more drivers. It will taper down logically.

I have not found even one dissatisfied driver with hundreds of uber I have used so far. I usually ask this question to them, and they are sometimes surprised with the $2 billion burnout number, but most of them are making good money with Uber.


#7

What about Snapchat?


#8

Uber has so many locations where you go to show your car and if it’s approved, you are in. That takes quite of some income from their profits.

Since Uber is working on self driving cars, I keep telling you, keep an eye on the people that are going to be out of work. It may not happen today, but the future is so out there you can’t predict anything unless you posses that beautiful crystal ball telling you anything you ask for.

Uber is big in this area. I know people, both spouses doing it. Some friends have bought cars, brand new cars for that purpose.


#9

Are you sure they can do the math and factor in their expenses?

The reason people use uber is because it is cheap. They are cheap because Uber is essentially funneling money from VCs into your pocket. When that tap dries up, Uber will be the same prices as a normal taxi (if not higher).

One topic I never see mentioned is that traditional taxi fleets have a cost advantage in that they are often vertically integrated, and have their own in-house maintenance/repair. A fleet of cars (all the same), and your own maintenance garage can drastically lower maintenance costs. This option is not available to joe the uber driver.

If ĂĽber had been smart, instead of chasing the autonomous car nonsense, they would have focused on partnering with a single auto manufacturer. They should have also focused on creating their own network of maintenance shops, just for uber drivers and uber approved cars.


#10

If uber drivers are actually buying new cars, then the manufacturers are the big winners…


#11

have you seen the state of the fleet of old taxis…think about that and gauge the success and results of your argument about the in house maintenance. This is not an argument about efficiency of scale. Your reasoning is exactly what Uber is trying to avoid. They are not trying to create another local Yellow cab model.

Uber is not subsidizing every ride per. A lot of variable outflow is actually in to attract the drivers. Such as complete 5 rides between 6:00 - 9:00 and get $100 bonus. If driver does 5 rides of 10 dollars technically uber is losing per ride or subsidizing each ride. But this is just to do two things: Attract more driver, and get more people used to take Uber for things that they were not previously using Taxis for. Eventually when both sides of this markets have reached the desired state no outflow would be required. People will be using Uber at large scale and drivers will make more money by just having more business. I gave you some examples of the former. I am sure you will have more.

If they are successful in self-driving cars their valuation will go through the roof. And they dont have to be successful at it themselves. If anyone else is successful they will be able to use it.


#12

Also Uber can provide services cheaper than regular taxis. They dont maintain the fleet, they dont have to buy insurance…they have no other cost except for the payment to drivers. I am sure the even at 50% of the regular taxi fare one can make money…


#13

If Uber cuts subsidies, then will drivers still drive for them? There are a ton of services where people use their car to drive or deliver stuff. They all lose money at impressive rates.


#14

Those cars, while old and unattractive, are safe, approved, and work. It is all about doing the bare minimum to provide safe transportation with minimum maintenance costs, thereby maximizing profit (you know, that thing needed for companies to exist).

Uber is double dead, in that:

  1. they subsidize current rates and lose money hand over fist
  2. even with the subsidies, drivers barely make minimum wage, once you account for maintenance.

If the subsidies go, it won’t make any sense to drive for uber. Turns out putting 200K miles a year on your car is quite costly to the average joe.

Uber’s model doesn’t change with more scale (more drivers). The math doesn’t work at any scale. There are no fixed costs to amortize. This has been pointed out countless times for the past several years, but for some reason folks ignore it.


#15

I don’t have an opinion on either side==taxi vs. uber–except that Uber should not be investing in self-driving cars at this point. That’s research right now and research is Uber expensive. To survive, Uber needs to be mean and lean and taking over the taxi industry, not doing research. Those self-driving cars probably cost $50M each right now. In 5 years, they might be $100K each. Huge difference, and they should let someone else shoulder the bill.


#16

Yeah, but then how would they justify 60B market cap?
They are playing VC’s game.

The same can be said for twitter and square.
If jack kept them lean and mean, both companies should be running fine (but not with the current market cap)


#17

They have to lead the research. Between Google, Apple and other tech companies (not the auto companies) that are doing the research, Uber stand to gain the most. For Uber it has a direct relevance to its current business.

I will rest my case. Just to summarize, Uber is not losing money in each ride. These rides even at 50% of what the current regular Taxi ride cost are profitable for Uber. Uber is losing money as its working on expanding two sided market globally in a winner takes all scenario. Once both sides of the market level up they dont need to pay “large” incentives. They are making ~6 Billion in revenues annually and have already captured a large percentage of current market, and expanded the market as well.

Uber has a great upside and little downside. The business model works. The current bleed is for claiming the potential upside, not for survival.


#18

More than 250 people have died climbing the mount Everest. And their deaths mostly aren’t when they are going up, but when they are going down after achieving such prodigy.

I hope you find a comparison with the economy here.


#19

I was bullish on Uber until I learned of its dysfunctional and toxic corporate culture. Economics can be changed on a dime. Culture is fully baked in.


#20

I disagree. Either Uber is there to take over the taxi industry or it’s there to make a self-driving car. These are two different things. And if Google has already started down that road, why duplicate the effort? Better to let Google buy Uber once Google has developed its self-driving car to make a profit on it using Uber’s customer base. That would be a win-win situation.