[slackstation]

Sales growth in commodity product that is loosing money on ever sale? I'll never understand this. Uber won't own the market. There is zero lock-in. If Lyft is cheaper this week, I'm riding Lyft.

I sold my car over a year ago and use a mix of ridesharing and rentals for transportation. Uber and Lyft's greatest competition in my life is a small Google product where people pick up people on their daily commute to and from work and the drivers are compensated only for gas money.

Locally, there is a company that will allow you to rent an electric car for free for two hours (it has an electronic billboard on the ceiling).

In the future, cheap electricity and efficient manufacturing might make a world where rides of a certain distance would be free or extremely low cost in exchange for advertising.

Transportation is a commodity. For a short ride, I don't care that much about the differences, whether I'm sitting in a Toyota Corolla or Mercedes S-Class. It gets me from point A to point B.

In this environment, I think the VCs pouring billions of dollars into Uber are throwing their money away subsidizing Uber's leadership in commodity market. Cheaper wins. I get to choose on each ride. There's no lock-in, there's really no reason for brand loyalty. Whatever is cheaper wins. If it's free, whomever gets here first wins. If they are both available right now, it's who has the nicer seat.

This is a race to the bottom and as a customer I'm only going to remember negative experiences with the brand. Lyft is better by encouraging themed cars but, they've stopped doing that from what I've seen.

There's a good chance that Lyft and Uber might face huge backlash for bait and switching drivers when they roll out driverless cars.

I'm bearish on Uber in the long term.

[Yhippa]

> Uber and Lyft's greatest competition in my life is a small Google product where people pick up people on their daily commute to and from work and the drivers are compensated only for gas money.

When I first heard about Uber I never thought about it as a replacement for the traditional taxi system but more of this. People on the way to their destination who can take some people there. Not some guy waiting around for the next person who needs a ride.

[jacquesm]

> Sales growth in commodity product that is loosing money on ever sale? I'll never understand this.

It's almost a standard by now: lose on every sale, make it up in volume.

Joseph Heller had that one first I think.

[maxxxxx]

Can you even call this a business?

[jacquesm]

Well, there are some examples of such loss leaders becoming successful but not in a market like this.

Tesla is a good example of a company that did this.

[monkmartinez]

And there are people that think Tesla is doomed. You can't run losses forever and expect to keep the lights on. I don't know what is so hard to understand, it is simple math. They, Tesla, are not "successful" in any sense of the word as it relates to financial stability.

[Denzel]

You're conflating the basic unit economic principles of fixed vs. variable costs. And you're ignoring the breakeven point.

A company that loses money on every unit sale has no breakeven point (Uber). A company that makes money on every unit sale has a breakeven point (Tesla). Because Tesla's fixed costs are very high, their breakeven point is out there, and thus they must operate at a loss for a period of time.

Now this is a simplistic one product view. When you add multiple products and release timing to the model, the complexity increases. Not only does the complexity increase, we don't have enough external financial numbers to break apart the data per product.

Don't get me wrong, Tesla has execution risk. But financially, I'm not at all concerned. They won't fail for lack of profitability or demand, they'll fail because they couldn't execute if anything. And... well... they've been slowly but surely derisking their execution risk as well.

So we shall see.

[aianus]

> A company that loses money on every unit sale has no breakeven point (Uber)

What? Uber spends an additional ~$0 on every additional ride. They only lose money because of growth and price wars with the competition.

In mature markets with no competition (eg. Toronto) there are no driver incentives or bonuses and they are still cheap and popular with riders and drivers alike.

[petra]

There's no lock in, because Uber failed in the most important category of their business - true ride sharing, a business with strong network effect, while others(ridewithvia, ford chariot) are already succeeding with true, high-density ride-sharing, with others companies(moovex, mercedes, ..) are working on their own service.

And chariot i think started in 2014, so Uber is very slow to respond, not sure why.

[pfarnsworth]

Chariot is doing exactly the same thing as Uber, ie. subsidizing all the rides to get a low price. But they don't have the same network effects, they will go out of business soon.

[petra]

But chariot has network effects:more passengers = Fuller vehicles + shorter routes = lower costs and lower trip times.

And I'm sure Ford did the math, they're not some VC with free money.

[AndrewKemendo]

If you look at the primary ways they keep their market it looks closer to a CPG than a technology company in that it's almost 100% brand recognition and sentiment.

Totally different long term business model and why they are pushing so hard for driverless cars, because that's more of a platform.

I expect that they want to really be an infrastructure player more like Verizon than anything in the very long term where they have lock in through municipal or state mandate for contract vehicles and driving infrastructure.

Given their less than positive relationship with governments I could see a city/state starting with autonomous buses and then moving to cars in a hub and spoke type system for public transport level fares. Uber probably would want those contracts more than anything.

[unpopularidea]

Well they have been getting those contracts in a few municipalities. AFAIK no other player in this market has started signing up municipal governments to use ridesharing to supplement or replace other public transportation options like buses.

[tedsanders]

Citation please?

Is there any public information that says Uber is losing money on every sale? I'm honestly curious. In my brief searching, I haven't found much. I'd love it if someone would point me to information on Uber's finances/economics that shows their negative gross margin in developed city markets.

My mental model of their finances is heavy fixed costs (~5,000 programmers) and near-zero marginal costs. The only way they are losing money on marginal rides is if they are paying drivers more than the fare. Do they? I honestly don't know.

[dllthomas]

There have been leaks (from a while back) that show a loss in most markets (but not all). The spending involved is mostly from driver incentives, which takes some form of "paying drivers more than the fare[s they get]", but is often of the form "we will guarantee you make at least $X so long as you're online in that area during this time and accept at least y% of the requests".

[tedsanders]

Do you have links to these leaks? I'd like to learn more.

[hackuser]

> There is zero lock-in. If Lyft is cheaper this week, I'm riding Lyft.

It makes sense, but I'm not sure it works out that way. Many web services have zero lock-in (not including those with a network effect such as Twitter and Facebook) and competitors are a URL away, yet the first ones to gain (mindshare? marketshare?) seem to keep it: Google search, Amazon, etc.

[greglindahl]

Google was the first search engine? Actually, the field was crowded when Google appeared.

[jimmywanger]

Amazon was definitely not the first ecommerce site either.

[slackstation]

Google has superior search results. FB/Twitter are where all my friends are. Amazon has network effects with Prime that are more than just free next day shipping.

Uber takes me from point A to point B in a virtually indistinguishable way than Lyft or any of the other smaller ride sharing services. The most important thing is the transport, not the comfort, not the branding, not the "Lifestyle Experience". Maybe they will succeed because all of these people want something more out of a ride other than the ride but, for me it's cheap, reliable, fast; in that order. Everything else if fluff.

[icebraining]

Services like UberPool/Lyft Line do benefit from winner-takes-all effects, as the service that can keep its cars full can offer lower prices.

[sogen]

Just a note: There were many search engines with a lot of market share before Google (i.e Lycos).

[kjksf]

Yes, but not really.

Google search was the first one to find a business model for pure search (adsense i.e. advertising based on your search terms).

That allowed them to build the best pure search experience they could and was so profitable that they could spend more money building it than anyone else. That's a virtuous cycle.

Their competition at the time was moving away from pure search (because it was unprofitable for them) into yahoo-like portals, because that's where the money was (also ads but non-contextual display ads).

Which is why that's not a good analogy for uber.

In U.S. there's really Uber and Lyft. Every time Uber is discussed, "no lock-in" comes up but why no one even tries to compete with Uber and Lyft in US?

It does seem like people who actually have the money to potentially mount an attack on Uber or Lyft came to the conclusion that it would be a foolish waste of money.

Uber and Lyft have a clear business model: they are better and cheaper than taxis and have global presence (while taxi companies are historically local and don't have the capital to go global).

Customers in this market do care about price and better service, so it's rather obvious that Uber and Lyft will win over taxis (arguably they already won given that they're 100x bigger than any taxi company).

Both Uber and Lyft are still in the phase of aggressive expansion and growth, they still enter new markets, subsidize the service to increase usage density (which makes the user experience better), they experiment with things like Uber Pool, being alternative to busses etc.

None of the above is cheap so it's understandable that they loose money today.

But at some point the growth will stop, their costs will go down and one of them (or even both) will be very profitable companies.

The only thread for Uber and Lyft are self-driving cars (i.e. Google, Tesla, GM) because they'll drive costs down by 5x. Whoever wins that race wins the taxi business, which is why Uber spent $680 million on Otto and GM $1billion on Cruise and Google was apparently paying $120 million to a single individual in charge of self-driving cars.

[InclinedPlane]

Google and amazon won the market because they made a better product. Before google search was clumsy and slow, it was just bad. But people still went to search sites because where else are you going to go? Most other search sites (yahoo being a prime example of one that existed before google and still survives) decided not to try improving search (which was too hard) but rather to bolt on additional features, to make their web-site a "portal" by providing directories, other services, games, etc. Portal sites were all the rage in the late '90s. But then google came around and knocked it out of the park with a rethink of search. They took cutting edge CS and software engineering in the form of pagerank and map/reduce and married it to an equally cutting edge model for running web apps in the form of sharded multi-host metacomputers and then hosted it on a clean, fast loading page. The result was that google could produce better results faster and at lower ammortized systems cost than the competition, and the clean UI made the site more usable. Instead of taking 5 seconds per page to return a result that might have something worthwhile on like page 3 google returned a page full of high quality results in a fraction of a second. That's why they won. And it's how they made money too because they could provide more targeted and less intrusive ads (based on search terms) and they could make less money per ad while still making more money overall (because their cost per search was so low).

Amazon figured out how to marry a familiar and easy to use web-based store to a state of the art fulfillment pipeline, which is how they took over the market. Fulfillment is a non-trivial problem. Keeping track of what is where and how much is left, figuring out what to charge for shipping and handling, and figuring out where to keep stock and how to produce orders. A typical web-based shop will get to your order in one or two business days and be able to put it in the mail maybe that day or a day later. Amazon figured out how to optimize everything about their systems to be able to get your order in the mail within hours of you placing it. They've consistently been improving that process for years, and almost nobody can keep up with them. They can achieve same day delivery on a lot of common items in many metro areas, for example.

If Uber was as superior to the alternatives as Amazon or google was they wouldn't have any problems keeping marketshare. But they really aren't that much different than Lyft or other ride hailing apps. The core valueadd comes from being able to use a smartphone to set up your ride instead of having to place a call or having a cab be immediately visible to you. There's not enough that Uber brings to the table otherwise which would allow them to keep their business if they couldn't subsidize fares using VC money.

[nickbauman]

> Uber and Lyft's greatest competition in my life is a small Google product where people pick up people on their daily commute to and from work and the drivers are compensated only for gas money.

The Who's Driving app is great for this kind of thing.

[nebabyte]

*losing, every

Yeah, it's actually kind of amazing how many 'traditional' checkboxes Uber seems to miss with its 'rapid growth'. Little network effect lockin, low (ish) barrier to entry (with the hardest thing being brand recognition, with news of new/cheaper/'better' ridesharing plats potentially spreading like wildfire), opportunistic customers (and even drivers) without brand loyalty.

If Kalanick implements some sort of amazing plan to pull them through despite all of that (not counting the moonshot of expediting SDCs into the market) he'll be a walking testament to the whole 'market doesn't care who you are as a person, but if you can get the job done' maxim.

I'm not necessarily bearish - I'm not expecting an upset like that, but I'm not particularly invested in Uber so am more keeping an eye on it for the entertainment than anything.

[ikeyany]

> There is zero lock-in.

They're fixing this. You buy 100 flat fares that you can use over the next 6 months, then you're more or less locked in.

[slackstation]

I tried that with Uber. It was great, everywhere I wanted to go for a month for $1.99 per ride $40. I saved a FANTASTIC amount of money that month on Uber and I used the hell out of it. As soon as it was over, I went back to checking Lyft again.

I'm sure they lost even more money on me that month than normal.

[changdizzle]

what's the electric car company??