[HappyTypist]

I just do not understand how ridesharing cannot turn a profit. Let's look at unit economics:

~25% take rate on a ride ($15 average): $3.75 take

Payment processing: 2.5% + 30c = $0.68

Servers / datacenters: $0.20 (for a margin-sensitive business, you should be colo'ing your own servers, or using cheap alternatives like OVH/Hertzner)

Customer support: Automate as much as possible (auto refunds up to a certain point; for lost items, connect directly to driver); assume 1 in 50 rides require manual human support with a $3 cost = $0.06 support cost per ride

Fraud/refunds: Assume a 2% fraud rate that cannot be reclaimed; thus $0.30 cost for fraud. Refunds for things like driver purposefully took a longer route can be clawed from the driver.

Gross COGS: $1.24

Gross profit: $2.51

What am I missing?? Marketing? Fuck marketing when you can't turn a profit. Everyone knows about Uber or Lyft already, you need to turn a profit, not waste $30 per CAC.

[dsr_]

You're missing roughly 30,000 employees to run a service that, at steady state, probably needs about 30 software developers and a few hundred second or third level customer support folks, with first level being handled by outsourced local-language companies.

And then there's Uber self-driving. Uber AI; Uber electric airplanes. Uber freight, Uber restaurant delivery, Uber grocery delivery, Uber this and Uber that. Oh, and Uber scooters.

[polote]

The Uber app alone would probably need much more than 30 developers, see here : https://news.ycombinator.com/item?id=25376346

[michaelt]

A lot of that is optional complexity, though.

Uber eats? Scooter integration? Mass transit support? Scheduled rides? Commuter cards? If you were building the app with 30 developers you'd simply not bother with those features.

[faeriechangling]

I can only see giving up on Uber Eats as being foolhardy, that is a profitable business with a solid business case, yet lacking those other features would not really cause me to prefer traditional taxicabs telephone dispatch over using an app.

There's legitimately a reasonable argument that Uber rides has a worse business case than Uber Eats. If I were in Uber's shoes I would be clinging onto both.

[thoughtstheseus]

Delivering time sensitive goods from many locations to many other locations is not an easy business model. Especially when you do not control the provider of the sensitive goods or the delivery provider.

Logistics is a tough business so I’m bearish on Uber eats.

[puranjay]

> that is a profitable business with a solid business case

I reaaaaly wouldn’t assume its a profitable business unless you get some data from a few “normal” (i.e., not pandemic impacted) quarters.

Delivery is the first thing people will cut down on if we get a recession as well

[thawaya3113]

Isn’t Uber Eats their most profitable business.

At least that’s what Uber recruiters would tell me when trying to recruit.

[disgruntledphd2]

Most profitable business for an overall loss making company doesn't say much.

[shukantpal]

Why are you ignoring the regional differences & the other stuff listed above those points in that post?

[missedthecue]

Companies like eBay have a global footprint and send/receive money in dozens of countries. eBay has apps for all devices and a website.

Uber has 3x the headcount as eBay.

[aeyes]

eBay looks like a platform that is at least an order of magnitude simpler: No realtime data streams like GPS updates, no matching algorithms, no demand-based pricing or incentives, no ETA calculations. Uber is operating in the real world which means that weather, traffic, protests, construction, events and so on affect the operation.

The eBay business requires no boots on the ground, Uber Eats does because they have to equip riders. And eBay has almost no market-specific laws/regulations which change every couple of months to worry about.

I think eBay doesn't process payments, that is outsourced to PayPal.

It looks like eBay is in about 25 markets, Uber is available in 85 countries.

Serious question: Why does eBay have so many employees? It's just a search engine for a user generated product catalog where users can place bids on the items. My guess is that most Uber employees aren't high-paid developers, it is more likely that they are in support roles.

[true_religion]

eBay can get away with relying on third parties for advertising, selling, and transporting goods. They are just an online marketplace.

Uber has to market themselves which needs local expertise, if nothing else to liaise with a local PR firm. Then they need local legal expertise to actually operate in the country (eBay transactions happen online, and the transport agency hired by the seller figures out how to get the package to its destination). Uber then has to have maps for every country it operates in, as well as change their standards to match local expectations.

[robryan]

eBay is arguably a bad example because they sure could do with a proper overhaul of their software that is halfway modenised with a bunch of rough edges accumulated over decades.

[michaelt]

I will agree that 'receipts' is part of the core product and should be retained. I didn't mention it because I'm sure we can agree it's within the capabilities of a 30-person team!

I ignored the other stuff because I don't know WTF "pickup special cases" or "on-trip experience business logic" or "growth features" are. So I'm not informed enough to guarantee they aren't part of the core product offering - although you can probably guess my intuition on the matter.

[yourapostasy]

This kind of "how hard could it be" analysis is what causes people espousing it to go surprised-Pikachu-face when their nose is ground into fractal complexity requirements. The closer to the coalface you get, the more "huh, who would have thought?" is murmured. A huge chunk of this comes from only thinking about happy path logic in one setting.

The software that runs the world and gets actual work done day-in, day-out behind the scenes, is riddled with edge case handling. In really mature codebases impacting many stakeholders (not just direct users), the product team can categorize 1% or less of the stakeholder population by a tiny fraction of a commonly-used feature set they use. On that basis, the coding and maintenance effort for the edge cases can sometimes outweigh the sliver of features used by that sub-population of stakeholders.

We aren't talking about a web scraper or run of the mill DevOps here. Anytime you work with lots of business rules in multiple jurisdictions impacting the same processes, the edge case counts go up rapidly, and combinations of processes that you never thought would intersect but are forced to by specific jurisdictions also appear more frequently.

[2OEH8eoCRo0]

That's interesting. Because of the aggressive expansion from VC money they now have too much bloat making it more difficult to be profitable.

[kevin_thibedeau]

Scheduled rides are sort of important where driver availability is low. Not everyone is in a major city.

[kylehotchkiss]

Scheduled rides never actually allocates a driver for me; just a time range and it books a normal ride right when that range starts. Then the driver comes late!

[hyperbovine]

Just like Twitter is one guy hacking on RoR for two days... we've heard this old canard before.

[Barrin92]

Whatsapp used to service 900 million users with literally 50 engineers. Instagram had 13 employees when it was acquired. The old canard is true if you focus on a core product and make smart architectural choices. (in Whatsapp's case they credit a lot of their efficiency to Erlang).

[1]https://www.wired.com/2015/09/whatsapp-serves-900-million-us...

[bradlys]

Simplistic messaging apps aren’t really a good model to run off of. Designing WhatsApp and Instagram are common system design questions because they’re trivial in comparison to design Uber/Lyft, etc.

[DeathArrow]

Even Waze isn't complex enough to compare with Uber. Waze has to process real time data but doesn't have to deal with processing payments and complying to regulations worldwide.

[CaptainZapp]

Could it be that introducing compliance at a later stage in development is just that much more expensive?

That's after shitting on compliance for years as part of your business model.

[websap]

Don't conflate scale complexity with business complexity

[phillipcarter]

There's a bunch of reasons why this model doesn't hold up in the long run, and I'll give one of them: accessibility. Once your business decides that your app must be sufficiently accessible to reach the many people who need accessibility work, your backlog explodes.

[MacsHeadroom]

So ignore accessibility. It's not a legal requirement and it doesn't pay.

McDonald's restaurants have handicap accessible ramps but they don't staff ESL speakers. Apps and web services are no different.

Clubhouse, for example, isn't accessible to the hearing impaired and that's ok.

[XorNot]

Technically it isn't: if you run an American business, you are subject to the Americans With Disabilities act as it is pursuant to electronic services [1].

Uber specifically would definitely fall under a "public transportation" service - accessibility is non-optional if someone decides to sue. [2]

[1] https://www.ada.gov/2010ADAstandards_index.htm

[2] https://www.businessnewsdaily.com/10900-ada-website-requirem...

[NickRandom]

>> So ignore accessibility. It's not a legal requirement and it doesn't pay.

Firstly that is just plain incorrect in a lot of areas (of business) and jurisdictions. Secondly your outlook on accessibility is just ... SMH and walks away from keyboard.

[DrJokepu]

says who? accessibility is not that hard to achieve if you know what you're doing and make efforts from the very beginning to build your product in an accessible fashion

[dwaite]

The problem is that accessibility is not a common high priority requirement for most software, making people with accessibility experience rare.

[phillipcarter]

Show me a single piece of successful software that didn't suffer the "new business requirement upends everything about how we built it" problem.

[DeathArrow]

And MS Notepad is servicing billions of people with one engineer.

Do you think complexity of Uber is comparable to that of Whatsapp?

[TuringNYC]

>> Whatsapp used to service 900 million users with literally 50 engineers. Instagram had 13 employees when it was acquired.

There is a big difference here -- revenue. Real transactions. Financial reporting. Country-by-country regulations and reg reporting.

[pessimizer]

Yes, it would be impossible to do something as complex as the Uber app with only 10,000 employees. Better to run the company into the ground.

[redisman]

It’s just some text on the web! And they wonder why software engineers are bad at estimates

[jlizzle30]

> 30 software developers

- iOS rider app

- android rider app

- iOS driver app

- android driver app

- ride/driver matching

- routing/supply

- security/compliance

- fraud detection/prevention

- backend rides services

- backend user services

^ 10 teams of at least 10 people off the top of my head. Amazing how underestimated engineering resourcing needs are.

[nradov]

Plus all the back end billing and payments, including integration with some third-party enterprise expense management systems.

[StillBored]

https://www.google.com/search?&q=android+ios+cross+platform

Wow that was easy.

[cudgy]

If it only was so easy …

[StillBored]

Well, the google results when I initially posted it didn't even bring up the choice I would probably use (again). Which is C++ and either a custom hand rolled platform abstraction layer, or maybe something like QT if the application were UI heavy. Which from what I can see of the uber app isn't.

That is because its very well supported on both platforms, and one of the few language ecosystems that can actually create native looking/acting applications on both.

Yes, the initial development may be a bit slower, but that is common with C++ because what the smart people are doing is usually creating an application specific "language" out of C++. Then once that core bit is done the actual development would probably outpace many of the other choices. I've done this a couple times with native development toolkits, the "customer" in one case was really questioning how much work was actually going on when 1/2 way through the contract it barely had a single "screen" in a data collection/reporting application working. But, then another few weeks went by, and literally in the space of about 2 days the application went from looking like it had just been started, to being basically feature complete. That is because the C++ engine was complete and it took ~12 hours to fill out the few 10s of thousands lines of boilerplate ui descriptions that actually formed the UI (in that case it was a custom textish/declaritive application description language, most of the c++ code was parsing it and doing layout/drawing in response. Super happy customer too, once they understood that their inhouse "IT" people could update/change the app with little more than a text editor against some fairly simple to understand rules).

And many of the functions the GP was asking about are the kinds of things one could contract out. Aka, why not just use google maps API for the routing/etc.

Frankly, given what I saw a couple years ago when I went poking around in the iphone app store, it seems just about every region taxi company had reimplemented large parts of the uber interface in their own apps. Maybe not always as slick, but the core parts were in many of them, and I doubt random regional taxi companies can afford the engineering effort uber apparently is spending on.

[onlyrealcuzzo]

IIUC, Uber employs 2000 engineers. I'm not sure how that's only 6% of the company.

If you're looking to trim fat - surprisingly - there might be better opportunities outside of engineering.

[TuringNYC]

>> You're missing roughly 30,000 employees to run a service that, at steady state, probably needs about 30 software developers and a few hundred second or third level customer support folks, with first level being handled by outsourced local-language companies.

This comment is insane for any real app in the real world transacting in real dollars. There are a hundred countries with 100 regulations. Accounting/P&L/bookkeeping for the United States ALONE would take 30 developers for a revenue base this size.

[hoppyhoppy2]

FWIW Uber sold its autonomous vehicle research division in 2020. https://www.npr.org/2020/12/08/944337751/uber-sells-its-auto...

[spoonjim]

LOL. Just regulatory compliance will be more than 30 software engineers.

[tyingq]

From Uber's Q2/2022 report:

  Revenue                     6854
 
  Cost of Revenue             4026
  Operations and Support       574
  Sales and Marketing         1263
  Research and Development     587
  General and Administrative   632
  Depreciation & Amortization  254
  Total Costs                 7336

[fishtoaster]

I wonder (and am too lazy too try to find out) what portion of sales and marketing is driver-focused. One could maybe argue (as the grandparent did) that they should be spending less on rider marketing, but marketing to get drivers in the door seems pretty important. Dunno what their driver churn rate is, but keeping the pool of drivers large is critical for their service.

[frankfrankfrank]

From what I’ve come to understand you are right on the money. All these “sharing economy” models rely heavily on churn and burn like many other less than solid business models like MLM.

I would love to see the breakdown of drivers and their immigration status, because from what I can gather, what is happening here is not any different than in the past of America’s history where the whole business model relies on the exploitation of “immigrant” labor that knows no better and is easily exploited, aka their unrealized labor value is converted into profit, or better states, benefits and riches for the executives.

[bushbaba]

I wouldn’t assume immigrants “knows no better”. More likely if they don’t have a better opportunity available. Especially if they are not on a visa.

[jelling]

Bingo. Andrew Chen, formerly of Uber, says exactly that in his excellent new book The Cold Start problem. The driver side is the hard side of the market and must be constantly tended.

[redisman]

Interesting because the taxi business had all that figured out already. It was a profitable business and drivers stuck around for decades. Does Uber have too much overhead to ever be profitable?

[ceras]

The taxi industry had it figured out only on a smaller scale. Rideshare reaches more people and rides than taxis did. In most of America, taxis were never a serious option outside of niche use cases like getting a ride from an airport. Even in NYC, where street hailing is possible, that only ever really worked in Manhattan (and not even all of Manhattan); and medallion caps meant driver supply could never fully meet rider demand, unlike for rideshare, so getting drivers wasn't a realistic problem.

Rideshare expanded the reach of taxi-like services to more regions, people, and use cases. It's now viable to travel without renting a car in many US cities - you can see this by how rideshare affected rental car companies. That's what makes the rideshare business hard: the places where they didn't have existing competition, because that's where the matching is harder and the economics not as easy.

It's a similar story for food delivery: GrubHub/Seamless operated in core areas of cities like NYC for many years (since the 90s in NYC, I think). Uber Eats brings that service to far more places, and that's where the challenge comes from in that business.

[DeathArrow]

>Rideshare expanded the reach of taxi-like services to more regions, people, and use cases.

You don't need rideshare for delivering service to large areas.

In my country we have a taxi app which can be used by any taxi driver. If you request a drive, your call can be seen by all drivers which are at a certain distance from you. That distance can be se by each driver.

One or more drivers will reply to your request and you get to pick the driver.

And you can either pay directly to the driver using cash or card or you can be charged through the app.

The fee for the drivers is very small so almost all drivers use it.

And the money are not subject to tax evasion, they stay in the local economy. Taxi drivers have wages, social insurance, health insurance and pension funds. They also have a valid license to transport people and are regularly checked to be able to hold that license.

No Uber needed.

[monocasa]

I mean, I used plenty of taxis in towns down to 90k population before Uber was a thing. Uber doesn't seem to drop much below that either.

[airstrike]

Didn't drive stick around because they dropped thousands on medallions?

[mattzito]

Depends on the city/locale. In NYC most drivers don’t own their medallions, they drive shifts for someone else’s medallion.

In fact I’ve had a lot of conversations with Uber and taxi drivers who started as taxi drivers, switched to Uber when the bonuses were lucrative, and then some of them switched back because they liked the predictability of a fixed shift and not being ordered around by a machine. Others felt exactly the opposite.

[kristjansson]

Sales and marketing should be labeled price discrimination. It’s all incentives to match driver earnings and rider costs to respective minima (maxima).

[pid-1]

What does Cost of Revenue means?

[Izkata]

> The term cost of revenue refers to the total cost of manufacturing and delivering a product or service to consumers. [0]

It sounds like "developing the core product" falls entirely under this bucket, so with what others are saying about what falls under other buckets is right, then the one that looks most cuttable to me is actually "Research and Development". That sounds like the "experimental new stuff that may go nowhere" bucket, and if it's eliminated it would also put them just above break-even. Maybe they could focus on improving profits for their core product for a while before bringing that back.

Maybe there is necessary stuff included in it though, which I guess means that wouldn't be an option.

[0] https://www.investopedia.com/terms/c/cost-of-revenue.asp

[spookthesunset]

All tech companies put most of their engineering under “research and development”. It lets you capitalize your expenses and smear them out over many years.

[poppytaker]

Kinda, they can classify the activity of the engineers project work as r&d, and capilise the appropriate amount on the balance sheet (i.e. does not show under r&d expenses). Over time that would then be shown as depreciation, not r&d. You can't captilise an engineers time that is maintenance work.

A quick look at Ubers annual report states they do not capitalise r&d costs and instead expense it as incurred.

[spookthesunset]

Exactly. I just wasn’t about to write in all the details.

[ToFundorNot]

Cost of revenue is mostly insurance costs [1].

If you look at their financials, they show gross bookings, which include both the full billed values for food and delivery, and transportation of people. Revenues only show their share of that total.

In regards to incentives, it looks like a complicated question, I found an interesting outline[2]

[1] https://seekingalpha.com/article/4293755-insurance-primary-b... [2] https://news.bloombergtax.com/financial-accounting/rideshari...

[drc500free]

Cost of Good Sold is the variable cost most directly associated with bringing in the revenue. So the raw materials for making a physical product, or the salaries paid to service workers who are billed out hourly. Anything that is strictly mandatory to create the product or service.

Cost of Revenue goes a step further, and includes the next layer of costs that are necessary to cause sales to happen for a given product/service line in a reporting period. That includes things like sales and marketing, and distribution. Basically anything that would cause the revenue to stop coming in fairly immediately if it wasn't done.

Neither includes R&D to create the product/service in the first place, or general overhead.

[tyingq]

Mostly the payments to drivers.

[oneoff786]

The payments to the drivers not including all those other ones hidden away in other promotions

[mjevans]

Slash Sales and Marketing by 50% and they'd be profitable.

[onlyrealcuzzo]

Marketing is not what you think it means.

It's a clever way to disguise their unit economics to look better.

Their marketing budget is mostly going to pay drivers.

Put another way - you could be saying - why not pay drivers EVEN less? Well, they're paying them the least they can already. You can be sure of that.

If they did actually paid the drivers more and not disguise it as marketing - then their unit economics wouldn't look good - and when the business as a whole doesn't look good either - that's not a good look.

[DeathArrow]

But if they use the marketing budget to pay drivers or to subsidize rides, aren't they lying about the financial state of the company?

[frankfrankfrank]

They can’t, that “S&M” is heavily focused on getting low information drivers into the service by smoke and mirrors about how wonderful it is to drive for them. They have to keep the rate of influx of new drivers at least above the rate of people realizing what a bad deal it is for them, aka churn.

[josefx]

If I remember correctly they spend a lot of money on marketing campaigns against any law that could hurt their business model. So slashing marketing might actually hurt them even more.

[underwater]

Sales and marketing affect revenues, you know.

[robertlagrant]

"Marketing is crucial" is the most important marketing message.

[tomrod]

Typically not enough to offset 50% of budget once the brand is known.

[underwater]

Isn't the product already built? Why are they continuing to invest in R&D?

[endisneigh]

based off what?

[mjevans]

At this point who hasn't heard of Uber?

They only need some occasional reminders that might be targeted at the few people that haven't used or heard of friends or family using an Uber before.

[tyingq]

Fyi, should say Q1/22, the report from March/22.

[obblekk]

You've missed the following:

Take rate ~40% = $6

- payments -0.7 (correct)

- servers -0.2 (correct)

- refunds -1 (driver is indemnified, not in cabs)

- shared rides -1 (on avg, not in cabs)

- insurance -1 (drivers and riders get generous insurance, not in cabs)

now we have $2.5 per ride to pay fixed costs, not including marketing. in reality, they also give out generous marketing coupons to riders which cabs did not do. $1 per ride on avg discount drops us to $1.5 per ride.

it's probably true that 100 engineers could sustain uber in the US without any new features. 100 * 500k payroll cost = $50M/yr = 33M rides per year.

Lyft alone did >300M rides per year. Uber and lyft combined would be a solid company able to sustain and be profitable. This company would provide a way higher quality service (and safer, and more insured) than it replaced, without monopoly profits being captured by rich medallion holding families.

However, uber and lyft are still pouring money into product development. Shared rides as an example, still hold the potential to improve everything in cities massively. Lower cost than taxi, faster than bus, less congesting than private car.

Both also seem to be expanding outside of ride share, which should be viewed like amazon expanding to aws 15 years ago. if it works, there could be hugely positive impact. if it doesn't, then it's a massive waste of shareholder capital.

¯\_(ツ)_/¯

[arrosenberg]

> without monopoly profits being captured by rich medallion holding families.

Then we'd have a(n) (inter)national tech monopoly. Soooo much better.

[tonyhb]

Uber's take can average ~45% depending on the day: https://missionlocal.org/2021/07/as-rideshare-prices-skyrock...

I agree and am not quite sure where it's going (other than software).

[throwoutway]

They have nearly 30,000 employees, mostly SDEs from what I understand. Its been discussed (and rationalized) here, but I still don't understand how that many are necessary. I read somewhere else that their engineering tend to need to rewrite their software every two years to keep up with the scale, so maybe they need them? it still seems insane to me.

Lyft only has 4500 employees

[ProjectBarks]

Uber has 3500 ish engineers. Then a huge amount of operations personal.

Best source I could find: https://www.themuse.com/profiles/uber/team/engineering

[mathgladiator]

This blows my mind. I used to use Uber a bunch, and I built relationships with drivers such that I could just text them and get a ride at a certain time for a discount.

Ultimately, I wonder if Uber is prime to be disrupted if drivers got together and funded a few engineers to build a city-scale service for the hailing and payment aspect.

[nobody9999]

>Ultimately, I wonder if Uber is prime to be disrupted if drivers got together and funded a few engineers to build a city-scale service for the hailing and payment aspect.

Apparently a whole bunch of folks are trying to do just that.

I was going to provide just one example, but a web search[0] shows a whole bunch of these efforts in a variety of locales. As such, I just provided the web search results here.

[0] https://html.duckduckgo.com/html?q=ride%20share%20cooperativ...

[noirbot]

Austin had that for a while when they went and banned Uber/Lyft. They were... ok? The issue ends up being that it's hard to be a one-city service that's mostly used by people who don't live in the city. If I arrive in a random city, the last thing I want to do to get to where I need to go is have to search for which app I need to install and give my CC info to in order to get a cab.

NYC used to have Juno, but it went bankrupt in 2019. I feel like if you can't run a single-city rideshare app in NYC, you're gonna have a hard time doing it anywhere else.

[dopidopHN]

2 city unions did that in France. In marseille and Lyon.

Last time I tried the Lyon app it was barebone and not really up to par with Uber by a large margin. But still.

[nerdponx]

My impression is that this is what the Curb and Arro apps were supposed to be. I don't know anybody who uses them.

[robertlagrant]

Some cab companies are doing this. Oxford has Royal Cars and a couple of others.

And they're...okay. I think they all use the same white label technology to make their apps.

[janejeon]

Already happening in NYC w/ Curb, though many (like me) are staying the fuck away from it and sticking w/ Uber/Lyft. It's a matter of trust and operational complexity (that's not easily "solved" from the ground up), imho

[rockarage]

It can turn a profit, but not the sort of profit the investors and top stake holders want i.e. Microsoft and Google type margins and profit.

[seydor]

But then Uber wouldn't be a Tech Company, they would be another lowly profitable company.

[StillBored]

The uber/swift rewrite thread from a couple years ago is highly informative of the company "engineering" culture.

The kinds of decisions taken for granted by the hacker news thread/etc are the kinds of decisions that could sink a self funded company, starting with the fact that they are basically writing multiple copies of the application for each platform (ios vs android) and going from there. This is maybe the problem with VC funded companies (like government contracts) the money just keeps flowing independent of all the bad decisions being made. Also, having enough engineers that whole teams can be split off to rewrite the application for no appreciable benefit except to peoples resume's is itself an upper mgmt problem. If the goal was a single unified application I might see how something like that could be justified, but they choose technology stacks that are to native for that to work.

[puranjay]

What happens when VC money stops flowing in? Do all these unprofitable companies collapse?

[paulcole]

> What am I missing?

Don’t forget about lawyers, compliance, lobbying, lawsuits, etc., etc. It’s also likely your assumptions are very wrong. Just think about what will happen when people figure out you auto-refund everything below a certain point.

> Fuck marketing

Possibly the bravest thing ever said on HN.

[criddell]

Uber has a compliance department?

[tempest_]

Of course?

How else would they know which laws in which locales are most profitable to skirt.

I am sure AirBNB has one for the same reason.

[Barrin92]

>What am I missing??

Competition. Part of Uber's biggest expenses is "driver and customer incentives" which is corporate speak for bribing people to stay on the app. We know from economics that competition drives down profits and rid hailing services are a dime a dozen.

[rzz3]

You’re missing the cost of engineering, for one thing. Also “host Uber at OVH” isn’t remotely realistic.

[onlyrealcuzzo]

For a simplified version of the app with arguably no worse user experience, it's not THAT farfetched.

Uber has an absurd amount of logging & analytics.

If the app was simply drop a pin, get a ride - it wouldn't be that crazy.

Uber has 3.9M drivers world wide. There's probably very rarely more than 1M drivers active at any time. Probably less than 300k people looking for a ride at the vast majority of times.

Assuming you can update the driver's location 1 time per minute - that's ~1.5B requests per day - less than 25k requests per second (including user bookings).

That's like ~2TB of bandwidth per day. That's less than $200 per day. Almost everyone spends more than 5% of their cloud bill on bandwidth. Meaning, the rest of a drastically simplified (but nearly equally useful) Uber could run for ~$4000 per day in server expenses.

That's a $1.4M / year data center. Uber has revenues of >$11B.

They could be making a lot of money. They just aren't because they're spending AT LEAST 50x more on servers and product engineering than they NEED to.

They paid for growth for a long time. They have a monopoly now. There's not a lot of growth left to get. At some point the axe will come down.

Lyft is even worse. They're ~1/3rd the size.

[isatty]

It just does not work that way. I was an SRE at a similar company. You need driver locations, passenger locations, cost calculators (including ML models), ads serving, respect user preferences, geofencing, ride sequencing, analytics, compliance, fraud detection (you'd be surprised at the amount of fraud and clever tactics people employ). This is just a very minimal set of services (I'm guessing <10% of what you need) and you need to run this somewhat reliably.

Cost of revenue in just terms of infrastucture was measured in $/ride and minimizing it reliability is difficult, especially if you're a fast growing startup and on cloud providers. Unfortunately, if you're a fast growing startup you also don't usually run bare metal (even though I'm a fan of colo/OVH/Hetzner).

Don't forget that money used to free, with the way interest rates and investors were. It's far more difficult cutting down, than it is to throw money around, obviously.

[DeathArrow]

You need all of that if you try to complicate things. Otherwise you can get 90% of the money for 10% of the effort.

You can have a fixed rate. Fraud detection is a problem that thousands of apps requiring in app payments solved it somehow.

You don't need to have 1 million features, you only need to have the features demanded by the people who will make you most of the money.

[frankfrankfrank]

It’s also a denial strategy. The bleeding edge that also forces your competitors out of the market because they cannot get past the network effect and name recognition hurdle is worth its weight in gold.

Most people will say they’re going to get an Uber, even if they end up having to use Lyft, no? Ubers, as well as others’, expressed strategy has long been not only first mover, but also monopolization of all aspects of their space, expressly anti-competitive. Part of that is not only being the leader, first to mind, but also draining the enemy/competitor’s resources and undermining their efforts to even challenge you. It’s a total market domination strategy that shouldn’t even be allowed, but they’ve also paid off politicians and captured government in other ways too, so don’t expect anything from there either. There used to be other ride sharing services, I don’t even know if they exist anymore, but even before the Great Monopolization, aka COVID, they were barely scraping by on crumbs in a few local markets while the likes of Uber worked in basically every market, especially in the high spending business travel and entertainment segments.

[DeathArrow]

Maybe that was their thinking? Have massive loses while killing all competition including taxi drivers and capture the market and after that just cut features and jack up the prices while paying less money to drivers?

Fortunately it haven't worked. But could it work assuming the VC investors would be able and willing to pour much more money into it?

[GauntletWizard]

You're way overoptimistic in your expenses calculation - Maintaining a "real-time" app is 100x more complex than that.

100x, bringing their opex to hundreds of millions on billions of revenue. They should still be able to cut the fat and actually turn a handy profit, but they won't.

[onlyrealcuzzo]

No one needs real-time (above 1 minute) driver locations.

Riders never see the driver's location before booking.

Uber doesn't need the exact location to get a decent match.

And anyway - they send the ride to several drivers and the lowest / first bidder wins.

[edmundsauto]

What is the set of information that makes you say this? Because I would put money that Uber's data team has run an experiment with lower realtime status updates (realtime is expensive, these companies aren't filled with idiots, they test things). And based on that, I think it's reasonable to assume that critical metrics are negatively impacted by not having realtime updates.

So I'm curious if you have any knowledge, or if what you are saying is "I don't need realtime", or perhaps more charitably, "I can't imagine realtime being valuable to users". I push back on the 2nd, and I strong push back on the idea that someone with can reach the conclusion that Uber is wasting money on things that don't drive user value.

Unless, of course, you work/worked there and worked on these projects, and saw firsthand that Uber decided to waste a bunch of money internally.

[DeathArrow]

Taxi apps in my country have real time updates. I can see the taxi on the map and every turn in makes to get to me. The driver can also see if I move.

And it's clear they didn't employ anything like Uber massive work force to do that.

[lumost]

In a major metro like Boston 1 minute further down the road could mean a 5 minute longer wait. I think your point stands however with 6x traffic increase to once every 10 seconds.

[onlyrealcuzzo]

You only need to update the location if the driver is moving. IIUC, most drivers are stagnant while they wait for rides.

They're in the business of saving gas. Not cruising around idly while they wait for a ride.

Sure - some drivers are finishing a trip nearby. But you know the route they are taking...

[nathanvanfleet]

Surely you don't think a modern and complex app requires just a single API endpoint that triggers once a minute? And that it's that simple a thing for the driver/ passenger?

[onlyrealcuzzo]

Surely you don't think there's another endpoint that's getting hit an order of magnitude more to change the point?

Multiply by 3 for redundancy & availability. Multiply by 3 for other endpoints. You're not even 10x...

And this was not Uber as it exists. This is a simplified version of Uber that gives the user a nearly equal experience.

[DeathArrow]

I wonder why all backends are now web based even if the frontend apps are not web based?

If someone does a mobile or desktop chat app (think Whatsapp or teams) he will use web technologies on the backend. But IRC is very old and still works like a charm without using web technologies.

Likewise, if email was invented today, it would be just calling some REST api instead of using SMTP.

When I worked as a game developer, the server side of our games was a slow and ineficient PHP crap becouse the founders were friends with a PHP programmer. I had to jump through many hoops to mask huge latencies from web server or even the web server not replying at all.

I think using web for anything can add a massive overhead.

I can see the advantage of the web, though. You don't need to implement a server, you just think in terms of HTTP requests and the framework will transform those for you in data and transform the data back into replies.

But if you need something real-time you have to use web sockets, and at that time the simplicity goes away and you can use OS sockets just as good.

I am arguing that using web frameworks for an app which won't have a web fronted adds almost the same kind of overhead as using Javascript for mobile and desktop apps. It's doable, yes. It's the best usage of resources, no.

Normally I should be the last one to complain since I architect and develop web apps for living.

But I do like efficiency, I think that sometimes many layers of virtulization, abstraction, indirection, protocol encapsulation are hurting both the performance and the speed of the development.

And I also know how to develop a server side app without using an HTTP server and a web framework.

I wonder if the root of the problem is that apart from the the people doing mobile apps, the rest are mainly learning a frontend or backend framework and they can't do or are not willing to do anything besides that. Or, even worse, new developers are just learning dynamic laguages such as Javascript or Python or PHP which catters mostly to the Web.

If you only have a hammer, everything looks like a nail.

When I had to design a tool to masquerade the real people data in our microservice based app, everyone from my team was amazed I wrote a console app instead of a Web based application. But since there it wasn't a need for that tool to be called through an API, why should I have made it a web app? Just to use curl instead of command line arguments?

[HappyTypist]

Okay, OVH is not realistic, but at Uber scale, you can certainly roll your own data-centres and get costs lower than, or similar to OVH, even when including the cost of sysadmin and maintenance.

Yes, it means you won't get all the shiny quality of life services offered by cloud providers, but you're in a _margin sensitive business_. Deal with it. Optimize every cost.

Also, you don't need expensive engineers re-inventing the most basic things (I know Uber had a huge not-invented-here syndrome). Use the boring tools for the job. Only reinvent what is necessary. You don't need engineers practicing resume-driven-development.

[bthrn]

Uber does use its own data centers.

[boatsie]

You’re missing very large categories like G&A, R&D etc but just look at their most recent SEC 10K or 10Q filings and you can see where the money goes.

[hyperhopper]

I don't think he's missing that. Why does an app to connect drivers to passengers that's been around for a decade need R&D?

Now this is not about self driving or whatever else, it's about a ride hailing app. The point is there is no reason ride hailing can't be profitable.

Now, using any company to prop up r&d and investor hype for a moonshot, that's a whole other idea...

[quickthrower2]

Marketing. At first people needed to know about Uber. Then they needed to trust Uber. But now they need to carry on using Uber instead of the competitors.

I think if the tech investment bubble bursts (if it is a bubble) then this makes it easier for Uber in terms of competition as ride prices will tend towards the original "Taxi" prices and people will have to get used to that. And then Uber can make their profit (and also the drivers can make a reasonable living).

[DeathArrow]

In my country Uber is more expensive than taxis. Sometimes much more expensive during rush hours or busy days or holidays. A lady I know payd 10x the price for a taxi ride because it was new Years Eve.

[oneoff786]

Are these numbers made up? Everyone is pointing out the indirect costs but I suspect that’s only a piece of it.

A big chunk of that $15 goes to driver incentive promotions. Not the steady state cost, but the sign bonuses and what not. Given high driver churn, this is always a big line item.

Google first result says just 3% of drivers drive for them for more than a year.

[bushbaba]

Colo of servers might not be cheaper. Either way the server cost should and could be minimal per ride.

[robbiemitchell]

Legal, finance, HR, R&D, facilities, comms, support, endless vendors for all of the above…

And no, you can’t just automate support. Refunds are not the only issue.

[uh_actually]

You're missing insurance costs, which dwarf payment processing, fraud, and support.

[thawaya3113]

The 25% take is likely only in their best markets.

Most of their markets are terrible markets.

[hackernewds]

driver cost is a lot more than $3.75. you think really drivers are working for 75% of a $10 ride per active hour? they're publicly measured to make 4x that

[hyperhopper]

He said Uber is taking 3.75. that means the driver is getting 11.25.

You flipped the values. The driver is making a bunch, and that's per ride, not per hour

[eden-alpha]

Insurance?

[briandear]

> Marketing? Fuck Marketing

Do you have an MBA or other similar business experience? Because you can’t “fuck marketing.” Without marketing you have no business. How are people going to find out about your product?

[DeathArrow]

How did people find out about Google, YouTube, Facebook, Whatsapp, Waze, Instagram, when they have started?

I think it was because they provided an unique service and word of mouth was enough.

I remember when Gmail was in beta. There was no marketing. I was fortunate to receive an invite and once I get 5 invites, friends were begging me to send them one.

[jitix]

Exactly! As a SWE pursuing MBA, I was surprised to learn how critical marketing is to the existence of a business, and that it's way more logical, quantitative and data driven than people realize.

You can write a hugely popular app with great UX, and super scalable backend but if you don't align your marketing parameters you won't make ends meet.

[DeathArrow]

>Exactly! As a SWE pursuing MBA, I was surprised to learn how critical marketing is to the existence of a business

And you are wondering that people who are in business to teach you something tell you how vital is what they are teaching you? All salesmen sell things that are vital for your success, health, well being if you trust what they are telling.