UBer pricing

[PandaBear]

Originally Posted by fdcg27
I find it hard to envision any road to profitability for Uber or Lyft.
As things are, the drivers bear all of the capital costs in rolling stock as well as the operating expenses while providing their own labor on a piecework pay basis.
You'd think both should be rolling in dough, although both remain in the burn phase for investors.
Does it really cost that much to run a bladed server farm and buy wireless bandwidth?
Having had Uber and Lyft do the heavy lifting in clearing local legal/regulatory barriers to entry, what prevents smaller start-ups from offering locally the services that these two offer trans-nationally?
Local users would use these local services as well as savvy travelers visiting popular tourist destinations.
If this type of operation could be set up on a small scale at lower cost than what Uber and Lyft have faced, then rates could be reduced while also allowing higher pay for drivers, which would peel them away from Uber and Lyft.
Just a thought that I'm sure has already crossed the minds of taxi company owners in various cities.
This seems like a business model ripe for decentralization.


Most of the cost would be for marketing (they do run a lot of marketing for drivers, customers, and the investors). Then there's the cost to hire people (I knew a few new grad getting 140k/yr and experienced people getting 350k/yr) to test out all sorts of ideas (i.e. surge pricing, pool, etc). Then one thing you forgot is the lobbying and campaign contributions, and crisis controls (murder, rape, vandal, driver getting high, driver getting attacks, passengers in pool attack each other, attack on the bro culture, etc). They all cost A LOT OF MONEY.

If everyone running a blade server can start uber / lyft, we won't have all these startups like sidecar folding, and uber won't be throwing in the towel in China.

 

[fdcg27]

Okay, let's assume that everything you've written is a significant factor in the so far loss-making potential of Uber and Lyft.
That begs the question of where the upside lies.
It doesn't lie in autonomous vehicles, which are not currently ready for road use in the current state of the art and may never be in the absence of smart roads.
Even were autonomous vehicles readily (legally) accepted for road use sans monitoring drivers, as they aren't, the required capital investment in rolling stock along with the required MRO infrastructure would require capital investment making that currently in play look tiny.
I'll note again that any route to profitability for Uber or Lyft seems not to exist.
Local competitors will emerge at some point. You could start on a small scale with little more than a smart phone and a few guys driving.

 

[Wolf359]

Well the stock is down again today. It's hard to figure out how they make money. Losses are pretty high but I suppose once they stop spending so much, maybe they'll make a small profit, but hard to figure out what the real P/E ratio will be at that point. It's like the old saying where they lose money on every sale but they make up for it in volume. I keep thinking that eventually they'll run out of drivers if they keep pushing the pay down as low as it will go but I guess there's probably a bunch of people who are always in transition who will do it for a few months and maybe that's all they need.

 

[PandaBear]

Originally Posted by fdcg27
Okay, let's assume that everything you've written is a significant factor in the so far loss-making potential of Uber and Lyft.
That begs the question of where the upside lies.
It doesn't lie in autonomous vehicles, which are not currently ready for road use in the current state of the art and may never be in the absence of smart roads.
Even were autonomous vehicles readily (legally) accepted for road use sans monitoring drivers, as they aren't, the required capital investment in rolling stock along with the required MRO infrastructure would require capital investment making that currently in play look tiny.
I'll note again that any route to profitability for Uber or Lyft seems not to exist.
Local competitors will emerge at some point. You could start on a small scale with little more than a smart phone and a few guys driving.


There is no upside based on long term revenue and profit.

The original idea was based on Taxi Medallion valuation (i.e. if Taxi Medallion is worth 200k each then we can capture the revenue of 50000 taxis, so we are worht 50000 x 200k), but that's no longer realistic due to plummet valuation of medallion and reduced trip fares.

Now it looks like they are just trying to keep the valuation up by limiting the competitions (i.e. Uber / Lyft / other foreign equivalent into a cartel), and the story of "we'll hit autonomous one day".

At the moment it is just a musical chair / accounting scam in the age of negative interest rate, like Zynga.

 

[PandaBear]

Originally Posted by Wolf359
Well the stock is down again today. It's hard to figure out how they make money. Losses are pretty high but I suppose once they stop spending so much, maybe they'll make a small profit, but hard to figure out what the real P/E ratio will be at that point. It's like the old saying where they lose money on every sale but they make up for it in volume. I keep thinking that eventually they'll run out of drivers if they keep pushing the pay down as low as it will go but I guess there's probably a bunch of people who are always in transition who will do it for a few months and maybe that's all they need.


That's probably the whole reason why Travis didn't want to go public, but the VC wants to have an exit to reduce their exposure.

VCs are all using ratchet these days to protect themselves, and would rather sacrifice the valuation instead. This is why most employees RSU / options are worth a huge cut or even nothing these days (unlike back in the mid 90s when they made you a millionaire).

 

[fdcg27]

The VCs were thinking that they should cash out of a long term loser when they could at a profit. Were there any long-term potential, they'd still be all in. The success of the IPO was merely a matter of too many dollars chasing too few equity plays and those buyers will and are probably already suffering some serious remorse. They bought the sizzle without doing enough thinking to understand that there was no steak.
Those who became millionaires back in the nineties were working for companies with real potential, not the equivalent of a diner where the servers were paid bupkis but were always told they'd make it up in tips.