What is business model of UBER ride-hailing co. ?

[Andrew1972]

My guess is they are using drivers and loosing money setting it up until self driving vehicles arrive.

 

[HTSS_TR]

Originally Posted By: jimbrewer

They are losing money because they are spending so much to expand. No mystery there.

I think UBER is acting as middle man like eBay. UBER's drivers works hard to service UBER's clients(riders), and UBER just take 20-25% whatever driver's make, just like eBay make some profit from their sellers and eBay didn't sell anything, didn't worry about shipping either. UBER didn't spend any money for buying any car, no maintenance, no fuel cost, no insurance , virtually nothing. What expend did UBER absorb in expansion ? Did they build garage to maintain their fleet ? All they spent money on is processing power to take in calls and to forward those calls to drivers. Amazon is different, for many years Amazon expanded like crazy. They keep building more and more distributors, hiring more workers, buying more everything ... this expanding took all the profit they made many years. It was almost impossible to not have a profit with $10+ billion in revenue, but they did because they spent more than they took in.

 

[Nate1979]

Uber is a technology company bringing together drivers, as independent contractors, and riders. They do this through technology offering (app), data, software, etc.

 

[Garak]

Originally Posted By: stro_cruiser

Uber is not an ethical company....

Be patient. I think their time is limited. Sure, as was already pointed out, they have lawyers and lobbyists. However, in any city where the administration doesn't just roll over for them, they won't do business. Sooner or later, other jurisdictions will smarten up, too, or at least want their share of the pie.

 

[raytseng]

Originally Posted By: HTSS_TR

Originally Posted By: jimbrewer

They are losing money because they are spending so much to expand. No mystery there.

I think UBER is acting as middle man like eBay. UBER's drivers works hard to service UBER's clients(riders), and UBER just take 20-25% whatever driver's make, just like eBay make some profit from their sellers and eBay didn't sell anything, didn't worry about shipping either. UBER didn't spend any money for buying any car, no maintenance, no fuel cost, no insurance , virtually nothing. What expend did UBER absorb in expansion ? Did they build garage to maintain their fleet ? All they spent money on is processing power to take in calls and to forward those calls to drivers. Amazon is different, for many years Amazon expanded like crazy. They keep building more and more distributors, hiring more workers, buying more everything ... this expanding took all the profit they made many years. It was almost impossible to not have a profit with $10+ billion in revenue, but they did because they spent more than they took in.

They give bonuses to drivers; as well as promos to attract new riders. Again the subsidies are not everywhere, it's only in areas where they are targetting, often globally. Here are examples of subsidies from this link. https://www.washingtonpost.com/news/the-...ly-defeat-lyft/

Quote:

Pick up a certain number of rides each week in certain cities, and Uber will throw as much as $500 a driver’s way on top of the money he or she make in fares. Drivers in other cities are eligible for the “Precious Metal” program, which guarantees them surge pricing on every ride they accept. For its part, Lyft has offered drivers and recruits $750 in certain cities when a new driver signs up with the app.

It's basically trying to bootstrap a chicken/egg business problem. Without enough drivers there won't be users, and if there are no users there won't be drivers. So they can't just "expand" into an area by word of mouth. So they spend this money to try to bootstrap an area and get everyone trying to use it for free or cheaply for awhile, once there's enough drivers and users in an area to reach a network effect, then they can cut off the subsidies and people will use it paying the regular rate.

 

[Vikas]

What is the barrier to entry for this business model? I can't think of any which can NOT be overcome with peanuts money. It is certainly NOT a capital intensive operation! NPR had a segment where somebody has started a competing ride sharing company in NYC. They claim to treat their drivers much better. I recall the name as Juno or something like that. I have not looked them up. One think is certain. Economics of car ownership are abysmal. Which other resource do you own which is idle 23 hours out of a day? The only thing private vehicle does best is to occupy a parking place. You have already seen that the current crop of 15 year olds are not in to driving or in to cars as their parents were. In the old era, cars helped to achieve mobility independence and the ability to hook up with other people. Technology has changed all that. This is so called "disruption" in the market place. It is happening whether you like it or hate it. I already gave an interesting lecture reference in the past about how in 13 years NYC went from all horse buggies to all cars.

 

[OneEyeJack]

Link In El Cajon, California an Uber driver raped a female passenger. Turned out his background check was a sham and he was never drug tested. He has a criminal record that should have been easy to discover. He's in jail headed for a conviction. Uber's statement is that what he did has nothing to do with them, they are not liable because he's a contractor but still, their thoughts go out to the victim and her family. The media took no real interest in the story and even if the woman wins a judgement against this man with no financial resources at all what good will it be? This driver's private insurance company has notified him with a letter of reservations stating that because this attack is a criminal act there will be no liability coverage. Turns out there are many complaints by passengers of sexual assault and rape. Uber's response to leaked records and the frequency of the word "rape" in these reports thousands of times represents a typo when the report should have read "rate" even though such a substitution does not make sense.

 

[Vuflanovsky]

Yeah, Uber could say that the customer meant "fiscal" rape instead of "physical" rape, hence the confusion about whether their ESL driver thought the customer said "Can't you give me a better rate?" vs. "Can't you give me a better rape?" I can see it now: "In his culture, the latter would constitute a "come on" and a "green light" to act as he did, so it's apparent that there are language and cultural differences at play here versus specifically involving the thoroughness of our vetting processes." I don't think I'd want to be on their PR staff....

 

[Garak]

Originally Posted By: Vikas

NPR had a segment where somebody has started a competing ride sharing company in NYC. They claim to treat their drivers much better. I recall the name as Juno or something like that. I have not looked them up.

This is the problem that I've addressed in other threads. Uber and other ride sharing startups think they're clever, but they're not. They don't like the municipal taxi rules, the requirements for insurance, inspection, and licensing, so go at it while ignoring the rules? Anywhere that city hall has had a backbone or a state or provincial regulator said no (since they have the real resources to make prosecutions stick), Uber has turned tail and run. Even where Uber has a foothold, they're simply going to be repeating the same things that the taxi industry did over the years. They will be required to get extra insurance. Inspections will be required. Driver licensing and background checks will be required. Rates will be required to be posted, and be verified by a device with which one cannot tamper. Liveries will be required. It all happened to taxis over the decades. Uber just can't learn from other people's experiences.

 

[Vikas]

But the founders and early investors would have become multi-billionaires before that happens. That is how the game is played.

 

[CKN]

Originally Posted By: OneEyeJack

If you are a Uber driver and have an accident the whole deal is on you. Uber specifically says they have nothing to do with your problem and that included the victim/passenger, you are a contractor. If there's a problem with your insurance then, tough luck. The passenger is coming after you. The driver is anyone who signs up, no drug testing, no FBI background check so when you get in that car you are on your own. Those are all just little details. What's important is that you're using your smart phone an an app and it's all wonderful. You're tech savvy and getting a ride sometimes cheaper except for those surge pricing days like holidays and 7X pricing, oops. In fact your new driver might even know where you want to go and if there's a problem you can email Uber and they'll get back to you, very soon, usually. Take good notes so you don't forget.

Not according to this- Uber requires all of their drivers to have car insurance, and provides supplemental insurance coverage, but only while the app is on. Here’s how it works: When the Uber app is off, a driver is covered by their own personal car insurance. When the Uber app is turned on, a low level of liability insurance becomes active. When a trip is accepted, a higher level of coverage kicks in and remains active until the passenger exits the vehicle. Previously Uber had only offered coverage when a passenger was in the car, but the company updated their policy after a series of accidents which resulted in various lawsuits. Lyft and some of the other ride-sharing services point to the $1 million per incident excess liability coverage that certain states require them to carry. The policies are designed to deal with liability claims, which a driver’s insurance doesn’t cover. But these policies won’t cover a driver’s car – you must rely on your own personal auto insurance policy. At the onset-it looks like you should really have a level of coverage just in case. IMHO.

 

[Leo99]

My son's Geico auto policy specifically excludes coverage when the car is used for any sort of ride sharing.

 

[Revving2Redline]

Or what these Uber drivers should do...if they are dealing with these clients on a regular basis is try and get informal to where these drivers can just be called by the passengers and cut out Uber all together.Drivers making more, riders saving more and Uber get NO more.

 

[CKN]

Originally Posted By: Leo99

My son's Geico auto policy specifically excludes coverage when the car is used for any sort of ride sharing.

Any normal policy excludes "livery service".

 

[Garak]

Originally Posted By: Vikas

But the founders and early investors would have become multi-billionaires before that happens. That is how the game is played.

Of course, that's how most businesses start. The barrier to entry you ask about is already coming into place, slowly but surely, depending upon the jurisdiction.

 

[firemachine69]

Originally Posted By: Marco620

I would do it as a 3rd part contractor so you can be your own llc and take the mileage off as a tax deductible.If they are pulling this jazz on drivers they wont last. I as CEO of Uber would run a 5-10 percent PM and let the driver keep the rest. Uber cant keep doing what they are and expect to survive. At .50 plus a mile is the going rate,drivers could expense the mileage as a tax write off. 25 percent GPM...Wow and ugh no. Uber will be Uber in trouble soon. They are writing the rules and yet they do nothing to back the drivers. They definitely didnt build that.

The thing with Uber is at one point they were only keeping 5-10%. They had a [censored] near perfect trifecta: happy drivers, happy shareholders, happy customers. What ended up happening is their race to the bottom brought along the scum of society with them, both at the top, and the bottom. Now they're basically coasting to failure.

 

[Mr Nice]

Some drivers protesting in front of San Francisco Uber office. If the pay is [censored] why drive for Uber ? Better just to work fast food.

 

[CKN]

Originally Posted By: Mr Nice

Some drivers protesting in front of San Francisco Uber office. If the pay is [censored] why drive for Uber ? Better just to work fast food.

Driving for Uber you really have to look at wear and tear/maintenance on the vehicle you are driving. Your going to make $30,000-$40,000/yr (if you work pretty much full time) and wear out your car. Is it worth it?

 

[PandaBear]

I've taken Lyft but not Uber, they are practically the same except Uber gets more publicity and headlines, attacks, etc. The drivers typically said once upon a time they made great money, but Uber and Lyft competition keeps dropping the fare so it is not as profitable as before. The alternative is to drive a cab, which may or may not make them more money. Most complains about Uber is people sign up and buy a new car, hoping to make a lot of money, but in the end they didn't and were stuck with an expensive car loan. The money in this business is so thin that unless you drive a recent model Prius (car must be 10 years or younger) you are not going to make money. Half of the drivers I ride with were unemployed retiree driving what they already have, so they are happy. The others are young college students and they are ok drivings between classes, and the hours are flexible. Those who aren't happy are full time cab drivers with a car loan, and especially Taxi medallion owners, they got the biggest hit. I can think of 10 more companies that are more evil than Uber, eBay would have been on the top, Microsoft on the 2nd, and Intel on the 3rd at least, all for their monopoly behavior and drive their competitors out of businesses via illegal tactics. Uber is hardly a monopoly as Lyft is almost always offered by the same driver at the same time, drivers typically do both and have both logos on their cars.

 

[PandaBear]

Originally Posted By: CKN

Originally Posted By: Mr Nice

Some drivers protesting in front of San Francisco Uber office. If the pay is [censored] why drive for Uber ? Better just to work fast food.

Driving for Uber you really have to look at wear and tear/maintenance on the vehicle you are driving. Your going to make $30,000-$40,000/yr (if you work pretty much full time) and wear out your car. Is it worth it?

Depends on what your alternative is. I don't know anyone making 60k/yr or more on a San Francisco salary (60k is borderline poverty here) would drive them full time. The one that got the hardest hit is the medallion owners, as their market value would collapse into nothing almost immediately. Uber is cheaper and their drivers get more ride on a regular basis, despite only taking in 1/2 the fare they do not have to lease or acquire a medallion, so in the end the taxi vehicle and medallion lease has to drop to compete.