Setting aside the other reasons to dislike Uber, there is obviously a valuable product there. I get that it has been subsidized by VC dollars in a land grab, etc., but saying it can never be profitable is saying it can never find a fair market value, and that doesn't make sense to me. What am I missing?

Non-governmental subsidized transportation infrastructure is and always has been a race to the bottom. Taxis are mostly only profitable with extremely low overhead and only servicing high traffic areas like Manhattan or other major metropolitan areas.

Uber's thousands of engineers and SF HQ disqualifies them from being low overhead anything.

In the 1890s in Chicago when massive subway and interurban train networks were built out by private business, they either failed financially or succeeded only by real estate speculation around where they built their lines. Eventually all of those lines were acquired by local governments or shut down. Mass transit lines in LA, NYC and around the country followed similar trajectories. Look up the Interborough Rapid Transit Company in NY, or Charles Yerkes and Sam Insull in Chicago.

These days modern suburban subdivision companies don't bother with creating mass transit, they just fund street construction and install public works lines like gas/sewer/water/electric, and let the city deal with the traffic and the inevitable deferred maintenance that clashes with their low tax philosophies.

> Taxis are mostly only profitable with extremely low overhead and only servicing high traffic areas like Manhattan or other major metropolitan areas. Uber's thousands of engineers and SF HQ disqualifies them from being low overhead anything.

If I'm understanding correctly, the argument is that taxis are basically a shit business—bad enough to break the "software is eating the world" rule because they have such low margins that you can't pay a software team (or at least, not operate a marquee SV software company) and compete. Better tech isn't enough.

If that's true, that answers my question. I'm surprised if it's true, though. I didn't think the taxi business was that miserable, and I'm not sure how it squares with taxi medallions being the highest-performing investment of the 20th century (or some factoid like that which I read years ago).

Is that worth $80B? I don't know, but I'd guess probably not. But it'd easily pay for a SF HQ and several thousand engineers.

Uber, for all its flaws, provided a service that was better than the taxi companies simply because they didn't require their contractors cut corners, cheat, or provide poor service to make money. People flocked to Uber because it was genuinely a better experience than the local taxi companies. I think in the long run, Uber will compete by becoming as expensive as (or more expensive than) local cab companies, and having a much smaller customer base.

Do you have evidence of this claim, at least insofar as U.S. taxis are concerned?

They'll sell you a new taxi cab meter "preprogrammed with your rates". You swap the legit one out yourself. Install this bad boy. Charge whatever you feel like. When it's time for the annual inspection you swap it out for the regular taximeter and you're good to go. Taxi cab drivers share other tips like replacing the tires for k-value tests, swapping out the vss, or installing a "pulse divider" (Google taxi pulse divider / multiplier). Then there's good old-fashioned charging the wrong fare. Many cities have special fares depending on time, pickup / drop-off location, and cabbies will try to "accidentally" charge someone the wrong fare. I've even had taxi drivers show me their "special fares" programmed into their taximeters.

I present no evidence. I have been charged the wrong fare entirely too often in the days back before Uber. It's a real event that happens a significant proportion of the time, and that's not even to touch on the subject of pirate cabs.

Besides, "significant" is a classic weasel word - it could mean one, for all we know.

My google-foo skills haven't found the relevant story tho.

So that means the addressable market shrinks. Think premium black-car-only service; Uber’s roots). Why can’t such a service find demand/price equilibrium? I think it can, but not in a manner that can justify Uber’s “unicorn” valuation. And I think that’s at the core of Uber’s conundrum/identity crisis: it provides value, but with tech-company cost structures. However, it doesn’t deserve tech-company valuations because it’s just not as scalable — it’s tied to operating in the physical world, with physical constraints.

If the strategy is to burn cash, continue entrenchment, and eventually leapfrog to self-driving Ubers (mitigating the scaling/cost problem to an extent), then that’s a war of attrition. Fingers crossed.

As others have also mentioned below:

- Uber is global, and has a standard interface. I don’t have to fiddle with credit cards and the payment dance. It’s the de-facto global “taxi”. Kind of like the warm homey fuzz one feels at a Starbucks in a foreign land after enduring burnt coffee served in a styrofoam cup on a long flight. (Granted, a bourgeois American-centric view, but I hope it’s illustrative.)

- If you pay a premium (Uber Comfort and higher), the cars are better, the drivers are better (higher rated too), and one can communicate preferences such as temperature and conversation (no, thanks).

- Other long-tail uses: 7 passenger SUVs for large groups, lots of luggage, etc.

- I’ve tried using the taxi apps (Flywheel, etc.), and they’re atrocious/geographically limited. In some places the Uber app can now call taxis. Even then, I’ve never voluntarily wanted to call a taxi for the last decade or so. I especially like the Black Mirror vibe of drivers and passengers having a “rating”. ;)

Uber is a hassle-free experience and saves you from dealing with the one miserable human being you'll encounter that day. Stress has a price.

Drivers are rated and you can cancel if you're handed a bad one.

A large part of Uber is also the rating model. I don't know if taxis have that, but at least for LGBTQ passengers it makes a huge difference. You can't harass your passenger and keep a good rating.

Unfortunately, it traded one kind of monopoly for another.

Ideally, Uber would have been an app and a network that taxi companies plug into.

This product existed, and was profitable until Uber drove them out of business with rides subsidised by VC money.

My complaint would be the exact opposite of yours: taxi drivers often have a few tricks up their sleeve while Uber drivers will follow Google Maps straight into a traffic jam.

They managed to drag our cab companies into the 21st century without even being active almost anywhere, so thanks for that ;)

But in South Africa? Taxis are extremely expensive cars that often look as if they’d fall apart any moment. Uber was/is cheaper, but I’d have taken them even otherwise. Most certainly a premium service.

[0]https://www.nytimes.com/2019/05/19/nyregion/nyc-taxis-medall...

So how did the eg NYC medallions become so valuable? The taxi cartel bought into the (mostly unspoken) notion that the medallions represented a government guaranteed blockade on competition. For a city like NYC with rather epic taxi demand, a license to print even just 8% margins perpetually can be an enticing prospect (especially in an age of forever low interest rates). Then, instead, the city governments mostly allowed Uber and Lyft to continue to operate (after their initial move to operate first and seek forgiveness second), rather than shielding the taxi cartel from competition.

Taxi medallions are an artifact of how NYC regulated its taxi fleet; other places may have had them but the investment factoid probably comes from NYC. Joe’s Cab in Peoria, IL probably doesn’t have a medallion worth $1 million to borrow against. And, of course, note: not all cabbies owned (or currently own) the medallions they drive under: many lease them or drive for a company that owns them, and has sat on them as a speculative asset for decades.

Source: went to school in NYC with plenty of cabbies’ kids. It’s not a job many people eagerly take.

Have I characterized your argument correctly, more or less? If not, I'd like to know what I missed.

In efficient market ANY business must be a shit business. If you have high profits -- competitors should squeeze into your profits.

Same logic works for other low-margin businesses, e.g. restaurants, they just saturated their supply.

https://marketurbanism.com/2010/12/22/japanese-transit-and-w...

My understanding of how Japan transit is profitable (I live there and I'm interested on it quite a bit) is multi-sided, but the main difference is that train companies own (or are leased for free/cheap) the station areas. So they setup big malls and stores around the stations, that for the fact of being on a station are probably the most transited and profitable ones in the nation.

Some smaller but meaningful differences might be that Japan urban density is very high (small country, lots of mountains/forests), that there's a lot of public transportation traffic, that the train rides for employees are normally subsidized by the companies, etc.

Why does Uber need a thousand engineers?

The first time I used Uber was 4 years ago. It felt like a complete product. I understand the constant need for expansion around the world requires engineering to scale up servers in multiple regions, but does that really take a thousand engineers? Do they really need thousands of people to handle the feature creep?

I'm just finding it hard to believe that there's enough work to do on a ride hailing app to keep thousands of engineers busy.

Taxi medallions are required to operate in a city. The supply is artificially constrained, creating a taxi cartel. But medallions are rarely owned by the drivers themselves, rather they're owned by the taxi company or an investor, and leased back.

Limited supply + lease -> rents

Plus the medallions can serve as collateral (as with any asset), or be bought and sold. If one entity controls enough of them, they can then influence taxi availability (and hence prices) within a region.

This hits the bigtime only in a few major cities, but is probably enough of a factor in taxi finances to warrant a mention.

(I'm not nearly as knowledgable about this as it may seem. Mostly some discussions in econ courses at uni and the stray article since. Uber did crash medallion prices though.)

(Stock exchange seats are another somewhat similar asset, and also staple of econ course discussions.)

"Dispatching" a message to a phone based on its location. Why would that need special software engineering? That's all open source stuff that's readily available. Certainly everything else Uber does (collecting money, ratings, etc) is all off-the-shelf stuff.

But as usual the software isn't the biggest challenge. Building a driver and rider network at the same time is.

Uber subsidies changed leisure for many folks. When it’s $6-10 for a ride, even middle class incomes don’t even think twice about it. But when the true price of the ride must be paid, those people won’t be a part of that economy.

And without those mass short rides to fill the gaps, there’s not enough “fat” rides to keep enough drivers on the road to keep the wait times low. So the product might exist, but it devolves to a taxi rate with a taxi wait, just done over an app.

Maybe not routinely (like to work or the grocery store), but:

I will absolutely pay $35 to get to and from the airport, which is 15 minutes away from my home.

I will absolutely pay $20 for a 10 minute ride that takes me to a restaurant or bar where I plan on drinking enough such that I don't feel comfortable driving.

I was just in Manhattan a couple weeks ago and paid a taxi to drive 10 minutes, and it cost around $20 with tip. This pricing scheme seems to work fine for traditional taxis.

I'm not saying everyone will pay this much. Maybe Uber's addressable market when charging the true cost of a ride is much, much smaller than they think it is, and they need to rethink and restructure how they operate. Maybe users need to expect longer wait times for a car, and lower availability. But that doesn't mean they're doomed or that they have an impossible business. That's like saying "taxis with an app" is an impossible business, and I don't think anyone can make the case for that.

If I take a rideshare to the airport, I don't have to leave my car in expensive airport parking for several days until my return. That can pay for a significant markup on the trip charge.

If I take a rideshare to a bar, I'm trying to dodge a $10,000 DWI ticket.

If I use one intermittently in Manhattan, it's likely part of the "few people own a car in Manhattan" dynamic, which is tied in part to having to pay hundreds of dollars per month just for parking said car.

I don't think "For sure, turn down spending and turn up the prices" is something that the people arguing "Uber can never be profitable" would agree with. They're arguing that this can't work, and therefore Uber is destined to go out of business once the investment billions dry up. I'm just asking why that is so, given that the taxi market is a thing, and that a lot of people like Uber better than taxis.

And probably doesn't look a lot better than taxis for many people any longer.

And for not on demand and not price sensitive, there are always private cars as there have been all along in many areas.

But then if we're admitting that Uber's unlikely to be profitable over its lifetime, why would anyone buy their stock?

That's really what people care about in these discussions. Its not "Will Uber be profitable this quarter?", its... "should I buy Uber stock?".

The last guy lost money on Uber stock and is trying to offload these shares / certificates onto someone else now. Will buying those shares at this current price (aka: very expensive: $81 Billion market cap) be worthwhile?

You can buy many other companies at much cheaper prices than that.

It's definitely not what I care about. I'm just a user, not an investor. What I care about is whether I'll still be able to use the service in the long run, albeit at higher prices.

Also, if that's what people making these arguments really care about, then I think it's misleading for them to be arguing that Uber can never be profitable and is destined to go out of business. That is not the same thing as being a poor stock market buy at current valuations, whether the latest round of investors will lose money, and so on.

The blogpost is pretty clear to be coming in from an angle of "stockholders" perspective.

> Uber didn't need self-driving cars – it needed us to think it would have self-driving cars. That way the company's Saudi owners could raise investment capital from subsequent "investors" (AKA "suckers") all the way up to the IPO, cash out, and walk away, whistling innocently.

> That's the bezzle at work – a dazzle op that keeps new money flowing in, convincing people that a pile of shit this big must have a pony beneath it. But as the years went by, the stories that Uber told us about its path to profitability got more and more fanciful.

The big gist of this entire blog post is "Hey Stockholders, I think you've been swindled by Uber's CEO". That's the thesis in a nutshell.

If you don't care about the stockholder perspective, that's fine and dandy. I'm not saying you should care. (I'm not a shareholder, so I certainly don't care very much). But... as someone who does participate in the stock market, I still find these stories fascinating. I probably will be buying stocks in the near future, so I do want to know about all of this drama going on in different companies.

Taxi companies negotiate the entire fleet purchase at one time and replace vehicles on a schedule (like rental car companies). Often, the fleet is all one brand and model. This makes it easy to hire one or two guys to work on all of them. You can also buy all your standard parts in bulk and you get commercial pricing for those. Fuel is also all bought from the same vendor on a contract.

Those agreements would be impossible for any gig worker to get. He is going to pay full price for the car, the maintenance, and the fuel. Gas stations aren't owned by oil companies; they're owned by individuals. So you'll never get national pricing on gas. Each taxi company negotiates with a particular owner (hopefully of several stations) in their area.

The final nail in the coffin (and the one that keeps it from going national, even if such agreements could be worked out for a group), is that car repair is local. You cannot operate a maintenance depot in Chicago that serves Houston. The further away the depot is from the points of service, the longer the car is out of service each time.

The "hub" nature of the taxi operation with all cars, staff, repair people, and parts in one place (and all maintained on the same schedule so fewer surprises), simply doesn't scale unless you have enough customers to build another hub.

BTW, this is the same reason there's no Del Taco in Texas (or your favorite fast food where you live). You have to have a certain number of restaurants to make the distribution hub and the truck trips worthwhile. There cannot be one isolated McDonald's somewhere that's profitable, just like there cannot be a "too small" taxi operation without a hub -- it won't be profitable. And building hubs in small cities without enough demand isn't profitable, either.

Hence, taxis don't scale.

There is no reason "a national taxi service" couldn't operate in the top 50 US metros, even if each metro managed local hub operations.

Uber's overhead in misbelieving they are a software company rather than a taxi service has only added to the expense, not saved anything.

Because taxis rely on cheap fleets, centralized and cheaper maintenance, and volume fuel agreements, they simply don't scale.

Uber is an attempt to mechanize the human aspect of driving by turning people into machines that produce for them. Unfortunately, in the fever dream that led to its creation, no one stopped to consider why "Big Taxi" wasn't a thing already.

> The individual driver has no buying power to negotiate This is true for the full-time driver, and certainly uber drivers have by in large become this in larger markets. But where I am, most drivers are still part-timer that do it for extra income on nights/weekends. In that case, their capital expenditures are already sunk costs, and they just need fuel+maintainance to balance out, which they can probably deal with at lower margins.

One can certainly imagine a world with app-dispatched taxis (already here) that is more efficient, with burst capacity from part-timers. That is probably a world with more taxi usage proportionally to the population than 20 years ago.

So yeah in the last 100 years why are there a couple of taxi companies in each large city. I think you are right the business doesn't scale beyond a certain point.

Anecdote: Friend said he and the people he was with tried getting an Uber and balked at the $50 price. Then one them had the bright idea to check a regular taxi, $15.

There’s nothing to say that Uber/Lyft don’t stabilize near a similar dynamic.

Heck, there might even be a business for creating a white label taxi calling app.

Modern ridesharing services flipped the script. Livery services here in Minneapolis/St Paul are all over the rideshare apps and I am more often than note picked up by licensed taxi/limo service drivers instead of random Joes looking for extra dough (I'm sorry; I didn't realize it until after I typed it--it's staying).

---

I have come to rely on the expectation that rideshare will be available in whatever city I am in. On a recent vacation, there was exactly 1 rideshare vehicle available to pick up my family to go to the airport on a Friday morning at 6:30 AM and one available to get home at 12:30 AM on a Sunday night. These drivers were professional drivers. There were exactly 0 rideshares available on Hilton Head Island on the several occasions I looked and there were only a handful available in Savannah.

Ridesharing may be dead but this article is nothing but a very angry response to someone who hates the business model that actually fixed a VERY broken system. Whether or not those companies continue to exist, rideshare services have made it WAY more accessible to move around w/o having to rent cars, get stranded, etc.

Bring 'em on I say.

But the reason for this is because of surge pricing. The times I want a ride are when everyone else wants a ride, and we're all coming out of the same venue. Taxis offer much more affordable fares, and sometimes will even be parked outside waiting for the people exiting the venue.

Saying no one is using taxis is not true. Few people think to use them, but there are times when it is worth it.

Uber, in its current pricing model, is unsustainable, period. You might be willing to pay an increased price for Uber's service, but you still need a minimum density of drivers to make the service not outrageously expensive.

What's a "taxi wait"? Do people routinely wait longer for taxis than for Ubers? is that because of a lack of taxis there?

1. Apple

2. Microsoft

3. Amazon

4. Alphabet

5. Facebook

6. Tencent

7. Tesla

8. Berkshire Hathaway

9. TSMC

10. Alibaba

With the exception of Berkshire Hathaway, these are all tech companies. And a fair chunk of Berkshire Hathaway's market cap is Apple stock [2].

[1] https://en.wikipedia.org/wiki/List_of_public_corporations_by...

[2] https://markets.businessinsider.com/news/stocks/warren-buffe...

learn the mediallion's history.... most of the yello cab drivers (at least in nyc), see a lot less than the 50% of the fare. That's why they are exclusively immigrants, as they are only the ones to put up with it.

1. Rent permit, 2.Rent Car. 3. Other fees...

For some reason there is the naive thinking that yellow cab drivers are owners of their cars or permits, which is not the case. A local mafioso, is getting more than half of each fare.

I mean, at least it’s staying local.

You can imagine a taxi company with 20 cabs on the road has a fairly predictable supply. A gig model is always playing the odds. When there's too few drivers, Uber both misses customers and has to charge the customers extra to pay the drivers more. When there's too many drivers, Uber can probably charge less and meet all demand, but the drivers have a worse experience. This is not so bad when the overall level of activity is high, but is not good when the overall level of activity is low.

That is, it's much worse to have 5 drivers and 10 riders than it is to have 55 drivers and 60 riders.

tl;dr if you're charging high prices, you have a small, upper class target market. The gig model is suited to a mass market model.

Taxi licenses are an artificially constrained resource, which keeps prices high. As a result, taxis are typically only conveniently available in high-demand locations (among other ills).

There probably is a niche for ridehailing services as public infrastructure (or perhaps using a co-op model) running on open source software, but that excludes VC-fueld behemoths like Uber.

It isn't so much that Uber can never be profitable, it is that Uber could never be profitable enough to recoup the sunk costs and operate as an attractive publicly-traded company.

Plenty of companies show a profit and remain privately owned. They aren't hypergrowth companies. VCs don't invest in them, except accidentally.

There are, ironically, business models that would have justified some VC investment and led to decent outcomes with a market cap around $1-5B, but they are shaped completely differently, and would have produced much more modest returns.

This is only true for some markets where there is a monopoly or a medallion system. Not all markets are like that, not even all markets Uber operate in. Some of the biggest are though.

Uber's only major contribution is an easily reproducible app and considerable market manipulation which it can no longer maintain. If Uber decided to charge what their failed system actually requires for profitability, it would be uncompetitive against traditional car services that actually have the capacity to scale the costs associated with car services.

I don't switch from FB to another social network unless a bunch of my friends do.

As a consumer, it is very easy for me to install Lyft or Curb or $LocalTaxiApp and switch. There is very little brand loyalty.

As a driver is a harder, there is a burden to onboard to a given app service. But I've seen plenty of drivers with simultaneous lyft/uber signs, so I know they are doing it. And driver forums/social-networks are constantly talking about ways to maximize income, so if there is new app that is better many would try it, because they wouldn't need to abandon the older platforms just to try the new one.

Bootstrapping having both demand and supply is the hard problem of the two-sided market to scale. Riders and Drivers might try out an app easily enough, but they'll only stick with it if there is enough capacity to market-match (and some cost benefit over the other app-markets).

because competition exists. Same reason your local bakery can't sell bread at 50 bucks and make their owners millionaires. In a market economy you don't get to 'set prices' at arbitrary rates until you don't make losses.

Right-hailing companies have no differentiating features, there's dozens off them, they also have to compete with taxis, and if Uber was to raise prices someone else would eat their marketshare until they've got the same problem and they've all competed each other into the ground.

The entire flaw with the company is that building you an app that lets you hail a car isn't actually providing any surplus value to the tune of tens of billions of dollars and the only thing that keeps that illusion running is dumb Saudi money having nowhere to go

That's the legal reality. Plus the political one- the average Uber customer is middle to upper middle class in an urban area- i.e., the types of people that politicians actually listen to. Politically sympathetic, vote in very large numbers, have an outsized voice in the media, etc. Every media outlet in America would cover the price increase nonstop. If raising prices didn't result in an antitrust suit the very next day, I will eat my hat

If the cost of an Uber from the airport is too expensive, people won't just take cabs, they could also park in long term parking or have a friend drop them off instead.

* I know not everyone agrees with this, but enough people do that it's clearer to put the argument this way.

Mostly open source software.

Competition is largely on price.

Plenty of small entrants into the market, fewer big providers, lots of resellers.

Many of the 'apps' are white-label skins on the necessary backend services, others are self-hosting the infra. Some local governments operate these services as utilities.

So, the software opportunity looks a lot like Automattic (the makers of Wordpress software and operators of the wordpress.com hosting service), which is a privately held company and valued at $3B.

To my understanding the only people making non-poverty wages in the taxi business are owners who purchased 'medallions' decades ago- aka another governmental licensing restriction. I believe they frequently lease out the cars to drivers who make minimum wage or less. I'm not sure an individual taxi is necessarily profitable on a per-car basis

If a not-profitable company is raising prices to not go out of business then idk how well that would play out in courts.

Would a court force uber to go out of business instead of raising prices?

Sure they do, as long as they just get an app built by a contractor and don't employ 5000 engineers building cool open-source infrastructure projects and unnecessary "growth" features.

Multiple taxi companies with ~200 cars in my city each have their own smartphone apps with all the features you actually need: ordering or scheduling a ride, GPS tracking, payment with credit card or business invoice.

Looks like these apps were last updated in mid & late 2020, but if it works you don't need a permanent tech team to keep the taxi business going.

Wouldnt it "just" be because of the massive overhead that Uber has with the software engineers, support staff, execs, etc?

Well, the thing about Taxi's was that they were available, at some times, in downtown business districts. If you wanted a taxi south of 70th St in Manhattan, congrats! If you wanted one in the Bronx you needed to get very lucky. If you wanted one in a typical suburb you had to call someone and talk on the phone to schedule a taxi to come get you with plenty of advance notice. It's something that was so inconvenient I only remember ever doing it to go to the airport. The number of taxis was such that in a busy central business district you had a pretty good chance of catching one (presuming you didn't look too 'scary') but pretty much anywhere else you would never see one.

Uber tried to change that fundamental fact of life by bringing many more drivers out there, so that it would never be more than a few minutes wait, even in the suburbs. This, of course, means much more competition for drivers. They tried to solve that by bringing many more riders out, which was where the massive subsidies come in: you can keep both sides of a two sided market coming out if they are getting big subsidies. It's when they tried to make the riders pay enough, and paid the drivers little enough, to be profitable that the drivers and riders stopped showing up. Presumably it will be profitable still in heavily trafficked areas, but the dream of Uber being a reasonable choice for transportation in suburbs of Des Moines seems like a failure.

I well remember being unable to get a taxi in 45 minutes of waiting at 19th Avenue and Judah in San Francisco's Sunset district, despite calling taxi companies' dispatch offices. Yes, it was Sunday, but it was also 2pm, and anyone who knows the area knows that 19th is a very, very busy street at all times because it is the de facto north-south route between the Golden Gate Bridge and the peninsula, in the absence of a true highway.

Now no one ever thinks of not being able to get a rideshare regardless of time or place, as long as the area isn't completely rural.

I think the real product is in the dispatch app.

But it really only works if all the various cab companies subscribe to the same dispatch service. Every cab company having their own dispatch app doesn't work.

Basically, we don't need Uber, we need DoorDash, but for cabs.

It does for people like me, who prefer taking an Uber to dealing with taxi drivers pretending they can't take credit cards, the stress of figuring out how much to tip, and so on. I know that not everyone feels this way, but many do, and that certainly has some value. The question is whether it has enough value for Uber to be able to eventually make a profit.

If this was a purely artificial supply constraint (medallian monopolies and abuse, say), then that would be one path to Uber profitability.

If this was just a flexibility problem - where taxi driving full time as a requirement for drivers meant you couldn't hit peak demand without an unsustainable amount of idle time too - Uber could have a path there.

If it was a sort of "step change" demand function, where if you make it trivially available and cheap the growth in demand will be enough to offset the lower per-ride revenue, there's another potential path there.

But it's been a long time now for really none of those theories to pan out.

https://en.m.wikipedia.org/wiki/Price_elasticity_of_demand

If it costs like a taxi, looks like a taxi, pays its drivers like a taxi, it's a taxi. It's not an 'Uber' - whatever that's supposed to mean.

Uber appealed to the riders because it was cheaper - now the costs are approaching taxi prices, what's the 'Uber' advantage?

Uber appealed to drivers because they could earn more money than it cost to run their vehicles - with lower driver-payments, what's the 'Uber' advantage?

So, if the costs are higher and the returns aren't there why drive for 'Uber' at all? Without the drivers, there's nobody to take the riders anywhere. Best to order a Taxi. At least you know that there is a taxi in the town, and it will get to you eventually.

On the other hand, if no Uber driver happens to feel like driving at the moment, you could be waiting for days until your trip happens.

I've always said that Uber is scam. Soaking the investors and drivers alike, while the 'management boys' skim the top and laugh all the way to the bank.

Pickup from a map pin, dropoff to a map pin, driver follows traffic-aware navigation the whole way (like GMaps or Waze), payment automatically handled.

Cost was never why I preferred Uber/Lyft.

Traditional taxi services. "I don't know the name of it, but I'm in the big white building opposite the Night Market."

driver follows traffic-aware navigation the whole way

You haven't ridden in a taxi lately. I venture to say that a GPS of some description is standard in all taxis, including things like GMaps and Waze.

payment automatically handled.

Restriction to one form of payment. A Taxi can take cash, card, voucher, or can wait while you borrow money that you haven't got from somebody else.

I still don't see any 'Uber' advantage over a plain old taxi service.

I’ve noticed massive increases lately in Ubers prices. So have lots of other people. In response, people take fewer Ubers. As prices go up demand will go down.

Uber has massive fixed costs. Even if they maximize where supply meets demand (where they can make the most money) if it’s not enough to cover their fixed costs they won’t be profitable.

Uber needs to find a way to lower their costs or grow their users (raising prices doesn’t help) to hit a profitable break even point.

It’s been the VC money that has been subsidizing Uber prices for a while. That’s disappearing. Uber is also trying to expand into more spaces (Uber eats) to acquire customers. Maybe this will work but so far it’s not.

So, I got in the taxi thinking it would be around 60EUR (what an Uber usually costs). The taxi cost me over 100EUR to get home in 30 mins vs. 1 hour. I should have gotten an Uber but I was too exhausted to think of it and figured a regular taxi would be in the ballpark of an Uber.

Uber can give me a price before I even request a car. No taxi can do that atm and I don't think demand would go down because prices are increased.

If I knew it would have cost me 100EUR+ to be home in 30 minutes after spending all day in airports and planes, would I still have paid that much? I probably would've hesitated, but I think I'd still have pushed the button.

I disagree. Of course demand will go down as prices go up. It's quite literally the most basic principle of economics. Uber is not like a life saving pharmaceutical that people will pay any amount for - that is, an inelastic service. Consumers will absolutely avoid a service because it costs too much. Uber is no different. While people may still take Ubers, they'll take them less often. So Uber will still have reduced revenue.

> I couldn't convince the driver to give me a flat rate or quote to my destination

I'm from NYC, so granted our taxi fleet was well established well before Uber. One law established is a fixed cost to and from airports for cabs. Certainly this can be be replicated but yes, it's not something that can be immediately addressed and so Uber wins in this space (an upfront price).

To respond to your general message, yes, Uber is excellent in certain circumstances. This is one of them. Though I've also seen the reverse when traveling. Hoards of people waiting for an Uber, and plenty of taxis around.

As it currently stands, with prices going up, drivers' compensation going down, and Uber burning money, it's not likely sustainable. So Uber's future is at risk regardless of anyone's individual consumption

After Uber, you can get a ride even in less populated areas (almost) on demand. The price is definitely lower, but not significantly. But we went from only using a taxi to get to the airport (if you could find absolutely no one to drop you off) to being able to take one home from the bar or concert.

I guess tech is catching up with Uber and what they still have is a good brand and there is some confidence that you hopefully has a smaller risk of getting ripped off with them at least if you're a tourist in a new city.

The problem is that the "solution to the system equation" might have a complex/imaginary solution as its only solution (i.e. the business is not viable at any product price or any company cost structure) which is actually pretty common for startups - it's one of the primary reasons why a start-up and its product can fail.

Over $1 billion in past 4 quarters. Rides prints money.

https://en.m.wikipedia.org/wiki/Uber

Cheaper is a big part, but not all of it by a long shot.

It's a fundamentally different service.

The cabs still wouldnt show up, so I made friends with a bunch of personal Black-Car Drivers in SF and had their numbers directly and would coord trips from my house to SFO before hand (17 miles) - I would pay then a set fee including tip.

---

Once, I got a cab from my house to SFO and it was $65. for 17 miles, and a 30 minute wait.

I was flying from SFO to LAX. My plane ticket was $99.

450 miles, @~500 miles per hour or such. $99. 6AM Sunday. no waits, no hassle.

17 miles from House to SFO, @~30 MPH, 5AM sunday. 30 minute wait. $65 dollars. (2010/2011?)

---

Then Uber was born. I have never used a taxi in the greater bay area since.

Fuck taxis.

---

That being said - Uber & Lyft are not without faults.

Uber was run by a C-Suite of douchebags. The product was valuable, but the culture was toxic.

That has not changed - rather than actually being a better company, they are simply constantly attempting to cover up for the fact that they are douchebags... and thus, their platform as a business model (the drivers) is collapsing.

----

Here is the biggest PR debacle with Uber that goes un-reported:

They attempted to have a lottery for a secret party night where you had to attempt to book a ride to this "party" and you may or may not be let in... and you had to keep trying and they would havea driver pick you up and deliver you to a secret party spot, with a special DJ and special drinks! YYAYAYA!

Well - not so fast punk.

The lottery was bullshit and had many problems where people were accpected, then the driver rejected them, and all sorts of other failures...

Then, (I was one of the "lucky winners") they were able to pick people up and rather than carrying them off to some super-cool-secret-party location, they had a mediocre half-assed "party" at Harlot in San Francisco -- where after going through the gauntlet of disorganized Uber Drop-offs (the drivers were just as confused as was the inept marketing group at Uber) you were still put into a line as if it were a regular lame club in SF.

They attempted to charge a cover, but backed down after people pushed back based on this "contest" to come to "secrete party"

Then the special drinks? They were $12/drink... You WON this lottery to go to harlot as if it were ANY other night in SF... the inside of the party was an utter joke - the uber employees were uber-douchebags; stomping around like they were in charge of some super important event and had no time to talk to you and what not...

But here was the worst part: Those fucking douchebags had ~1,000 people come to this club harlot, attempted to charge them for cover, then charged them the same price for everything as if it were any other night that one might go out, fight over getting a spot in the app lottery -- but when it came time to go home:

Uber didnt plan for that!

So they had 1,000 users standing on the sidewalk, EVERYONE LOOKING AT THEIR PHONE trying to schedule an Uber home...

These fucking morons didnt have the forethought to make a fucking ROUND-TRIP BUTTON in the app which said "pick me up here. Drop me off there. Pick me back up and take me back home at THIS TIME."

So their system crashed and all their coked-out "PR/SocialMedia" douchebags ran around unable to answer questions because they were too busy sucking their own PR dick.

Fuck Uber.

This was my experience in New Orleans as well. The taxis simply didn't service non-tourist areas.

Some friends and I had some fun while playing video games and barbecuing by calling 5-6 of the largest taxi services every 30 minutes for 6 hours. 50+ requests, not a single taxi showed up that day. Most said "the driver went there but no one came to the car". We were in the front yard most of the time.

yeah - I have zero sympathy for cab drivers/cab companies.

A friend of mine who was a stellar SRE/DevOps guy refused to comment on his tenure with uber simply saying "It was the most fucked up place I have ever worked" -- and he was a seasonsed SV vet at the time... and this was several years ago

Luxury towncar services however did the trick. This was before Uber/Lyft of course.

That's what I use exclusively. Would never trust a taxi where I live and certainly not Uber/Lyft to have sufficient network to pick me up. But my company is usually paying.

I'm not an Uber apologist in the slightest but why is it that apps for the alternatives still suck? In a similar vein a delivery co-op app launched in my area semi-recently and I tried their app and it's absolute garbage. I've done minor app development and while I'm not great at it, I don't think you need millions (or billions in Uber's case) of dollars to create something on-par. Honestly you could pair me with a good designer and for the price of 1 year of pay I have doubt it could be built.

Agreed, here in SF Uber and Lyft have both become considerably slower, more expensive, and less reliable over the last weeks/months.

A friend suggested the YoTaxi SF app, which is an app for ordering local licensed taxis. You can pick your start and endpoint and order a car just like Uber. Great! Except you can't tip the driver via the app, so the reviews are mostly negative where reviewers explain they arrived at their destination only to be shaken down for cash or venmo by the driver, potentially for the full cost of the trip because "that app doesn't work, I won't get paid."

I would love to stop using rideshare. I urgently want to, because several times recently I've nearly been late because of issues - for example on a recent trip after I waited 10 minutes, my driver flew past my exit on the highway and canceled my ride before reporting me for "health and safety violations" so they would not be penalized for the missed trip. But my alternatives are either to utilize multiple intermodal transfers across the bay area public transit system, typically more than doubling the length of the trip, or to deal with the taxi system. I'll use public transit when I can but for example, the trip I took yesterday was 22 minutes by car and 1 hour 5 minutes by public transit - assuming my bus transferred on time. I just don't have 45 +/- 15 extra minutes each way every time.

Maybe that's where Uber should focus? Become an Airbnb of transportation.

to be fair they're not shooting for Principal FAANG engineers either

$72K/yr to build an app/website/platform from the ground up is absurd IMHO.

That only works as a business if the moat is a loss-leader for some other product or service.

I would never use this since i have the uber app first.

I could accept the higher cost as just part of fairly pricing out ride service, but the weaker experience was a hard pill to swallow.

The people who are focused on the app crap use Uber and avoid the cab that is 10 feet away.

The restaurant crap is even more ridiculous. It literally takes the customer 5x more time to order a pizza on an app. I’ll call and say “Hi, I’m Spooky23, two cheese pizza and garlic knots” and I’m done.

This depends heavily on the restaurant.

(The app potentially wins, too, if have a recurring order saved to your favorites. My family tends to have the same fairly complex sushi order and I can re-order it in a click.)

And on the type of pizza. Cheese pizza is easy enough. :)

Regardless, as an international student with an accent, I’m very sure I’ll never order a pizza over the phone.

Apps can be so much more accessible for people

But I would say many places, esp fast/casual service places are just trying to shave some labor and make it difficult to not buy combo meals, etc.

Clearly not because of other features like ease of payment, or reviews

>The restaurant crap is even more ridiculous. It literally takes the customer 5x more time to order a pizza on an app.

Clearly not because of discoverability (both in terms of restaurant and the menu), or being able to confirm that the order was correctly placed.

It remembers the last few orders I made (so I can repeat one), and I don’t need to spell out my delivery address, area code, leave instructions of how to use the apartment buzzer, etc (because it remembers the previously written instructions).

But ordering delivery didn’t need a shakeup like taxis did. If your average taxi driver (at least in my Montreal), wasn’t a scumbag trying to hit every red light or closed road on the way to run up the meter, and feigning that their card scanner (debit/credit/Interac ) was broken at the end to save 50 cents of transaction fee and avoid paying their taxes on the income then they wouldn’t have taken the city by storm.

Even when they were actively banned by the province they were most of the rides I’d see people taking. Of course the government came around to Uber once they realized that drivers wouldn’t be pushing cash to be paid under the table anymore.

Today I would rather take an Uber, even at a 50% premium because the experience is better.

Just google 'white label Uber', there are plenty of results.

The payments can be outsourced too, to Google or Apple pay, including in-app. Since they represent a physical service there's also no app store commission.

In this particular article: if Uber is losing money by subsidising rides - then people get cheaper rides than they could otherwise have. But that also article suggests that Uber victimizes riders. That does not compute. Yes - it is anticompetitive and possibly without Uber we would have something else that could potentially be better - but also without it we would not have all those cheap rides and all those valuable things that the riders did because of the cheap transportation. That all subsidising in bad in the sense of disrupting normal market forces - but it is a stretch to declare the riders to be victims here.

Will Uber be profitable? I don’t really care, they improved society, period.

They added an extra convenience to your life, and made your life better. This may or may not be true for a lot of passengers. It may or may not be true for a lot of drivers.

It’s a stretch to call that an improvement to society, when the only example cited is a minor convenience improvement, that only the upper 50% of the society you live in can afford to use regularly.

In what way did they set back public transit? My understanding is that every american city except one or two has had abysmal public transit for decades. And the only alternative was walking/biking/driving yourself (often not possible) or taking a taxi (which as stated elsewhere in the thread has a terrible UX).

Uber provided an alternative, which I guess technically reduces the demand from voters for better public transport, but so far the strategy of “everything will be terrible all the time until voters get fed up with it to the point that they demand better public transit” hasn’t seemed to work very well to actually improve public transit.

This isn't the case anymore. There is a shortage of drivers and no one wants to work for the prices offered by uber and lyft anymore. I had a friend try and visit me who lived like 5 miles away. 5 million people living in my city so its no slouch in terms of ridership and size of the uber and lyft networks. Three drivers cancelled rides on him before they picked him up, it took him like 45 minutes before a driver finally appeared. You pretty much have to reserve a ride in advance if you have something important, there is no telling how long it will take before drivers pick up your ride or finally show up.

This is one reason it's so hard for me to rag on Uber. On the one hand this thread describes many of the horrible things about Uber but I have to say, my life has improved since Uber came out.

Maybe they find a benefit in the relationship?

Cost of ownership has huge variance. A surprisingly large number of people have no idea when to do an oil or brake or battery change. Small accidents can change your cost equation dramatically. Random crap like hitting a pot hole, a hailstorm or someone scratching your car while parallel parking can trivially drain a month's salary.

It is very difficult to foresee these expenses unless you have an extremely consistent driving experience, and given that most of the drivers are not doing this professionally and don't have great numeracy skills, many will be in trouble.

The wear and tear on a new car may not become apparent for years.

(i don't necessarily agree, but i understand the argument)

This is the key word. If it hasn't formed already, there's a good chance it won't, so anything that reduces the pain now instead of a hypothetical in the sky is a win in my book.

There's room for a sustainable middle ground, IMO.

I've seen cherry-picking by taxi drivers. Do Uber drivers even get to see the destination before they accept?

Why is this argument always coming up? "Uber does good stuff because the competition (taxis) suck"?

If there is a good taxi market, then there are excellent taxi companies. I book one on an app, I see where it is, I pay in the app. I did for a decade. What's the problem? The problem is that there was a medallion system in some cities, that make taxis suck. The solution to bad regulation obviously can't be having a company just circumvent it.

To Judge the profitability of Uber, look at how it does in every citi where there is good competition. Because any city can do that, with the flip of a switch. Just deregulate taxis and Uber is a taxi company among others.

And yet it turns out that was the solution for many cities. Because otherwise I didn't see those bad medallion systems changing.

Why is that "obvious"? A lot of our society functions because rules get ignored where necessary.

This sounds like the typical arrogant software developer declaring that they could build someone else's entire business during a weekend with a text editor.

"Literally one app away" is exactly what was wrong with the taxi business before Uber and Lyft. And yet with 10 years to catch up, taxi apps -- many of them built specifically to try to compete with Uber/Lyft -- still suck.

Incidentally, how is it that hyperscale tech companies such as Uber and Deliveroo are struggling to turn a profit on proven business models, while charging more to both the customer and provider? Isn't tech and scale meant to make it cheaper?

I'm not sure I buy that, personally. I don't think riders are victims. Uber to me has always looked like a way to subsidize a bunch of cheap rides for riders with some wildly-optimistic "one day this will be profitable and we'll be the biggest name in the space" plan. Even self-driving cars didn't seem like the answer - that's a massive investment in a vandalism magnet, like the scooter companies but dozens of times more expensive (maybe running a scooter business helped them realize this?).

The problem with trying to profit off "scale" with something like Uber is that the service still has to be delivered one-on-one. Things like Uber Pool are the closest they can get to scale, but suffer from a "why am I paying for this" problem as the experience suffers and the cost can't be that low (since their base rate is artificially low already).

I lived in Cleveland and i tried a taxi once. It was $100 to get to airport from within city limits. It was a 2 hour wait.

Uber basically invented usable taxis there.

I did take ubers/friends to the rapid all the time.

I think that's the main argument.

Uber had ~$17Bn revenue on ~1.44Bn trips in 2020 per quarter. That's ~$12 per trip.

Salaries are >$7Bn. That's about $1 per trip. Add in the marketing and server costs - and it's close to $3 per trip - without profit. Then they're going to want a >10% profit margin (another $1). When >50% of trips are only a few miles and <$9 - that's a lot of overhead - not even including Visa's ~6% cut.

The Taxi company was happy to just get a 10-20% cut. Uber needs a 40% cut to break even.

As New York is showing - you don't need to spend >$14Bn per year on an app. Uber's app is pretty awesome - but riders aren't going to pay a 30% premium to use it. And driver's (of equal quality) definitely aren't going to take a 50%+ pay-cut to make up the difference.

When the alternative is the traditional taxi experience? Hell yes I am going to pay a 30% premium to avoid that.

One of Uber's main contributions is changing this dynamic.

Corporate salaries??

Uber has never made any sense to me as a business (since 2016), and it's crazy how long it's lasted.

It sucked having to rely on friends, family, and especially yellow cabs.

I’m not saying Uber is the best company or business model, but ride sharing makes total business sense to me.

That said, I realize I'm financially better off than many people and would prefer to have safe, affordable, and widespread public transit.

The only thing changed by uber is that the minicab operator is now an app, and pricing is less predictable

To push back on taxi apologia elsewhere -- Years later I lived in Philadelphia during the cab era and the city passed a law that the cabs needed to accept credit cards, but the cabs wouldn't unlock their doors unless you promised to pay cash. Even still, they'd often ask where you wanted to go and speed away if you said the wrong thing. Around the same time, in D.C., there was a "zone system" where cab fares were set around how many zones the cab traveled through, and so every rider got used to knowing the tricks cabs would play to go out of their ways to enter and exit unnecessary zones and surprise you with a high bill. They also had the right to pick up additional passengers whether you liked it or not. In NYC it was common knowledge that you just can't expect a cab to take you to the outer boroughs.

To drivers AIUI. The "fair" value a driver should make is $1. Uber is paying them $0.7 and charging the customer $0.5. That said, I'm not sure how valid OP's assessment is without also considering Lyft/Didi/Grab. If Uber's business model is ultimately untenable, every company should be in trouble

"Uber’s continuing operations had a GAAP net margin of negative 38% while Lyft’s was negative 49%." https://www.nakedcapitalism.com/2021/08/hubert-horan-can-ube...

I guess Doctorow doesn't want to waste space commenting on the also-rans.

A legitimate, licensed, insured car in livery service probably costs more like $2/mi just to operate the car and pay the driver.

Think about how NYC Cabs are operated vs Uber. The cab is a fixed asset with operating expenses, and many cabs get rented 24/7 to maximize the return on asset. With Uber, the vehicle is a consumable and the business is to lease time from contractors who don’t understand accounting, and both the company and driver is losing money.

I don’t think the investors are getting ripped off. They own an international network that has value, and have more money than they know what to do with!

fingers crossed

Innovation is full of scenarios where visionary companies thought they could offer something at a loss, and then eventual improvements to technology/logistics/supply chain/process/etc would make the concept profitable.

Whether it's Amazon offering free shipping, or Google offering OUTLANDISH (for the time) storage volumes for Gmail.

I can definitely imagine that Uber's leadership genuinely believed that various economies of scale or technological innovations would allow them to be fully profitable in the long run.

Same for Self-driving cars: When Uber was investing billions into it, it really looked like they were at the tip of the spear of innovation together with Google. People felt that Uber was actually BETTER Positioned for introducing self-driving technology than Google because they were focusing on adding extensions to existing cars, and they already had a built-in customer base using them for ordering point-to-point rides (Whereas Google/Waymo had to build out those capabilities themselves since)

This is where my charity ends. Uber has not treated their drivers because it considers them completely fungible and replaceable. Everything to do with Public Transit is completely bang on - it's ludicrous to even imagine Uber participating here.

And I buy the overall conclusion - in the long run we will look back at Uber and consider it a net loss for humanity's progress.

But there is no getting around the pure delight of the original user experience - irrespective of pricing. And I'm willing to bet that the leadership did not consider it a con from the beginning, they really thought they could make a profitable business from this in the long run.

I worked in government and started doing services procurements years ago. When I first started doing that, I was really taken aback by the cynicism of the procurement officers and attorneys. Then I did two or three engagements… and it makes sense.

Similarly, I experienced the delight aspect on a trip where I paid $20 for a ride in a Mercedes SUV in Baltimore that would have been a $30 cab ride.

The next time I used Uber, 5 years later, it was a 10 year old Odyssey with an Afghan guy who was illegally sub-letting somebody’s Uber Driver account, and it cost $35 for a $20 cab ride.

End of the day, all of these stories boil down the same thing. Commodity services are either luxury at a premium, or minimum viable level of delivery at a low price.

I have no doubt about the same. But the point isn't about what Uber was; it's about what Uber became, and how their over-promises turned into outrageous claims that snowballed into a completely unsustainable business.

And while I do respect the spirit of the original app being a serious improvement over prior experience, truth is that nowadays even traditional banks and even government apps can be found that are just high-quality and show that you don't need a cutting-edge startup to have good service.

I also believe that other entrepreneurs would have been able to plod a similar path without ripping off investors or mismanaging finances.

I never understood the value of that.

The value is in the driver network, which is hard to build with human drivers, but trivial with self-driving cars. Given a driver network, building a customer network is trivial.

You can have a large fleet that moves to a city that you want to bring up. The novelty of a self-driving car will help find users, the sudden large presence of highly recognizable, branded vehicles will automatically serve as a billboard for your service, an offer of free rides does the rest. Once people realize that the self-driving option is a) cheaper b) faster (because of the excess of cars) c) safer (because there is no unpredictable human driver that could be a bad actor), human-based competitors will have a very hard time.

Once the city is brought up, they can leave the number of cars that they deem appropriate (gradually worsening service), and have the rest of the fleet drive to the next city.

What does Uber have? An app (easy), a way to handle fraud and abuse (totally changes and gets a lot easier when you remove the driver), network effect (see above).

Google has a special advantage, the maps app. If they manage to not ship the org chart, they can add a "order Waymo" button to navigation. Boom, everybody has their ride share app already installed on their phone, and many of the users have payment data in their account.

I do however use Uber and Lyft constantly, all over the country and world, and the contrast between the services today and a a year or two ago is stark.

Pricing is often 4-5x what I used to expect for the same trip, sometimes with wait times of 30-40 minutes, even in non-peak times in central business districts.

As a regular user who just happened to be in 9 different cities over the past three weeks (I'm in the conference business) it's really clear something really severe is going on with these companies right now and their service level is in free fall.