Author Topic: Uber/Lyft have defective business model?  (Read 5571 times)

Spekulatius

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Re: Uber/Lyft have defective business model?
« Reply #10 on: March 06, 2018, 05:59:41 AM »
I donít really care about their business model or how much money their drivers make. I Luke them as a customer, they have created a way better way and interface to hire transportation, when I need it.
To be a realist, one has to believe in miracles.


StevieV

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Re: Uber/Lyft have defective business model?
« Reply #11 on: March 06, 2018, 07:03:22 AM »
Yes, I think they do have a defective business model.

They don't make money now.

I don't know when AVs will come, but when they do, I agree that they won't have a competitive advantage there.  The current MOAT is the driver network.  When there are AVs, why won't the car companies directly win that business.  Or rental car companies.  Or folks signal their own car to pick them up.  I think that will be a tough business and I don't see that Uber will have a big advantage.

Pelagic

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Re: Uber/Lyft have defective business model?
« Reply #12 on: March 06, 2018, 07:44:13 AM »
Yes, I think they do have a defective business model.

They don't make money now.

I don't know when AVs will come, but when they do, I agree that they won't have a competitive advantage there.  The current MOAT is the driver network.  When there are AVs, why won't the car companies directly win that business.  Or rental car companies.  Or folks signal their own car to pick them up.  I think that will be a tough business and I don't see that Uber will have a big advantage.

I don't see the driver network as a defensible moat for them, drivers can and do switch between Uber/Lyft and other smaller ridesharing apps where they exist - most drivers will use both at the same time and pick up rides interchangeably between them. Furthermore, save for a small minority of drivers, most drivers don't see driving for Uber/Lyft as a long term gig, they work when they want, when they feel it makes economic sense to do so. Should they be priced out by higher costs (fuel costs for instance) or cheaper AV rides they'll stop driving.

Where I see Uber and Lyft currently having a moat relative to taxi companies is in the platform used to hail drivers. People like being able to summon a ride through their phone and whether it's a human driver or an AV I don't see this disappearing anytime soon - not that taxi companies can't replicate it easily enough if they choose to. It all comes down to price though, if they're not providing the cheapest, or close to it, ride - riders can easily open another app. I usually price shop between Uber and Lyft before summoning a ride and there's no reason to think if a company running a fleet of AV pops up in my area and offers an app to summon them with transparent pricing, I wouldn't also check their rates.

The "let's use our drivers as guinea pigs to prove the platform can work then undercut them with our own fleet of AVs" model has always struck me as funny. Technology is great, don't get me wrong I love tech and can't wait for self driving personal cars. But I feel Uber/Lyft are pushing for AVs because the technology exists rather than because of an economic case for it. If you have people willing to work for essentially minimum wage as drivers, is switching to a capital intensive model where you own and have to maintain massive fleets of self driving vehicles really the path you want to take? Perhaps they're making the case that driver's earnings are higher than estimated to justify their push toward AV to their investors.

StevieV

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Re: Uber/Lyft have defective business model?
« Reply #13 on: March 06, 2018, 08:59:46 AM »
The "let's use our drivers as guinea pigs to prove the platform can work then undercut them with our own fleet of AVs" model has always struck me as funny.

Good point.

I don't see the driver network as a defensible moat for them ,....  Where I see Uber and Lyft currently having a moat relative to taxi companies is in the platform used to hail drivers.

I am not sure we understand each other here.  IMO, the reason why you or I would have difficulty starting a ride-sharing company today, among others, is scale.  People use Uber and Lyft because they are well-known and available.  I can go to many cities and be confident it has Uber and there are a reasonable number of Uber drivers around, so that I can get a ride.  Drivers want to be with Uber or Lyft because they have the customers.  I called that the driver network, but perhaps network effects or scale would be more appropriate.

Pelagic

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Re: Uber/Lyft have defective business model?
« Reply #14 on: March 06, 2018, 09:08:16 AM »
The "let's use our drivers as guinea pigs to prove the platform can work then undercut them with our own fleet of AVs" model has always struck me as funny.

Good point.

I don't see the driver network as a defensible moat for them ,....  Where I see Uber and Lyft currently having a moat relative to taxi companies is in the platform used to hail drivers.

I am not sure we understand each other here.  IMO, the reason why you or I would have difficulty starting a ride-sharing company today, among others, is scale.  People use Uber and Lyft because they are well-known and available.  I can go to many cities and be confident it has Uber and there are a reasonable number of Uber drivers around, so that I can get a ride.  Drivers want to be with Uber or Lyft because they have the customers.  I called that the driver network, but perhaps network effects or scale would be more appropriate.

Makes sense, I was thinking more in terms of the drivers themselves which have little attachment to either and are a sort of revolving door of people that use the apps to make extra money until they tire of it, which I don't see as being their moat. Their platform connecting drivers/riders is the real moat as I see it.

KCLarkin

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Re: Uber/Lyft have defective business model?
« Reply #15 on: March 06, 2018, 09:16:31 AM »
I don't see the driver network as a defensible moat for them ,....  Where I see Uber and Lyft currently having a moat relative to taxi companies is in the platform used to hail drivers.

I am not sure we understand each other here.  IMO, the reason why you or I would have difficulty starting a ride-sharing company today, among others, is scale.  People use Uber and Lyft because they are well-known and available.  I can go to many cities and be confident it has Uber and there are a reasonable number of Uber drivers around, so that I can get a ride.  Drivers want to be with Uber or Lyft because they have the customers.  I called that the driver network, but perhaps network effects or scale would be more appropriate.

Yes, this is the classic example of a two-sided network. The demand will go to the network(s) with the most supply. And the supply will go to the network(s) with the most demand. And the moat increases as the network grows since the dynamic is self-reinforcing. These are very, very powerful moats.

rkbabang

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Re: Uber/Lyft have defective business model?
« Reply #16 on: March 06, 2018, 09:51:16 AM »
Anyone expecting to see autonomous cars running on our highways has a long, long wait ahead.

Perhaps in sunny south California, but not in the snow belt and not on rural two lane highways during the winter where there are no lines on the roads and where snow drifts and whiteouts can crop up in minutes.

Easiest places to implement due to population density and weather will be first, other places will get it slowly over time.  I remember as a kid waiting for cable TV.  The small city next to my town had it a good 5 years before my town started getting it, and even then it was a year or two before it reached my street. Kids at school would brag about getting cable and it seemed like forever before it reached my neighborhood.  Population centers always get stuff first if population density is an issue.  And eventually the weather condition concern will be solved as the AI gets better.   Eventually it will be available everywhere but the most rural places (the type of places where dialup internet is still the only option today).

DanielGMask

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Re: Uber/Lyft have defective business model?
« Reply #17 on: March 06, 2018, 10:39:24 AM »
Here is the information you are looking for:

https://www.wsj.com/graphics/uber-financials/

Of $11bn revenue $7.5bn goes to drivers and their cars.  It's an enormous opportunity for both revenue growth and cost optimization.

Self driving cars will cost less than a typical vehicle today and will be much better utilized.

But what is Uberís edge running a large fleet of cars exactly?

Network effects, scale economics, brand recognition, market share, etc, etc, etc. I have no clue if they are making money right now but moving people within a town or city is more necessary than ever and Iím confident there will be a lot of money to make and the first move advantage of these companies itís going to be difficult to overcome.
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LC

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Re: Uber/Lyft have defective business model?
« Reply #18 on: March 06, 2018, 10:50:01 AM »

I am also going to guess that a fully autonomous car is going to cost at a MINIMUM $50k.  What if these cars cost $75k or $100k?  They are going to buy a very expensive piece of machinery to capture $8/hour in profit (maybe?).


Autonomous cars will kill Uber/Lyft.

Why wouldn't I take out a loan, have the car drive itself for the 22 hrs/day when I don't use it myself, and capture that $ myself?
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DanielGMask

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Re: Uber/Lyft have defective business model?
« Reply #19 on: March 06, 2018, 11:09:43 AM »
Yes, I think they do have a defective business model.

They don't make money now.

I don't know when AVs will come, but when they do, I agree that they won't have a competitive advantage there.  The current MOAT is the driver network.  When there are AVs, why won't the car companies directly win that business.  Or rental car companies.  Or folks signal their own car to pick them up.  I think that will be a tough business and I don't see that Uber will have a big advantage.

I think thatís a fallacy. Having a huge fleet of cars is going to be expensive to set and expensive to mantain - Itís today and it will always be. Having a real and huge network of cars/drivers on demand an the digital ecosystem supporting that network is the most valuable thing here.

Just as anybody can replicate the ITunesí model (but in reality is not just that easy!), anybody would be able to replicate Uberís model but itís not going to be that easy!
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