Uber is stupid for not including a driver incentive program in their model. They could hike the price of fares to their heart's content, because no one would be driving for their competition anymore.

Currently they offer like 10% off oil changes at selective stores, and a few other utterly worthless crap.

Hmm...when I talk about "logistics" with respect to Uber, I'm thinking of the problem of mapping vehicles to users to minimize trip times subject to pricing constraints and overall fleet configuration.

So I'm thinking of a human mobility problem, really---which is quite a bit different than the "logistics" problems that Amazon and Wal-Mart solve.

What are you thinking of?

I don't get it. Can you elaborate?

Great points. My chosen hyperbole was clearly a bad one.

I was thinking the same thing for carpenters. I mean, if a construction company came along that would just offer carpenters $1,000,000 per hour when they've got work available...

Moving people and goods around.

Uber has no plans to employee human drivers for any longer than the minimum time required. (Per their acquisitions and Kalanick's statements) If it takes 20y to develop autonomous vehicles, they'll go bankrupt. If it happens in the next few years, they'll grow at a meteoric pace.

I don't understand why people are focused on the issues with their current unsustainable business model that isn't even the core driver of their valuation. I guess it is a fundamental misunderstanding of their business model and what they're trying to do.

The global taxi business is maybe 100b. Uber is valued at 50b? Is this uBeam or is it more likely that they're viewing ride sharing as a foothold to a much larger business model?

Goods are irrelevant to their future valuation. The movement of humans is where all the revenue and profit is, especially for autonomous vehicles, which is why everyone is really confused by your logistics + transient driver comment.

That's a very high figure for gross revenue, and only a fraction is ever attainable, and a further fraction is profit.
They're not a "ride sharing" service, they're a de facto taxi service. And the only way they're going to have huge growth is if taxi services increase greatly thanks to autonomous taxis driving costs down.

I was reading an article recently that said almost all Uber drivers are also Lyft drivers. So the driver can do both. If one raises its rate (and compensation) the consumer will just shift to the cheaper one and the rate raiser loses.

Note that once autonomous cars are a thing it actually destroys Uber's competitive advantage. When you don't need drivers Uber's marketplace isn't the consumer benefit that it is right now. Any service that can invest in the cars can ramp up and down supply as required and nothing ever reaches surge pricing.

Ride-hailing in autonomous cars will lead to margins dropping to commodity levels, imo.

Uber is actually branding as a commodity and not a marketplace. I don't know why people claim it is a marketplace or it has network effects.

It is simply trying to get your from point A to point B, with a few levels of transport (Black/Pop/Bus/etc), with no consumer choices (car/tip/etc). It is pretty much the exact opposite of a marketplace.

Absolutely not. Uber brands itself as a superior experience to traditional taxis. It's "everyone's private driver" not "ride in this metal box to get to your destination."

You get a car with one click. You pay with one click. You don't tip. The card readers are never "broken." You know exactly how long it will take for your car to pick you up. You don't get gouged with the tourist route that's 50% longer.

It is ABSOLUTELY a premium service.


For the marketplace side, while they don't let people drivers set their own rate (a true marketplace) Uber does have surge pricing when demand > supply. That encourages more drivers to get out there and the price comes down. Having a deep roster of available drivers allows that dynamic to play out.


When Google or Apple have autonomous cars (both have much more cash available for this project than Uber) they're also going to have their own native apps that will let you hail one of those cars and get from point A to point B. And both already have extremely profitable businesses that can withstand a price war.

Autonomous cars are not going to make Uber's human transportation business some stratospheric level of profitability. It will hopefully get them to a commodity-level profitability of 5-7% that they can invest into other businesses to try to live up to their valuation.

Based on their internal projections that got leaked they're looking at $1.25B in net revenue in 2015 which would mean ~$88M in profit in that scenario (right now it's going to mean hundreds of millions in losses as they build out the driver network and pump marketing into driving consumers onto the platform).

There is almost certainly a place for them in the logistics industry, but that's another super low margin business and one where there will be lots of competition.

Uber's best bet in that scenario is to develop better self-driving car technology than Google or Apple or Tesla and hope they can become the provider to UPS or FedEx. Similar to how UPS is making a ton of money off Amazon while they operate at a low margin, Uber can hope to be the one making a ton of money off UPS while they still get by with a 5-7% profit margin.

mmbt,

That is awesome! I'm excited to hear your thoughts about more "marketplaces" that don't allow customer choice. What do you feel is the next industry ready for this? Gas stations? Electricity?

Why don't you actually write out your thesis rather than speak in convoluted abstracts? You're being sold investment marketing baloney, which loves abstracts. Let's hear a thesis instead.

e.g. In 2020 Uber can own x% of a market that will be $y billion and can make z% profit doing it, and here's why.

There are so many steps to get from here to there that seem to be hidden for you behind nonsense like "logistics" and "commodity" and "marketplace" and "autonomous driving" and "core driver of valuation".

How big will the market be, how much can Uber own of it,and why? You threw out "multi trillions" before I believe. What does that consist of? Moving people around? Goods? Be specific. If you were specific rather than waffly you would never have mentioned logistics, because all of their meaningful valuation will be in moving people around aka being a taxi service. Which doesn't sound as sexy but is reality.

So. Uber is going to be the next great big taxi service with a gigantic fleet of self driving cars all around the globe. Why will they get there, and not someone else? Why will competition not squeeze them out. How much revenue and profit will there be?

I see nothing even remotely resembling a moat for them. Cost of switching for drivers and customers doesn't exist. Mapping/routing/scheduling software is everywhere. The verb form of the company name "ubered" doesn't have positive connotations (I even overheard a guy promising to uber his woman real hard).

It does have real potential as a premium service (it is in certain South and Central American countries* and there is uber premium/select and black), but it is focused on the level of service you expect from a the pizza delivery guy minus the intense training the pizza delivery guy gets. Premium service does not come at discount rates.

It is just a cheap way to get a ride in a halfway decent amount of time for the riders and what looks like a good deal for financially illiterate people who happen to own a car.

*not being kidnapped and held for ransom counts as a premium service in these markets and they charge 3-5x taxicab rates in those markets.

Premium service is meaningless. The only bull scenario for Uber above their already insane valuation is capturing via self driving cars a decent part of half billion a day (average) commuters and current car drivers at 50c/ride in profit.

That's about $50 billion a year in profit. This is what the nutcases are believing an Internet app maker will leverage into when they talk multi trillion. I'd like to see someone who believes this case to lay out this case so we can critique it.

Uber clearly lacks any kind of a moat so the only thing you could be betting on is that they execute better and faster than others due to stellar leadership. On that side of things I have to think they've done a pretty good job - rapid expansion, smart PR decisions, staying on top of problems, grass roots lobbying against problem laws, controlling risk and making sure execution is smooth (for example, background checks, giving drivers phones and bluetooth earpieces for directions). They've had a cult's level of devotion and creative thinking in getting the job done and intimidating opponents. But then, so did Enron...

The self-driving thing is way to far out to discount to present value even if you decide to be silly and assume they own that market in its entirety in 2025.

Betting on disrupters is a fool's game. Which horseless carriage maker would you have invested in?

(Uber is an excellent test of libertarian idealism though)

Update: Forgot to mention Amazon in likely competitors list

https://flex.amazon.com/

Can't stop an idea whose time has come. Same goes for airbnb.

see ya TAXI

I don't think anything that has ~1 million users a day can be stoped.

Myspace?

One of the ways to slow them down is simply banning them. The Ministry of Transport in Japan declared them illegal as it allowed drivers without taxi licenses to profit by providing transport. Germany did the same, and Uber now has licensed drivers up and running there.

China puzzles me. I'm struggling to find a reason why they'd let them in. If any country seems capable of regulating Uber out of existence, it's China.

With Uber's track record, I don't see how you can bet against them. I'm not referring to their valuation, just their ability to execute.

Yeah, but it's more fair to say "customers" than users since Uber's actually getting money from each of their folks (unprofitable money, but money).

I certainly don't think Uber's going to go bankrupt. They're a multibillion dollar company unless something terrible happens.

However I don't know if I'd be super bullish on my return if I'm buying in at a $50B valuation right now (which the investors aren't really doing anyway, but that's another story).

Well then how about AOL?

Is it really unprofitable money if they're making profit and using it to fund expansion?

That is an important word.