This is a great point. A crowded market means there's lots of space for new entrants and that no one has quite figured out how to win the whole thing. Good opportunity to steal and borrow from the best currently in the market and try to consolidate.
I think a lot of the maneuvering that's happening now is prompted more by TK's seeming unwillingness to make sincere changes (and that's always worse than the initial mistake), but more importantly Uber's financials are still utter garbage right now and changes need to occur for that to be fixed in time for them to find the next Saudi Arabia that'll invest another $3.5B for them to keep the lights on for another year.
I am opposed to the taxi industry collusion entirely, but Uber/Lyft are creating customer value by subsidizing their transportation costs via investor dollars. While I would love to see the taxi companies forced to reform, Uber will never make a penny.
You're exactly right though, and that's the problem.
People won't pay to use the service if Uber charges what it actually costs to deliver it. They're heavily subsidizing each ride. When you pay for an Uber, they're basically giving investor money to the driver to cover your fare for you. Investors have been paying for your transportation over the past few years.
At some point, they have to actually make money, and the only way to do that is to raise prices. The issue is no one will stick with the app at higher prices. I've already abandoned Uber/Lyft/others for a $300 bike and a bus pass, because it's much cheaper and much healthier. If they double or triple their prices, which is about what they'd have to do just to break even, lots of people will be following suit.
The self-driving car game was supposed to save them, but I don't think they're guaranteed to win that fight. Tesla seems further along than anyone, and I have far more faith in Musk's ability and track record of executing than I do in Travis (or whatever committee is replacing him). Not to mention every automaker is working on self-driving cars right now to boot.
Uber has no guarantee they'll dominate that market, and considering they can't even break even in their current market, I see them as a ticking time bomb.
>The self-driving car game was supposed to save them, but I don't think they're guaranteed to win that fight
Agreed. I'd argue that existing car-sharing companies like Car2Go are better positioned to dominate the "self-driving taxi" market. They've already solved the challenges of owning and maintaining a shared car fleet profitably. The day self-driving technology is ready, they'll already be miles ahead of Uber.
You got green name, so I'm gonna reply here too. You already pay for the bus, does not matter if you use it or not (okay there's a surcharge, cause we ain't no commies). Uber has to compete with that! If you thought VC's are good at throwing away capital...
edit: I forgot what green name means... green btw...
If you're losing money on every ride, then your aggregate profit on all rides will be in the negatives. More volume just makes the total loss bigger, because that's more money you've been giving away.
But are they losing money on every ride? I thought the whole point of subsidizing rides was(as OP comments pointed out) to raise demand, both for drivers and riders, they first entice both ways with the promise of lower rates and higher payoffs, then slowly increase their cut of the pie against the driver's payoff and increase the rates on riders.
I'm not saying this will ever offset their increasing losses, but that is what always seemed the long term goal of monopoly.
> I thought the whole point of subsidizing rides was(as OP comments pointed out) to raise demand, both for drivers and riders, they first entice both ways with the promise of lower rates and higher payoffs, then slowly increase their cut of the pie against the driver's payoff and increase the rates on riders.
Right, and by the logic that decreasing prices raises demand, increasing prices will decrease demand.
That's my point, and the point of critics that are often ignored. Their customers will bail the moment they start getting charged the $25 their $10 ride actually costs. And that increase will be to break even. Not make any money. Just break even.
Uber will never achieve a monopoly. There are buses, bicycles, and used cars for $1500. People aren't going to pay $600 per month on a ride hailing service. I've already ditched Uber, and so have many of my peers, in favor of alternatives that save money. And that's without significant price hikes yet.
The fundamental economics of having a private driver have not changed. An app doesn't change what it costs to pay someone to drive you everywhere. I hate being critical because it's often a waste of time, but Uber is sincerely one of the worst investments that Silicon Valley has ever produced.
