Originally published at: http://boingboing.net/2017/04/10/costs-are-costs.html
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I wonder if this is writing on the wall for other “sharing economy” bubbles like AirBNB, or if it’s primarily Uber’s business model that’s doomed it.
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I doubt Uber loses money “on every ride”. They’re blowing though cash trying to expand and take over the world. Two different things. I don’t see a reason the basic idea, which is about efficient and customer friendly car dispatching, is a failure. The failure is the ambition. As I understand it there are a number of small similar services in cities like Austin that aren’t toxic.
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If the articles posted here are any indication, it can’t die soon enough. But didn’t Amazon also run ginormous losses year after year in the beginning?
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As long as there are plenty of teens and twenty-somethings driving Mom & Dad’s car on Mom & Dad’s insurance bill, Uber has a viable business model.
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Never saw it coming.
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The play for Uber is to grab as much market share as possible and cash in when autonomous tech becomes viable. It’s a gamble of course and they face many hurdles but they’re far from doomed.
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but Amazon was actually selling things. Uber is selling a service that really anyone can do.
Sort of like Miss Cleo?
that could be years before it gets to the point that people trust it. For now, no go on that.
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An Uber future where they could go autonomous was effectively killed when they got caught stealing Google’s autonomous driving IP:
Uber’s toast.
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Just Uber, because it’s setting prices. not drivers. The whole thing is an economic mirage that falls apart if they run out of capital before they change it.
AirBNB and the rest of the sharing economy are fine because there’s a real marketplace: you set the price, they just take a cut.
Uber really does have infinite money, though. They might have a very specific survival scenario to aim for: Saudi Arabian personal transport, that sort of thing.
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I considered Uber awhile back but noped right out as soon as I saw the surge pricing model. Glad to see them die.
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Business pivot:
Guber: we pay you peanuts.
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Uber ist Unter.
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Until someone has a serious accident and they discover that the insurance doesn’t cover driving a taxi. Most car insurance that I have had in the UK does not cover commercial use. See, for instance: Which class of use for car insurance do you need? - Admiral and gocompare.com:
Note that if you’re carrying passengers for hire or reward - something becoming more common with the rise of Uber and other ride-sharing apps - you’ll almost certainly need taxi insurance.
Perhaps it’s different in the US.
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Bullying legislatures into killing public transit, so that when Uber kills all the other taxi services and then turns its own service into a carpool-only, riders won’t be able to opt out by switching back to riding the bus.
This is how Judge Doom would’ve done it in the 21st century. Why buy the Red Car when you can get the Legislature to take away its subsidies, causing it to wither and die?
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If I have it right, Amazon still runs some of their major components at a loss. There are big differences between it and Uber, however, that help to explain why a similar tactic- broadly read as ‘buying market share’ (tho really far more complex,) doesn’t translate directly across industries.
For starters, Uber only has one thing to sell! Amazon can make up for losses in their emerging markets with gains elsewhere, while simultaneously cross-platforming, i.e. Prime. This should not be understated! Amazon’s market positions also allow them to extract favorable contracts from suppliers, so even while they’re spending heavily they are also lowering costs- very important for their investors because Amazon can better predict their future. Uber is not in a good position to do the same- they just don’t have pull to negotiate a favorable contract from GM, for example. That’s not too say that a contract with GM isn’t good for Uber, just that it’s most favorable to GM. Amazon, on the other hand, is an outright bully in some markets like book sales.
Another key difference is capital assets- nuts and bolts stuff like land and physical goods. Even If Amazon were to go south, investors could mount a hostile takeover and recoup some of their money via fire sale. Uber has comparatively little in physical capital (a classic concern for internet business,) so if they collapse investors are left standing with their pants down.
So that’s just scratching the surface, but I’ll make a final note- Amazon has already long paid off their initial investors- most of them became billionaires in the process. Uber can’t and likely never will make the same claim.
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It is no different, you absolutely need taxi/commercial driving insurance to drive for hire in the US. I am pretty sure that Uber carries and insurance policy and/or requires its drivers to, but I don’t know how good/extensive it is. I vaguely remember a couple years back a fuss that they only insured with a passenger in the car, but taxi operators / cities were insisting that they needed insurance to cover driving to pick up, or driving around waiting for a fare. (like a regular taxi driver that has insurance covering his entire shift). Not sure what came of that.
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Is it safe to assume that Lyft is in the same boat? Or is there something uniquely doomed about Uber? All similar services have to chase the same unrealistic low prices, right?
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Components maybe, but Amazon as a whole is now fairly profitable – They lost $214M in 2014, earned $600M in 2015, and earned $2.3B in 2016. They did run at a net loss for a long time due to investment in growth, but it was supported by their revenue growth and margins.
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I hadn’t realized that Amazon had turned profitable…Although somebody once told me “The only numbers from the management team that I trust are the ones on the dividend check.” They were speaking generally, not about Amazon.
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