It's only question of time until the margins from riding app start to go down. Someone builds competing app with similar bells and whistles and sells it to locals as a service without branding for example.
I think competition is the other thing that makes them work. The local options know if they fuck customers over that they'll just jump ship to Uber/Lyft. And same is probably true for Uber/Lyft!
This often gets cited as an advantage of Uber but in my person experience I've been driven 3 sides of a square and Uber hasn't refunded me when I've complained.
Is a high-margin business a sign of market inefficiency that will eventually be stamped out?
High margin, COULD be inefficiency, but it could just be a technological or innovation advantage.
It seems ride hailing is transitioning into a commodity since innovation has dried up. The one obvious disruption would be self driving cars
If your potential competition is stymied by huge costs of startup or catchup, or you've got the government (be it national or local) on side to help you maintain a monopoly or cartel (I'm looking your way, numerous US internet service providers...), then your high margin can exist for a very long time. I don't know if I'd like to say "indefinitely" but with the right moats, yeah, maybe indefinitely.
It's definitely not the lack of competition... it's just that the competition doesn't behave much better compared to them.
They take no liability on anything (delivery delays, food problems, missing items, etc). They have no customer care number, and take days to respond to emails. If anything goes wrong, they make you call the restaurant, and of course they redirect you back to Tkwy. In the end, you will receive no refund, none of the missing food, and have waited 1-3hrs for an order that should've taken <1hr.
It's a horrible experience, but they get away with it because they have a near-monopoly. Uber Eats & Deliveroo have <25% of the restaurants on Tkwy.
kozmo.com https://en.wikipedia.org/wiki/Kozmo.com
Webvan was once valued $4.8 billion.
I don't see that coming because it is 2020 and we have: smartphones in every pocket, easy payments from those smartphones, it is super convenient to order via such platform, in the end lock downs basically mandate food delivery.
Which will maintain parking and map zones?
Who will work on routing and matching?
Who's working on fraud? On safety?
Who is working on payments, both from riders and paying drivers?
Who is generating required tax reports for drivers?
Who's doing driver onboarding?
Which will ensure that drivers have the proper paperwork to operate in their market (insurance etc)?
And who is working on Android and iOS apps, both for drivers and riders?
Who's working on the backend?
I agree with the overall sentiment though: "What are all these people doing?" is a valid question against lots of Silicon Valley companies who are currently growing for the sake of growing. Yes, you need a few lawyers. Do you need 100 lawyers, each with executive assistants, and lawyer managers of other lawyers? Why? What specifically are they all doing? Why can't you do it with 90 lawyers? or 80?
I've worked for companies ranging from 12 people up to 100,000+. I've seen companies that were legitimately understaffed, but also companies where I don't think anyone (including the employees themselves) could articulate why all these people were needed. Outwardly, it's always explained with some nebulous reason like "Oh, what we do is oh-so-complex! We need people to, um, manage the complexity, and uh, create synergies." Yea, and they need exec assistants and interns, and their own staff of sub-complexity-wranglers, who also need assistants, and soon it's complexity-wranglers all the way down, and nobody knows what any of them are actually doing, but they're all sending E-mails to each other!
The unspoken side is that most companies simply measure your importance by how many people are under you, so everyone tries to hire as many people as they can get budget for, and build their empire. But it's an empire of paper, of TPS reports! These people aren't really doing anything, but they make this SVP's org bigger than the other SVP's org, and the CEO can tell everyone how huge (i.e. important) the company is getting, and that's what's important.
If we're throwing around conventional aphorisms, one could just as easily argue that most companies simply optimize for maximizing profits by minimizing labor costs, and therefore have an incentive to eliminate redundant labor. Heaven knows that Uber's primary goal for the next few years is profitability. Why, then, wouldn't Uber just get rid of all of these paper TPS report empires? Should be simple enough, right?
The reality is that it's a lot more complicated. I think GP's comment about armchair quarterbacking is an important one, and I think this comment as a good example of that. A fun joke I've heard is that the mark of a senior engineer is how often they say "Well, It Depends™". It mostly alludes to the general tendency to avoid simple explanations of complex systems the more senior one gets.I think the same applies in the context of organization building.
There was a good comment a while ago from a former Uber engineer that broke down just why the Uber app is so big: https://news.ycombinator.com/item?id=25376346
If you take that, and try to imagine that it's not just engineers, it's also Product Managers, Designers that feed into the raw R&D; and the fact that Uber actually operates in multiple business lines (Eats, Rides, Freight, Bikeshare, Transit) and then the operationalization of all of those features, including customer support, biz ops, product marketing, etc. And then wrap all that up into the core organizational infrastructure necessary to support all that: FP&A, HR, etc. It all adds up! And that's just the current businesses we see, you also have portions of all of that feeding into the numerous exploratory efforts they probably have underway into new business lines.
Even with this thread, I have to say I'm kind of a hypocrite, since I'm one of these "support role" guys in my own company. I make it a goal every day to try to draw a clear understandable line between my work and the company making money. Some days it's not easy after 8 hours of TPS reports. I've been in roles where to this day I can't figure out how what I did made the company money. It was a lot simpler to explain when I was directly making the product.
This is fundamentally untrue, although you hear it a lot here. I have to wonder whether the people who think this have actually worked on a system at the scale Uber operates at.
Uber is an incredibly complicated system. The trick is it's presented to the user as a very simplistic one, so people overlook what's actually going on behind the scenes.
Sure, like many well-funded tech companies with a large engineering staff there's a fair amount of fat you could probably cut away (and indeed, Uber have - they've done engineering layoffs in the past). But just to sustain the app in all the territories they currently operate in you're talking hundreds of engineers, not "two or so devs fixing issues". That's how large the problem surface area is.
Undercut competition. Use borrowed money to sell rides under cost. Wait for all competitors to die. Jack up prices.
AFAIK they’re still living on borrowed money.
It reminds me of the airline deregulation of the 90s. New airlines would use borrowed money to sell seats at below cost to attract customers, driving established carriers out of business.
The funny thing is that this smells a lot like “the tragedy of the commons”. Everyone wants to use this amazing infrastructure for flying, but no one wants to pay for it. New firms undermine the stability of the system by charging less than cost in order to starve established competitors whose business model is focused on being profitable.
The interesting thing is that there is more than one startup using this model. The competition isn't the other startup; it's the other startup's investors.
I wonder how long those investors will keep on pumping money into the scheme, hoping their guy will be the last standing. Or will they ride the sunk cost fallacy all the way down?
It's not like they're building railroads here. It's an app.
There is absolutely no reason for ride hailing app to get 10-20% markup per ride.
I suspect that after the competition really kicks in, Uber/Lyft must settle for 1-3% per ride or less.