Uber is Failing at Increasing Ride Volume

Tuhes

Well-Known Member
Very good article :
https://pando.com/2016/07/11/despit...ers/a5d1bc50987fc671d5784f4240141c01cd32368e/

Morgan Stanley is leading a coalition of banks lending Uber an additional $1.5 billion in capital -- mostly to spend outright buying up international market share.

Morgan Stanley would -- apparently-- also like to understand what is actually happening in this black box of a company and industry. It is now analyzing New York’s TLC data in hopes that New York-- the largest US transportation market-- could be some sort of barometer for the world.

A few obvious problems with the premise: New York doesn’t come close to representing trends in China, India, Africa, or other major cities where Uber is spending the bulk of this capital because the competitive landscape is completely different.

And, even in the US, extrapolating a taxi and ride-sharing market based on what happens in New York is like assuming Silicon Valley represents broader startup trends in the US. Unlike China, few US markets have the density, congestion or low car ownership to ever look like a New York. And in New York, taxis were far more functional and omnipresent than other major US cities like San Francisco.

Still, as the largest US city, with low car ownership, and the largest pool of professional drivers, it’s certainly relevant info. New York should be the dominant market for any transportation company that represents the future of how people get around.

The first batch of results showed in part what you’d expect: Uber is by far the biggest ridesharing company with some 170,000 trips a day, versus just 27,000 for Lyft and far less for Via and GETT. Taxis are still dominant: Doing some 400,000 trips per day.

But the most interesting thing to me was what was driving Uber’s growth: It isn’t drivers doing more trips, rather it’s upping the number of drivers signing up to the service.

From the report:

Vehicles dispatched by Uber per week increased 102% YOY between April 2015 and April 2016, and trips per vehicle per week only increased 10%. Lyft reported a 114% increase in trips per vehicle per week and a 354% increase in vehicles per week.

This is important because all of Uber’s talking points in the press and to lawmakers center around the opposite: That its technology and increasing market share is allowing drivers to be more productive, completing far more trips on a shift. This is key to Uber’s claims about how good it is for transportation and congestion in cities. This is Uber’s key defense in slashing drivers wages. And it’s key to Uber’s supposed only advantage in a driverless future: That somehow all that ride data has given it a way to better utilize vehicles.

It’s worth noting that taxis in New York have significantly higher utilization without all those mapped out trips and machine learning: Taxis represent less than half of the vehicles than Uber, but complete four times the rides.

If Uber is going to increase drivers’ volume in any US city, New York would be the easiest. It has density, lower car ownership, and a huge fleet of existing professional drivers. If it’s not doing it in New York, you can believe volume isn’t making up the wage cuts for drivers in, say, Detroit.

The finding implies that the bulk of New York Uber drivers aren’t professional drivers, they are trying to make extra cash. That’s exactly why Uber and Lyft have dug in their heels against fingerprinting in Austin, and by extension elsewhere. Lyft investor Mike Maples argued this exact point in the wake of the Austin battle:

The business models of Lyft and Uber create flexible options for drivers that are intentional  — They want to let drivers drive only a few hours a week if that is what they want. They want to let drivers drive some weeks and not others, or some seasons and not others. They want to let some people drive as a part-time job and some as a full-time job. When drivers are qualified, they want to get them on the road asap, without process-heavy regulations that do not improve safety. They try to eliminate all of the friction for all of the safe drivers who are willing to offer supply, by offering them an extraordinarily fine-grained model for participating.

This is core to the model….

...The Austin City Council passed an ordinance for fingerprinting that broke this. People who drive only part time or some of the time very often choose not to get fingerprints because the process is too onerous and takes too long to complete end to end.

This is what a lot of riders fail to understand about ridesharing companies. They are not designed to replace cabs in terms of how you hail one, pay for one, and how clean the car you ride in is. They are designed to replace fleets of professional drivers mostly with part-timers.

You can decide for yourself if that’s a good or bad thing. I take more Lyfts than cabs. But because they’ve made a security trade off to get more drivers on the road quickly, I also would never put my children in one alone.

More interesting is what this means long term when it comes to these companies’ economics. Uber has argued it’s profitable in the US, but part-time, extra cash jobs have incredibly high churn rates. It has to be a drag on the company to constantly be paying out subsidies to recruit new riders and spend marketing dollars and bonus schemes to acquire drivers who are far less productive than cabs. Uber knows this: Its New York bonus schemes incentivize its drivers to work dangerous amounts of hours, never mind all its promises about ending “drowsy driving”. It has pegged any hope of making a living wage driving an Uber to volume, in hopes of changing this trend.

That this is the case even in a market like New York where there are more full-time professional drivers than anywhere else in the US speaks volumes of how much (or how little) of an advantage Uber’s base of drivers ultimately is against competitors.

What would happen if everyone in the space simply stopped spending money on growth for one month? We’ll never know, but the answer would certainly be dramatic.

Lyft committed to investors it was “only” going to spend just $50 million a month, and true enough after rapid year over year growth in May, it didn’t grow in June.

And that may be one reason Uber is putting off an IPO as long as it can. We know the truth is ugly in markets like China, where Uber is spending more than $1 billion a year to have low double digits in market share. But it may not even be palatable in markets like New York, where Uber’s economics should be the most advantageous.

I’m as disappointed as Bill Gurley that Uber isn’t filing to go public anytime soon. I would love to look at the actual numbers behind Uber’s claims which are time and time again proven false.

That ride growth is so heavily pegged to new drivers coming into the system means Uber and Lyft will continue having to heavily spend to recruit and incentivize drivers, even as they slash their wages later on to ensure they have low enough rates to entice consumers.

Drivers will continue to get bait and switched once those bonuses and incentives go away. More anger, more lawsuits. Just last week, I was in my hometown of Memphis, where Uber is making a big recruiting push. I overheard a table of 30-somethings talking about how they were going to start driving for Uber because they’d been “promised” six-figure incomes. They should probably do a little Internet research first...

It speaks to what Lyft investors have been saying for a while: That these are ultimately two commodity products, and the one spending more money will win more market share. Uber’s technology isn’t winning, its base of drivers isn’t winning: Its cash is winning.

And Uber has no shortage of cash. Yet another reason I’ve argued, self-driving cars will be a harder era for Uber to win in, not an easier one.
 

Old Smokey

Well-Known Member
The mask has come off of the FUBER PYRAMID SCHEME!!!! Those of us drivers with no "Franklin's" in the game figured it out pretty fast. Hedge fund managers would have been better off going to Vegas and betting red or black. NO COMPANY HAS EVER GOT SO MUCH MONEY WITHOUT OPENING UP THE BOOKS.
 

Jake2016

Active Member
Thanks for sharing the helpful article, Tuhes!

Uber is definitely failing to create a win-win ecosystem not only for passengers and themselves, but also for drivers. With the current low UberX rates and high commission of 20-25%, it is a revolving door for drivers who barely make a minimum net wage.

What's the point of increasing my car's utilization? I don't move till it's surge pricing, which is quite rare only during peak times and at busy places only. I won't give away my time and assets for less. The end of story, Uber!
 

ajcadoo

Well-Known Member
The summary of the article states that Uber is screwed due to high driver churn and low utilization of each vehicle in the NY market and thus every market.

They are spending A LOT of money in foreign markets and domestic markets through driver incentives.

They also lie about their stats given to law makers and drivers alike regarding rate cut benefits.

Pretty standard uber business practices.
 

mandreyka

Well-Known Member
We all keep saying it can keep up like this but it is. The driver churn and the metal type promos will continue.

How do they afford it? Easy, other markets and surge pay the bills along with burning investors money.

For some reason, uber wants everyone using uber so the rates are stupid low
 

Old Smokey

Well-Known Member
SEC regulations is probably the biggest reason why FUBER has resisted the IPO. Uber has a habit of breaking laws. Tesla is in big trouble for not reporting the accident before some stock market moves, SEC does not like INSIDE TRADING ACTIVITIES.
 

Shaitan1

Well-Known Member
In Ubers defense it is in a price war with another company that is also offering unsustainably low rates by burning through investor $$. Maybe it will be for the best if Uber forces Lyft to give up by simply outspending them.

Then they can move to a sustainable business model once they don't have a competitor who isn't.
 

Old Smokey

Well-Known Member
Once upon a time, Lyft did not have the money behind them to back stop their day to day in order to stay in the game. They have GM, Alibaba, (all the Chinese ride-share companies) integrated into the Lyft interface. A CHANGING customer market who is "so over Uber." Uber was so 2015. I want my lawsuit money before they fold the tent.
 

Too Many Miles

Well-Known Member
In Ubers defense it is in a price war with another company that is also offering unsustainably low rates by burning through investor $$. Maybe it will be for the best if Uber forces Lyft to give up by simply outspending them.

Then they can move to a sustainable business model once they don't have a competitor who isn't.
In Uber's defense?
Uber is the one that created the price war. There is more than enough market out there for Uber, Lyft, taxis and other companies. Uber wants a monopoly and that is bad for everyone.
I really think Uber will be the first one to get in serious trouble, at some point investors will want their money back and the amount of money that Uber continues blowing at the rate they blow is not going to be easy to get back. This is very similar to a ponsystem scheme. Travis may not end up in jail, but worse, look at who some of the investors are.
 

second2noone

Well-Known Member
nice article. Yup fuber knows it needs as many drivers out there as possible.

without drivers they are not going to make any money.

same old same old. Ants quit but more ants sign on.

more proof whatever fuber tells is a lie.
 

Old Smokey

Well-Known Member
Methinks the reason why the ridership is flat at best is because Uber does practically zero advertising to get new pax.

Maybe they do this to continue the ruse that they are "a tech company not a transportation company"
But they do, they try to get the drivers to give up their contact list; like Fakebook. New riders they wave a carrot in their face and say, like us and get your friends to sign up. We will give both of you $10.00. Text messages and gang emails are the new method of marketing. They thought that the US market was solid and growing, as usual they guessed wrong.
 

Too Many Miles

Well-Known Member
Methinks the reason why the ridership is flat at best is because Uber does practically zero advertising to get new pax.

Maybe they do this to continue the ruse that they are "a tech company not a transportation company"
I agree, they need more advertisement on the rider side but they probably thing that using social media is the best way. They are millennials and they have to be different and they are always right.
I don't think that saying that they are a transportation company is a problem, they can advertise emphasizing the download and use of the app.
 

Deric

Well-Known Member
Methinks the reason why the ridership is flat at best is because Uber does practically zero advertising to get new pax.

Maybe they do this to continue the ruse that they are "a tech company not a transportation company"
This^^ and promote cheap Pool rides.
 
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