You get an Uber. The overall cost of your trip should be $15 once you figure in all the various costs and overhead.
But you get charged only $10. Uber has already eaten $5 of the fare for you. That money has to come from somewhere. The 30% they take on the $10 isn't covering what they've already knocked off the price.
That money has to come from somewhere. That somewhere is the VC.
The 30% they take is really only stemming the bleeding.
That's what I don't understand. What are the various cost and overhead?
If a trip cost $10, the driver gets $7. You are telling me $3 to uber doesn't cover overhead?
Overhead to me seems extremely small, what is the marginal cost on an uber ride to uber?
There is a huge amount of Uber right now that needs paid for but is out of sight, though. Developers for the app and infrastructure, but also entire offices of engineers dedicated to R&D for driverless cars. Eats into that $3 quick.
If a trip cost $10, the driver gets $7. You are telling me $3 to uber doesn't cover overhead?
Your mistake (I think) is that you are connecting the costs to the prices on a per-trip basis.
In the hyper-growth phase where the objective is to gain mindshare and market share, their VC and IPO cash can be used instead of charging reasonable prices.
For your scenario it’s entirely possible that the price of the ride is $10 but the cost of the ride to the driver is $12.
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You get an Uber. The overall cost of your trip should be $15 once you figure in all the various costs and overhead.
But you get charged only $10. Uber has already eaten $5 of the fare for you. That money has to come from somewhere. The 30% they take on the $10 isn't covering what they've already knocked off the price.
That money has to come from somewhere. That somewhere is the VC.
The 30% they take is really only stemming the bleeding.
That's what I don't understand. What are the various cost and overhead? If a trip cost $10, the driver gets $7. You are telling me $3 to uber doesn't cover overhead? Overhead to me seems extremely small, what is the marginal cost on an uber ride to uber?
There is a huge amount of Uber right now that needs paid for but is out of sight, though. Developers for the app and infrastructure, but also entire offices of engineers dedicated to R&D for driverless cars. Eats into that $3 quick.
Your mistake (I think) is that you are connecting the costs to the prices on a per-trip basis.
In the hyper-growth phase where the objective is to gain mindshare and market share, their VC and IPO cash can be used instead of charging reasonable prices.
For your scenario it’s entirely possible that the price of the ride is $10 but the cost of the ride to the driver is $12.
Other costs include vehicle depreciation, insurance, maintenance, gas, etc.
Hubert Horan is an analyst who goes into these costs into detail. http://horanaviation.com/Uber.html
Isn't all this offloaded to the driver though? e.g. not Uber's $3 cut
That's a different discussion.
I'm not the one telling you that the $3 doesn't cover overhead. Uber is. Taxis that cost more are.