But...Uber's core competency is organizing drivers & vehicles without hiring/owning them. I'm leery of companies making dramatic change to their core; owning a fleet of a half-million vehicles is quite different from just telling them where to go.
And they went from having their business depend on having a physical inventory to a (more) purely software model.
The idea that Uber would thrive in going from "Hey, dude, sign up and you'll be on the road," to "First we're going to place an order for a $40,000 capital investment that is all risk to us if it doesn't pay out" is completely insane.
Not to mention that they will have literally no differentiating feature from any competitor who is interested in making the same investment, so they have no way to support any kind of large profit margin.
And all this assumes that people won't just want to own their own driverless car, which is far from certain.
Uber has to say that driverless cars will be wonderful for them, because large amounts of the people who might want to invest in Uber are also convinced that driverless cars will be here in three years.
Uber currently pays its drivers 70-80% of its revenue... A self-driving car makes that 0%. Not to mention marketing costs to get new drivers, all those iPhones, etc. Uber's revenue run rate is expected to hit $10B by the end of this year. That's a lot of cash sitting on the table that could be used to finance driverless vehicles.
Uber also is currently much more expensive than car ownership, and if a relatively low-cost driverless car gets on the market, there is literally no incentive for most people to ever use Uber rather than owning their own driverless car.
So in the event of driverless cars, Uber will have to slash prices -- and, unfortunately for them, a self driving car does not in fact claw back all of their driver's revenue.
Now, there are plausible scenarios (though it's by no means guaranteed) in which driverless cars vastly increase the size of the rides-for-hire market, so even if Uber has to take their current margin on lower-cost rides and pay for inventory, you could imagine that working out overall well for them.
But if it's such a great business to be in, why won't they face competition? There are plenty of companies that are deeper-pocketed than Uber. There are in fact plenty of companies with stronger brands than Uber. And the geographical opportunity to compete locally is pretty brutal.
What's Uber going to compete on?
Size of inventory? That drives up costs (when we're already stipulating that they are paying billions in new costs).
Price? That drives down revenue (when we're already stipulating that they're slashing prices).
Cleanliness, as various people have suggested? That means they have to get into a whole new hyper-local physical business with its own logistical problems, and why should we imagine that Uber can build the best car-cleaning business of its field? What about Uber makes us believe they're the best at that? Is this even a field that can be usefully competed on? Are people willing to pay top dollar for a really really really clean car, or does everyone bring together a basic cleaning service and, whatever, it's all good to the passengers?
The idea that Uber would thrive in going from "Hey, dude, sign up and you'll be on the road," to "First we're going to place an order for a $40,000 capital investment that is all risk to us if it doesn't pay out" is completely insane.
So the craziest part of a self-driving, autonomous, on-demand taxi service is that someone had to buy a bunch of cars?
Netflix's original goal, AFAIK, was to provide streaming monthly-subscription video service. Mailing DVDs was a means to build that business when that core still wasn't technically possible.
I doubt Uber's original goal was to outright own (with all the hassle & overhead thereof) a half-million vehicles.
Prediction: Uber goes the way of webvan, personal mobility is served by Google vehicles with Fedex/UPS/USPS owning the lion's share of freight self driving vehicles.
If you don't think Fedex and UPS have logistics and fleet management down to a science, I highly recommend you research their capabilities.
1. Google isn't going to be a player in personal mobility. Their technology is no more up to the task than Tesla's or anyone else's. Expect to see a few incremental improvements from all major automobile manufacturers in open-road autonomy, but nothing that's going to enable a driverless taxicab or anything like it.
2. Webvan isn't a good comparison for Uber, except in that it's dead. The actual concept behind Webvan was a good one and is now offered by many, many companies. Had it not been founded when it was, it's likely it could have raised a few more rounds, learned the lessons it needed to, and become profitable. There's nothing about Uber that's novel or interesting; from the end user's perspective, it's no different from Flywheel, which is nothing but the pre-Internet telephone-dispatched taxicab company with a new communication frontend. The only thing Uber has going for it is a structure that tries (and is now failing) to bypass regulation. Without that, it's just another taxi service.
Comments
But...Uber's core competency is organizing drivers & vehicles without hiring/owning them. I'm leery of companies making dramatic change to their core; owning a fleet of a half-million vehicles is quite different from just telling them where to go.
Netflix's core competency was mailing DVDs.
And they went from having their business depend on having a physical inventory to a (more) purely software model.
The idea that Uber would thrive in going from "Hey, dude, sign up and you'll be on the road," to "First we're going to place an order for a $40,000 capital investment that is all risk to us if it doesn't pay out" is completely insane.
Not to mention that they will have literally no differentiating feature from any competitor who is interested in making the same investment, so they have no way to support any kind of large profit margin.
And all this assumes that people won't just want to own their own driverless car, which is far from certain.
Uber has to say that driverless cars will be wonderful for them, because large amounts of the people who might want to invest in Uber are also convinced that driverless cars will be here in three years.
Uber currently pays its drivers 70-80% of its revenue... A self-driving car makes that 0%. Not to mention marketing costs to get new drivers, all those iPhones, etc. Uber's revenue run rate is expected to hit $10B by the end of this year. That's a lot of cash sitting on the table that could be used to finance driverless vehicles.
Uber also is currently much more expensive than car ownership, and if a relatively low-cost driverless car gets on the market, there is literally no incentive for most people to ever use Uber rather than owning their own driverless car.
So in the event of driverless cars, Uber will have to slash prices -- and, unfortunately for them, a self driving car does not in fact claw back all of their driver's revenue.
Now, there are plausible scenarios (though it's by no means guaranteed) in which driverless cars vastly increase the size of the rides-for-hire market, so even if Uber has to take their current margin on lower-cost rides and pay for inventory, you could imagine that working out overall well for them.
But if it's such a great business to be in, why won't they face competition? There are plenty of companies that are deeper-pocketed than Uber. There are in fact plenty of companies with stronger brands than Uber. And the geographical opportunity to compete locally is pretty brutal.
What's Uber going to compete on?
Size of inventory? That drives up costs (when we're already stipulating that they are paying billions in new costs).
Price? That drives down revenue (when we're already stipulating that they're slashing prices).
Cleanliness, as various people have suggested? That means they have to get into a whole new hyper-local physical business with its own logistical problems, and why should we imagine that Uber can build the best car-cleaning business of its field? What about Uber makes us believe they're the best at that? Is this even a field that can be usefully competed on? Are people willing to pay top dollar for a really really really clean car, or does everyone bring together a basic cleaning service and, whatever, it's all good to the passengers?
So the craziest part of a self-driving, autonomous, on-demand taxi service is that someone had to buy a bunch of cars?
Netflix's original goal, AFAIK, was to provide streaming monthly-subscription video service. Mailing DVDs was a means to build that business when that core still wasn't technically possible.
I doubt Uber's original goal was to outright own (with all the hassle & overhead thereof) a half-million vehicles.
Prediction: Uber goes the way of webvan, personal mobility is served by Google vehicles with Fedex/UPS/USPS owning the lion's share of freight self driving vehicles.
If you don't think Fedex and UPS have logistics and fleet management down to a science, I highly recommend you research their capabilities.
I'd agree, except for two things:
1. Google isn't going to be a player in personal mobility. Their technology is no more up to the task than Tesla's or anyone else's. Expect to see a few incremental improvements from all major automobile manufacturers in open-road autonomy, but nothing that's going to enable a driverless taxicab or anything like it.
2. Webvan isn't a good comparison for Uber, except in that it's dead. The actual concept behind Webvan was a good one and is now offered by many, many companies. Had it not been founded when it was, it's likely it could have raised a few more rounds, learned the lessons it needed to, and become profitable. There's nothing about Uber that's novel or interesting; from the end user's perspective, it's no different from Flywheel, which is nothing but the pre-Internet telephone-dispatched taxicab company with a new communication frontend. The only thing Uber has going for it is a structure that tries (and is now failing) to bypass regulation. Without that, it's just another taxi service.
Owning the fleet was a basic tenet of mass package shipping from the beginning.
AFAIK, Uber's MO was to organize a massive "bring your own taxi" contracting service.