Topic: Ride sharing
Weekly Narrative Video – Tech Disrupts Transportation (Apr 29, 2017)
Lyft’s Rapid Growth Continues in Q1, While Losses Narrow (Apr 27, 2017)
Following Bloomberg’s exclusive on Uber’s financials for the end of last year, which were provided officially, it now has leaked numbers for Lyft for Q1. Those numbers, like Uber’s, show very strong growth, though the implication that this has come as a result of Uber’s troubles isn’t supported by other recent data. What’s really happening is that the whole space is growing extremely rapidly and these two companies are capturing the vast majority of that growth in the US. The big difference between the two is that Lyft’s numbers show smaller losses in dollar terms, while Uber’s showed growing dollar losses. Lyft’s recent aggressive expansion is probably going to slow its progress towards profitability somewhat, but that goal continues to look quite a bit closer for Lyft than for Uber.
Gett Acquires Fellow Ride-Sharing Company Juno for $200m (Apr 26, 2017)
The Information has quite a bit of both data on Uber’s driver retention rates and on its efforts to do better in keeping drivers. The headline I’ve seen shared is that it retains just 4% of drivers, but that’s a bit misleading because it’s based on those that apply to be drivers, only 20% of which make it through that process. The more meaningful retention rate is the 25% of those who drive at least once for Uber who are still driving for it a year later. That’s still low, but far better than 4%. Still, Uber is sometimes compared to an early stage SaaS company, many of which exhibit the same low margins and high growth rates as Uber, and which generally become profitable over time as recurring revenue from earlier cohorts of customers offsets customer acquisition costs. Uber’s problem with such low retention rates is that it continually has to spend massive amounts to attract and retain drivers even as its business matures. In addition, better retaining those drivers going forward ultimately means paying them more, and if it’s also to reduce its subsidies for rides that’s going to mean large price increases, which in turn may well affect demand unless it’s squeezed out all its competitors by that stage, which seems unlikely. As such, even though VCs commonly scoff at the notion that Uber should worry about its lack of profits, I do think there are some legitimate concerns over its current finances.
via The Information
Uber Exec in Charge of Pittsburgh Self-Driving Test Quits (Apr 18, 2017)
Uber’s financial results frequently leak through various online publications, and this year it seems to have decided to shortcut the process and speak directly to Bloomberg, which of course also gives it the opportunity to present the most flattering version of the numbers along with commentary. The highlights are that Uber grew revenues significantly year on year, but losses also grew. Uber emphasized that revenue growth outpaced growth in losses, but of course what you really want is for revenue growth to outpace cost growth, because that’s how you eventually become profitable, but that isn’t happening yet. Uber’s revenue growth was also helped by the different accounting treatment of UberPool rides (for which Uber records the full revenue as net revenue) versus other rides (for which it only reports its cut) which has the effect of making losses seem smaller in comparison to revenues, but is really just financial jiggery pokery. The headline financials shared with Bloomberg also exclude both the Chinese business, which was hugely loss-making for Uber, and various other items including car purchases (presumably as part of its autonomous technology testing operation). So these really are a pretty sanitized set of results, which nonetheless show significant and even growing losses.
Uber Had a Program Called Hell Designed to Undermine Lyft (Apr 13, 2017)
There were reports about new fundraising for Lyft a while back, and it looks like it’s now completed a decent-sized round at a significantly higher valuation than its last round a year ago. The FT article also suggests that Lyft has been benefiting from Uber’s recent troubles, though there’s actually been little evidence of that and some to the contrary. It’s still smart for Lyft to raise funding and fuel its rapid expansion in the US during this time, but there’s no guarantee that it’ll be able to gain meaningful share as a result given that it seems to have been able to do little of that even in what’s been a disastrous period for Uber on the PR front.
via Financial Times
This isn’t a particularly new idea, and in fact it’s one that ride sharing companies have used for some time now in trying to convince regulators to allow them to operate. But it’s always good to see real data behind an idea, and in this case it seems to back it up pretty well, at least in New York City. The data isn’t consistent across the boroughs, but there’s certainly a clear trend suggesting the introduction of Uber in the City did indeed reduce drink driving, which is obviously a good thing. That’s a nice counterpoint to all the negative news stories recently about Uber in particular and ride sharing in general (including the one I just shared about driver vetting).
via The Economist
8,000 Uber, Lyft, ride-hailing drivers fail new background checks in Massachusetts – The Boston Globe (Apr 5, 2017)
Massachusetts put in place a new law requiring drivers for ride sharing services to acquire a license, which in turn requires passing an extensive background check. Of the 71,000 existing drivers who applied, a little over 11% failed these background checks, in many cases because of issues with driver’s licenses, at least some of which should have been caught by Uber and Lyft. Those companies, in turn, countered that they either don’t have access to longer criminal histories or that they have deliberately ignored older offenses as a way to help people with troubled pasts move on. Though there’s some truth to the former point, the latter is at least partly spin. Sex offenders, of whom 51 were rejected by Massachusetts, have to register, and presumably blocking them from becoming drivers would be both easy and desirable, no matter how long ago the offenses. The Massachusetts law is stricter than in other states and as such helps highlight how the background checks the companies themselves conduct can miss potentially serious issues in drivers’ histories.
via Boston Globe
Though I think we tend to think of services like Uber and Lyft as disrupting the status quo in transportation, it’s sometimes amusing to watch them instead recreate existing models, as in this case, where Lyft appears to be creating what’s essentially a bus service. Now, it’s still different in that it’s not tied to set routes, the drivers aren’t professionals or employed by any municipality as most bus services are, and the pricing is unpredictable, so there may be both pros and cons to this approach. But the more adoption of ride sharing services grows, the more they’re going to emulate existing modes of mass transportation like buses, because those continue to be the most efficient and cost effective ways to get people from A to B, especially during commuting times. Whether they end up being better than traditional mass transit in the same way as the original ride sharing services were better than traditional taxis remains to be seen.
Lyft will be breathing a big sigh of relief over the finalization of this settlement, which has been in the works for months, and Uber probably is too. Even though the latter is the focus of a lot of news coverage of how ride sharing companies treat drivers, it’s worth remembering that Lyft has exactly the same relationship with its drivers, which it insists on treating as independent contractors rather than employees. Both companies have now fought (and in Uber’s case are continuing to fight) groups of drivers lobbying for employee status and the benefits that would come with that, and so far they’ve prevailed. Keeping this arm’s-length arrangement in place is critical for maintaining the current financial structure of the ride sharing market, and any change to employment status would have pretty severe effects on the business model, so expect these companies to continue fighting these attempts to reclassify workers tooth and nail.
Uber Gears Up to Block Bid to Form a Union in Seattle – WSJ (Mar 13, 2017)
As with Uber’s eventual exit from Austin over fingerprinting, it’s threatening to leave Seattle if its drivers there join a union, and is also actively trying to dissuade drivers from doing so in a range of podcasts and other messages arguing that unionization could be bad for them. Seattle is something like the 20th largest city in the US, and a disproportionately influential one given its status as a tech hub and bastion of somewhat left-wing values. So if Seattle went this way, other cities might follow, and Uber is therefore fighting unionization there tooth and nail. This is just one of several fronts on which Uber is fighting its drivers, from unionization to employment status and benefits to pricing. And although it argues it’s acting in drivers’ interests here, it’s clearly mostly acting in its own, possibly to their detriment.
Uber has issued a statement announcing that it is ceasing the use of its Greyball platform for evading law enforcement and regulators, and that it’s in the process of responding to “organizations” (presumably regulators and law enforcement personnel in the cities where the platform previously did operate) who have enquired about it. This is striking because Uber’s initial response to the New York Times report was brazen in its lack of contrition – it had acted as though it saw nothing wrong, but has clearly now had a change of heart. The wording of today’s announcement certainly seems to concede that it did use the tool for evading regulators in the past, and even suggests it may continue to do so in the near future because of unspecified elements of how it works, which seems bizarre.
This is interesting data which confirms something that I’ve always suspected but never had more than gut feel to go on: that matters of principle rarely cause large scale and lasting changes in consumer behavior. In other words, even with the high profile and almost continuous coverage of everything going on at Uber at the moment, only relatively small numbers of people seem to be switching to Lyft, and they seem to be doing so fairly temporarily. The article cites spend data from a company called TXN which shows only a brief and switch of spending from Uber to Lyft in a couple of cities, which appears to represent roughly 5-10 points of market share at its peak. Convenience, habit, peer pressure and a myriad of other factors all likely weigh as heavily or more so in decisions to use a service or not, and Lyft’s big problem is that in many cities it’s simply not as big as Uber is. In the two cities cited here, it looks like Uber had two thirds and four fifths of spending at its nadir following the negative news, and that’s likely representative of many other cities where both operate (and of course there are still cities where Lyft doesn’t operate at all despite its recent expansion). That makes it tough to capitalize in a major way even when Uber appears to be stumbling significantly, especially because those stumbles haven’t affected the user experience in the slightest.
My apologies if you’re getting sick of Uber news this week, but here’s yet another. This one is tough to read, because the tie to the current investigation and fallout from the Susan Fowler post is more tenuous than with Amit Singhal – there’s a brief reference to an allegation of impropriety in this report, but it’s not substantiated or detailed. And unlike Singhal, who had barely got his seat warm, Baker had been at Uber for three years and been an integral part of its growth over that time. In general, as that Information article I just linked to indicates, he’s been a very well respected member of the team at Uber, so I’m inclined not to over-emphasize the link to sexual harassment issues. It’s possible that the timing is coincidental, though it’s obviously a particular loss coming right now with everything else that’s going on.
I’ve argued that the big car companies are actually participating pretty actively in the three big shifts occurring in their industry at this point, rather than just sitting idly by, and GM’s Maven business is a good example of some of that engagement, albeit on a fairly small scale. This new model doesn’t seem all that compelling – at over $1000 per month (including insurance, gas, and parking) it’s a little steep for a month’s Volt rental, which would cost you a fraction of that on a longer-term basis. But at least the company is experimenting. Other Maven services are a lot more interesting, and I had an interesting conversation with some of the team at the Detroit Auto Show in January. Maven Home is designed for high-end apartment complexes, for example, where owners get access to cars on an on-demand basis through their building, and GM is also doing interesting things with both Uber and Lyft separately.