Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

On-Demand Startups Are Hemorrhaging Tens of Billions a Year

bloomberg.com

Post reply on HN
Print view View original

31–40 of 191 posts

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#31

Post by SmellTheGlove »

Johnny555 wrote: post #4

Where does the money go for Lyft/Uber? The software platform can't be that expensive amortized across a million+ drivers. It's not like the drivers are overpaid (and in many cases, they are barely (or not even) paid enough to cover costs) What else do they spend it on? Marketing? Bribing...err... lobbying politicians for favorable treatment?

Well, Lyft and Uber have large offices here in SF where I now live. And they hire lots of engineers. And Uber, at least, is one of the better paying tech companies in the area. So I can tell you a good chunk of that money is going to bay area landlords! There's never been a better time to have bought a house in 1991 like my landlord did. Barely even pays property taxes on the thing, too.

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#32

Post by onion2k »

dawhizkid wrote: post #14
b_tterc_p wrote: post #6

I asked in the recent thread how Meituan could possibly be affording to subsidize restaurant meals to be significantly below cost at restaurant as that didn’t make any sense. Turns out according to this article that it’s simply that. It doesn’t make sense. They lost $17 Billion in 2018 for a shallow moat around an ugly castle. The next recession is going to hit hard, and I’m guessing a lot of the gig economy jobs wil…

Why would “gig economy jobs” get worse? If anything, during a recession, more people will want(need?) to become gig workers. Uber/Lyft are generally supply constrained today. If there’s a surge of supply because people need money they won’t have to pay new driver incentives, which is one the areas that cause them to bleed cash today. Demand side will fall a little, but people will still need cheap ways to get to/from…

Uber and Lyft may well survive, but Uber Eats, Postmates, Deliveroo, Handy etc probably won't fare so well. People won't pay to do menial tasks they can do for themselves if they're at all worried about money.

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#33

Post by lordnacho »

It's a strange age to be living in. On the same day I've visited people in a WeWork, been driven around in an Uber, and had food delivered by Deliveroo.

All of them blowing a huge load of money for the privilege.

If they don't make back this money, it will represent a huge waste of resources.

It's private money behind, but I still wonder whether this a reasonable way for the economy to run.

For one, it means the little guy can't compete. Only people with deep pockets. And they might not be the most competent.

For the investors it means selling a dream of profits, but not profitable businesses. You make more out of convincing someone your OD empire will succeed than making it do so.

I wonder what would happen if there was a rule that you could only resell equity in a business whose financials had improved recently.

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#34

Post by dragonwriter »

JMTQp8lwXL wrote: post #29
b_tterc_p wrote: post #6

I asked in the recent thread how Meituan could possibly be affording to subsidize restaurant meals to be significantly below cost at restaurant as that didn’t make any sense. Turns out according to this article that it’s simply that. It doesn’t make sense. They lost $17 Billion in 2018 for a shallow moat around an ugly castle. The next recession is going to hit hard, and I’m guessing a lot of the gig economy jobs wil…

The narrative is that automation will make all of these services cheap, so the "gig economy" jobs get lost regardless to autonomous vehicles and robotic hamburger makers, for example. Only then, do these companies come out on top -- and quite big if they can float until automated solutions exist. At least, that's the story these types of business tell to acquire funding. That's essentially the bet with these companie…

> Only then, do these companies come out on top

Only the ones that also own the automated vehicle/robotic hamburger flipper technologies—and if it's not one of the on-demand firms that does that key job automation piece, all the existing on-demand firms are worthless in the face of the firm that owns the technology that erases the big cost in their business, and therefore can partner with the whichever is willing to accept the smallest share (or just start it's own) and own the whole market.

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#35

Post by dawhizkid »

12298765 wrote: post #25
dawhizkid wrote: post #19

Earlier quoted context omitted.

Uber and Lyft can be profitable today. They are in their most mature markets like SF and NYC. If they need to get to profitability they scale back and cut certain cities. That’s it.

The whole point was that the jobs would disappear -- if Uber and Lyft back out of smaller cities to be profitable, all of those jobs are gone, which is exactly the point of the person you replied to. Most of those gig jobs would start disappearing

There's no "backing out" if we're talking about individual cities in a country they already operate in (save a few edge cases). That isn't really how Uber/Lyft enter/exit markets. They will just not pay driver incentives for new markets, which is usually the lighter fire for incentivizing new supply (i.e. drivers) to start driving.

There's no job to be "lost." They aren't going to turn you away for a "job" or "fire" you because you literally aren't employed by the company. Think of it as if you are licensing Uber/Lyft software to generate leads for your own business. That is literally how they think about it and what the driver ToS says.

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#36

Post by treis »

tomnipotent wrote: post #17
dawhizkid wrote: post #14

Earlier quoted context omitted.

Why would “gig economy jobs” get worse? If anything, during a recession, more people will want(need?) to become gig workers. Uber/Lyft are generally supply constrained today. If there’s a surge of supply because people need money they won’t have to pay new driver incentives, which is one the areas that cause them to bleed cash today. Demand side will fall a little, but people will still need cheap ways to get to/from…

This isn't about supply & demand, it's about profitability and if these companies are viable long-term. There can be no gig economy jobs if there are no gig economy businesses.

I don't think Lyft/Uber should be grouped in with the other gig economy players. Taxis have been a thing for a century and Lyft/Uber represent a real improvement over the traditional model. It's effectively a certainty that we will have app summoned taxis 10 years from now. I don't see a good reason to think that it won't be Lyft/Uber providing them.

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#37

Post by vkou »

Johnny555 wrote: post #4

Where does the money go for Lyft/Uber? The software platform can't be that expensive amortized across a million+ drivers. It's not like the drivers are overpaid (and in many cases, they are barely (or not even) paid enough to cover costs) What else do they spend it on? Marketing? Bribing...err... lobbying politicians for favorable treatment?

> Where does the money go for Lyft/Uber?

Mostly into customer discounts and driver incentives.

Both companies are burning billions of dollars on selling people a $10 taxi ride for $5, while paying the driver $12.

Once they stop spending their way to market-share, customer demand, and driver supply will drop.

There's a price point where they are a viable, profitable business (After all, taxi firms have existed for centuries), but that price point will be higher for riders and lower for drivers, than it is today.

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#38

Post by moorhosj »

doctorpangloss wrote: post #18
supernova87a wrote: post #12

My summary of where all the money goes: -- Every on-demand service struggles with the problem of peaky demand, variation of >50% in peak to average traffic / demand -- Peaky demand is inherent in our consumer / passenger / people behavior, not going to change any time soon -- think of the daily hours typical for commuting, eating, etc. -- These services make their money / entire value prop on serving peaky demand qui…

The trends in future of work, particularly remote / non-office work, would favor people being more economical and de-peaking usage. Working at home saves you daycare. It takes a commuter off the road and off public transport. It lets people eat lunch at 11am or 2pm. It lets you build houses instead of empty office buildings. It lets you spend a lot more time with your partner. It keeps you cleaner and healthier. It m…

Lots of claims in this comment I'd love to see backed up.

==Working at home saves you daycare.==

Is this true? Most people I know who work remotely don't have enough free time to also watch their kid, they are doing their job. It does save the 1-2 hour round trip of commuting each day.

==It lets people eat lunch at 11am or 2pm.==

Can't most people in an office environment already do this? I do.

==It keeps you cleaner and healthier.==

How does it do this? I see very few overweight people on my daily train commute. I figured that the walking involved in commuting plays a role in health, but maybe the stress of commuting is a net negative. On the flip side, my wife works from home and although she likes it, the lack of human interaction frequently has a negative impact on her.

==It makes you care about your local community a lot more.==

In what ways?

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#39

Post by celticninja »

b_tterc_p wrote: post #6

I asked in the recent thread how Meituan could possibly be affording to subsidize restaurant meals to be significantly below cost at restaurant as that didn’t make any sense. Turns out according to this article that it’s simply that. It doesn’t make sense. They lost $17 Billion in 2018 for a shallow moat around an ugly castle. The next recession is going to hit hard, and I’m guessing a lot of the gig economy jobs wil…

They lost $17 billion in 2018 and I haven't even heard of them.

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#40

Post by JMTQp8lwXL »

dragonwriter wrote: post #34
JMTQp8lwXL wrote: post #29

Earlier quoted context omitted.

The narrative is that automation will make all of these services cheap, so the "gig economy" jobs get lost regardless to autonomous vehicles and robotic hamburger makers, for example. Only then, do these companies come out on top -- and quite big if they can float until automated solutions exist. At least, that's the story these types of business tell to acquire funding. That's essentially the bet with these companie…

> Only then, do these companies come out on top Only the ones that also own the automated vehicle/robotic hamburger flipper technologies—and if it's not one of the on-demand firms that does that key job automation piece, all the existing on-demand firms are worthless in the face of the firm that owns the technology that erases the big cost in their business, and therefore can partner with the whichever is willing to…

It is completely valid to question the value of being first to market. Will anybody care about Uber or Lyft if a new player, Company X, has a fleet of hundreds of thousands of autonomous vehicles in all major U.S. cities? Consumers have shown us just how easy it is to switch to a new app.

I concur that the branding wouldn't matter-- if the existing rideshare companies couldn't strike a deal with makers of autonomous vehicles, they won't be getting a share of the autonomous profits. Of course, these companies are actually developing their own technology. But that is far from their singular focus today.

Quietly, I assume there are folks operating on the thought that market dominance doesn't matter. We don't hear about them today very much, because they don't get much media attention.

Post reply on HN