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Uber Valued at More Than $50B

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Re: Uber Valued at More Than $50B

#71

Post by moistgorilla »

henrikschroder wrote: post #60
paulgb wrote: post #14

Earlier quoted context omitted.

I remember following Groupon closely and feeling like Groupon was spending a bunch of money teaching people around the world how to use daily deals, only to have competitors come in make it a race to the bottom because the barriers to entry were so low. I feel like Uber is doing the same: spending a bunch of money teaching people how to hail a cab from their phone. When competitors like Lyft, Hailo, and Via enter the…

You also have existing taxi companies to compete against. Way before Uber was a thing, my preferred company in Stockholm had a simple hailing app, it was basically one button for "I want a cab, here, now". No tracking, no payments, nothing fancy, but still. These days, Taxi Stockholm has a hailing app that is on par with Uber's app, and I just can't see how Uber can compete with that. I can use Taxi Stockholm and get…

> nice luxury car

Are the cabs in Stockholm actually nice?

Re: Uber Valued at More Than $50B

#72

Post by moistgorilla »

spiantino wrote: post #64
gdeglin wrote: post #28

Just one year ago, a NYU finance professor calculated Uber's risk-adjusted value to be 5.9 Billion. ( http://fivethirtyeight.com/features/uber-isnt-worth-17-billi... ). I wonder what he would say now...

His analysis used the size of the current taxi market as the ceiling for Uber's revenue. In San Francisco Uber is already generating 3x as much as the traditional taxi market was.

I know many people (myself included) who never used or would have considered using taxis but now use uber all the time.

Re: Uber Valued at More Than $50B

#73

Post by curiousjorge »

pitnips wrote: post #67
flexie wrote: post #56

Earlier quoted context omitted.

What network effect? How does my friends using Uber force me to use Uber as well? I see it more like a toilet paper or shampoo thing: My friends might recommend Uber, but other friends would recommend Lyft, and others a local competitor. There is nothing that locks me in. We can disagree and I can live with them using Uber and me using some other service for years. Unlike Facebook, Uber is easily replaced. I can't co…

More users (i.e., your friends) drive higher service levels (more Uber drivers and quicker service times, which spirals). There is no "forcing," just as no one "forces" you to have a Facebook account. If you want bad service (long wait times, high prices) then your argument makes sense. However, the more people that use Uber will lead to better service levels and lower prices. Drivers benefit by minimizing wait times…

No it doesn't have any speakable economic moat built around it. Like the parent comment mentions, it's just one of the many possible ways to get around the city, there's no cost of change.

>However, the more people that use Uber will lead to better service levels and lower prices.

That would be very bad for Uber. Lower prices would mean that they are constantly operating at a loss against traditional taxis and other competitors or apps.

Your argument fails to support that there is a network effect that would raise the cost of switching to alternative means of transport and incorrectly assumes that uber is able to operate at a loss constantly as the network size grows.

Take a look at the airline industry. The first guys to do it are nowhere. Everyone is undercutting each other because customers are not locked into one airline and are price sensitive.

Re: Uber Valued at More Than $50B

#75

Post by curiousjorge »

pitnips wrote: post #68
paulgb wrote: post #63

Earlier quoted context omitted.

I wouldn't call it network effect, it's just a market. They need riders and drivers, just like Groupon needed buyers and businesses, but the fact that my friends use Uber doesn't stop me from trying Via. My Via driver the other night was telling me about how he drives for Uber on weekends. The switching costs are very low for both the rider and driver.

But it is a network effect. The more people that use the service, the better that service will be. If only a few people used Uber, there would only be a few drivers. This would lead to high prices and poor service levels. The more people that use Uber, the more drivers there are, and the lower the price and better the service. That leads to consolidation to those services with a high number of users, and those servic…

I don't think you understand what network effect is. A network effect is where the network raises the costs of switching to another network significantly that they are locked in. ex. FB and your friends.

There is nothing that suggest Uber has a network effect that locks in a user to use Uber. You are talking about a quality effect from the assumption that more assets will lead to a lock in effect but it's hopeful at best. There are no barriers to entry to erode future Uber profits if they make money and no perceived cost of using new entrants services or existing ones.

Re: Uber Valued at More Than $50B

#76

Post by pitnips »

curiousjorge wrote: post #73
pitnips wrote: post #67

Earlier quoted context omitted.

More users (i.e., your friends) drive higher service levels (more Uber drivers and quicker service times, which spirals). There is no "forcing," just as no one "forces" you to have a Facebook account. If you want bad service (long wait times, high prices) then your argument makes sense. However, the more people that use Uber will lead to better service levels and lower prices. Drivers benefit by minimizing wait times…

No it doesn't have any speakable economic moat built around it. Like the parent comment mentions, it's just one of the many possible ways to get around the city, there's no cost of change. >However, the more people that use Uber will lead to better service levels and lower prices. That would be very bad for Uber. Lower prices would mean that they are constantly operating at a loss against traditional taxis and other…

There's as much difference between Uber and the airline industry as there is in a $10 ride home versus a $250+/person flight.

Uber doesn't own any cars. How would better service and lower prices be bad for Uber? It wouldn't. The more activity they generate, the better off they are. They simply get a cut off everything. It would be wiser to compare to VISA/MasterCard. Those are software companies with huge network effects similar to Uber. Could anyone just go out and create their own payment network? Sure. Are prices per transaction competitive? Sure. Do VISA and MasterCard make a TON of money? Absolutely. And in this case (the more accurate comparison), the first guys to do it are still the main players, and they haven't needed to truly innovate in decades.

I think a lot of people tend to forget that these valuations aren't just some people out there being euphoric about the future. These valuations come from experienced investors, using real money, making thoroughly calculated guesses.

Re: Uber Valued at More Than $50B

#77

Post by curiousjorge »

pitnips wrote: post #76
curiousjorge wrote: post #73

Earlier quoted context omitted.

No it doesn't have any speakable economic moat built around it. Like the parent comment mentions, it's just one of the many possible ways to get around the city, there's no cost of change. >However, the more people that use Uber will lead to better service levels and lower prices. That would be very bad for Uber. Lower prices would mean that they are constantly operating at a loss against traditional taxis and other…

There's as much difference between Uber and the airline industry as there is in a $10 ride home versus a $250+/person flight. Uber doesn't own any cars. How would better service and lower prices be bad for Uber? It wouldn't. The more activity they generate, the better off they are. They simply get a cut off everything. It would be wiser to compare to VISA/MasterCard. Those are software companies with huge network eff…

The fact that they don't own any car proves there is no barrier to entry. If they had their own self driving cars it would be a very different story but since they don't own any of the assets like an airline does, the barrier entry is nil. To start an airline you need large investments (you need to rent or purchase airplanes, crew, fuel). To start something like Uber does not require the same investment in assets, there is no such cost apart from copying the app and offering lower prices as soon as Uber begins to raise prices.

Nothing suggests they are like Mastercard company, rather the logistics company line is a better explanation of their high valuation. But network effect or lock in? It simply doesn't happen by purchasing more assets because the customer simply does not care in a price sensitive market.

Re: Uber Valued at More Than $50B

#78

Post by mikeyouse »

paulpauper wrote: post #3
mikeyouse wrote: post #2

Wow.. I was curious if the pending employment law debates and changes were going to impact their valuation, it appears not.

it was way overblown, the details ignored in the anti-Uber cacophony. This ruling only effects California and a single driver, as explained by an article in Forbes: http://www.forbes.com/sites/quora/2015/06/30/the-california-... California did not rule that Uber drivers are employees. Rather, a single labor commissioner made that finding (not a ruling) in an informal, non-binding hearing that is based on the facts of…

It's clear that there are coming changes to the contractor / on-demand economy and how labor is treated, the value of Uber is likely a proxy for the depth of the changes that are expected.

Re: Uber Valued at More Than $50B

#79

Post by prostoalex »

untog wrote: post #38
Animats wrote: post #34

Uber's revenue numbers are awful. "According to Bloomberg, Uber had revenue of $415 million (we assume net revenue after payments to drivers, not gross revenue) and an operating loss of $470 million." That's for 2014, and it's leaked data. But it's not good. Why are they losing money? They're an app and a server farm, some "driver centers", and an admin staff. It's not like Amazon, with giant warehouses full of expen…

They're losing money because they are aggressively expanding into new markets. They're an app and a server farm, some "driver centers", and an admin staff. And, you know, a lot of cars and drivers. Of course Uber would want to make sure we all remember they are not Uber property and employees, but they still have to spend a lot of money to get them on board.

> They're losing money because they are aggressively expanding into new markets.

So expenses related to office space, hiring and marketing in each new market? Now, are those one-time charges that will scale overtime, or does the model call for local presence in every single market and becomes inherently unscalable?

Re: Uber Valued at More Than $50B

#80

Post by prostoalex »

henrikschroder wrote: post #60
paulgb wrote: post #14

Earlier quoted context omitted.

I remember following Groupon closely and feeling like Groupon was spending a bunch of money teaching people around the world how to use daily deals, only to have competitors come in make it a race to the bottom because the barriers to entry were so low. I feel like Uber is doing the same: spending a bunch of money teaching people how to hail a cab from their phone. When competitors like Lyft, Hailo, and Via enter the…

You also have existing taxi companies to compete against. Way before Uber was a thing, my preferred company in Stockholm had a simple hailing app, it was basically one button for "I want a cab, here, now". No tracking, no payments, nothing fancy, but still. These days, Taxi Stockholm has a hailing app that is on par with Uber's app, and I just can't see how Uber can compete with that. I can use Taxi Stockholm and get…

Same in Copenhagen, every taxi cab now carries advertising of its respective app.
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