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Comment by ManishR | Hacker News Reader

People here seem to think that Uber/Lyft do not have any competitive moat. I disagree. What we seem to forget is that just because a VC can burn boatloads of money to capture ridesharing market from Uber/Lyft doesn't mean that they would. From a game theoretic POV, Uber and Lyft have signaled that they're ready to fight for survival in markets they are established in. Unless as a startup founder you can demonstrate that you can achieve lower cost structures than Uber/Lyft, no VC will fund their rapid growth (small offerings will still find a niche, assuming they don't get gobbled up). Uber/Lyft do have a VCs-will-not-race-to-the-bottom-with-them moat, and tomorrow they might as well raise their prices to turn profitable. Their biggest challenge is Waymo and SDC because if a competitor as significantly lower cost structure, all bets are off.

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> no VC will fund their rapid growth (small offerings will still find a niche, assuming they don't get gobbled up

And yet Grab and Didi drove Uber out of South East Asia and China, Ola is giving Uber a run for its money in India and now GoJek in turn is challenging Grab. In my recent trip to Tokyo we were mostly advised to take regular cabs Vs Uber in contrast to a year ago. That's literally half the world where they're getting out competed.

When reasoning doesn't line up with facts, there are usually flaws in the logic. One possible flaw it turns out is that well off globe trotters or even people who frequently travel across cities in a country and would love to use the same app everywhere likely form a small % of total cab trips. Majority of trips are just local trips by an area's residents. So locally, majority just goes with whoever offers better service and relevance. Cutting Price can trump over these but by going public, bottom line became a lot more important to Uber and Lyft - so this isn't likely a viable strategy. Another possible flaw is that the compute required to support this is likely commoditized and there's not likely as much competitive advantage in data.

So it's going to be interesting...

Also nothing stops a “low tech” competitor from skimming local price information from a larger rival and automating their matching. The pricing has to be publicized or else how else would the drivers know?

They did not get "out competed" in china, a country where competition has nothing to do with success. Likewise in Russia. Grab is the only company to out compete Uber so far.

What about Ola in India?

Sure, if you want to define competition as the market you come from, rather than the market you're in.

Ola vs Uber in India is so similar in terms of experience that I literally open the first app that's on my screen.

There is no way to differentiate in this market. The only thing that would make me switch is a guarantee of a good driver, but that would just raise the costs absurdly.

There is actually -- both the companies have certain cities where they seem to have many more drivers than the other. Due to this, when I'm in Bangalore, I prefer Uber, but when in Calcutta, I prefer Ola.

On the contrary, China is the most competitive country in Internet industry and Uber was beaten badly by Didi.

Actually, the success of Didi,Grab,Ola etc. vs. Uber proves that in the complex e-business, as long as there is enough market space in the local area, and you can organize a good team, you can win in the competition with foreign companies. Just like Alibaba and JD beat Amazon, Meituan beat Goupon in China.

>> Likewise in Russia.

That's BS. Yandex is an incredibly strong player in Russia in the search space and Google is not outcompeting them either. It was the case way before Putin's political ambitions became relevant.

All in all, there are many reasons to blame Russia for it's government, but that's blatantly not one of them.

Not much, it is like saying that Google outcompeted Apple in mobile world.

It’s more like saying Google outcompeted Apple in creating a better clone of Excel via Google Sheets vs Numbers.

Thats bs, you only need to google "china bikesharing competition" to know what it means to compete in China. Startups in China will resort to any means, legal and illegal to bring each other down. A lot of bikesharing companies went bust because people essentially competed to the point of reducing price to wipe out the other competitor.

Even if you succeed temporarily, your competitor will clone you and your technology. Its similar in USA but in China its multiplied by the population factor in a region the same area so its more intense.

The competition also permeates downwards and creates beasts like the 996.

Useful points with Grab and Go-Jek. There's a neat backstory to the founders. They used to be classmates and good friends. Last month's Fortune article offered some context - if interested, it's here: http://fortune.com/longform/grab-gojek-super-apps/.

Go-Jek is not challenging Grab.

They have a deeply inferior product, fail to catch up to Grab's breakneck innovation pace.

Also, being an Indonesian company, Go-Jek has a disorganized company culture that is not conducive to competing with a lean, well-oiled machine run by Singaporeans like Grab.

I have traveled extensively in Indonesia, and have always preferred Go-Jek over Grab, and I have a feeling I share the same with the number of drivers and riders, at least in Medan, Jakarta, Bandung, Yogyakarta, and most of Java.

I also don't think being an Indonesian company has challenged Go-Jek in any way. Traveloka, Tiket.com, and Go-Jek are one of the most prominent businesses in Indonesia, and they all look like well-oiled machines.

This is so racist...

Besides being racist this is factually incorrect.

Grabs two co-founders were born in Malaysia and the execs are from all over the world.

Both are very successful companies but from the innovation perspective Gojek is most definitely the leader. You need only look at their offering (dozens of products built in house) in comparison to everyone else outside of china. Their food business is now bigger than the ride sharing for example, and their rollout of this was exceptional. Light-years ahead strategy wise of the rest at the time (grab/uber).

The only thing I can think of that Grab has executed on better is international expansion and the initial grab-car service was at one stage far more popular than go-car.

>>When reasoning doesn't line up with facts, there are usually flaws in the logic.

I don't think there's an opposition of facts and logic here. Grab was founded in 2012 (https://www.grab.com/sg/about/), Ola in 2011 (https://www.olacabs.com/about.html), and GoJek in 2010 (https://en.wikipedia.org/wiki/Go-Jek). All of these were entrenched players in their respective markets when Uber decided to put up a fight. Uber gave the Grab and Ola's VCs no option but to double down, if they were to save their existing investments. In this race to bottom, it was Uber who blinked first. Losing SE Asia was not an existential threat to Uber, but definitely for Grab. Media likes to talk winners and losers, but Uber did end up taking 27.5% stake in Grab just to leave the market (https://techcrunch.com/2018/04/24/grab-uber-deal-southeast-a...). However, their fight in India with Ola continues. But to my initial argument - back in 2010-2012, we thought that the network effect of social networks (like Facebook) extended to ride-sharing services too creating high barriers to entry. We know now that isn't the case. Imagine how a VC would react today to a startup founder pitching a ride-sharing idea in a market where Uber/Lyft are already entrenched, given what we have learned from Lyft IPO and Uber's SEC filing. My argument may seem counterintuitive here, but I believe that the Uber/Lyft's revealed financials is what may ultimately save them. They have successfully managed to make the ride-sharing market unattractive (at least for 10x return seeking VCs).

Apart from SDCs, there might be a market for an enterant that focuses on drivers as much as the rider experience: That could really steal drivers from Uber/Ola/Grab 'cause I hear nothing but endless list of gripes from drivers about how they are treated and how helpless they are.

I'd go back to late 2000s when Nokia's and Blackberry's stranglehold on high end phone market seemed unassailable but how it was blown away in the preceding years by a more expensive product (better app store for developers, better device for the end user).

You underestimate how much VC money is out there right now and Uber's competitive position in international markets is far from stable.

What's SDC? I got nothing obvious from googling it.

UPDATE: Got it, self driving cars. I am not deleting the comment in case others were confused as well.

Self driving cars

Most people in the industry use 'AV', or Autonomous Vehicle.

Startups won't win this. Manufacturers will. They have brand, cars, and soon can license the self driving tech. How hard is it for a billion dollar company to roll out a ride hailing app? Think about where that leaves Uber. They have to buy the cars from said manufacturers. This already gives them a significantly larger cost base and let's face it, while they also have a brand it is no more powerful a draw than Mercedes or Toyota.

Here's a thought experiment: how hard is it for a billion dollar company to roll out a simple crud app? Easy, right? Now name a single major bank with an app that is better than "barely usable". Which is easier? A crud app or a ride hailing app?

All my banks have good apps on par with the fintech startup apps I use (and actually I trust them more because they aren't moving fast and breaking things).

> and actually I trust them more because they aren't moving fast and breaking things

VERY true, not just in finance.

Same for me too - my incumbent bank's app is mostly comparable with the latest hot fintech's. The latter has nothing but a slightly more polished visual look, and that's not enough for me to trust them with my paycheck.

I use a regional bank and their app is only usable for minor day to day things. For that it's fine. But I can't do anything "serious" in it: checking account transactions are limited to only the last 2 weeks; I can't search transactions for a specific amount or merchant or date; I can't view past payments I've made for bills, etc.

For any of the above, I have to use the desktop site. These are not technical limitations either and should all be in the app if we want full parity with mobile.

Which national US bank or investment company has an app you find “barely usable”? The only one that comes to mind is Vanguard and that fits my mental model they’ve cultivated of keeping costs low on extraneous things so in a perverse way is a positive.

Chase's website is pretty crappy. I regularly have to login twice, or check the developer console to debug why I get infinite loading spinners. This is with a stock and up-to-date Chrome install on a good network.

I would give the Bank of American app 4 out of 5 stars, it's better than, say, the Gmail app.

> soon can license the self driving tech

My personal guess is that "soon" for fully autonomous cars is not any reasonable definition of soon. Even if you accept the tech is close to okay in Arizona (I wouldn't), think about the weather and driving conditions in most of the worlds' markets for these global companies.

50% of the worlds population live in cities. Car ownership is more expensive and has less utility in cities too. I'm also certain that we will start retrofitting AV enabling tech into our city streets soon to speed up the process. AV's will be "good enough" for many use cases very soon.

mm. so I don't think driving in cities is easier - I mean, it's certainly harder for a human to drive in a city; I don't see any reason why it would be easier for a machine to drive in a city than in the country.

Controlled environment with good lane marking etc. Obviously some cities are easier than others.

Controlled environment? well-maintained roads? this doesn't sound like any city I've spent much time in.

I'm thinking like 101 seems reasonably straightforward, modulo the occasional construction, but once you get into san Francisco, there's a lot of dodging pedestrians, cyclists, skateboarders, shopping carts, stopped delivery vehicles, etc... It doesn't look nearly as controlled, to my eyes, as 101 does further out.

I agree. The other day I was driving and thinking about this, and I started noticing "how many times during this drive have I looked another human (driver or pedestrian) in the eyes in order to determine their intentions?" It was a significant number even in a 15 minute drive.

I was still thinking about it during my bike ride later in the day, and I noticed that more than a dozen times I exchanged looks and nods with drivers to ensure they had seen me and that it was safe to do something.

No self driving car is able to look a human in the eyes and determine their likely course of action. And it most certainly won't be able to signal to the human a message as complex as "I have understood your intentions".

I got bear-ish on self-driving cars when I realized that, in order to be able to drive in Bucharest, you _have to_ break the (letter of the) law fairly often[1]. Knowing when to do so requires "common sense" which is a notoriously difficult nut to crack - computer vision may be advanced enough, but it's simply not enough. I still think it will evolve in time and reach mass-market, it's just that it will take lots of time - it's not something that will have a purely-technological solution, it will likely require legal and social changes too, and those take time.

[1] E.g. Car stopped in front; do you cross the continuous line to go to the opposite lane, or just wait a bit? Or merging from a side street into a busy main road.... some drivers will let you, but which ones? If you wait until "it's safe", well, good luck.

This is another good point. There's a hardware store near to where I live where it's literally illegal (if you observe the signs) to enter or exit the parking lot of said store. Everyone just understands that someone forgot to remove a road sign saying "buses only, cars forbidden" for the lane where you enter this parking lot. But how would a computer understand this?

I’m not sure that figuring out when to break the law in your example is any harder then figuring out when turning left is legal and safe on unprotected intersection. This is not to say that it's easy, but autonomous vehicles need to solve problems exactly like that one on a regular basis.

Yes - and I was saying that I realized that solving these problems require the elusive "common sense". If we get that figured out, even just roughly, I think we'll break the barrier of general-purpose AI. I'm not sure we're close to doing that... But, maybe I'm wrong.

This argument always seems a little strange to me. I think I can count on one hand the number of times, in 14 years, I've ever made eye contact with another driver while driving, or used some kind of hand signals. And in all of those cases, if the signaling had failed, the situation would have resolved itself just fine in less than a minute anyway. Most of the time, I can't even see the other drivers through reflections on their windshields. Sure, sometimes I'll stick an arm out the window to wave my thanks when somebody lets me merge, but that's not a critical communication.

Where do you live?

It is literally impossible to drive in Rome, Buenos Aires, Lima or Rio without looking at drivers for their intentions.

This is one of the more ill-informed tweets. How hard is it to roll out a ride hailing up? Borderline impossible. Especially for companies that have zero competency in service, software and marketplaces.

...which is part of why Audi bought Silvercar. This gave them a well-run service company with physical locations in most metros. And they've recently added renter pickup so it's not like this is black magic.

What's more unrealistic to think is that a move to driverless cars / less car ownership would lead to the manufacturer's rolling over.

> How hard is it to roll out a ride hailing up? Borderline impossible.

So how do we already have Lyft, Cabify, MyTaxi, Bolt, Kapten, Didi, AutoNavi, Meituan, Grab, OlaCabs, and a bunch more?

Lyft is the only one I've ever seen in the USA. Even Uber has struggled in markets where a strong player already existed.

Ubers problem is that it needs to compete locally: https://thinkgrowth.org/uber-is-going-to-0-and-benchmark-kno... . A taxi company does not need to challenge Uber globally to compete with it in any given city - because most taxi rides are from local population. This is different from AirBnB - where the customers need something that can be trusted globally.

I doubt AirBnB actually has a moat either, in practice. I think I'm using the right income - AirBnB's profit margin is something like 3.5% [0]. You don't need much of a moat to defend 3.5% profit margins. JP Morgan is sitting at around 30% [1] - that is the sort of margin that needs a bit of defense.

That aside, yeah, Uber has a negative moat; I don't see why the car drivers themselves couldn't band together to make a competing app if the mother company started to take a real cut.

[0] https://en.wikipedia.org/wiki/Airbnb [1] https://en.wikipedia.org/wiki/JPMorgan_Chase

so, as long as investors have appetite to lose money to buy market share? you are, of course, right.

But the business cycle goes up, and the business cycle goes down. (I mean, the general trend is upwards, but if you don't think there will be big downturns inbetween, well...)

The problem is that yes, uber and lyft have dominance for as long as they are willing to run the business for less money than anyone else; This puts a pretty hard cap on how profitable they can be.

(I mean, for an example of a competitor who might be willing to do it for very little over break-even, I've talked with several people who would be interested in setting up a competitor that was operated as a driver's cooperative. I mean, even that isn't workable when uber and lift are losing money, but it would work at profit levels that uber and lyft would consider break-even; such a cooperative could work really well as a break-even business, while investors in both uber and lyft would be super disappointed with a break-even business)

Compounding this, the ridesharing space is one that is massively price sensitive. Uber and lyft are so cheap that I've gotten rid of my car, and I use them all the time.

But if they raise their rates significantly? I'm gonna go buy a honda and drive myself; They get to duke it out for driving me around when I'm drunk, but we're talking less than 5% of my rides.

I suspect I'm not super unusual in this regard.

I’m skeptical about a non-profit service competing with Uber and Lyft. It would take a lot of money-losing ride subsidies to get the substantial market share required to get the necessary network effects.

I'm... not sure you'd need a lot of network effects? I mean, you need a critical mass of drivers and riders, but they can be all in a small area and you can still provide a service. I mean, for the occasional user, sure, brand recognition matters; If I'm going from a strange airport to a hotel, I'm probably going to use the brand i know.

But usually? I switch from uber to lyft on my daily commute based on saving a few bucks almost every day. (right now, Lyft has some scheme where you can buy a 30-pack of $15 off coupons for $300. But they're used every time you ride lyft, so if you want to go somewhere for less than $15, you use Uber)

I mean, 90+% of my rides are areas I ride in a lot, where it would be worth my time to put a fair bit of effort into discovery.

I think that on the driver side, there's a lot of drivers with very strong locational preferences, too; If you are in SF and try to get a ride to San Jose, my experience is that 3 out of 4 uber drivers will kick you out of the car when they find out, so I think you might be able to recruit drivers that way, too.

Sounds like Uber and Lyft are both subsidizing your rides - but for a new service to get off the ground would require even more subsidies. There’s a cost to idling and waiting for someone to come along and pay you for a ride. The higher the density of riders and drivers, the lower this cost and the less subsidy required for a given price level.

You only need to idle if you're using a single app. Many drivers use multiple apps at the same time.

True, but I believe this is approach only works well in certain cases. For shared/pooled rides, drivers are automatically assigned a chain of rides. In these circumstances probably few drivers would bother to keep another app open that hardly ever gives them any rides. It would take major subsidies to overcome that. You would need a lot of capital, and I don’t know who’s going to provide that other than investors.

The network effects are key here because you can't have competitive ETAs without having a lot of supply density and without enough demand you can't build the supply density, so aside from the incentives you are seeing Lyft and Uber using now, there are even more subsidies to build the marketplace and you have to do that city by city and neighborhood by neighborhood in the case of larger markets like NYC. There are also heavy ops costs to get a driver through the funnel and to keep them on the platform. Not saying it couldn't be done but it is not so easy for someone to come in and take marketshare.

sure, city by city and neighborhood by neighborhood... but my point is that you have a viable business, even if you only cover one city or even one neighborhood. Most of my traffic is to work and back.

Assuming that you have cheap/open source software (a big assumption) you could even setup federation. Like you and your crew setup a co-op in one area, and get a lot of riders through personal contacts. I and my friends setup a similar drivers co-op in a nearby area, and similarly use our contacts to build up a very local critical mass.

With federation, you could set it up so that if one of my drivers went to your area, say to drop off a customer, they could optionally be put on your network, either to work there, or maybe just to get customers on your network who wanted to go to my area.

I mean, you still have the huge problems of bad behavior, but I don't think uber/lyft have really addressed those problems very well, either. I think those problems are really hard, and maybe those problems would be easier to solve with a bunch of smaller but federated companies than with two large companies? Maybe not. I don't know.

I'm just saying, I think a lot of the critical mass issues could be pushed off to local leaders.

> From a game theoretic POV, Uber and Lyft have signaled that they're ready to fight for survival in markets they are established in.

And fight they have, because they don't have a moat. A moat is a competitive advantage that is _cost_effective_ to defend. Uber/Lyft don't have that.

They can be fought in local markets via regulation and specialization. Global brand is expensive, a long-term liability in local politics, and doesn't get them that much in local markets because it is so easy for both drivers and customers to use multiple apps.

It’s not that Uber can’t be self-sustaining. The problem is that’s not enough to justify their insane valuation.

They titillated investors with tales about autonomous vehicles leading to skyrocketing profits. But now the hype over autonomous vehicles has faded, and it seems unlikely that fully autonomous cars will be mainstream any time soon.

$100B+ for unprofitable ride shares and lukewarm burrito delivery? If you say so.

Why would anyone want to challenge them to take over a market they’re losing billions of dollars in?

That was my reaction. I can build a moat by selling anything below cost. But it doesn't really say much about the business viability, and what happens when you raise prices. Does demand shrink, or does another competitor with money to burn undercut you until they are out of money? Or, maybe...things work out.

It just doesn't seem to prove much beyond "subsidized pricing is popular".

ie MoviePass. As soon as a unprofitable company loses its investor backing it doesn't matter if they control the majority of the market, they are still doomed.

No different than airlines. You are only as profitable as your dumbest competitor- someone wise once said

You don't need people to make that point, Uber agrees to it too:

The personal mobility, meal delivery, and logistics industries are highly competitive, with well-established and low-cost alternatives that have been available for decades, low barriers to entry, low switching costs, and well-capitalized competitors in nearly every major geographic region. If we are unable to compete effectively in these industries, our business and financial prospects would be adversely impacted.

They can't just raise prices willy-nilly; taxis still exist.

Most people I know hate taxis. Uber can nearly raise prices to parity with cabs.

And as much as people used to hate taxis, the tide is turning to people hating Uber/Lyft more...mainly due to trying to kill passengers, pedestrians, bicyclists at a greater rate since the drivers aren't professionals and rarely know the city they're driving in.

Nearly? I'd pay more to not have to use a taxi.

When it comes to airports, I prefer taxis. I once got a Lyft driver at the airport who did not have enough room for all our luggage. Taxis generally will, and even if they don't, there is no charge for "canceling".

I recently arrived at an airport intending to take a Lyft/Uber out of the vicinity. Tried for 10 to 15 minutes to get a ride on either platform and it would just time out. Eventually opted for a taxi, which were immediately and readily available. Surprisingly it was also 30% cheaper in the end including tip than the quoted price on Uber at the time with surge pricing without tip.

The same thing happened on my most recent arrival back home. I am probably going to simply return to taxis at my home airport for now on.

Hailing cabs by phone (and later on, using the non-Uber hailing services that interact directly with cabs) never worked as well for me as Uber. Takes too long for them to get there, and the incentive for them to abandon your request and pick up a fare they find on the way is too strong.

Taxis only make sense in the very small perecent of the US where you can walk outside and hail one coming down the street.

Reminds me of a story I saw (I think on reddit) where someone had booked a cab for a 5am trip to the airport, and after it didn't show up after 30 minutes they just called an uber. They hadn't taken a cab since.

I know it can be an issue on the driver side in terms of job security, but poor customer service and behaviour is weeded out much better on ridesharing apps due to how their rating and tracking systems work.

Wait, is that how shitty cabs are in the US?

In Germany, we have two types: Funkmietwagen (kinda "callable cabs") which can't pick up someone without being called and proper taxis which both get dispatched but can also wait at taxi ranks to pick people up (or pick someone up on their way somewhere when empty).

Neither of those would abandon someone they've been dispatched to and dispatcher estimations are usually pretty accurate.

> Takes too long for them to get there, and the incentive for them to abandon your request and pick up a fare they find on the way is too strong.

The few times I've reserved a taxi for someone the estimation was accurate and the driver very friendly. Same for the company I work for, no real issues with taxis. Company wise it's often easier to just take public transport though (quickest to/from airport).

>Most people I know hate taxis. Uber can nearly raise prices to parity with cabs.

If they are willing to let their ridership fall to just above cab ridership numbers? sure.

That's the biggest problem with the market; demand is elastic. Uber's major competitor for my transportation dollars isn't lyft; it's me going out and buying a honda and driving myself. If they charged taxi prices, I'd buy a honda, and I'd use the rideshare less than 5% of the time I use it now.

In the US, correct. In most of Western Europe a taxi is normally a very different experience from Uber X - a nice car, nice driver, great navigation and safe trip. Yes, you're paying extra, but the comfort is also very different, especially when going from airports.

Which Western Europeans countries have you tried?

Netherlands, Germany, Belgium, UK (hah), France, some cities in Italy, some places in Spain.

Thanks. I'm surprised your description applies to all those places, but to be fair I don't really have direct experience riding taxis there.

Why surprised?

Because it doesn't match the reports I got from people living in Belgium, France and Spain.

I live in the UK. Can't say I agree with you. Especially because I have a mobility impairment. The Uber drivers are always more willing to help, (I'd imagine thanks to the rating system), stop exactly where needed etc.

In London - I'd say cabs are better. In Liverpool and Manchester, I'd say on par with Uber. Didn't have experience with Assist and Access Uber cars, so you have a better view on that.

Taxis have a damaged brand and no clear way to repair it at scale.

1. Be a city council 2. Create an open source competitor for integrated transport management 3. Destroy profit

They don't have to be outcompeted by another similar entity, though. Their pie could get eaten by lots of small local operators, or by someone like Google with a fleet of self-driving cars.

"Uber/Lyft do have a VCs-will-not-race-to-the-bottom-with-them moat, and tomorrow they might as well raise their prices to turn profitable."

That's the multi billion $ question, if they hike prices to become profitable, will customers swallow it, or jump to local alternatives. My feeling is the latter, I don't think you get economy of scale for running a taxi business, because your biggest cost is paying local drivers.

I have several apps on my phone for calling a ride. I usually pick Uber because it's cheapest, but if there is any hint of a surcharge I scan all of the apps to pick the cheapest.

Same here; Uber isn't even my first choice anymore, between the four we have available (five if you include taxis).

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