Uber and Lyft say they're ending services in Minneapolis over a city-mandated driver pay increase. The city council pushed through the measure to bring driver pay closer to the local minimum wage of $15.57 an hour.
It’s relatively cheap to maintain the service. What costs money is marketing and expanding that service. That’s what most people are working on.
Remember, Lyft and Uber have thousands and thousands of people giving them money every day. They don’t even maintain the cars, they just take a cut off the top. Sometimes greater than 50% of the ride.
They are making a ton of money, but they are also wasting it on new markets, new features, and Superbowl ads. They could easily just charge a little more in Minneapolis to make the same money, but they don’t want the drivers to win.
“Maintaining” means more than just leasing out a few server farms. It also means hiring software engineers, customer/driver support staffs, HR, legal teams, designers, etc, all of which are required to keep the day-to-day going. Uber and Lyft aren’t small operations, by any means. They are monstrously huge projects that require a lot of bandwidth - both technical and human - in order to keep the lights on.
For what it’s worth, Uber, Lyft, DoorDash, and pretty much every gig app out there have all operated at a net loss from the very beginning. It’s not just expensive to maintain the service, it’s impossibly expensive.
And at least Lyft is sending emails to customers making it sound like paying a decent wage makes their business model unsustainable.
Which is weird because what’s their overhead? They run an app. 99% should be going to drivers.
They have to pay hundreds of millions a year bribing politicians across the world!
Card fees, keeping it updated, onboarding drivers and doing checks, accounting for fraud, employees, advertising. 99% is a silly figure to request.
Yeah, apps that offer a live service across the globe 24/7 definitely run themselves. It’s just a silly little computer, after all. Totally.
It’s relatively cheap to maintain the service. What costs money is marketing and expanding that service. That’s what most people are working on.
Remember, Lyft and Uber have thousands and thousands of people giving them money every day. They don’t even maintain the cars, they just take a cut off the top. Sometimes greater than 50% of the ride.
They are making a ton of money, but they are also wasting it on new markets, new features, and Superbowl ads. They could easily just charge a little more in Minneapolis to make the same money, but they don’t want the drivers to win.
“Maintaining” means more than just leasing out a few server farms. It also means hiring software engineers, customer/driver support staffs, HR, legal teams, designers, etc, all of which are required to keep the day-to-day going. Uber and Lyft aren’t small operations, by any means. They are monstrously huge projects that require a lot of bandwidth - both technical and human - in order to keep the lights on.
For what it’s worth, Uber, Lyft, DoorDash, and pretty much every gig app out there have all operated at a net loss from the very beginning. It’s not just expensive to maintain the service, it’s impossibly expensive.
It’s not impossibly expensive. Uber is a public company and you can just read their annual reports. Their gross profit margin ranges from 38% to 45%.
They spend $4 to $5 billion every year on sales and marketing, more than any category besides cost of revenue (actually running the app).
https://d18rn0p25nwr6d.cloudfront.net/CIK-0001543151/bbb206f1-a6ba-4521-82cf-ae2d4011057f.html#
No, they are not just trying to keep the lights on.
It is already unsustainable, they are losing money