Low driver pay is a regular critique of Uber and Lyft, and now new rideshare companies are positioning themselves to do something about it by giving drivers more say over how much they make. Senior RSG contributor John Ince covers driver pay, plus what new companies are doing to increase that pay, and how autonomous vehicles plan to interact with pedestrians in this week’s round up.
How Much Do Uber and Lyft Drivers Make in 2018? [TheStreet.com]
Sum and Substance: How much can you make driving for Uber, Lyft or other ridesharing services? Not a whole heck of a lot. Nine dollars an hour, give or take.
As an average driver that’s how much money you’ll make with Uber or Lyft. It’s a photo finish with fast food as the lowest paid work in America, and considerably less than you’d make putting up with people at Walmart. On the other hand, as rideshare companies exhaustively advertise, you can set your own hours and be your own boss.
Is it worth it? Let’s look at the numbers. Uber in particular has a reputation for… let’s call it optimistic advertising. So we’re going to ditch the theatrics. Rideshare drivers do not rake in the bucks as highway roaming, scarf-wearing, loft-partying Manhattanites. Uber’s promise that you can “earn as much as you want” holds about as much water as those Disqus commenters who make $70,000 a year “working from home.”
…Here’s what the drivers actually earn:
Pay Per Trip: $11.48 – $15.97
As studied by the indispensable NerdWallet, drivers earn dramatically different amounts on different platforms. An Uber driver averages $15.97 per ride, while a Lyft driver makes an average of $11.48 per fare.
… No ultimately successful major technology company has been as deeply unprofitable for anywhere remotely as long as Uber has been. After nine years, Uber isn’t within hailing distance of making money and continues to bleed more red ink than any start-up in history… Across all its businesses, Uber was providing services at only roughly 74 percent of their cost in its last quarter. Uber was selling its services at only roughly 64 percent of their cost in 2017, with a GAAP profit margin of negative 57 percent.
Uber has lost money every year since its founding because it undercharges customers. When accounting for the full costs of its infrastructure, salaries and other overhead, the company spends more per ride than it makes…
My Take: Given this article was published on TheStreet.com, which is largely targeted to investors and finance types, these numbers should give pause to anyone considering getting in on the upcoming IPOs for Uber and Lyft. These types of numbers aren’t sustainable for drivers. No wonder so many drivers pack it in after a few months.
Even more concerning is the fact that while paying drivers such abysmally low wages, these companies are still losing gobs of money. Uber routinely bleeds almost a billion dollars a quarter of red ink. So exactly where are these companies going to squeeze more income out of this situation? That’s the billion dollar question.
If you’re hoping that driverless cars are going to solve this problem, you’re living in a dreamworld. Key investor, Bill Gurley of Benchmark, said recently at the Startup Launch conference in San Francisco that driverless cars won’t arrive as a serious factor in this industry for at least 20 years. So that leaves ventures like Uber Eats, scooters and bicycles. But those ventures are bleeding red ink too.
Folks, this is an industry that has serious economic problems, but somehow that hasn’t yet filtered down to the investors who have made it all work so far.
Priceline Meets Uber In A Name-Your-Fare Ride Service Arriving In New York [Forbes]
Sum and Substance: inDriver has entered the New York ride-hail market with a Priceline-style model. The city is its first in the U.S., its 11th country since launching in Siberia in 2012.
A ride-hail app new to New York lets you set a price for your trip (sort of). There’s a $15 minimum and its nearby drivers can accept your fare or counteroffer. It might become a haggle session, or it could ease a major pain point of using ride-hail in crowded cities: shocking fares.
… inDriver, a ride-hail app newly based in New York after growing internationally since its Yakutsk, Siberia launch in 2012, believes it can make everyone happy. It first balanced such competing interests in a legendarily cold Siberian winter. Taxi drivers, not Uber drivers, jacked up prices when it was -45 degrees Celsius and locals took matters into their own hands, negotiating ride prices via a social network as the Independent Drivers group.
Independent Drivers condensed became the company name inDriver and the micro-marketplace for ride pricing was named the Real Time Deals (RTD) model. Before targeting New York, the concept expanded into 160 cities in nine countries outside Russia: Mexico, Colombia, Peru, Chile, Guatemala, El Salvador, Kazakhstan, Uzbekistan and Tanzania. The company is unrelated to the New York-based Independent Drivers Guild, a ride-hail drivers union.
… Of course, to get a toehold in New York, inDriver needs the drivers that create the fleet that is a ride-hail firm’s critical asset. To supply its frugal passengers, inDriver will recruit drivers at driver hops and airport waiting zones and let word-of-mouth take over. It will retain those recruits by waiving its own commission for the first six months of operation.
Drivers will pocket the entire price of the ride less variable local taxes, variable tolls, a 2.5% Black Car Fund surcharge, a 3.55% processing and bank fee, and a 20-cent fee for each earnings payout. The company has not yet decided who — inDriver, contracted driver, or customer — will absorb the new $2.75 fee come January.
Past June, inDriver promises to only deduct 5% to 8% of every driver’s take. That leaves its share below the ride-hail market average. That average is 30% to 40%, according to ride-hail blog The Rideshare Guy’s breakdown. …
My Take: This is an interesting idea that could catch on with drivers who are feeling the pinch of disguised pay cuts. But the network effects give incumbents like Uber and Lyft an enormous advantage.
The drivers are key. If they start to move en masse – it would force Uber to react. I’m not expecting or predicting that. But I wouldn’t mind it if it did happen. Seems like progress to me.
Here’s how Lyft envisions self-driving cars (autonomous vehicles) will communicate with pedestrians [Techcrunch]
Sum and Substance: The question of how self-driving cars will interact and communicate with humans is one that has come up before, but the answer is still up in the air. Google has been looking into this at least since 2012, and earlier this year, Uber filed a patent for using flashing lights and sounds to talk to pedestrians. Now, the United States Patent Office has granted Lyft with a patent for what it describes as an autonomous vehicle notification system.
Lyft’s solution entails developing a predetermined message to display on the most visible car window. In one example, each window includes a projector, a see-through screen or another display device to communicate the message.
“[…] integrating these autonomously-provided services into a mixed autonomous and human-operated environment has many challenges,” the patent filing states. “Drivers and pedestrians are accustomed to interacting in particular ways, removing a driver from some vehicles can lead to uncertainty and miscommunication.” …
My Take: This article highlights one of the more daunting challenges facing the autonomous vehicle industry. Communicating with pedestrians is only one aspect of this dilemma. How will the vehicle find the passenger who doesn’t know where he or she is and most decidedly is not where the driverless car thinks they’re supposed to be? Every driver has encountered this type of situation, and it requires ingenuity and patience, especially if it’s happening in a downtown location where there is no legal place to stop and wait for the passenger to figure things out.
Having a flashing sign in the window as this patent suggests as part of Lyft’s solution seems problematic to me. How does any individual pedestrian know that sign is for them? In a world with all kinds of visual noise, how will a pedestrian know which car to trust with which message?
I realize there are a lot of smart people working on these problems, but I wonder how many of those smart people have ever been an Uber or Lyft driver for any appreciable period of time. If not, they’re basically just groping around in the dark.
Readers, what do you think of this week’s round up?
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-John @ RSG
Latest posts by John Ince (see all)
- What Uber and Lyft’s Earnings Reports Say About the Future - November 16, 2019
- Uber Enters New Markets, Trying to Get Its Edge Back - November 9, 2019
- Predictions for Uber and Lyft’s Upcoming Earnings Reports - November 2, 2019