Can Uber (and Lyft) drivers really manipulate the surge, increasing prices on passengers? RSG contributor Sergio Avedian looked into this claim: how it could be done, if it’s being done, and why drivers are even considering this. Let us know what you think about ‘surge club’ in the comments below!
Recently, we started hearing more about the so-called “Surge Club”. A few drivers craving for attention and their fifteen minutes of fame had the guts to be interviewed by reporters explaining in detail how by simply coordinating their efforts, they were able to trigger higher fares for themselves. Now, quoting from Forrest Gump “Stupid is stupid does”.
What does this brazen act accomplish other than turn the ire of Uber onto them? Possibly get deactivated due to Uber calling this act “fraudulent”. Is it really fraud or is it necessary for drivers to band together in order to scrape a living wage?
Mainstream media runs with stories without digging deeper into the details. They have no clue how Uber and Lyft function, what the drivers go through on a daily basis. They run with a story until it loses traction. From what I’ve read about this so-called surge manipulation by a handful of drivers on a daily basis, they keep throwing more fuel on this fire.
It is really difficult for me to understand why Uber would be so upset about this, are they really admitting that a handful of drivers have the power to manipulate the platform? If so, what does that say about the reliability of the platform Uber and Lyft care so much about?
Mass deactivations took place in Los Angeles a few months ago for exactly this reason. I was at the greenlight hub in Santa Monica for inspection. I started talking to a lot of drivers who were in the same long line as I was, pleading their case. They all said the same thing – deactivated for LAX violations. High cancellation rates, after calling the passenger and inquiring about their destination, at LAX (Los Angeles International) got you the axe.
What is Uber Surge Pricing?
The controversial practice of new surge pricing used by Uber is based on this logic of fairness. The idea behind surge pricing is to adjust prices of rides to match driver supply to rider demand at any given time. During periods of excessive demand when there are many more riders than drivers, Uber increases its normal fares. They do this with a “multiplier” whose value depends on scarcity of available drivers.
Surge pricing achieves two important goals for Uber and its customers. One is that it increases the supply of drivers to meet current demand attracted by the ability to earn more. Despite these obvious benefits and the benefits of surge pricing for drivers, it is quite clear that consumers loathe Uber’s surge pricing. Lyft has something similar, too, known as Prime Time.
Per Uber, surge pricing does not exactly depend on how many people are actually ordering a ride from a given area; it simply can kick in by passengers engaging their app and pricing rides. No one really knows how surge multipliers are calculated except Uber but, like everything else, they haven’t exactly been transparent about how and when the algorithm decides to put the surge on.
Can Surge Pricing Really Be Manipulated?
The answer is possibly! First, let me say that this type of alleged manipulation has been going on since Uber first came to town. Call it manipulation, call it an imbalance in driver supply vs. passenger demand, in this day an age of algorithms, I say it is highly unlikely. Attempting such a task could only be accomplished in a very localized area, i.e. airports with a small queue, concerts, sporting events etc.
As a veteran and a surge only/mostly driver, I can easily say that a few years ago when driver supply did not meet ever growing passenger demand, it was definitely unnecessary to deploy such tactics. Surge was plentiful, you could count on it, do all the cherry picking you wanted and gross close to $45-50 per hour here in LA at least. I have also witnessed intentional surge suppression by Uber at major events and at airports – their algorithm controls it all! With rates more than 50% below what they were a few years ago, diminishing quests, disappearing power zones and consecutive streak bonuses, I think “Surge Clubs” may pop up all over the country.
Hey Uber, the higher fares are, the more money everyone makes. Are Uber and Lyft concerned about the pocketbook of the passenger? No, don’t hold your breath, I have some screenshots below to prove that everyone is in this game for themselves, Uber, Lyft, the drivers and the passengers.
My LAX (Los Angeles International Airport) Take
Well, if anyone reading this knows about “HELLAX” (my made up term for our international airport), this airport is the black hole next to the Pacific Ocean. On a daily basis it swaps places with Chicago’s O’Hare International Airport as the busiest airport in the country. It is a total disaster on most days (due to unending construction) but it is an absolute nightmare during holidays and Sunday nights. It literally takes a driver 30-45 minutes to get to their passengers, from the staging lot which is located less than a mile away from the terminals, at one of seven rideshare signs. This is after possibly waiting for at least 30-45 minutes the previous hour in the airport queue, which is heavily manipulated by Uber/Lyft allowing Select, XL, Black, SUV classes to have priority over UberX cars, especially when it is surging.
Imagine the disappointment of the driver when they arrive to pick their passengers up after crawling for 45 minutes only to discover that the destination is to Manhattan Beach, El Segundo or Culver City for a whopping fare of less than $10 at base rates (60 cents a mile/21 cents a minute). Imagine working for two hours for gross earnings of less than $10.
Uber does pay the driver long pick-up fee at the rate of 24 cents a minute (Lyft doesn’t), and that kind of softens the blow, but I can’t tell you how many trips I had from the terminals to a hotel on Century Blvd. or In & Out burger on Sepulveda which are both located less than 3 miles away. It is the ultimate rally crusher, it absolutely ruins your day financially and mentally. I depend on steady surge trips to and from LAX to increase my per app on hour earnings, I depend on the expected surge since I know the patterns by heart.
Uber and Lyft used to put boost/power zones over the area as high as 1.8-2.0x (50-100% PT for Lyft) but those were the good old days! They are gone with the wind, Lyft replaced PT with the dreaded PPZ (Personal Power Zones), but to Uber’s credit they kept the surge multiplier in tact, albeit with a cap of 2.5x.
Who would drive for Lyft under these circumstances? Why would any driver opt to drive for Lyft over Uber, since the conditions are the same but Uber driver pay is drastically superior to Lyft (as shown below)?
Are passengers really getting hurt by these manipulation attempts?
The screenshots below are from a recent Sunday night at LAX. I was waiting for a pick-up and priced rides on both platforms. The passengers are definitely paying higher fares, the question is to whom? The driver? You be the judge, a picture is worth a thousand words.
The screenshot above (second image) shows how much the passenger is being overcharged for this ride. Talk about manipulation. It is from LAX to my house which is exactly 30 miles away and at 11 PM, this ride should not take more than 40 minutes.
As per Lyft’s Los Angeles rates, here’s the calculation:
30 miles x 80 cents = $24.00
40 minutes x 12 cents = $4.80
PPZ bonus $8.66
Total driver pay of $24.00+$4.80+$8.66 = $37.46. Lyft charged the passenger an obscene amount of $131.40! Go figure who’s exactly hurting the passenger. Lyft charging the passenger 300%PT while paying the driver $8.66 bonus – who’s manipulating who at this point?
The screenshot above (first image) shows the rates on the Uber platform for a similar time frame. Same trip as above.
As per UberX Los Angeles rates, here’s the calculation:
30 miles x 60 cents = $18.00
40 minutes x 21 cents = $8.20
Surge multiplier 1.8 = $20.96
Total driver pay of $18.00+$8.20+$20.96 = $47.16. Uber charged the passenger an upfront price of $104.31! So who again is hurting the passenger?
Takeaways for Drivers
Uber sent ABC7 a statement saying they “have taken steps to address fraudulent behavior … engaging in this behavior may result in removal.” The company said it can also be difficult to decipher what is a natural spike in prices, and a manipulated one.
Uber and its opaque algorithms control how much drivers get paid and how frequently a surge will occur, and the company can manipulate its own rules as much as it wants, yet it gets mad when drivers, the company’s backbone, attempt to do the same on their own terms through a solidarity action. I am definitely not condoning such a strategy, I don’t think it could be effective over the long term. It gives a black eye to all the drivers.
However, Uber and Lyft should learn from this, as much as they think they hold all the cards, if it is proven that a handful of drivers could manipulate fares that easily, what could happen if hundreds of thousands of us came together.
Drivers, have you seen this so-called ‘surge manipulation’ in action? What do you think of ‘surge clubs’? Is PPZ Lyft’s way to profitability?
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-Sergio @ RSG