Wednesday, May 31, 2017

Competition Uber Style: Burning Millions On Their Carpool Service

I had to check that BuzzFeed and Uber didn't have any investors in common.
They don't.
And BuzzFeed's Chairman was an investor in an Uber competitor, Sidecar, which failed and whose assets were bought by GM.
And whose co-founder went to Uber.

From BuzzFeed:

Leaked Internal Documents Show UberPool Was A Cash-Burning Machine 
In late 2015, UberPool was losing its home market of San Francisco to Lyft Line. Here's what Uber did to win it back, according to internal company documents.
In summer 2015, about a year after Uber launched its Pool ride-sharing service, the company was betting big on it. In order to beat out Lyft and cement its ride-hail supremacy, Uber needed to get droves of riders and drivers into Pool — and fast.

To do that, a trove of internal documents shows, Uber burned vast sums of money to subsidize Pool’s growth — sometimes well over $1 million a week in San Francisco alone.

“We were bleeding cash subsidizing rides and we didn’t have a plan for tomorrow,” a former Uber employee told BuzzFeed News. “Everybody was just trying to put a Band-Aid on this problem.”
But when Uber cut the heavy discounts, ridership tanked. Sixty-three percent of riders moved on to cheaper alternatives, according to internal Uber data, and 26% migrated to archrival Lyft’s Line. Uber was, as a November 2015 internal presentation somberly concluded, “Losing SF.”

Uber — which at that point had expanded to more than 50 countries and had a rumored valuation of $50 billion — was ascendant. But it was struggling to attract riders to Pool, a service it considered crucial to the company’s future. Uber’s struggle to make Pool viable in San Francisco offers a case study of the ride-hail juggernaut’s burn-now-and-figure-it-out-later corporate ethos at a moment when it is still struggling to pinpoint a sustainable business model. Uber reportedly lost $2.8 billion in 2016, and at least $2 billion in 2015.

Uber declined comment on Pool figures obtained by BuzzFeed News.

Uber introduced Pool in San Francisco on Aug. 5, 2014 — a day ahead of the launch of Lyft Line, a similar ride-sharing service from its pink-mustached rival. An internal Uber policy memo from the time celebrated Pool as “an engineering marvel."

Uber CEO Travis Kalanick would later describe Pool as a key evolution of Uber's strategy. “Two people taking a similar route are now taking one car instead of two. And when you chain enough of these rides together, you can imagine a perpetual trip — the driver picks up one customer, then picks up another, then drops one of them off, then picks up another,” Kalanick told employees in June 2015....MUCH MORE