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Is Uber This Bubble’s Webvan?

Posted by on October 22, 2014

Did Uber Send Hailo Packing?

Hailo, the taxi hailing app, started in London by a team of taxi drivers and tech entrepreneurs has pulled the plug on its North American operations, despite having raised more than $100 mil from some of the top venture firms.

The company operates in more than thirty cities around the world, and had US operations in a half dozen metro areas.

Hailo’s public announcement stated that the reason they are leaving is that the “high cost of marketing in the US” would make profitability a near term impossibility. Like they didn’t know the costs prior to opening the branches?

Some articles have opined there are other reasons, the obvious being the competition from Uber, Lyft, and similar services, as well as the fact Hailo relies on licensed taxi drivers, who 1) were ‘suspicious’ of making deals with the application company, and 2) the service relies heavily on smart phones, and penetration of smart phone users among US taxi drivers pales in comparison to the same segment outside of the US. (They didn’t figure this out ahead of time, either?).

While I agree that most ‘old line’ industries (including taxi services) could use some shaking up, I don’t believe on demand, private vehicle transportation like Uber is the answer. I prefer to think of Uber, with its billion dollars + of investment as the Webvan of the current bubble. In other words, I don’t think they will survive, at least in their present form.

Uber is currently operating in 200 cities, and is sitting on an $18 billion valuation. (Up from 3 bil last year) (LOL). They were projected to have $200 mil in revenue in 2013. Whatever happened to the days when company valuations were based on performance, instead of hype speculation?

If you’re not familiar with Uber, it’s basically a ride matching service, contracting with private citizens who own “late model sedans in excellent condition,” drivers must have insurance and be over 21. Prospective passengers use the app to request a ride, and software takes care of the rest, matching driver and passenger and handling payment.

Uber has expanded its offering to include licensed taxis and regulated limousines, along with adding ‘quality tiers,’ higher pricing for luxury transportation and such.

Some cities have banned Uber, saying the company is not regulated like taxis and therefore not as safe. There’s probably truth to that, there have been some news reports of passengers not feeling safe; there has also been complaints about ‘demand’ pricing with Uber, with rates jacked up during special events or high demand. Of course, taxis are unable to do that.

In order to have a complete US roll-out, Uber will have to litigate in a bunch of cities, fighting both municipalities and powerful unions. Expensive proposition.

My own concern as a user would be my personal safety, not only lacking confidence in the driver’s ability, but also being suspect of their individual character. Some proportion of drivers undoubtedly have nefarious reasons for signing up.

Some optimistic/pessimistic critics believe services like Uber will eventually put traditional taxi companies out of business, and then seriously jack their own rates.

An article in AdWeek magazine recently opined that the future of Uber is to merge with Google, and use the upcoming ‘self-driving car’ technology as an automated consumer goods delivery service, a road-based alternative to Amazon’s proposed drone delivery project.

That would mean Uber would switch from being a personal service matching company to strictly a logistics company, and there is pretty stiff competition in that segment.

The self-driving car will probably take a couple of generations to be fully adopted, after the inevitable battle with regulatory authorities.

What do you think? Do services like Uber and Lyft have legs? Would you be one of the first to have a self-driving car?

As for me, a big no for the first question, a big yes for the second.

 

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