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The Future of Rideshare in San Francisco

I’ve wanted to say something and bit my tongue several times, but I have to get this out there. This is an example of tech gone bad and I feel the need to say something about this because while the news writes articles about it they don’t contact someone like me or my Facebook buddy Michael Gumora [the first rideshare driver] to get our input.

Ridesharing/Ride hailing/Uber/Lyft whatever you want to call it is a money pit that’s losing. It’s become something that everyone needs and wants, but it is simply not sustainable because the companies are going after markets that aren’t sustainable to begin with. 

Currently, Uber and Lyft are attacking the public transportation system. The problem with that is in every city in the United States, if not the world public transport is government subsidized. It never turns a profit. Going after a market that doesn’t make money to begin with is a stupid idea and especially when you can’t figure out a way to make money at doing it. 

Let me give you an example. Currently in San Francisco, the home town of Uber and Lyft there’s a major fare war between the two. To be honest in every city there’s a major fare war even if Uber, the most widely distributed rideshare company is the only business in town. They want to pull in riders and give them an awesome price so they’ll buy in and give up their cars.

In San Francisco, giving up your car isn’t too hard to do even if you live on the edges of the city because our SFMTA, as bad as everyone says it is still will pick you up and bring you where ever you need to go. If you need to leave the city it’s pretty easy to get a hook up between MUNI and BART or AC Transit or SamTrans. You can even get a Clipper Card that will work on all of these if you’ve got the money to spare.

Here’s a problem. As I mentioned previously, none of these turn a profit. Uber and Lyft are trying to pull people away from government subsidized transport systems without having a way for themselves to make money. Sure, there’s UberPOOL and Lyftline where you can stack riders together, but that still doesn’t turn a profit for either company.

Neither Lyft nor Uber has made a dime in profit since they started yet they are still getting investors to keep them afloat. Uber even admitted to losing $1,000,000/week just on UberPOOL in San Francisco in order to try and get ahead. The long shot game these companies are pushing towards is driverless cars. OK, I worked for one of the companies testing driverless cars and they’re coming along pretty good to be honest, but currently I’ve only seen a high speed hour and a half video of a car in driverless mode. Cool, it’s very cool, but what happens if there’s a problem with the car at an hour and thirty one minutes? What will be the acceptable failure rate of a driverless car? Once every week? Month? Year? Government will the the one to decide and it’s not going to go well for the companies building the cars. In California the DMV has specified that any company working with driverless cars must hit 4.5 million miles in driverless mode before they can even think of removing the driver, but again, you hit the mark, but how often will a problem pop up?

I asked once and was told that they were thinking of putting a big red button in the back that the passenger could hit if there was a problem. Here’s the problems with that:

  • Have you ever watched cartoons? Big Red Button. Someone will push it…especially if it says do not push unless there is an emergency.
  • People riding in a driverless car will tend to trust the car and not pay attention to what the car is doing. If you’re one of those who won’t trust it you won’t book a ride, but if you do you’re not going to pay attention to what’s going on and just sit there with your glass of champagne and laughing about what the poor people are doing. Seriously, check out this video of what people think driverless cars of the future will be like.

Perhaps I’ve moved forward a bit too fast. We don’t have driverless cars yet even though that’s the future. Let’s step back and take a look at today. Uber and Lyft just aren’t sustainable. Let me explain why. I did a little math today. I went out this morning and drove during morning rush. Two hours and pulled in about $60. For a driver, $30/hour isn’t bad, but throughout the rest of the day it doesn’t stack up like that. During those two hours I gave four rides and Uber lost $32.67 because they now tell the driver what the rider pays and gives a complete break down and they subsidize rides through surge guarantees in certain areas. Lyft does the same thing, but it’s a lot more convoluted in such a way that they can find a way to not pay you the guarantee.

Uber has a flat rate program that it offers some riders that if you google uber flat rate san francisco you might get a sign up page if Uber hasn’t sent you an email offering you the deal. For $40/month all your UberPOOL rides are $2.99 and UberX rides are $6.99 up to a ride that is normally $20. If you take a ride that say costs $25 you’d pay $5 + your $2.99 Pool/$6.99 UberX price. Drivers on the other hand are paid per mile and per minute so it doesn’t affect them and if a driver tells you it does then report them immediately. Because of this Uber loses money. Lyft is competing with them so they lower their prices and also are losing money.

As I mentioned before, neither company has turned a profit. Now here’s where it gets interesting. General Motors has invested half a billion dollars in Lyft and has a spot on their Board of Directors. GM even made an offer to buy Lyft as the news previously reported, but Lyft rejected the offer. GM also purchased Cruise Automation last year that is working on driverless cars. Now Google’s driverless car company, Waymo has partnered with Lyft to provide cars. Google and General Motors have a few extra bucks that Uber doesn’t have and I can just assume that Travis Kalanick is sweating a bit these days. News reports have said that Uber lost $2 Billion in 2015 and between $2.8-$3.8 Billion in 2016. Current reports have suggested that Uber is hemorrhaging $1 billion every three months this year with Uber only sitting on $11.8 billion in actual capital.

The future does not look bright for Uber. I am guessing that Google who likes to toss money around will eventually purchase Lyft and it will be a game over man for Uber. Uber has had too much bad press lately and pulling in riders by subsidizing rides at a loss is no way to stay in business. I personally want to get out of the game because when I started drivers were getting paid $3.50/mile and today it’s $1.15 [or $1.10 for UberPOOL]. Even though Uber is still losing money, the 45,000 drivers who come to San Francisco every day to participate in the rideshare fiasco are starting to turn away, hopefully this blogging thing I’ve been doing for years will finally start to make me some money. 

If you’re a reporter working for a news agency please contact me. I’d be happy to talk to you and I can even hook you up with other drivers who’ve been involved in this for a long time.

Triangle vs. Square

So I’m sure you all know by now that I hate PayPal, I hate them a lot. Yesterday they unveiled their new product for mobile merchants: Triangle umm PayPal Here. I’m not buying into it for a number of reasons and yes, I’m about to pretty much tell you all of them.

First thing that was kind of funny to me was that they’re undercutting Square by .05%. What that means is that if you charge someone $100 you’ll be giving Square 5¢ more of your money. 5¢ out of $100 isn’t going to hurt me too much.

Second, the PayPal app looks like it was a complete reverse engineer of the Square app. The only difference between the two is that you have to enter the CVV number after swiping the card which you don’t have to do with Square.

People are talking about the 2.7% fee vs. the 2.75% fee of Square and then following it up with, but you get a free debit card that any money you charge someone is immediately available on the card which gives you 1% cash back making the effective rate 1.7%. While I’m good at math I’m not so good at bait and switch economics and something just didn’t sit right with me on this one until I saw a comment made by someone using the name SounderJunkie on The Verge that said:

Umm, the 2.7% is charged to the merchant, the 1% cash back goes to the customer using the card. The only way this becomes an effective rate of 1.7% is if you are charging your own card. Interestingly, this is classified under US law as money laundering.

Money laundering? Interesting idea. So they give you a debit card that accumulates your charges without the need for a bank account. As a freelancer I’ve run into times where I have to prove to a company that I was employed by showing them bank statements verifying PayPal or Square deposits to my bank. From what they’ve said so far they won’t be issuing bank statements for you and I can only suppose that they will show up on your PayPal account which looks more and more like a bank statement every time I have to look at one and at one time in the past they were acting like a bank encouraging you to keep your money in your PayPal account and earning interest on it through their Market Rate program or spend it with your PayPal debit card [something that when they got that started years ago I applied for, but never got.]

Third, PayPal is an established online payment juggernaut. They are virtually the only form of online payment that online businesses will accept. I just happened to check their site and noticed that they’re previous fee of 2.5% + 15¢ transaction fee has now been raised to 2.9% + 30¢ transaction fee. So in order to offset the extra .05% they’re giving you to undercut Square they now have to raise their rates for normal online PayPal exchanges unless you can get approved as a non-profit or make more than $3000/month. They also have some policies that are a very draconian in nature. They’re already telling book sellers that if they want to sell ebooks and accept PayPal payments they cannot sell erotica. Yet there is on eBay an ahem Adults only section where you can buy also sorts of erotica as well as some other rather bizarre sexually fueled devices and pay with PayPal and that’s OK because, well eBay owns PayPal and they love their monopoly status.

If you make a mistake and accept a payment for something they they don’t like you to sell [online raffles are a big one that people get hit with] they will suspend your account and hold all funds for 180 days and not even let you refund any payments. At the end of 180 days you can remove the money, but your account while still existing cannot be used because you have been banned for life. As a matter of fact anyone living at your address is also banned for life. If you sell your house and someone moves in that uses your old address they may end up being banned for life as well [in a call to PayPal that one caught them off guard, but they did say it could possibly happen].

 

Now Square, a San Francisco based start up that has been getting rave reviews since it’s beginning has also become pretty well established for mobile payments. Most of the food trucks around the Bay Area use Square. Small coffee shops and bakeries are using it. Sure there are a few other options around, but they usually charge more to process credit cards than Square does and the .05% lower rate for PayPal Here won’t help them overcome PayPal’s hatred by those who have used it in the past. I don’t think Jack Dorsey at Square will be quaking in his boots anytime soon.

If you want to get away from PayPal for online payments that don’t require a card swipe I suggest you check out Venmo. There are no fees associated with it unless you’re making a lot of money through it which in the future they say they will be instating fees for businesses to use it, but keep it free for individuals.

Baghdad By The Bay Meetup in the works

I’ve been thinking about this for awhile and I finally broached the topic on Twitter yesterday and was surprised by the response. I’m getting a large amount of people in San Francisco and beyond who read this website and I’ve finally decided to get out of the house and meet up with some of my “foreign corespondents” in San Francisco. That is the other bloggers, citizens, fans, readers and even the haters of this website.

Since I’m a Sunset redneck, it only made sense that I have the meet up in a suitable Sunset establishment. Also since I want to give some of the people from out of town a chance to prepare I’m going to not try a flash mob type of thing with a meet up tonight @ Uncle Fucker’s Chuckle Hut! but actually give you a few months warning. I like to plan ahead and I want to find a place that can handle the people who will come. Judging from last night’s twitter replies of over thirty people I suspect I will get a good amount of people to show up so I’ll actually have to approach a place and tell them what I’m doing. First stop will be the Blackthorn Tavern @ 9th and Irving because not only do they serve Boddington’s beer, Magner’s Cider, and have a DJ, but on Sunday’s they also have a BBQ going.

I’m thinking sometime during the San Francisco summer which falls right after the rest of the world’s summer meaning September. We should have good weather then and that’s the month of my birthday so what better excuse to stage a party. So I’ll be visiting the venerable Blackthorn Tavern in the next few days to discuss with them having a meet up there and see what they say. I want to see all the local blogger’s, politicians, scoutmobbers, miscreants and hipsters from all over the city to come to this event so make sure to mark your calendars for sometime in September for this get together.

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