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Uber Scores Wins in the Ridesharing Wars

Scott Lucas | September 22, 2014 | Story Tech World

There are two pieces of news today that don't mean much individually, but when put side-by-side reveal some indications that the last ridesharing company that's going to be left standing might be Uber. It's not going to happen tomorrow, but it's becoming increasingly obvious that competitors like Lyft—to say nothing of traditional taxi cabs—don't stand much of a chance in the current economic environment.

The first clue is in Forbes, which writes that Uber is now taking its largest commission from UberX rides ever. At 25 percent, that's greater than what had been holding around 20 percent of fewer of the total fares for its premium service. The rest of that money goes to drivers, meaning that as Uber increases its cut, drivers see less. Drivers now also have to pay a $10 per week fee to use the iPhone 4S that used to be free and a $100 deposit. What all that means is that a $10 ride that would have netted the driver $9 in the summer now only pays them $6.80.

What gives? Uber can afford to take more money, it seems, because it has too many drivers—and people who want to be drivers. Forbes quotes one of them as saying the system has so many that “it’s like cockroaches in a Tenderloin apartment.” It's all Business School 101 stuff. Establish dominance in a market by charging as little as possible—and then once you've pushed out the competition, start raising revenue.

There's indications that rival company Lyft is feeling the pain. According to the Chronicle, Lyft has just killed its luxury SUV service, Lyft Plus. Back in May, the company had lauched the premium program with 70 of its highest rated drivers. It required them to purchase a $34,000 Ford Explorer to participate. Now, having folded the service thanks to a lack of demand, the company is buying out those drivers—for $10,000. (Drivers can also sell their cars and Lyft will cover the depreciation.) The lack of demand comes as little surprise. A recent report by investment advisory firm FutureAdvisor found that customers were spending more on Uber than Lyft by a ten to one ratio.

Neither of these pieces of news are exactly Waterloo for Lyft—but they're not a skirmish, either. One company has so many drivers they're like cockroaches (Ew.) The other is abandoning an experimental project. That's all good news for Uber.

Does all of this add up to a need to drastically increase regulations on Uber, to try to head off its coming monopoly at the pass? That's what Andrew Leonard has argued at Salon. Or is it too soon to tell, as San Francisco might not be the most straightforward test case? That's what PandoDaily is arguing today. In either case, the answer's going to come sooner, rather than later.

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