Toyota invests, Uber rethinks surge, the other beasts of Silicon Valley
XII
Strategic investments.
Two more automakers and ride-hailing companies paired off last week: Toyota with Uber, and Volkswagen with Gett. News of the Toyota-Uber deal broke just a few hours after VW announced its $300 million investment into Gett, in what seemed a bit like a deliberate attempt to shove Gett out of the spotlight. Toyota and Uber plan to market various products to drivers (leasing options, in-app support) while also working toward loftier and less-defined goals (“sharing knowledge,” “collaboration in a variety of other areas”). Gett is using the funding to accelerate its expansion in Europe and to further subsidize its market in New York City.
Meanwhile, almost every big car company has a ride-hailing tie up these days:
General Motors-Lyft
BMW-Zendrive, Moovit, Scoop
Fiat Chrysler-Google
Apple-Didi
Volkswagen-Gett
Toyota-Uber
Rethinking surge.
Uber’s infamous surge pricing is getting a makeover. The company is testing a new system in which riders, instead of being shown prominent surge multipliers, see upfront price estimates that factor surge in. The change has already happened for UberPool, Uber’s pseudo-carpooling service, and for other Uber rides in a few cities including Chicago. Drivers still see where and when surge is in effect via geographic heat maps on their app. The change is cosmetic, but also seems long overdue. As many an Uber employee has admitted, everyone hates surge. Customers don’t like being told demand is “off the charts,” that fares have increased to meet demand, or, generally, that they’re going to have to pay more. So why bother when you could just bake all that straight into the price? People aren’t particularly good at math, so if Uber’s UI isn’t screaming “prices are higher,” they might not even notice. Uber gets more money during busy periods as per usual, and at least some customers will be less angry. Win win.
LTV vs. LAC.
Here is a very smart post from Adam Price, CEO of Homer, a food delivery logistics startup, on the threat that workforce churn poses to gig economy companies. For any company, there’s a cost associated with acquiring workers, and when they hire en masse, as many independent-contractor heavy startups do, those costs can quickly add up. What matters when doing out the math is that the labor acquisition cost of each worker (LAC) exceeds the long-term value to the company of that person’s labor (LTV of labor):
The inputs are clear. You have to retain labor, incentivize them to work the most hours possible in a week, and pay off the hiring “debt” as fast as possible. Ideally, you want large, absolute gross profits that would pay off LAC in a small number of tasks that are quick to complete. However, that’s tough in the on-demand space since most of the services are things ranging from short car rides to home cleanings.
Price thinks all of this is an argument for hiring workers as employees (as Homer does), rather than independent contractors. It can be more expensive up front, but also creates a “culture of retention,” which can help to avoid expensive churn.
The beasts of Silicon Valley.
The unicorn is old news. Quartz compiled a more diverse bestiary.
Other stuff.
Uber appeals $11.4 million fine. Uber threatens to leave Chicago. Uber seeks to force arbitration in price-fixing suit against Travis. Zoox raising up to $252 million in funding. Gig economy earnings go largely unreported. Gig economy discourages bad Kickstarter projects. Uber voter registration. Uber’s Drive-By Politics. Uber-for-X is over. Who gets VC funding? (Hint: men.) Brooklyn’s taxi graveyard. IPO blocking rights. The Polish Rider. The Minotaur Doesn’t Scale. “Aside from companies like Uber, what companies in our world are doing bad things?”
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