09 February 2015

The Washington Post: “There’s a battle brewing between Uber and Google. Here’s why Google will win”

Uber app on iPhone

Both firms appear to be crossing into each other’s territory. Uber on Monday announced a partnership with Carnegie Mellon that could enable it to get into driverless cars -- a major project in development at Google. And Bloomberg reported that Google is preparing its own ride-hailing service. Both bits of news raised eyebrows in Silicon Valley because Google is a big investor in Uber and one of its top executives sits on the ride-sharing company’s board of directors.

But if the two tech companies are going to go at it in this space, it won’t exactly be a fair fight.

The reason Uber could be expensive is because you’re not just paying for the car — you’re paying for the other dude in the car, Kalanick said at the Code Conference last year. When there’s no other dude in the car, the cost of taking an Uber anywhere becomes cheaper than owning a vehicle.

Andrea Peterson

While the reports have been conflicted, it’s certainly a plausible story. It’s hard to argue against the fact that is in a much better position than Uber in the race to build the self-driving car. They already have the mapping expertise and a working prototype, while Uber has, what? Ambitions and tons of money? ’s recent difficulties with creating their own mapping system have shown that some problems can’t be solved just by throwing money at them.

To me though, these future plans show, above all, a lack of focus and understanding of the task ahead – something I noticed in a recent interview with the CEO as well. Switching from human drivers to autonomous cars will not only require vast amounts of research and investment, but also a dramatic shift in the business model. Currently, Uber operates as a platform, distributing their app to drivers who sign up and charging them a fixed commission per ride – similar in a way to how the Apple Store works by charging developers for each purchase collected through the store. Uber doesn’t own any cars, doesn’t pay insurance or fuel costs, these need to be covered by the drivers. On the other hand, if Uber starts using self-driving cars, the company will have to bear all these costs, along with designing, building (or buying) and certifying the vehicles. That will fundamentally change the cost structure and there’s no guarantee it will make the company more profitable, or fares lower, as the CEO implies.

Also, consider how this message sounds from a driver’s point of view: the company you are partnering with sees you as a liability, and actively seeking to remove you from the value chain. If they’re smart, drivers should start looking for alternatives.

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