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Monday, January 12, 2015

Most Depressing Challenges of Ridesharing

Lyft made ridesharing exciting back in 2013. Designated times, referred to as Power Hours, gave Lyft drivers 100% of all trip earnings. A number of Lyft drivers earned $1500+ per weekend cranking out a 100+ trips between Friday-Sunday.

In 2014, Lyft and Uber battled out to compete for riders using price competition. This strategy adversely impacted driver earnings, especially when gas prices reached record levels.

The most depressing aspect of ridesharing is closing out rides and seeing the nominal value of this trip cost, but later on reviewing a current invoice to see the real value of rides after $1 safe rides fee, airport tolls and commission are deducted.

Imagine completing 27 rides over 14 hours and making $425. However, $27 in safe ride fees, $40 in airport tolls, and another 20%-25% commision to Uber water down ride earnings. Deducting gas cost, wear and tear, snacks and water, and increase in mileage make real earnings rather depressing.

Driving a personal vehicle on the road full-time wipes out any profit. Ridesharing is no fun and games. Unless drivers employ ridesharing to advance their primary jobs through word of mouth and plugging their companies, the real value of this independent contractor driving position is small in stature.

Lyft manages to make ridesharing lucrative. Their "Power Hours" rewarded drivers with 100% of all trip earnings, the real face value of rides taken during these high demand hours. Currently, Lyft reimburses commission based on the number of hours their drivers get on the road. This reimbursement is identified as commission rebates. The incentive to driver is there with Lyft.

Last Spring, Lyft drivers were given 4-months of no commission. Drivers kept all earnings, motivating them to drive more then, since high earnings could be set aside to afford gas, maintenance, car repairs, snacks and water.

At Uber, drivers must complete 60 hours to make $1000+. These earnings don't take into account recurring expenses and wear and tear. UberX drivers struggled to make money on New Year's Eve. What we noticed is that driving in the North Bay delivered massive earnings.

Nonetheless, San Francisco UberX drivers anticipated making good money but saw in decline in rides and earnings. Low surges and downtime impacted these trip earnings. The average UberX driver earned $600 during New Year's week, which is before Uber commission of 20%-25% is deducted.

Last New Year's Eve, high surges earned drivers $600+ on one night rather than an entire week. The word is going around that quite a few UberX drivers voiced their frustration toward low earnings on New Year's Eve. New Year's Eve was an utter disaster. It was not worth driving on this night.

The less drivers earn, the less time they will spend on the road. No money = No gas. No gas = No driving. No driving = No earnings. The most depressing challenge is trying to sustain ridesharing with keep afloat and affording the high cost of giving rides. Physical, mental, and financial issues are inevitably a mainstay to surviving as a driver.

Many uninformed people think completing trips and dealing with riders are easy to do. They don't know that making money with cheap fares complicate earnings, nor do they understand how ridesharing really works to make suggestions. Assuming and doing are two opposing forces, so actually understanding ridesharing services would require these know-it-all people to get on the road and experience this trendy service in real-time.

Cleaning up vomit, calming down drunk people, talking to rigid and dry people, trying to please demanding riders, being polite to rude people, driving on bad roads, and sitting in heavy traffic all take patience and respect. Ridesharing drivers must keep their ratings in mind, but also rate their clients fairly to protect their overall scores. Good riders receive bad ratings, whereas bad riders somehow keep good ratings intact.

Though all these challenges exist, the real problem is making money. Cheaper fares mean that drivers spend more time on the road, spend more on gas, drive more miles, and work longer hours to earn the same money doing far less a year ago. Low prices fail to translate into greater earnings. When available to increase the driving pool, guaranteed earnings are lower than previous offers.

Our best advice is to drive on busy days and at high demand times. Friday evening and Saturday evening are excellent days to take the road. Morning commute and evening commute hours are good times to get rides, reduce downtime and make money. Reducing the cost of anything doesn't always increase earnings. How is charging less going to increase driver earnings?

Any Economic and Statistics student could tell you that reducing prices deferred to drivers will cause them to exhaust resources. No trip within the city, without surge pricing, will make a driver greater than $22. Most Downtown San Francisco rides to the Sunset and Richmond cost less than $20. These were once rides that could earn drivers nearly $30. At one time, the cost of these rides exceeded $30.

Why compete on price? Riders want a great experience, a great adventure. Quality sells. Would you want a mediocre laptop or a top of the line notebook? Live in a dangerous area? Or spend more to increase safety standards? Uber bursted on the scene with a new, trendy ride app service in 2010. People are loyal to Uber, so dropping prices will continue to impact drivers.

Soon enough, drivers won't continue performing ridesharing services under these conditions. Find another angle, but keep prices constant or increase them. Activating surge pricing doesn't increase business. Clients are waiting to take rides. They cancel surged rides to reorder non-surged rides.

The bottom line is hurting for drivers. Many drivers are waiting until the weekend to drive. This decreases their overall weekly earnings, since they can't afford to take the road during the weekdays. Even so, the poor cash flow system limits them. Thursday direct deposits are allocated to pay bills; therefore, any unforeseen repairs could bury drivers and eliminate their earnings.

The last time UberX delivered excellent earnings was before price slashes on September 15, 2014. Taking away the $1 safe ride fee hurt drivers. The more $5 minimum rides completed, the less drivers see in their direct deposit. Locating clients in tough to reach locations within Downtown SF and Broadway and Columbus spots influence earnings. Driving these clients a mile is likely to affect time and earnings. Accepting 10 small trips would make each driver $30-$32 after $10 in safe ride fees and another $8-$10 in commission are deducted. A driver sees $30-$32 out of $50.

It is smarter to service furthermost areas where more longer rides are available. This means less downtime, less safe ride fees, lesser frequency of short rides and greater potential to make earnings. 4 rides given at $16-$18 per trip and completing these in 90 minutes and/or taking one long 1-hour ride and earning $88 can make drivers more than 10 minimum priced rides at $5 per trip that take 3 hours to complete (pickup time and drop-off). It is all about positioning and timing.

Lyft and Sidecar seem to launch better driver incentives than UberX. Prime Time gives the driver greater access to more earnings. Lyft and Sidecar drivers can receive tips via the app. Sidecar drivers have the freedom to adjust ride multipliers to increase fare prices. Lyft has "no commission" times available. Sidecar bonuses their drivers on various weekends. These two ridesharing companies are usually launching new promotion and incentives to motivate drivers.

Uber reduced guaranteed hourly from $45 per hour to $30 an hour. If reducing fares actually increase driver earnings, wouldn't Uber be confident to offer $45 an hour than $30 an hour? There are so many discrepancies that this can all be verified on Uber Weekly Summary to compare earnings, hours online and other statistics. Ridesharing drivers are seeing far less of their earnings than a few years ago. Even a year ago, drivers earned great income. However, high gas prices wiped out most of this profit.

It depends on what outside factors influence trip earnings. Client cancellations, no-shows, and wrong addresses due to pin drops and address mistakes, affect drivers. A fair number of clients have no idea that drivers are only earning money when completing trips. They are not hourly workers that get paid no matter what happens on the road. It is feast or famine on the road.

For the most part, complete rides to make money. In contrast, drive without riders and make no money. Wait for clients who took a taxi without canceling their rideshare. Travel to a pin that is dropped 50 miles away. Wait 30+ minutes for a client to get ready. Deal with clients telling you to speed in the rain and be aggressive at the airport. This is not fun for ridesharing drivers. Money is the most important aspect that is hurting the bottom line.

Waiting to get paid is a major problem. Taxis maintain a competitive advantage in this area. Ridesharing can be rewarding because of its flexibility to go online whenever you want. There are no limits to the hours a driver wants to work. Less or more. It is all up to the driver.

Implement strategy to become successful at ridesharing. If you don't adopt a system, you will lose out. In our opinion, you will be far worse off after deciding to quit ridesharing than before performing these ride services. Drive your business forward. Avoid slow times to protect time and maintain fuel. Driver longer hours on busy days. Eliminate slow days and times. Good luck!