The Future of Ridesharing Services

There is a nice article from Steve Dent of Engadget from a while about explaining ridesharing services like Lyft, Uber and Sidecar:

It’s hard to see the downside of ridesharing for passengers. The increased supply of cars makes it easier to find a ride, for one thing – even if you prefer taxis. It also avoids the normal calling or wandering around to hail a cab, and gives you a status of your ride from the moment you request it. It’s often cheaper than a cab, and there’s rarely a dispute about unwanted fees or questionable route decisions. And the rating systems help keep drivers (and passengers) honest.

Meanwhile Jeramey Jannene discusses the legalization in Milwaukee:

But the Milwaukee discussion comes in the context of a nationwide push by Uber and Lyft to oppose any local regulations. The firms want to conduct their own background checks to approve drivers, as well as having no licensing permits or costs to their drivers. In effect, they want a completely unregulated market.

Bauman compared this to McDonald’s or Burger King being able to conduct their own health inspections. “That’s just not how protecting the public’s health, safety and well-being works,” he said.

This is where things get tricky. All is well and good right now because these ridesharing services are somewhat niche businesses. The comparison to McDonald’s isn’t that off base really. It sounds a like crazier than it is, but these ridesharing services are relatively new territory. And most people wouldn’t want to get into a cab without knowing that it’s safe.

Many people almost exclusively use Uber (or Lyft) in place of cabs nowadays. The ability to request it with an app, know when it will be there and pay without having to do anything are the selling points. The potential cleanliness (and other minor things) are just bonuses. Most cab companies could have stomped this kindling fire out by just creating better on-demand services before these ridesharing services took off. Instead the situation is a bit more interesting.

But fear not, the race to the bottom is just around the corner. Sidecar’s prices have increased pretty dramatically in the last year, and all the companies likely will have to do things to keep their drivers interested. At some point some company will swoop in offering the cheapest prices, and if things like airlines and mobile applications are any indication, low cost is #1 for most consumers. That is when things will get interesting. Will the existing companies be able to survive?

The motivation for most driver’s is obviously to make money. There are certain situations that will always be “free money”. If a person is headed to the airport to pick up a friend and can take a “fare” of someone headed to the airport, it’s win-win. But a lot of these drivers seem to do this as at least partial income supplementation. If they are going to sit around waiting for fares they have to know that they are coming and will be worth their time financially. If the prices drop to complete, the quality of these drivers/vehicles will drop as well.

That is why big picture, this ridesharing thing is a fad. One that could be killed by Taxi companies investing heavily into an easy system of ordering and paying1. In the meantime, most people will continue to enjoy the convenience.

  1. In Chicago, many cab drivers are still annoyed when a person wants to pay with a credit card []