Tag Archives: users

Uber might be crashing back to Earth

Posted on by

Last Friday Uber decided to start operating in Portland. I know, it’s a little surprising that Uber or any of the other rideshare Taxi apps aren’t already in the city. Portland had told Uber they could not operate in the city, but Uber decided to thumb their nose at that similarly to what they have done in other cities. Even though Uber was recently valued at $40 Billion they have had some serious issues lately, like rape of a woman in Delhi while illegally operating in the city. Furthermore, as I mentioned in my last article, they have smeared women journalists with the data Uber collects.

Portland has decided to sue Uber over their illegal operation within the city. The city is following Nevada in suing the company rather than trying to fine their drivers. Uber has since ceased operations in the state due to an injunction against the company operating in the state. This appears to be the only route that will work effectively as Uber is still operating in Delhi despite the citywide ban of the service. Uber has also been banned in Spain, Thailand, and parts of the Netherlands. I think the biggest blow, however, is the fact that both San Francisco and LA are suing the company for false advertising related to their fees and background check.

These responses should not come as much of a surprise to anyone that has been watching the company over the past few years. The company is part of the Silicon Valley culture of going fast and trying to break things. The problem is that, incumbents are incumbents for a reason and they do have the ear of government. It’s not to say that they should be incumbents or that it makes them something worthy of respect, but you need to understand the cards are stacked against you. In cases where you want to go in and intentionally ruffle feathers, you must have strong safe guards in place to protect your customers and be public about how you protect them. Uber should welcome background check audits, privacy audits, and driver safety audits whenever they go into a new market. These should all be huge features that they brag about and let people under the hood to actually see.

I think it’s time that companies like Uber start treating our data as if it’s Personal Health Information, which is protected by Health Information Portability and Accountability Act (aka that HIPAA agreement you sign at the doctors’ office). The default is to not share personal information about a patient, that if someone is caught looking at the data without just cause, it typically results in a firing and a fine for the organization. Similar action must be taken at Uber to show they are a steward of our data. Now the government won’t be taking that money, but instead they should be donating the funds to a good cause at a similar rate to a HIPAA violation.

In some respect Uber is exhibiting the effects of a company that is growing too large too fast without designing processes to enable their business activities properly. For Uber to be a successful long term company they need to figure out how to both appease city governments through over protecting their users and breaking existing rules. If the company can be trusted then governments will be more willing to accept pushing boundaries.

Facebook, IPO and valuing a company

Posted on by

This week we’ve been hearing about the debacle that was the Facebook IPO.Which has revealed that some of the underwriters for the IPO were doing shady things. Matt Taibbi believes that this indicates that there are essentially two markets. One for the insiders and one for the schumcks, the every day investors.

Why is this important? Well, based on the discussions I’ve read online, there’s a lot of concern of the validity of the whole IPO process, the valuation methods of companies and how investors think of companies. The valuation of Facebook had a great deal of discussion before the final IPO price of $38/share, this was partially driven by two articles that came out. In the first one it was mentioned that GM was pulling it’s account because “Facebook ads don’t work.” The other article of note relates that researchers found that 44% of Facebook users will NEVER click an ad. This research is important because some of the valuation is based on the conversion rates of ad views to ad clicks. On average Facebook was only able to earn around $4.34 per user. The valuation of $100 billion puts the life time earning potential per user at $100 (at 1 billion users). This is pretty low, but at the same time, if only 560 million users ever click ad, that pushes means the people that do click ads need to be earning Facebook roughly $200.

MIT Technology Review discusses how this is an unsustainable growth model for Facebook. Essentially, Facebook will begin to drive down the cost per view for their advertisers to try to increase their total revenue. This falls into the race to the bottom mentality that crushes industries. Advertisers will be able to say to any website, why should we pay you x amount per ad when we only pay Facebook y there is no way that you can get me more views than Facebook. The only way that a site could get more revenue if they can show data for a higher click through and conversion rates than Facebook. That might be tough. The Review article argues that this will eventually kill Facebook and a lot of the ad driven website business models.

The other aspect of the IPO is a difference in the way that business and technology media are reporting on Facebook. Things have shifted from all the non-business related activities to focusing solely on this aspect of Facebook. This will likely shift over time, but I believe that these considerations will be discussed in any article related to Facebook. If Facebook wants to remain a haven for activists it will be difficult if there are potential suits over people being activists. There will be an increase of risk aversion within the “owners” of the company as there will be influence from investors.

Zuckerberg has said that he plans on doing what is best for the long term and try to ignore the demands of investors. He might be able to do that because he still owns 57% of the voting rights for the company. However, it will be difficult for him to avoid the influence of the discourse of media outlets. Even if he gets all his news from his friends on Facebook, there will likely be articles posted that will give him news about the company and things that he probably won’t want to read.

Essentially, discussions will shift from being about the risk of privacy for users to how changes to Facebook will impact investors bottom line. I don’t think this is healthy for businesses, consumers of Facebook or the general public. There are other things companies do that are unrelated to investors that are important for society as a whole. The Facebook coverage really indicates that we don’t look at businesses in a long term sustainable manner. We need to change this if we want to save capitalism.

AT&T deal is most likely dead

Posted on by

We all should be extremely happy that this deal failed. Even those that don’t live in the US. Two major US agencies were investigating the eventual impact of a merger between AT&T and T-Mobile. From a consumer point of view what would have been the impact of the merger?

Well, there could be benefits, for instance T-Mobile users will get access to a much larger network. They will have higher quality signal connection in more cities and in more areas through out the US. T-mobile has one of the smaller network area coverage of the 4 remaining cellphone providers in the US. (Verizon, AT&T, Sprint, T-Mobile). AT&T users may get some relief in large cities like San Francisco and New York. It is likely that the combination of the two companies’ networks will increase the total capacity in a given city.

AT&T and T-Mobile claim that not only will these things be better for the customers of both providers but there will also be an increase in investment in the network. However it really doesn’t seem to be the case. Based on their own documents they show that it would actually reduce the yearly investment in the cell networks for the new network overall, reduce the number of employees and likely increase the prices of cell service.

Why is this expected? Well, if the networks are combined there will likely be a reduced need for RF Engineers. These guys are effectively the “Can you hear me know guy” from Verizon commercials. They both design the interaction between the cell sites and look into where the coverage, how much capacity there is for calls/text/data in a given area and if there will be dead spots within their expected coverage area. If a group of engineers for both T-Mobile can cover all of NYC and there’s a group at AT&T to cover the same area, well some of them will have to go.

What about the investment though? Well, if capacity suddenly increases in areas that are cramped for capacity, then there will be less investment. Additionally, if there is excess capacity in areas that don’t have the growth potential for fully meeting that capacity the new merged company would be stupid not to redeploy those areas that have less capacity. This means that AT&T could potentially go a few years without actually buying new equipment to meet capacity demands.

Why would prices go up? I wrote an article about how monopolies at the Urban Times. Effectively, when there are not pressures driving a company to lower prices to attract more customers prices will rise or stay the same. Which will be significantly higher than the costs of the company. With only two other competitors, which most people assume Verizon would buy Sprint, there is little pressure to innovate and keep prices low. Additional the cost of switching keep prices higher too.

Because of these reasons it’s a very good thing that the US government stepped in to prevent this merger. It also indicates that the government is still willing to step in and act in the best interest of the people. In fact, the collapse of this merger could be a good thing for T-Mobile users as the company will get a settlement of $4 Billion. This should be invested in their network and will increase their ability to compete. Another reason we should be happy for this collapse, is that T-Mobile is a very innovative company in terms of adoption of new types of cell phones. T-Mobile has also had excellent customer service compared to the other cell phone providers.