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Uber Just Got Cheaper In The US And Canada And Its Drivers Are Pissed

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Uber just got cheaper in eighty cities in the US and Canada, and Uber drivers are pissed. “We’re reducing prices to heat up demand,” the company wrote in an e-mail to drivers for its Uber X and Uber XL services. Demand, many drivers point out, does not necessarily mean higher earnings for them, and they claim instead they’re subsidizing the new rates with paltry earnings.

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Drivers claim that while Uber continues making the same rate as before the rate cut, their earnings are directly impacted; indeed, in some markets, they will be subsidizing the costs to chauffeur passengers. Since Uber actively prohibits drivers from collecting data in its driver agreement, there is not much insight available publicly into Uber driver data.
driveragreementOne Denver driver, in breach of his Uber contract, supplied me with his pre-rate cut driver data in spreadsheet form. His data demonstrated that, on 75% of rides, his net earnings were less than $5 and 15% of his driver fares net less than $1 after taxes and expenses. Denver is one of the higher paying markets for Uber drivers.

His data demonstrated that, on minimum fare rides, which account for 30% of total driver rides, Uber deducted nearly 50% of the total fare for itself. Before the recent rate cut, and after taxes and expenses, he earned between 55 cents and 90 cents per mile on minimum fares, which comprised 30% of his rides. Coming up with how much a driver earns per mile is difficult because Uber does not calculate miles driven towards a passenger.

Read More: Uber Drivers Don’t Want To Die On Cross-Border Trips Into Mexico

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The 2015 IRS estimate for costs to operate a vehicle is 57.5 cents per mile. Drivers in multiple North American cities reported making less than this amount per mile after the new rate cuts, such as in Detroit where drivers earn 30 cents per mile.

When the tech giant launched its new cost structure, Uber marketed a new “guarantee” to drivers. In order to be eligible for the guarantee, drivers must accept two rides per hour (sometimes demand does not allow for this) and be online during pre-stipulated “peak” hours. Otherwise, the guarantee is voided. I spoke with one former Detroit Uber driver, where rates are among the lowest, who stopped driving after the new rates were announced.

“It’s a joke,” the driver, who wished to stay anonymous, said.

Can’t make any money now, and the guarantees are a joke too.

The driver notes that Uber rates were already less expensive than a taxi’s in his city. “Now this is a minimum wage job at best,” he noted.

Read More: Uber Drivers Are Planning The Biggest Uber Strike In History

YouTube personality Uber Man, whose city earns nearly twice as much as Detroit, released a video in which he quit in protest of the new Uber rates. He calls the rate cuts “drastic and widespread.” He cites that many drivers will now essentially be paying to drive their passengers around, such as in Detroit. Drivers claim that Uber will be making the same exact money as before.

“The ones that are still driving are the ones that have no clue what their actual expenses are,” Colorado Springs Uber driver Karac Kirby said, listing some of the expenses.

“I do need the money, but there is none to be made.”

In Houston, drivers are striking, and claim to have caused a false surge in the area due to too few drivers on the roads.

“When I started in 2014, it was roughly three cents a mile and sixty cents a minute [to drive] and now we’re at 87 cents a mile and 11 cents a minute,” one Houston area driver told a local news stations covering the strike.

In a survey conducted of 215 Uber drivers, 92.1% believe the new rates are “terrible.” 90.6% do not believe they can make a “livable wage” at the new rate. 48% do not know if they will continue driving for Uber, while 40.7% say they will not. The overall sentiments from those who left comments in the survey are disgust, anger and discouragement.

An Uber spokesperson stated to me via e-mail that the company foresaw a slowdown for January based on data from the company’s five-and-a-half years of operation. “Reducing prices for riders can keep drivers busier,” the company wrote in an e-mail to Hacked. The company confirmed they will keep a close eye on the seasonal price cuts to understand the results and will reverse them  “if we don’t see drivers do as well or better.”  

While drivers remember previous rate cuts becoming permanent, the company cites examples in the past where price cuts were temporary, such as in Charlotte where a 40% price cut became a 29% price cut, and “earnings for drivers grew by nearly 20%.” The company also noted that in two cities, including Seattle (where Lyft recently lowered rates but kept driver pay the same), they reversed price cuts because prices were clearly too low “and earnings have remained stable since.”

Uber drivers shared with me stories of past wage cuts which, while marketed as temporary, became permanent.

Featured image from Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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Justin O'Connell is the founder of financial technology focused CryptographicAsset.com. Justin organized the launch of the largest Bitcoin ATM hardware and software provider in the world at the historical Hotel del Coronado in southern California. His works appear in the U.S.'s third largest weekly, the San Diego Reader, VICE and elsewhere.




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4 Comments

4 Comments

  1. Bitcoins and Gravy

    January 15, 2016 at 2:12 am

    Well what is coming is a DECENTRALIZED model that will effectively put Uber and Lyft out of business. It’s going to take a few years, but it’s coming and there’s no stopping it. These new decentralized business models will allow drivers to make 100% of the profits, set rates competitively and have safeguards built in that will NOT allow price fixing, monopolies or anti-trust violations.

    Uber, Lyft, Airbnb, VRBO . . . your days are numbered y’all! So go on and rape, rob and pillage indiscriminately while you can . . . you dirty, greedy bastards!!!

    • Brunoxxx

      January 16, 2016 at 12:49 pm

      Dufus independent single owner taxis have been around for many decades. Your iq seems to be in lock step with the decline in bitcoin cash value and is prone to speculation for upticks.

    • Brunoxxx

      January 16, 2016 at 12:50 pm

      Yeah god and heaven forbid someone smarter than you making a “killer app” and raking in the big bucks you’ll never see.

    • Dimitri Andre

      January 30, 2016 at 7:05 pm

      yea right lol!! combine openbazaar (https://openbazaar.org/) with coinbase.com or uphold.com to take care of volatility and problem solve

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Business

MoneyOnMobile: Aiming Big in South Asia

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Bitcoin and other cryptocurrencies maybe destine to take over the world of payments but that is not stopping other ambitious entrepreneurs.  In the past we have written about QPAGOS the nascent Mexico City based payments company and covered M-Pesa the name for payments in Kenya.

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Now comes MoneyOnMobile (MOMT:OTC) looking to create a payments business in South Asia where 95% of the population has no bank account.  Let’s take a look but before doing so, caveat emptor. MoneyOnMobile is a microcap that went public about a year ago. Its size and limited liquidity will not be suitable for everyone.

Going For The Gold Indian Style

Here is what the company does that makes MoneyOnMobile interesting. MoneyOnMobile is a mobile money service provider allowing Indian consumers, through its  to use mobile phones to pay for goods and services, or transfer funds from one person to another using simple SMS text functionality. Their vision is to connect the cash based Indian society of over 1.3 billion to the digital world.

They have established relationships with 350,000 retailers throughout 700 cities in the country. They serve over 200 million Indian customers, based on unique phone numbers, who have conducted a transaction with MoneyOnMobile.

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In India, only a small portion of the population use bank accounts and credit cards. Consumers typically prepay for these utilities with cash, either directly to utility providers or through distributors. MoneyOnMobile offers electronic wallet services (“M-wallet”), similar to carrying a prepaid debit card, using the consumer’s mobile phone.

MoneyOnMobile is not a rogue company operating outside the system. It holds a license to operate issued by the Reserve Bank of India and maintains custody of customer funds in accordance with India’s regulations. MoneyOnMobile claims it is ranked as one of India’s top mobile money providers based on the number of unregistered users who on their mobile money service.

How They Make Money

MoneyOnMobile charges a small fee for transactions and is developing several add on services.  For example, MoneyOnMobile purchases utility units, such as mobile phone minutes, at wholesale rates and resells these units to distributors.  Additionally, they process utility bill payments made by consumers and supply a range of services that are being tested on retailers intended to become a major player in the electronic payments processing business similar in the US to First Data or Fiserv.

Management Surprises

There is a natural bias when you come upon MoneyOnMobile to expect the founders to be one or more brilliant graduates of India’s Institute of Technology.  Wrong: the company is actually based in Dallas Texas and managed be some pretty savvy American guys.  Here are two key abbreviated bios.

Harold H. Montgomery, Chairman & CEO

Mr. Montgomery, age 57, has served in this position since April 2010.  Mr. Montgomery brings to the Board of Directors extensive experience in the payment processing industry.

Mr. Montgomery has served as an industry expert for the Federal Reserve Bank of Philadelphia Payment Card Center and the U.S. Congress as an expert witness for credit card reform legislation. He is a widely known industry authority, a speaker at regional and national trade shows and has written over 120 articles for Transaction World Magazine. Mr. Montgomery graduated from Stanford University where he received a BA (International Relations)

Will Dawson, Executive Vice President

Mr. Dawson has over 20 years of experience in the technology industry. Prior to MoneyOnMobile, Mr. Dawson was the Chief Operating Officer at a MasterCard and Smart Communication in Asia, the Middle East, Africa, and Latin America.

Brief History But Substantial Progress

The MoneyOnMobile service was launched just a few years ago in April 2011. Like many young companies MoneyOnMobile has yet to earn a profit and is operating with a substantial deficit net worth.  On the other side however, consumers seem to be taking to the service very rapidly and recent moves have strengthen the balance sheet.

The company released nine months results on February 22nd showing a 75% revenue gain to $6 million.  In the analyst conference call that followed, management pointed out how monthly revenues from January to December 2017 increased 210%: pretty impressive.

They also announced several financial moves to boost capital to finance daily operations and build the company for the future.  Among others, management raised $12.6 million in new equity capital, restructured $6.1 million in debt.

A Word About The Stock

MOMT is a microcap stock whose total value is just under $40 million.  The price has spent the last year below $0.75.  It currently trades around $0.50 having been as low as $0.20.  The fun fact is how there is literally no analyst coverage of the company.  So there should be little worry of Wall Street over hyping the MOMT name.

FYI: I bring this company to your attention for its interesting business model.  I do not own the stock and not compensated by them for this article.  Hope you enjoy reading about MOMT.

Featured image courtesy of Shutterstock. 

 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.3 stars on average, based on 23 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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Ethereum

Ethereum: Building A Lead In The Marathon

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A lot of what is written these days on cryptocurrencies fits into one of three categories. The first is a description of the latest price moves up and down.  We all know how much drama there is and that makes good headlines.  

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Let’s call the second category the SegWit syndrome where we receive a description of the latest breakthrough in blockchain technology written from a developer viewpoint: hard to read and nearly impossible to understand.

In the third category is all of the other highly qualified writers and journalists that I have not already insulted.  Apologies to all.

For more than 30 years as a Wall Street analyst, hedge fund manager and Director of Research, my approach is to access things from an analytical perspective.  Technology is constantly changing the world but the things that make for long term business success pretty much stay the same.  That is why our bias tends to favor the crypto giants Bitcoin and Ethereum.

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Focus On Ethereum

By now it is probably no longer necessary to describe Ethereum’s open source blockchain platform that features self executing smart contracts.  Everybody knows that by now, right?

As a business person and investor, I am drawn to the leadership already created by Ethereum founders.  Say what you will about Initial Coin Offerings, but Ethereum accounts for over 80% of that market.  But that is just surface stuff because if ICO were to stop overnight, the demand for Ether would not end.

One of the forces behind this prediction is the Enterprise Ethereum Alliance which is now just over a year old.  Membership totals somewhere near 300 companies from JP Morgan and MicroSoft down to much more modest enterprises.  The mission of EEA is to bring together Fortune 500 companies with blockchain experts.  This is a great selling tool for Ethereum and as the list grows, so does their competitive strength.

Capital And Competition

To be successful, it is critical to always keep an eye out for what is going on around your business.  It is a well turned phrase that if a business doesn’t disrupt itself, someone else will. That takes capital. These days capital is flowing into crypto in many different ways.

The Weird Journey of Algorand

Venture Capital are dying to find a way of tapping into the cryptocurrency wave.  As we pointed out in a recent article, VC’s have been wounded by things like crowdfunding and ICOs and looking for about any action.  That is when I came across MIT’s Algorand blockchain project.  It raised $4 million in seed money from two VC’s.  Now $4 million is chump change but still it made me ask, what were they thinking?

Here is how CoinDesk described the project.  Algorand constitutes a digital currency and transaction platform.  It represents the latest effort to build a wholly new blockchain aimed at tackling some of the perceived governance issues associated with distributed systems.

The Professor Speaks

The head of the Algorand is MIT professor,  Silvio Micali. In addition to spending 30 years in cryptography he is also a Turing Award winner.  So obviously he is no slouch.  But apparently all these years in academia has depleted his appreciation for Econ 101 which states that everyone behaves in a way to optimize profits.  Professor Micali and the Algorand platform appears to be forgetting the value incentives for crypto mining.

At a recent conference Macali explained his attitude and the Algorand approach in this way. “We must use incentives as a last resort.” “ When you put incentives out there, people learn how to use those incentives for making money in ways that are nearly impossible to predict.”  Wow, that sounds a lot like creative capitalism.

Crypto Socialism

Micali believes that miners who have invested lots of dough in expensive equipment are dealing in trivial computations and do not need to be rewarded.  Instead the Algorand platform uses “validators” who in return for doing trivial computations will not have to invest in expensive equipment.  

Coindesk describes Algorand as the latest effort to build a wholly new blockchain system. The best guess on a release date is sometime in the next year. Taking that statement at face value out of respect for the author, at this time,  investors in Ethereum have little to be worried about from competition.  In the meantime Ethereum founder Vitalik Buterin is working on something call a DAICO.  It is intended as an improvement on the current Ethereum ICO process.  As we suggested earlier, when a tech company disrupts itself, it reduces the chances of being overtaken by others.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.3 stars on average, based on 23 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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The Abyss Becomes First Startup to Test “DAICO” Concept

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An ICO by the name of The Abyss is looking to become the first project to test Vitalik Butrin’s “DAICO” concept. The founder of Ethereum outlined the new crowdfunding protocol in a post that appeared on the Ethereum Research Forum in January. If successful, The Abyss’ token raise could have profound implications on the budding world of ICOs.

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The Abyss Token Sale

Next-generation gaming platform The Abyss is developing a token sale based on Butrin’s Decentralized Autonomous Organization Initial Coin Offering, or DAICO for short. The company will launch a month-long token sale on Mar. 7, with early participation giving investors a bonus of up to 25%. A hard cap of $60 million has been placed on the sale, with 1 ABYSS token valued at 24 U.S. cents. Minimum investment in the project is 0.1 ETH.

According to a post that appeared on the project’s Medium channel last month, The Abyss token raise “will represent an advanced and improved ICO mechanism, allowing token holders to control the fund withdrawal limit, also providing an option to vote for refund of the remaining contributed money in case the team fails to implement the project. With all this, The Abyss project is to become the world’s first Token Sale, pioneering and promoting the DAICO concept.”

The Abyss essentially serves as a multi-level referral platform allowing gamers to participate in in-game and social activities. It also allows developers to lower marketing expenses by directly engaging the gaming community.

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As far as we can tell, no other company has adopted DAICO yet. As a member of the Ethereum Enterprise Alliance (EEA), The Abyss could provide a valuable case study into the system’s viability and reception among investors. As it turns out, The Abyss is very well received by the blockchain community, with several third parties giving the company a favorable review.

DAICO Model

At the core of Buterin’s DAICO model is the need to minimize investor risk during an ICO campaign. The solution is to combine the current ICO structure with the DAO, The resulting DAICO system utilizes smart contracts to encode certain rules into the token raise that startups must follow from the very beginning.

For example, DAICO could stipulate that management receive “approval” from investors each time it wants to utilize funds generated from a crowdsale. In this case, the company would “tap” investors for approval, and the investors themselves would decide whether to grant the firm access to the funds.

DAICO systems can also implement KYC/AML standards and structure a campaign more transparently than current methods. Widescale adoption of this system could have a lasting impact on the blockchain economy by weeding out scams and other companies looking to generate easy cash to finance their business operations. Hacked covered the development of DAICO in a Jan. 19 article, which provides greater insight into Buterin’s thought process.

ICOs generated billions of dollars for hundreds of startups last year, but the parade may soon end as regulators begin clamping down on token raises. The U.S. Securities and Exchange Commission (SEC) has taken special interest in ICOs, warning companies that their definition of a “utility token” will come under intense scrutiny by federal regulators.

Although ICOs aren’t illegal in the United States, there’s a good chance they will be categorized as securities. Such a designation would make them bound by federal securities laws, something most ICO projects want to avoid entirely. Against this backdrop, many ICOs are electing to avoid the U.S. market entirely.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 164 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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