Farewell, Millennial Lifestyle Subsidies-The New York Times

A few years ago, when I was working in Los Angeles, I called Uber across town during rush hours. I knew it was going to be a long trip, so I was prepared to make more than $ 60 or $ 70.

Instead, the app spit out my amazing price, $ 16.

Such experiences were common during the golden age of millennial subsidies. During the period 2012-early 2020, the daily activities of many people in their 20s and 30s in large cities were quiet. Called the time spent. Invested by a Silicon Valley venture capitalist.

Over the years, these grants have allowed us to spend the Balenciaga lifestyle on a Banana Republic budget. Collectively, we took millions of cheap Uber and Lyft rides, traversing ourselves like the bourgeoisie royal family, and splitting bills with investors in those companies. I thrust MoviePass Bankruptcy ClassPass is due to taking a lot of subsidized spin classes with unlimited movie tickets for $ 9.95 per month Forcibly cancel Unlimited plan for $ 99 per month. Simply accepting low-priced gourmet food offers from food delivery startups such as Maple, Sprig, SpoonRocket, and Munchery has filled the graveyard.

Investors in these companies did not try to fund our decadence. They were trying to gain the traction of start-ups, all of which needed to quickly attract customers to establish a dominant market position, overwhelm competitors and justify their soaring reputation. , They flooded these companies with cash, which was often passed on to users in the form of artificially low prices and generous incentives.

Users are now aware for the first time that their luxury habits actually have luxury price tags, due to the disappearance of subsidies and the surge in demand due to the end of the pandemic.

“Today, using Uber from Midtown to JFK cost as much as a flight from JFK to SFO,” said Sunny Madra, vice president of Ford’s venture incubator. TweetedWas attached with a screenshot of a receipt showing that he spent about $ 250 on the ride to the airport.

“There were too many Airbnb chips,” said another Twitter user. Complained“No one can pay $ 300 for a hotel stay with pool, room service, complimentary breakfast and daily cleaning, but keep paying $ 500 for a two-day stay in an apartment. Get a laugh. “

Some of these companies have been tightening their belts for years. However, the pandemic seems to have emptied what was left in the bargain bin. Average ride for Uber and Lyft 40% higher cost According to Rakuten Intelligence, than a year ago Steadily raising fees The past year. According to the company’s financial report, Airbnb rental average daily rates increased 35% in the first quarter of 2021 compared to the same period last year.

Part of what’s happening is that as the demand for these services skyrocketed, companies that once had to compete to win customers are now dealing with excess services. Uber and Lyft are suffering from a shortage of drivers, and Airbnb pricing reflects a surge in demand for summer vacations and a lack of available listings.

In the past, companies may have offered promotions and incentives to prevent customers from being shocked and robbed of their business elsewhere. But now they are shifting one of the subsidies to the donor side — for example, the recent Uber. setup The $ 250 Million “Driver Stimulation” Fund-or abolish them altogether.

I confess that I have been willing to participate in this subsidized economy for many years. (My colleague Kara Swisher is memorable. Called it “Millennials’ Life Support”) I had Mr. Washio deliver the laundry, Mr. Homejoy to clean the house, and Mr. Lux to park my car. Can’t make a profitI bought a used car from a venture capital-backed startup called Beepi. The startup offered a white gloved service, offered a mysteriously low price, and delivered the car wrapped in a giant bow, as seen in TV commercials. (Of course, Beepy Closed in 2017After running out of $ 150 million in venture capital. )

These subsidies do not always have bad consequences for investors. Some venture-backed companies, such as Uber and DoorDash, have fulfilled their promise to get an IPO and eventually recover their money. Other companies have been acquired or have successfully raised prices without scaring customers.

Uber, which raised nearly $ 20 billion in venture capital before listing, may be the most famous example of investor-funded services. During 2015, the company burned $ 1 million annually. weekly According to San Francisco alone with driver and rider incentives Coverage by BuzzFeed News..

But the most obvious example of an unsightly shift to revenue may be the electric scooter business.

Remember the scooterBefore the pandemic, you couldn’t walk on the sidewalks of major American cities without seeing them. One of the reasons they took off immediately was that they were ridiculously cheap. Bird, the largest scooter startup, charged $ 1 for each ride and then 15 cents per minute. For short trips, renting a scooter was often cheaper than a bus.

However, these fares were not close to Bird’s actual fare. The scooters broke frequently and had to be replaced on a regular basis, and the company was scraping money from the door just to keep the service going. As of 2019, Bird lost $ 9.66 for every $ 10 on a ride. Recent investor presentationsThis is a shocking number and a sustained loss that can only occur in Silicon Valley start-ups with very patient investors. (Imagine a deli that costs $ 10 for a sandwich with a material cost of $ 19.66, and how long the deli will stay open.)

The pandemic-related losses, coupled with the pressure to make a profit, forced Bird to sail. Price Raised — Bird’s price is now $ 1 plus 42 cents per minute in some cities — manufacturing more durable scooters and revamping the vehicle management system. In the second half of 2020, the company made a profit of $ 1.43 for every $ 10 ride.

As an urban millennial who enjoys bargains, I could and often lament that these subsidies are gone. And I found even more deals than I did. I’m looking forward to hearing people’s stories. (Ranjan Roy’s essay “DoorDash and Pizza Arbitrage” Realizing that Doordash sells pizzas from a friend’s restaurant for $ 16, paying the restaurant $ 24 per pizza and ordering dozens of pizzas from the restaurant with the $ 8 difference in his pocket. I made it.

But it’s hard to blame these investors for wanting to make a profit for their company. And at a broader level, it’s better to find more efficient use of capital than to give discounts to wealthy urbanites.

Back in 2018, I wrote The whole economy was starting to look like MoviePass. Offering daily movie tickets attractively and very unprofitably for a flat rate of $ 9.95 paved the way for decline. Companies like MoviePass I thought I was trying to go against the law of gravity with a business model that assumed that if you achieved a huge scale, you could switch it on and start making money at some point in the future. (This philosophy, which Amazon invented more or less, is now Are known In the technical world, it is called “blitzkrieg”. )

There is still a lot of irrationality in the market, and some start-ups are still burning huge amounts of money in search of growth. However, as these companies mature, they seem to discover the benefits of financial discipline. Uber lost only $ 108 million in the first quarter of 2021 — believe it or not, a significant improvement over when it lost $ 3 billion in the same quarter last year. Bird’s leading electric scooter competitor Lime posted its first quarterly surplus last year, and Bird recently applied for a $ 2.3 billion valuation through SPAC, which is better in the coming years. Predicting economic effects.

Of course, profits are good for investors.And while it’s painful to pay an unsubsidized price for our luxury, it also has some legitimacy. Hire a private driver to and from Los Angeles during rush hours. should If everyone in the transaction is fairly indemnified, it will cost more than $ 16.Ask someone to clean your house, do your laundry, and deliver your dinner should If exploitation is not included, it will be a luxury. The fact that some high-end services are simply unavailable to the semi-rich people may seem like a worrying development, but it may be a sign of progress.

Farewell, Millennial Lifestyle Subsidies-The New York Times

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