Uber And Google May Collide Over Driverless Taxis

Uber is working on autonomous cars and Google is working on a ridesharing app, but the two products aren’t equally difficult to copy

Uber is on a collision course with Google, one of its largest investors, as both companies are building toward a driverless taxi service in the not too distant future. Uber (which already has a popular ridesharing business) is working with Carnegie Melon to develop autonomous vehicles while Google (which already uses driverless cars in a limited capacity) has developed a tax-calling service for its employees, reports Brad Stone at Bloomberg.

Uber would rather not pay drivers

For Uber, the reason for wanting to get rid of drivers is clear, the company will be able to keep more of its revenue.

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“The Uber experience is expensive because it’s not just the car but the other dude in the car,” said Uber CEO Travis Kalanick last year in a comment that shows what he thinks of Uber drivers. “When there’s no other dude in the car, the cost gets cheaper than owning a vehicle.”

After seeing Uber ramp up prices during the terrorist attack in Sydney in December, hoping those savings actually make it to consumer is optimistic, but it could potentially save the company a great deal of money. It could create even more political resistance, but that’s a separate issue.

Even though Google generates the bulk of its revenue from online advertising, it has experimented very freely in other areas, and has a history of dropping even popular projects if they don’t eventually become profitable (eg Google Reader). It’s possible that Google doesn’t specifically intend to compete with Uber and just wants to see what it can accomplish on its own.

Uber doesn’t have much of a moat

Since both companies appear to want the same thing, an app service that calls driverless taxis, you might wonder if Google would consider buying Uber, but this highlights why many value investors were shocked when Uber managed an $18 billion valuation during a funding round last year. Even if Google and Uber have two halves of a business brilliant plan, Uber has the half that’s easy to replicate. Ultimately, it’s just an app that connects two people and facilitates payment. The network effect gives Uber an edge over other new entrants like Lyft, but Google would be able to advertise its own app pretty easily, pre-installing it on a future Android release isn’t far-fetched.

Uber has proven that the taxi business is prime for disruption, but they haven’t proven that they’ll be able to hang onto the market they created.