Google, Uber, and Lyft: Why Google Must Win - InformationWeek
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2/3/2015
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David Wagner
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Google, Uber, and Lyft: Why Google Must Win

The question isn't whether Google will enter the ride-share economy, but when. There is too much at stake for them not to.

Drones, Phones & More: What Tech Will Last A Century?
Drones, Phones & More: What Tech Will Last A Century?
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Yesterday it was reported that Google was entering the ride-share business and now today there are people doubting those reports. "Are they or aren’t they" isn't the right question. The only question is when. It makes too much sense for Google to enter the ride-share economy as part of a larger transportation strategy for the company, as well as its emphasis on localized services, and perhaps most importantly its efforts in Google retail.

The ride-share economy is fairly small potatoes for Google. The entire annual revenue for Uber is $2 billion per year and Lyft is significantly smaller. That's great, but for Google, with more than $66 billion in annual revenue, to want in on Uber's game, it either needs to see a lot more growth or it would need to devour the whole ride-share pie.

What Google is after is a way to connect its dots for multiple billion-dollar plays.

The first one is obvious. Google's most publicized experiment is the driverless car. Many have speculated that Google would compete with Uber with a driverless car taxi service. This idea has its advantages. Driverless cars never get tired. They work forever, and they can be more efficiently distributed than people who are using their free time to give a customer a lift.

[ Learn all about Ford's big plans for its mobility platform? Read Ford Mobility Plan Searches For Growth Beyond Cars. ]

But there's more, way more. The real money is in trucking (a $600 billion dollar industry in the US alone) and passenger cars ($4 trillion worldwide but that includes sectors that Google isn't planning on competing in) not to mention the courier business (nearly $100 billion). Why would Google mess around with a $500 million business when a chunk of these three giant industries is at stake?

Because it needs a proof of concept. Because the only people who are going to buy driverless cars when they first come out are daredevils and those who can’t drive themselves. Would you spend $30,000 on a driverless car before knowing if it was safe? Would you spend thousands of dollars retrofitting your existing car? Probably not. But would you spend $25 or $50 to sit in a driverless taxi to see what it was like? Not all of you, but many of you would. And eventually, you might find that trusting your life to Google is no different than trusting your life to a stranger with road rage.

(Image Source: Mariordo Wikimedia Commons.)

(Image Source: Mariordo Wikimedia Commons.)

Before consumers respond to the driverless car, they need exposure. Before trucking companies and couriers fill their fleets with autonomous trucks, they need to see a track record of safety. Pilot programs are one thing. Real world experience is another.

A taxi service also fits into Google's local strategy. An oft-overlooked portion of Google is its connection of Maps to local services and advertising. Locating a business on Google via ads or search and then being able to say "we could take you there" or "you can shop there now" brings an added level of use to a service. Once Google cars are ride-sharing you around town (or you own a car yourself), an internal network of business discoveries, ads for sale, and pushing of special offers turns Google Local from a nice service into a cash cow.

Speaking of shopping, the other major aspect of Google getting into ride-sharing is getting a bigger bite of the $4.7 trillion (in the US alone) retail industry. At first, the connection isn't so clear (beyond the local connection). But we all know delivery is becoming a major part of retail as brick-and-mortar stores struggle. Amazon and Google are both flirting with one-hour deliveries of products. Drones are a long shot, but cars, perhaps self-driving ones, are not so far-fetched. Even before driverless cars, a ride-share service seems like a great way to use Google Express drivers' time.

A ride-share service could be used to eliminate "dead runs" of vehicles delivering a product somewhere and not having anything to take back on the return trip. And people-driven cars coming before driverless cars might be a good way to build marketshare before driverless cars appear. At any rate, if Google solves the delivery problem, or helps another company like Amazon solve it, its chunk of the retail industry goes way up. Given Google's advantage in search, it could possibly increase its direct retail presence.

So forget Uber and Lyft. They aren't the targets. The targets for Google are much bigger. But to bag the big targets, the company needs a proving ground. Uber and Lyft just happen to be in the way of a $66 billion juggernaut. If it wants to, Google can win. It will win. The stakes are much bigger than a ride share. And because of that, it is only a matter of time before Google comes into this market.

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David has been writing on business and technology for over 10 years and was most recently Managing Editor at Enterpriseefficiency.com. Before that he was an Assistant Editor at MIT Sloan Management Review, where he covered a wide range of business topics including IT, ... View Full Bio
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SaneIT
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SaneIT,
User Rank: Ninja
2/10/2015 | 8:00:23 AM
Re: Driverless Cars???
While getting their own employees to work might be one benefit and a good test case I think the picture is much broader.  That auto market is so mature it's hard for anyone to break in with any amount of success, I don't think Google wants to compete with the big auto makers for consumer purchased vehicles but they do want to sell those automakers the tools to build self driving cars and get their product into those vehicles any way possible.  A taxi fleet of driverless cars gives them the proving ground for their solution and if it catches on people will want a Google powered car even if GM, Ford, Toyota or Honda are building it.  They are trying to get in front of the market on this one because they see the longer game playing out.  Think of how many elderly people would buy a driverless car or rent a sharing program vehicle to give themselves some freedom after they aren't able to drive.  I don't know the market though but people with DUIs and lost licenses would probably jump at the chance to buy a driverless car if it meant they  could get back behind the wheel in some capacity.  Most of the people that I know who use Uber or Lyft don't use it every day, they use it to avoid trying to find parking in high traffic areas or for safe rides after a night out.  A driverless taxi service that shows up where you want and when you want would be a big deal for people where I live since our taxi service is horrible.
freespiritny25
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freespiritny25,
User Rank: Ninja
2/9/2015 | 12:18:23 PM
Re: Google, Über, and Lyft: Why Google Must Win
A driverless Google car might be safer than riding with some of these reckless cab drivers in NYC. It also helps they the cars are electric, less pollution. I would like to get in the backseat of one of these to see how it runs.
Ashu001
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Ashu001,
User Rank: Ninja
2/9/2015 | 11:30:41 AM
Re: Driverless Cars???
Daniel,

Have to agree wholeheartedly with your perspective here.

However,I also subscribe strongly to David's View as well.

Eventually(unless this ends as another massive failure like Google Glass or Buzz);Google would like to take this higher and broader than most of us can even imagine today.

I am sure you are aware of the Latest Search Advertising trends as well-Google is losing its Leadership in this Space(especially Mobile) to FB and Twitter.

If that happens and they stay out of the game for much longer;eventually they will not have much Cash left to Experiment with.

 
danielcawrey
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danielcawrey,
User Rank: Ninja
2/8/2015 | 1:05:53 PM
Re: Driverless Cars???
I think that this Google news is all about figuring out the logistics for getting its own employees to work.

In the SF Bay Area, the transportation structure is pretty taxed on a weekday. Google has been using buses for sometime to circumvent employee use of the Caltrain, and I think its used of ridesharing technology has a lot to do with making sure its not difficult for employees to get to the Googleplex. 
batye
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batye,
User Rank: Ninja
2/6/2015 | 2:24:33 PM
Re: Driverless Cars???
@Dave I think we are living in the future now... and Google keep buying all the technology they could get they hands on... but time will tell...
batye
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batye,
User Rank: Ninja
2/6/2015 | 2:18:24 PM
Re: Driverless Cars???
@soozyg maybe in 20-25 years from now we gonna see this technology get common for everyday use... but for now...???
batye
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batye,
User Rank: Ninja
2/6/2015 | 2:17:08 PM
Re: Driverless Cars???
@Kelly22 could not agree more, I would not trust this new technology yet
soozyg
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soozyg,
User Rank: Ninja
2/6/2015 | 9:57:03 AM
Re: Driverless Cars???
@Dave, are you going to get in one? Or maybe wait 5 years after that? : )

I would be too nervous not to be in control.

Maybe they'll build tracks where we can practice and test accident avoidance?
Gary_EL
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Gary_EL,
User Rank: Ninja
2/5/2015 | 10:36:22 PM
Re: Driverless Cars???
Well, for starters, who gets sued the first time someone gets hurt or killed in a driverless car? Reams and reams and reams of law will have to be written in all fifty states. There will have to be a massive readjustment of the insurance system, and the pathways through which massive amounts of money flow will need to be altered, and everyone will have his hand out. How will highways and streets have to be modified? How will consortiums between US and foreign tech and auto companies be organized? You're taking human judgements out of the equation, so who programs in the machine judgement? Will a new module have to plugged in when you cross over from California to Nevada?

This isn't the nice, neat, precise, well defined world of tech. This is the much more murky world of the streets, where one and one doesn't always add up to two.
David Wagner
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David Wagner,
User Rank: Strategist
2/5/2015 | 8:50:31 PM
Re: Driverless Cars???
@soozyg- Multiple companies have been road testing driverless cars for years. Both GM and Google say 2020 is the year. Even if they are off by a couple years this is near horizin stuff.
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