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Uber's Rise In China May Be Counterfeit

Posted by timothy on from the uber-has-a-reputation-for-gaming-too dept.

retroworks writes: Josh Horwitz' story in Quartz reports both the apparent rapid success of Uber adaptation in China, and a queasy footnote for shareholders applauding the rapid growth. While China is a natural ride-sharing haven, it also has a tradition of gaming the western system. From the story: "Accomplices can sit in their apartments, disable location settings, and specify a pickup not far from the actual location of driver's vehicle, the report said. The driver then accepts the hail, and goes on a trip without a passenger. After the accomplice approves payment, the driver will – hopefully – pay back the fee and share a cut of the bonus. It's not the most clever get-rich scheme on the planet. But for drivers, it's better than waiting for a hail in a parking lot." Uber's spokeswoman told the Quartz writer that the company has an on-the-ground team who investigate into these various type of fraud, then uses "deep analytics, and new tools developed by our Chinese engineers in our dedicated fraud team to combat against such fraud." The Uber spokeswoman declined to elaborate on the nature of these tools.

8 of 86 comments (clear)

  1. Trying to figure out how this works... by TWX · · Score: 5, Insightful

    How is money made, if the fake passenger pays X to Uber, the driver earns X-% from Uber, and the driver pays X-% back to the fake passenger?

    --
    Do not look into laser with remaining eye.
    1. Re:Trying to figure out how this works... by rhazz · · Score: 5, Informative
      You aren't trying very hard then, since TFA clearly states that Uber is adding special bonuses and subsidies to attract drivers. They are weathering smaller profits and some losses to gain market share because there were existing players in the market.

      By one account, Uber was handing drivers 300 yuan (about US$50) for every 30 trips and 400 yuan for every 40.

      Seems like they need to add other metrics into their bonus system, like a minimum fare required to count towards the bonus.

    2. Re:Trying to figure out how this works... by ShanghaiBill · · Score: 4, Interesting

      Okay, but at some point Uber has to make money, and at that point, it is then a net loss for the driver and his co-conspirator.

      At some point Uber has to make money, but that point may be off in the future somewhere. WARNING: I READ TFA. Uber is paying "new driver" bonuses. So the driver signs up for an account, does enough fake rides to earn the bonus, then still has enough to make a profit even after paying both Uber and the accomplice. Then they create another Uber account with another name, and do it again.

    3. Re:Trying to figure out how this works... by Lobachevsky · · Score: 4, Insightful

      I received a $30 credit from Uber when I installed the app. That's free money. However, Uber only lets me spend it on my first Uber ride. So I can't just put that $30 into my bank account. In my case, it was raining one day, and I didn't have an umbrella, so I called an uber and got a short ride home. It came to $8, which used up my $30 credit. I didn't cleverly hatch a scheme with the driver.

      If I were in China, I could say, hey, dude, bill me $30, it's coming off my new user credit anyways. Then give me $10. The driver makes $20 instead of $8, and I make $10 instead of $0. The loser would be Uber. Now, if I were to make a criminal enterprise out of it, I could say, hey, why even get a $8 ride? Let's have NO rides, and just keep billing $30 to get that juicy new user credit! We'll get keyboard farms to keep creating new uber accounts and riding and get that sweet $30 snatch!

      Now, in the U.S., Uber stops me from creating new accounts on my own to take that $30 repeatedly because it requires a credit card. Now, if I were savvy, I'd use a new credit card with a cousin's billing address on a wiped phone and create a new uber account. If I have 12 credit cards and 12 cousins, I could register 12 new accounts. The only overlap would be my name, but Uber has zero way of telling if two John Smiths with different credit card numbers and different billing addresses could possibly be the same person. They rely on the fact that no one cares so much about $30 to bother with wiping their phone, swapping in a new sim card, using a new card and a cousin's address. And, they're right, in the U.S. In China, people will go through a lot more hardship for less. Clickfarms in China pay something like 10 cents per hour.

    4. Re:Trying to figure out how this works... by ShanghaiBill · · Score: 5, Interesting

      Uber is giving out free money to get people to use the service

      I have lived and worked in China. If there is any way to game a market, the Chinese will figure out how to do it. When BAT (British American Tobacco) first entered the Chinese market, they were surprised to see sales higher than expected. Sales continued to grow for several months, and they ramped up production. Then, after six months, sales plummeted to zero, and never recovered. They took huge losses on infrastructure and unsold merchandise.

      It took them a long time to figure out what happened. Their sales were high because their products were being purchased by their competitors, and stored in damp warehouses, where they grew stale and moldy. Then after six months, all the accumulated rotten cigarettes were dumped onto the wholesale market, crashing the price, and destroying BAT's reputation for quality.

  2. Desperate for growth? by gnasher719 · · Score: 4, Insightful

    Do I get this right: Uber is so desperate for growth in China that they pay the driver more money than a genuine customer pays for the drive, and as a result the drivers give fake rides to fake customers, and after returning the ride fee plus some bonus to the fake customer, there is still money left over?

    This reminds of a story from the former German Democratic Republic, where the prices for apples (the fruit, not the fruity computers) were so much subsidised that farmers delivered their apple harvest to the state, then bought up as many apples as they could in the stores at subsidised prices, and sold them again to the state as freshly harvested?

  3. Wow... by fuzzyfuzzyfungus · · Score: 3, Funny

    And here I used to think that Uber was dead-set on being as aggressively disrespectful to local cultural practices as possible in every market except its native valley 'disruption' fetishists. I guess I was wrong, if they have in fact embraced counterfeiting in the Chinese market.

  4. Re:China, the yellow scourge by gnasher719 · · Score: 5, Insightful

    There is an implicit racism in all these stories that hit the media decrying 'Chinese Fraud and Duplicity'.

    That's you looking for racism. If Uber is so desperate for growth that a driver can make money by driving his wife around the block all day, especially if he doesn't actually drive her but has a coffee with her or something that slashdot users wouldn't comprehend, then people will take advantage of that. In every country. And Uber fully deserves it.

    Because in the end these drivers make a few Yuan, while Uber fraudulently makes billions of dollars by pretending to investors that they have genuine growth, when this is only due to losing money on every trip made.