As self-driving technology is improving, there are so many companies developing self-driving cars like Google, Uber, etc. Is it possible that we won't need any private/paid self-driving cars and the "self-driving taxi" becomes ubiquitous in the city? If we assume that there are such taxis everywhere, would transportation become extremely low cost or free? (The self-driving car company could benefit from broadcasting advertisements for advertising agencies.)
You ask an interesting question. There have been many discussions by industry on this topic. A company called Vugo has their business model based on advertising to passengers. An article about Vugo, "The Quest to Make Ridesharing Free", states:
- Flessner is co-founder and CEO of Minneapolis-based rideshare advertising platform Vugo, which uses its patented TripIntent technology to display targeted advertisements to Uber and Lyft passengers on a tablet attached to the back of the vehicle’s headrests.
- The company’s founders predict that within the next few years, all ridesharing vehicles in the U.S. will be driverless, and in-vehicle advertising tailored to passengers’ destinations and interests will lead to free transportation. “The idea is to put brands in front of passengers who are en route to make purchases,” says Flessner. For example, retailers will sponsor transportation to their stores so they can preview products to customers who are headed their way.
This article "How free self-driving car rides could change everything" makes these comments:
- Car data is so lucrative that Ben Volkow -- CEO of otonomo, an Israeli startup that sells vehicle data -- expects automakers to make more money selling data than vehicles by 2020.
- If the money made off self-driving vehicle data outweighs the costs of offering rides, then it becomes reasonable for a business to offer free rides broadly.
A paper entitled "Leveraging Adverts in the Coming Autonomous Car Eco-system" published by Berkeley, University of California, proposes "a world where rideshares are free, or in some cases, heavily subsidized through the use of advertisements".
Oil prices are not cheap, but online advertisement per impression is relatively cheap. Especially given that there isn't much engagement in a taxi, its hard to imagine that ads alone can fully support a taxi service.
From this source, we find CPM for a youtube video about 0.1$:
But keep in mind this value could be lower since user engagement in a taxi is much lower compared to someone on the internet. With smartphones everywhere, how can you entice someone to watch an ad on a moving taxi?
From this source, we see:
For a 5-mile, 10-minute trip going 25 miles per hour the entire way, uberX would cost the $2.55 base fare plus $3.50 for the 10 minutes plus $10.75 for the mileage, for a total of $16.80. It is not customary to tip the Uber driver.
No matter how you cut it, the margins seems to be quite thin. So free taxis seems unlikely for now unless someone comes up with a different business plan.
They can definitely be made cheaper, using a combination of techniques. But I doubt if they will be free in the near term. Once the passenger is inside a car, they are bound to be in the car for the duration of the travel. Any company who finds an efficient way to sell things or make them their product during this time creates a business opportunity. Some scenarios that companies will employ to reduce cost of travel are:
- Sale of items on board (snacks, soft drinks, liquor etc)
- Usage based discount (The ride is free if you purchase $100 on amazon when you are in the car)
- Discount for services by passenger (Give us feedback every minute of the car operation, we will discount 50% of cost)
Once self driving is popular, there will be a plethora of companies trying to exploit the passenger; the passenger is bound to be inside the car for the duration.