Can Delivery Services Stay On the Road?- DTNS WEEKLY TECH UPDATE 12/15/2016

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Patrick Beja and I had a conversation Tuesday about on-demand delivery services and why funding is drying up for them. So this week I'll summarize what we talked about and add a little more detail on my analysis about whether you'll be able to continue to have that Indian food you love delivered through an app.  But first here are some big stories from the week, in case you missed it. 

NEWS

Yahoo announced Wednesday that data provided by law enforcement in November indicates a security breach compromised more than one billion accounts in August 2013. Information may have included names, email addresses, telephone numbers, dates of birth, hashed passwords (using the easily crackable MD5 hash) and, in some cases, encrypted or unencrypted security questions and answers. This is separate from the breach disclosed September 22nd. Yahoo is notifying affected users and invalidating security questions. Yahoo is still in the process of being acquired by Verizon. http://arstechnica.com/security/2016/12/yahoo-reveals-1-billion-more-accounts-exposed-and-some-code-may-have-been-stolen/ 

Amazon launched a private U-A-V delivery trial December 7 in the UK-- delivering an Amazon Fire TV and a bag of popcorn. Two shoppers are so far approved to order goods to be delivered by quadcopter-- as long as it's good weather and during daylight. There are plans to eventually expand to all shoppers who live near the Prime Air fulfillment center near Cambridge. The first trial took 13 minutes from order to delivery. Amazon’s goal is to keep the process less than 30 minutes. https://techcrunch.com/2016/12/14/amazons-prime-air-delivery-uk/ 

Apple’s TV app is out for iPhone, iPad and Apple TV Monday as part of iOS 10.2 and tvOS 10.1. The app tracks shows you’re watching and sends you into the right service to watch it. It can send you into the right spot on a partially watched episodes and notify you when a new episode is available. It makes recommendations of what to watch but not based on viewing habits. HBO and Hulu work with the new TV app but Netflix does not. ReCode’s Peter Kafka points out that Netflix does work with the Xfinity X1 box’s similar guide features though. http://www.theverge.com/2016/12/12/13922474/tv-app-ios-tvos-released-apple-ios-10 http://www.recode.net/2016/12/12/13921920/apple-tv-app-netflix-comcast-x1 

Apple started selling its bluetooth headphones Tuesday morning.  The AirPods have no connecting wire and sell for $159. Delivery dates were listed for December 21st but quickly slipped into January. https://techcrunch.com/2016/12/13/airpods/ 

Michigan governor Rick Snyder signed four bills into law Friday creating the first comprehensive regulations for autonomous driving in any US state. Vehicle manufacturers will be allowed to operate on-demand networks of self-driving cars. Operators of such networks must take full liability for accidents in which the vehicles was autonomous and at fault. There is some debate over whether Google would qualify as a vehicle manufacturer. Google says the US National Highway Traffic Safety Administration recognizes it as a manufacturer of record but a Michigan Department of Transportaion spokesperson said it sees Google as a  manufacturer of automated vehicle technology and could become a motor vehicle manufacturer if it met Federal Motor Vehicle Safety Standards. http://www.recode.net/2016/12/9/13890080/michigan-dot-self-driving-cars-laws-automakers 

Alphabet announced Tuesday it will move its autonomous car project from Google X into a new company under Alphabet called Waymo. FiatChrysler has been partnered with the Google X project since May and will continue to partner with Waymo. Waymo CEO John Krafcik said the technology could be used in ridesharing, in transportation, trucking, logistics even personal use vehicles and licensing with automakers, public transport. Krafcik expects the first modified Chrysler Pacifica using Waymo technology to be on the road in the near future. Bloomberg and the Information reported that sources said Alphabet hoped to have a ride sharing service available for passengers by the end of 2017. https://techcrunch.com/2016/12/13/googles-self-driving-car-unit-spins-out-as-waymo/ 

Starting Wednesday,Uber began operating self-driving Volvo XC90s for UberX customers in San Francisco. As in Uber’s more limited trial in Pittsburgh, two Uber employees are on board and riders can choose to decline the autonomous ride if they wish.   The California Department of Motor Veicles sent a letter to Uber Wednesday telling it to stop its illegal autonomous car tests in San Francisco until it receives a permit. The DMV said it will pursue legal action if Uber does not comply. Uber says its cars are compliant because they cannot be driven without a human present. At the same time the San Francisco Examiner reported dashboard camera video of an Uber autonomous car running a red light. Uber said the incident was due to human error and the driver has been suspended. http://www.theverge.com/2016/12/14/13921514/uber-self-driving-car-san-francisco-launch-volvo-xc90  http://www.theverge.com/2016/12/14/13962180/uber-california-self-driving-dmv-permit 

Jon Barlow, a developer advocate for Pebble and now Fitbit posted that the company will keep Pebble software and services running through 2017. That means the Pebble SDK, CloudPebble, Timeline APIs, firmware availability, mobile apps, developer portal, and Pebble appstore will all remain in service. The company will also seek to reduce app dependence on cloud services like authentication, analytics and app locker to ensure that core Pebble functions still work even with cloud services discontinued. Four Discord channels have been set up for Pebble community members interested in keeping the Pebble watch experience going. https://developer.pebble.com/blog/2016/12/14/first-steps-forward-with-fitbit/ 

Twitch opened a new content category today called IRL, which allows streamers to talk about anything they want for as long as they want. The service launched at 2 PM Pacific Thursday. Partners can monetize their content through ads and subscriptions just like other streams. Twitch says it will add live streaming to its mobile app sometime next year. https://techcrunch.com/2016/12/15/twitch-opens-to-vloggers-with-launch-of-irl-mobile-broadcasting-to-come-next-year/ 

In a preview update, Skype Translator now supports audio translation on calls made from Skype to mobile phones and landlines. The preview is available to Windows Insiders on Windows 10. Skype translator currently supports 10 languages with real time translation, including Arabic, Chinese, and Portugese.   http://www.theverge.com/2016/12/12/13918176/skype-real-time-translation-mobile-landlines 

Synaptics announced its FS9100 fingerprint scanner can be embedded under up to a millimeter of glass. That means phone manufacturers could have an all glass front, something that has been rumored for several upcoming models. It also is claimed to work well with wet fingers. Synaptics did not release many details but said it expects the sensor to roll out in Q1 with mass production beginning in Q2. https://techcrunch.com/2016/12/13/synaptics/ 

The Information reports Magic Leap’s augmented reality technology is years away from completion. The Information also alleges that much of the  product demo released last year was misleading. One of the videos was supposedly created by the Weta Workshop visual effects studio. Magic Leap promises to build its AR into everyday glasses but is having trouble making its fiber scanning display work. Magic Leap has raised has raised $1.4 billion in funding at a $4.5 billion valuation. Alibaba, Google and Andreesen Horowitz are among the investors. On Twitter Magic Leap CEO Rony Abovitz said everyone will get to test it when it ships, claimed the company is making mini-production test of its first system,  and told people to stay tuned and believe. http://www.theverge.com/2016/12/8/13894000/magic-leap-ar-microsoft-hololens-way-behind 

In the journal Science, Scientists describe how they have mixed the highly viscoelastic polymers in Silly Putty with graphene to make a composite material that makes an excellent hear monitor. Silly Putty’s rate of flow varies based on force not temperature. That’s why it bounces from a low height but shatters with a sharp blow. That sensitivity combined with graphene’s conductivity makes a very sensitive sensor. A bit on a person’s throat can measure heart rate and blood pressure and it can  detect the footsteps of a small spider. http://www.npr.org/sections/health-shots/2016/12/09/504823222/adding-a-funny-form-of-carbon-to-silly-putty-creates-a-heart-monitor 

The Florida Court of Appeal’s Second District has ruled that police can compel a man to provide his passcode to an iPhone 5 that they have a warrant to search. Courts in Virginia, Michigan, and California have previously ruled that compelling the revelation of a passcode violated protections against self-incrimination. The courts reasoned that  something you know, like a passcode should be treated differently than something you have like a key or fingerprint. The Florida court wrote, “We are not inclined to believe that the Fifth Amendment should provide greater protection to individuals who passcode protect their iPhones with letter and number combinations than to individuals who use their fingerprint.” https://consumerist.com/2016/12/13/court-rules-that-police-can-force-you-to-tell-them-your-phones-passcode/ 

CLOSER LOOK - ON-DEMAND DELIVERY

The spur for our discussion of delivery services on the show was this Reuters article from Paul Lienert, Heather Somerville and Alexandria Sage.

http://www.reuters.com/article/us-delivery-startups-analysis-idUSKBN1420DO 

Venture capitalists are slowing down the funding of delivery services with several winding down because they can't get a new round of funding.

$9 billion was invested into 125 on-demand delivery companies over the past decade, including $2.5 billion this year. But only 600 million has been invested in the second half of this year and most of that in Q3.

WHY SHOULD THIS WORK AT ALL?

Apps were the great hope to improve on delivery. Instead of each person calling and having a phone conversation about their order, Eaters could go into a centralized app, quickly access menus, and order the delivery. The cost went down for the restaurant and the friction went down for the consumer. The app maker just needed to figure out how to make money in the middle.

WHY AREN'T THEY MAKING MONEY?

The problem is that it costs a lot of money in logistics and labour to coordinate delivery. The hope was that this would scale as more people used services and drivers could hit several restaurants on their way to several deliveries making trips more efficient. It doesn't seem to work out that way. Plus driver churn means more time and money spent training new people and putting more emphasis on the costly operations and support people.

And that means costs aren't falling as number of orders rise. And the amount you can charge people for the luxury of home delivery has a low ceiling, so you can't increase consumer prices to make more money that way. 

SO WHAT ABOUT ELIMINATING THE DRIVER?

One immediate thought is that the arrival of autonomous cars could alleviate driver cost. It's a tempting thought, but there are two main problems (aside from many small ones.)

1. Autonomous cars may be tested on roads right now but that's far from being able to unleash them on whole cities to deliver Chicken Tikka and Falafel.

2. Even when that does come nobody has a solid solution for the end points. Someone still has to put the food in the car and the customer has to get it out. If there's no human in the car a  system has to be in place to make sure the right food is available to the right customer. And even then making customers come outside to get the food introduces more friction especially in apartment buildings and dorms which have enough problems with human deliveries.

THE UBER ADVANTAGE

One company that has a leg up on all this is Uber.

Uber has roughly $15 billion in cash on hand. That means it can spend a little more time experimenting. 

It also has an existing system that covers the logistics of transportation that it can piggy-back on.  Not only can drivers easily pick up meals and deliver them but UberEats even has been experimenting with drivers having certain meals in the trunk so they can get them to customers in less than 10 minutes. Sometimes they're even still hot!

And Uber is invested heavily in autonomous cars. Plus Uber owns Otto which is devoted to shipping logistics, mapping and tracking for trucks, which could also be applied to deliveries. Uber is well-positioned to crack those logistical problems both with routing and taking care of the endpoints for autonomous deliveries.

And don't forget Amazon, another company with cash on hand, is approaching the same space from the end of same day sometimes 30 minute deliveries. That includes using UAVs to land your delivery right on your porch.

Meanwhile companies like DoorDash and Deliv continue to scrape together enough funding to keep going until they reach some magical revelation on scale or inject some new technology that gets them up over the hum of profitability.