5 ms·

If they can kill the competition they can then crank the prices back up and profit of this for years and years. It feels slightly 'evil' but it does make busine

by laksjd 10y ago

If they can kill the competition they can then crank the prices back up and profit of this for years and years. It feels slightly 'evil' but it does make business sense, especially if they know they can outlast their competitors.

Vraxx 10y ago
I'm not so sure I agree. If you crank up the prices, a lot of users who are users because of those prices will just stop being users. You don't exactly have a good way to lock users into it, so this strategy doesn't seem as effective. I imagine that the most locked in user will be one that sold their car to solely ride uber, and they can just go get a car if the the cost analysis tips more in favor of the car. "Worst" case for this user is they need to buy a vehicle, slighly better but still bad case, they pay more, but less than owning a vehicle but still reaped years of low low prices.
- niftich 10y ago
  As you say, there is no effective way for them to lock users in, but they don't need to. They can outspend and outlast Lyft to make them run out of cash and/or devalued to the point where they can acquire them and shut them down. At that point, any (future) new entrant to the market will face a steeper uphill battle than Lyft did. In the process, they may lose some customers to real cars or public transit, but they'll remain the only player in this space.
  - ethanbond 10y ago
    No they won't face a steeper uphill battle. They'll have a much easier time: legislation will be clearer, drivers will already be driving for uber so installing another app is trivial, riders will already be familiar with app-hailed rides and so installing another app is trivial.
    - niftich 10y ago
      These are good points, but at the end of the day, a provider is going to have to pay out to drivers (and collect fares). Uber will be difficult to compete with on price for the exact same reasons that Walmart and Amazon are difficult to undercut consistently.
      - toomuchtodo 10y ago
        I wonder if this holds true once it's determined Uber drivers are employees and not contractors. That bill will be quite the bite.
- hkmurakami 10y ago
  Those users who were only in it for the cheap fares would have left anyways in a world where Lyft survives but fares increase to profitable levels. If Uber succeeds in killing Lyft, they can dictate pricing more effectively and harvest a surplus from the remaining consumers.
  - ethanbond 10y ago
    Okay and then one of the 13 other startups doing this suddenly become able to undercut Uber because they have VCs who are willing to gouge the actual balance sheet in order to put Uber out of business. Crucially, Uber doesn't own the cars nor the drivers. Anyone willing to throw more cash to drivers and take less cash from riders (with the infusion of VC funding) can instantly steal both the supply and the demand from Uber.
    - foobarqux 10y ago
      Why would Uber let a competitor undercut them?
      - ethanbond 10y ago
        Because they have a finite pile of VC cash to burn through.
        foobarqux 10y ago
        But one larger than the new entrant.
twblalock 10y ago
> If they can kill the competition they can then crank the prices back up and profit of this for years and years. It feels slightly 'evil' but it does make business sense, especially if they know they can outlast their competitors. They can do that, if they want anti-trust problems. I bet Uber wants Lyft to survive so they can have a substantially similar competitor to point to when the government's lawyers come knocking.
lsc 10y ago
I don't know. Right now? It costs me ten bucks a day to uber pool from my house in Santa Clara to my gig in mountain view and back. At those rates, I am totally paying and reading. But if that were twenty or thirty a day? Maybe not, or at least it would not be an every day thing. The problem for uber is that I am paying the majority of the cost of owning a car, the parking space, either way, so switching back to driving myself has a low cost. Housing situations I want that don't come with "free" parking are few and far between in my area. Now if uber would bully the city into letting someone build a parking free tower of studio condos? Yeah o.k. Maybe they could exploit the lack of competition to get me to pay a lot more for transport, but as it is, they need to keep the price below what I would pay to read for twenty minutes rather than drive, and I am not sure that would add up to a market clearing wage without some vc largess.
- Paul-ish 10y ago
  > Now if uber would bully the city into letting someone build a parking free tower of studio condos? Yeah o.k. Maybe they could exploit the lack of competition to get me to pay a lot more for transport. If Uber gets big, expect this to happen in addition to blocking the construction of effective bike lanes.
serge2k 10y ago
Well they are built off ignoring regulation, so I guess they just figure they will get away with ignoring laws against monopolies.

by laksjd 10y ago

Vraxx 10y ago

I'm not so sure I agree. If you crank up the prices, a lot of users who are users because of those prices will just stop being users. You don't exactly have a good way to lock users into it, so this strategy doesn't seem as effective. I imagine that the most locked in user will be one that sold their car to solely ride uber, and they can just go get a car if the the cost analysis tips more in favor of the car. "Worst" case for this user is they need to buy a vehicle, slighly better but still bad case, they pay more, but less than owning a vehicle but still reaped years of low low prices.

niftich 10y ago
As you say, there is no effective way for them to lock users in, but they don't need to. They can outspend and outlast Lyft to make them run out of cash and/or devalued to the point where they can acquire them and shut them down. At that point, any (future) new entrant to the market will face a steeper uphill battle than Lyft did. In the process, they may lose some customers to real cars or public transit, but they'll remain the only player in this space.
- ethanbond 10y ago
  No they won't face a steeper uphill battle. They'll have a much easier time: legislation will be clearer, drivers will already be driving for uber so installing another app is trivial, riders will already be familiar with app-hailed rides and so installing another app is trivial.
  - niftich 10y ago
    These are good points, but at the end of the day, a provider is going to have to pay out to drivers (and collect fares). Uber will be difficult to compete with on price for the exact same reasons that Walmart and Amazon are difficult to undercut consistently.
    - toomuchtodo 10y ago
      I wonder if this holds true once it's determined Uber drivers are employees and not contractors. That bill will be quite the bite.
hkmurakami 10y ago
Those users who were only in it for the cheap fares would have left anyways in a world where Lyft survives but fares increase to profitable levels. If Uber succeeds in killing Lyft, they can dictate pricing more effectively and harvest a surplus from the remaining consumers.
- ethanbond 10y ago
  Okay and then one of the 13 other startups doing this suddenly become able to undercut Uber because they have VCs who are willing to gouge the actual balance sheet in order to put Uber out of business. Crucially, Uber doesn't own the cars nor the drivers. Anyone willing to throw more cash to drivers and take less cash from riders (with the infusion of VC funding) can instantly steal both the supply and the demand from Uber.
  - foobarqux 10y ago
    Why would Uber let a competitor undercut them?
    - ethanbond 10y ago
      Because they have a finite pile of VC cash to burn through.
      - foobarqux 10y ago
        But one larger than the new entrant.

twblalock 10y ago

> If they can kill the competition they can then crank the prices back up and profit of this for years and years. It feels slightly 'evil' but it does make business sense, especially if they know they can outlast their competitors. They can do that, if they want anti-trust problems. I bet Uber wants Lyft to survive so they can have a substantially similar competitor to point to when the government's lawyers come knocking.

lsc 10y ago

I don't know. Right now? It costs me ten bucks a day to uber pool from my house in Santa Clara to my gig in mountain view and back. At those rates, I am totally paying and reading. But if that were twenty or thirty a day? Maybe not, or at least it would not be an every day thing. The problem for uber is that I am paying the majority of the cost of owning a car, the parking space, either way, so switching back to driving myself has a low cost. Housing situations I want that don't come with "free" parking are few and far between in my area. Now if uber would bully the city into letting someone build a parking free tower of studio condos? Yeah o.k. Maybe they could exploit the lack of competition to get me to pay a lot more for transport, but as it is, they need to keep the price below what I would pay to read for twenty minutes rather than drive, and I am not sure that would add up to a market clearing wage without some vc largess.

Paul-ish 10y ago
> Now if uber would bully the city into letting someone build a parking free tower of studio condos? Yeah o.k. Maybe they could exploit the lack of competition to get me to pay a lot more for transport. If Uber gets big, expect this to happen in addition to blocking the construction of effective bike lanes.

serge2k 10y ago

Well they are built off ignoring regulation, so I guess they just figure they will get away with ignoring laws against monopolies.