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There is most certainly a network effect. It's similar to eBay: Buyers and sellers can switch to another eBay clone, but they don't because there are no buyers
by MarkMc 10y ago
There is most certainly a network effect. It's similar to eBay: Buyers and sellers can switch to another eBay clone, but they don't because there are no buyers or sellers on the clone.
Similarly, nobody will download another app if it doesn't have any drivers, and drivers will not install another app if there are no riders.
- surfmike 10y agoDoesn't this analogy stop holding with self-driving cars?
- MarkMc 10y agoYes, it probably does - good point! When that happens the Taxi market will probably be analogous to airlines: companies will have huge capital investments but will receive low returns on that investment because the service they are selling is essentially a commodity.
- adventured 10y agoOnly if you assume Uber isn't going to get there first, with their billions in capital and other vast resources. Meanwhile you have to convince a VC firm or similar to give you an extremely large amount of capital, to build out your fleet, enable/create the self-driving car tech, hire the people to make it all work, market to customers / convince them to even try you, all the while Uber is racing forward. Uber's present advantages are providing the springboard to lead in the next evolution of that business. Similar conceptually to what Netflix managed in transitioning from physical to digital. The advantages of your present can provide for your continued dominance in the future if you're willing to eat your own business when necessary. In five to ten years when self-driving cabs are increasingly common, Uber will already have been there the entire time. You still have to steal their customers (a lot of marketing $$$), build out a huge infrastructure, have a large fleet of vehicles, convince someone to give you a lot of money, compete against a super famous brand (that has already achieved Kleenex type status), and be able to survive the blood-letting competition with a very entrenched and very rich company (see Amazon vs Diapers.com).
- adventured 10y agoThat's spot on. The massive moat is that Uber has captured the market, which requires both drivers and customers (not to mention the billions of dollars of global infrastructure & deployment, people talent, accumulated knowledge, brand & user trust, etc). To compete you need a very large amount of capital and nobody is going to give you that money now that there is an Uber. You don't just have to replicate Uber, you have to then steal their drivers & customers, which is drastically more difficult than just replicating Uber (extremely difficult unto itself despite what the MVP crowd pretends). See: try raising large sums of money to go after Google's search business in the last decade.
- ddalex 10y agoThe problem is that Uber doesn't control the platform. It doesn't control the cars that it uses, or the laws, or anything. It has no natural moat - its moat are the money it has. But the moment a car manufacturer that has significant production capacity deploys self-driving cars on it own, with an app to rent-a-ride on its platform, and the caveat that the self-driving tech cannot be used on the Uber service (Tesla, I'm looking at you), Uber is toast.
- chris_va 10y agoI think this analogy breaks down with ridesharing services because there isn't any lock-in, and barrier to entry is low (now that Uber has plowed through the regulations). Many Uber drivers are already logged into Lyft at the same time, despite a disparity in demand.