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This is a good point, but it doesn't change the prognosis. Uber will run out of runway long before that vision can be realized. And even if by some miracle it d

This is a good point, but it doesn't change the prognosis. Uber will run out of runway long before that vision can be realized. And even if by some miracle it doesn't, it will find itself in a low-margin commodity business. Unless it can muscle its way into a monopoly, it can't win. Which explains the company's aggressiveness and anti-competitive nature.

dageshi 10y ago
Amazon is in a low margin commodity business with massive amounts of competition, but they're still massive and becoming even bigger because they do what everyone else can do just that little bit better that there's no real reason to switch away.
- vannevar 10y ago
  Also a good point. Low margin doesn't have to mean unsuccessful. But it's taken 20 years for Amazon to get where it is. Uber's valuation seems pretty premature. Amazon lost money for years because it was building infrastructure. Uber is losing money because it is subsidizing its sales. Amazon may have been low margin, but I don't know that they ever took investor money and gave it directly to customers in the form of price subsidies.
  - rcach001 10y ago
    Great contrast – and you're not really saying that Uber is not building infrastructure but that one is happening faster than the other one: 1) Uber: a) subsidize sales b) build infrastructure 2) Amazon: a) build infrastructure, b) grow sales at a sustainable rate even if it takes 20 years. I think Zappos had the same business model. But we'll see.
    - ghaff 10y ago
      Zappos is an Amazon subsidiary even if it does operate quasi-independently (and quirkily from a management perspective). It looks a lot more like Amazon though with generally far less emphasis on building out infrastructure. Ultimately it's sort of a niche because of the nature of selling shoes online.
      - andrewprock 10y ago
        Zappos is now an Amazon subsidiary. It grew sustainably for a decade before Amazon acquired it.
        ghaff 10y ago
        Yes. In many ways they grew more in the vein of many traditional mail order catalogs than Amazon.
- zelias 10y ago
  Amazon also has crazy AWS profits to subsidize major investments. Uber lacks such a super profitable but tangential revenue stream.
  - wnevets 10y ago
    People seem to underestimate just how much money AWS makes.
    - pdeuchler 10y ago
      AWS makes almost no money compared to their core business, it's around 10%, maybe a little bit more. The profit from AWS, however, is something like 50% of Amazon's total profit. That said, it's not hard to occupy a huge percentage of profits from Amazon since they purposefully run almost every other facet of the business at razor thin margins.
      - wnevets 10y ago
        3.2 billion of revenue in one quarter [1] is is nothing to scoff at. However the more important point is without the profit from AWS, Amazon would still be posting huge deficits [2] and would probably face much higher shareholder pressure to produce. [1] http://venturebeat.com/2016/10/27/aws-reports-3-2-billion-in-revenue-in-q3-2016-up-55-over-last-year/ http://venturebeat.com/2016/10/27/aws-reports-3-2-billion-in... [2] http://www.geekwire.com/2016/amazon-without-aws-online-retailer-posted-big-loss-not-booming-cloud-business/ http://www.geekwire.com/2016/amazon-without-aws-online-retai...
        ben0x539 10y ago
        Isn't that an invalid assumption that Amazon would do nothing else differently if they didn't have AWS?
      - mikeash 10y ago
        I always understood "make money" as referring to profit, not revenue. A business with $1 trillion in revenue and $1 trillion in expenses makes no money.
- discodave 10y ago
  Amazon actually didn't have much competition at a key point in it's growth, i.e. just after the dot com crash. Amazon survived, many did not and Amazon then had a few years to cement their dominance in the online shopping space. Amazon is also very different from Uber in that it a) went public earlier and b) didn't need huge outside cash injections like Uber and c) Wasn't making a huge gross loss on sales like people claim Uber is. I believe Uber has already lost more money than Amazon has in it's entire existence! http://s1.ibtimes.com/sites/www.ibtimes.com/files/styles/embed/public/2013/12/18/amzn-chart_0.jpg http://s1.ibtimes.com/sites/www.ibtimes.com/files/styles/emb...
  - beambot 10y ago
    > Amazon actually didn't have much competition at a key point in it's growth Except for every single brick & mortar store -- which has always been Amazon's biggest "competitor".
    - enraged_camel 10y ago
      Brick and mortar stores were (and still are) extremely weak competition. That's why Amazon utterly crushed many of them and continues to do so. Not just small mom and pops either. Borders, which at one point was one of the largest bookstore chains in the nation, shuttered its doors because it didn't switch to an online model fast enough. Barnes and Noble at some point was in deep trouble as well.
      - beambot 10y ago
        Last numbers I saw had online sales across all categories at less than 10% of total retail sales. Hardly "weak competition." https://ycharts.com/indicators/ecommerce_sales_as_percent_retail_sales https://ycharts.com/indicators/ecommerce_sales_as_percent_re... (Note: that growth is still a good reason to be bullish about Amazon!)
        busterarm 10y ago
        If you look into the indicators that fall into the Retail and Services sales category, there are extremely big ticket items and high-volume items that aren't sold in high volume or at all due to regulation. All auto sales, gas purchases, alcohol & tobacco, heavy industrial equipment (commercial farm equipment, etc) are included in that category. Online sales only being 10% of that still probably looks massively outsized if you're drilling down to B&M clothing & electronics purchases. I haven't made a B&M retail purchase any more times than I can count on one hand since 2004.
- niftich 10y ago
  And now with them having become an online-only warehouse club [1] with Prime, there is even less reason to switch away. [1] https://en.wikipedia.org/wiki/Warehouse_club https://en.wikipedia.org/wiki/Warehouse_club
  - _Codemonkeyism 10y ago
    As a long time Prime user I've recently considered dropping my prime subscription. I need to spend a lot of money (even more than I already do) to make the P&P work and the film offering is getting worse and worse.
- _Codemonkeyism 10y ago
  Since Amazon seems to have shifted to generate profit instead of subsidizing prices, it went downhill (at least in Berlin). Amazon Logistics is a huge pain (several lost packages, Saturday and 8pm delivery to business) and the prices of most goods at Amazon is mediocre. As a very good and Amazon customer for a very long time, I've reached the point to jump to something else should it materialize.
  - rockostrich 10y ago
    While I haven't experienced this sort of thing very often in the US, whenever it does happen Amazon has either sent another package, refunded the cost of the order, and/or offered a free month of Prime. And it usually only takes 5-10 minutes in an online chat with customer service to figure out. There are definitely plenty of meh things about Amazon, but customer service is certainly not one of them.
    - _Codemonkeyism 10y ago
      YMMV, I'm not happy if paying for Prime and 50% of packages get lost, I call, and get them some days later than expected or get them later as expected and payed for next day delivery in the first time.
- _Codemonkeyism 10y ago
  Amazon got kicked by Zalando for Fashion at least in Germany and despite heavy investments and promotions for fashion can't compete with Zalando. If someone starts an electronics site on the same professional, data drive, aggressive level as Zalando, I'm sure Amazon is in trouble here in Germany.
moultano 10y ago
It's a business with natural network effects. The service that has the most cars on the road has the most liquidity to clear the market, and will have the shortest wait times. People pay for rides in both time and money, and you can be "cheaper" by getting a car to show up faster.
- vannevar 10y ago
  The problem is that in this case, Uber doesn't own the car network. It's trivially easy for a driver to shift between networks, or even work for multiple networks simultaneously. Uber not only has to talk a rider into giving them the fare, they also have to talk the driver into taking that fare. There's just nothing special about Uber for either party unless Uber can be the one that performs that matchmaking service at the lowest possible transaction cost. Welcome to Uber's low-margin world.
- erispoe 10y ago
  Network effects don't accumulate to a natural monopoly in this case. Yes you need a fleet large enough to get to a sweet price / waiting time optimum, but each new car in your fleet has a diminishing marginal effect. You could say exactly the same for airlines: there's network effect. Each new plane allows your to fly more rotations, have more frequent lines, open new routes... The reality is that most people take decisions based on price. We know most people are pretty bad at valuing their time, and even so, waiting a minute more for a cheaper service is something people will do for sure. As long as you're below an acceptable waiting time for your car, you can compete on price. I'm curious about how Uber will avoid being a commodity just like airlines are.
  - aetherson 10y ago
    Each new car in your fleet has diminishing marginal effect to a passenger, and has negative effect for the other drivers. And you need to compete for both drivers and passengers. This is why Uber and Lyft end up in driver subsidy cost wars.
    - hedora 10y ago

dageshi 10y ago

Amazon is in a low margin commodity business with massive amounts of competition, but they're still massive and becoming even bigger because they do what everyone else can do just that little bit better that there's no real reason to switch away.

vannevar 10y ago
Also a good point. Low margin doesn't have to mean unsuccessful. But it's taken 20 years for Amazon to get where it is. Uber's valuation seems pretty premature. Amazon lost money for years because it was building infrastructure. Uber is losing money because it is subsidizing its sales. Amazon may have been low margin, but I don't know that they ever took investor money and gave it directly to customers in the form of price subsidies.
- rcach001 10y ago
  Great contrast – and you're not really saying that Uber is not building infrastructure but that one is happening faster than the other one: 1) Uber: a) subsidize sales b) build infrastructure 2) Amazon: a) build infrastructure, b) grow sales at a sustainable rate even if it takes 20 years. I think Zappos had the same business model. But we'll see.
  - ghaff 10y ago
    Zappos is an Amazon subsidiary even if it does operate quasi-independently (and quirkily from a management perspective). It looks a lot more like Amazon though with generally far less emphasis on building out infrastructure. Ultimately it's sort of a niche because of the nature of selling shoes online.
    - andrewprock 10y ago
      Zappos is now an Amazon subsidiary. It grew sustainably for a decade before Amazon acquired it.
      - ghaff 10y ago
        Yes. In many ways they grew more in the vein of many traditional mail order catalogs than Amazon.
zelias 10y ago
Amazon also has crazy AWS profits to subsidize major investments. Uber lacks such a super profitable but tangential revenue stream.
- wnevets 10y ago
  People seem to underestimate just how much money AWS makes.
  - pdeuchler 10y ago
    AWS makes almost no money compared to their core business, it's around 10%, maybe a little bit more. The profit from AWS, however, is something like 50% of Amazon's total profit. That said, it's not hard to occupy a huge percentage of profits from Amazon since they purposefully run almost every other facet of the business at razor thin margins.
    - wnevets 10y ago
      3.2 billion of revenue in one quarter [1] is is nothing to scoff at. However the more important point is without the profit from AWS, Amazon would still be posting huge deficits [2] and would probably face much higher shareholder pressure to produce. [1] http://venturebeat.com/2016/10/27/aws-reports-3-2-billion-in-revenue-in-q3-2016-up-55-over-last-year/ http://venturebeat.com/2016/10/27/aws-reports-3-2-billion-in... [2] http://www.geekwire.com/2016/amazon-without-aws-online-retailer-posted-big-loss-not-booming-cloud-business/ http://www.geekwire.com/2016/amazon-without-aws-online-retai...
      - ben0x539 10y ago
        Isn't that an invalid assumption that Amazon would do nothing else differently if they didn't have AWS?
    - mikeash 10y ago
      I always understood "make money" as referring to profit, not revenue. A business with $1 trillion in revenue and $1 trillion in expenses makes no money.
discodave 10y ago
Amazon actually didn't have much competition at a key point in it's growth, i.e. just after the dot com crash. Amazon survived, many did not and Amazon then had a few years to cement their dominance in the online shopping space. Amazon is also very different from Uber in that it a) went public earlier and b) didn't need huge outside cash injections like Uber and c) Wasn't making a huge gross loss on sales like people claim Uber is. I believe Uber has already lost more money than Amazon has in it's entire existence! http://s1.ibtimes.com/sites/www.ibtimes.com/files/styles/embed/public/2013/12/18/amzn-chart_0.jpg http://s1.ibtimes.com/sites/www.ibtimes.com/files/styles/emb...
- beambot 10y ago
  > Amazon actually didn't have much competition at a key point in it's growth Except for every single brick & mortar store -- which has always been Amazon's biggest "competitor".
  - enraged_camel 10y ago
    Brick and mortar stores were (and still are) extremely weak competition. That's why Amazon utterly crushed many of them and continues to do so. Not just small mom and pops either. Borders, which at one point was one of the largest bookstore chains in the nation, shuttered its doors because it didn't switch to an online model fast enough. Barnes and Noble at some point was in deep trouble as well.
    - beambot 10y ago
      Last numbers I saw had online sales across all categories at less than 10% of total retail sales. Hardly "weak competition." https://ycharts.com/indicators/ecommerce_sales_as_percent_retail_sales https://ycharts.com/indicators/ecommerce_sales_as_percent_re... (Note: that growth is still a good reason to be bullish about Amazon!)
      - busterarm 10y ago
        If you look into the indicators that fall into the Retail and Services sales category, there are extremely big ticket items and high-volume items that aren't sold in high volume or at all due to regulation. All auto sales, gas purchases, alcohol & tobacco, heavy industrial equipment (commercial farm equipment, etc) are included in that category. Online sales only being 10% of that still probably looks massively outsized if you're drilling down to B&M clothing & electronics purchases. I haven't made a B&M retail purchase any more times than I can count on one hand since 2004.
niftich 10y ago
And now with them having become an online-only warehouse club [1] with Prime, there is even less reason to switch away. [1] https://en.wikipedia.org/wiki/Warehouse_club https://en.wikipedia.org/wiki/Warehouse_club
- _Codemonkeyism 10y ago
  As a long time Prime user I've recently considered dropping my prime subscription. I need to spend a lot of money (even more than I already do) to make the P&P work and the film offering is getting worse and worse.
_Codemonkeyism 10y ago
Since Amazon seems to have shifted to generate profit instead of subsidizing prices, it went downhill (at least in Berlin). Amazon Logistics is a huge pain (several lost packages, Saturday and 8pm delivery to business) and the prices of most goods at Amazon is mediocre. As a very good and Amazon customer for a very long time, I've reached the point to jump to something else should it materialize.
- rockostrich 10y ago
  While I haven't experienced this sort of thing very often in the US, whenever it does happen Amazon has either sent another package, refunded the cost of the order, and/or offered a free month of Prime. And it usually only takes 5-10 minutes in an online chat with customer service to figure out. There are definitely plenty of meh things about Amazon, but customer service is certainly not one of them.
  - _Codemonkeyism 10y ago
    YMMV, I'm not happy if paying for Prime and 50% of packages get lost, I call, and get them some days later than expected or get them later as expected and payed for next day delivery in the first time.
_Codemonkeyism 10y ago
Amazon got kicked by Zalando for Fashion at least in Germany and despite heavy investments and promotions for fashion can't compete with Zalando. If someone starts an electronics site on the same professional, data drive, aggressive level as Zalando, I'm sure Amazon is in trouble here in Germany.

moultano 10y ago

It's a business with natural network effects. The service that has the most cars on the road has the most liquidity to clear the market, and will have the shortest wait times. People pay for rides in both time and money, and you can be "cheaper" by getting a car to show up faster.

vannevar 10y ago
The problem is that in this case, Uber doesn't own the car network. It's trivially easy for a driver to shift between networks, or even work for multiple networks simultaneously. Uber not only has to talk a rider into giving them the fare, they also have to talk the driver into taking that fare. There's just nothing special about Uber for either party unless Uber can be the one that performs that matchmaking service at the lowest possible transaction cost. Welcome to Uber's low-margin world.
erispoe 10y ago
Network effects don't accumulate to a natural monopoly in this case. Yes you need a fleet large enough to get to a sweet price / waiting time optimum, but each new car in your fleet has a diminishing marginal effect. You could say exactly the same for airlines: there's network effect. Each new plane allows your to fly more rotations, have more frequent lines, open new routes... The reality is that most people take decisions based on price. We know most people are pretty bad at valuing their time, and even so, waiting a minute more for a cheaper service is something people will do for sure. As long as you're below an acceptable waiting time for your car, you can compete on price. I'm curious about how Uber will avoid being a commodity just like airlines are.
- aetherson 10y ago
  Each new car in your fleet has diminishing marginal effect to a passenger, and has negative effect for the other drivers. And you need to compete for both drivers and passengers. This is why Uber and Lyft end up in driver subsidy cost wars.
  - hedora 10y ago