4 ms·

The cost of entry into this space is much greater than I think most people realize. It's not "building an app". It's building a balanced, efficient marketplac

by tom-_- 8y ago

The cost of entry into this space is much greater than I think most people realize. It's not "building an app". It's building a balanced, efficient marketplace. This means complex matching, pricing and routing algorithms that have been developed for almost a decade. It's also about working with regulations at the city level and building a reliable labor force of contractors to supply the marketplace in every new city before the launch date. There is so many experiments and tweaks to ensure that both supply and demand side remain properly incentivized, not to mentioned fighting deeply entrenched Taxi companies from city to city, that I'm surprised Uber and Lyft have gone to IPO so quickly, other than for cash raising.

hn_throwaway_99 8y ago
I disagree. http://www.rideaustin.com/ http://www.rideaustin.com/ was launched in Austin a couple years ago when Uber and Lyft were temporarily kicked out of the city. The app had some growing pains but now I use them whenever I can in preference to Uber and Lyft because they pay their drivers more. If Uber and Lyft suddenly went away Ride<CityName> could easily pop up all over. Of course, Uber and Lyft right now ARE so big because of all the advantages you mention, but a lot of that is still due to boatloads of VC money that allow them to operate unprofitably.
- largehotcoffee 8y ago
  A service that exists in one city, (and can't even keep their appstore rating above 4 stars in that city) is not a good comparison.
  - janfoeh 8y ago
    Yes, they are. I don't care whether a ride service is available in one, a dozen or three hundred locations. I care about the best option in my city, and I would bet dollars to donuts that this aligns with the market majority. A thousand local or regional competitors are just as much an existential threat to Uber as one or two big ones.
    - SOLAR_FIELDS 8y ago
      Agree, it’s definitely possible (and rather easy) for regional competitors to enter the market. I also live in Austin and when Uber and Lyft left I switched to Fasten and Ride Austin with absolutely no difference to the end user experience. If someone else came along at a significant discount to Uber and Lyft I would switch in a heartbeat. I often converse with drivers about it and they have the exact same approach. Whoever pays the most for them gets their business, whoever charges the least gets the rider business. Ride sharing is basically a commodity right now and anyone who thinks otherwise and invests accordingly is going to get burned. The only thing that is going to change that IMO is autonomous vehicles.
      - bunderbunder 8y ago
        > Ride sharing is basically a commodity right now and anyone who thinks otherwise and invests accordingly is going to get burned. The only thing that is going to change that IMO is autonomous vehicles. TBH, I think that the autonomous vehicles is just a further illustration of the extent to which it's a commodity. To an approximation, the product is that you got from point A to point B for $dollars in #time. If you can get that sorted out, people will barely even care if the service is provided by JohnnyCab from Total Recall. It's exactly the same economics as govern airlines, which are famously the last place you put your money if you're trying to turn it into more money. There's some room for differentiation based on quality of service, but it's proportional to the product of the percentage of people who aren't spending their own money and the percentage of companies whose operations departments are on the ball.
        SOLAR_FIELDS 8y ago
        You speak truth, but the weird reality that we live in seems to dictate that the first mover advantage in autonomous vehicle world suggests that the people who are able to bring this reality forward will own the space for at least a year or two. It’s an exciting time to be alive and witness this at least.
- freewilly1040 8y ago
  How is that a counterexample when they started when Uber and Lyft couldn't operate? Are there examples of local services that sprouted up and had to compete with Uber and Lyft and got off the ground?
  - AlexandrB 8y ago
    No one can compete with Lyft and Uber because the latter are heavily subsidized - effectively providing $2 of service for $1 of revenue. Once they run out of runway - and the self-driving pipe dream hasn’t yet materialized - we’ll see a real competitive market emerge in the ridesharing industry.
    - RhodesianHunter 8y ago
      Somewhat ironically, one of the few cases where increased competition will not coincide with better prices for the consumer.
  - hn_throwaway_99 8y ago
    You are implying an argument I did not make. I was replying to the statement "The cost of entry into this space is much greater than I think most people realize. It's not "building an app". It's building a balanced, efficient marketplace." My point is that building a balanced, efficient marketplace is actually not that difficult. The fact that Uber and Lyft can kill the competition now by burning through multiple billions in VC funding is irrelevant to that. In the end, I think the ride-sharing business will look a lot like the airlines: lots of people traveling, but not a particularly great business.
    - foobar1962 8y ago
      Most of the "cost of entry" - building the marketplace, approval from government etc - has already been paid by the earlier players.
  - reubenmorais 8y ago
    Yes, Brazil/South America have 99Taxi and Cabify, although most drivers and users have 2 or 3 apps and switch around depending on promotions, price of a specific route, etc.
danvayn 8y ago
The cost of entry might be higher than other spaces but I think automating those aspects will become cheaper and easier to do over time. Actually the cost of entry being high seems like a good reason to go public "so quickly", atleast to me. I don't see any other ride sharing IPOs happening anytime soon and investors are desperate to buy into the concept of a stable active marketplace as a product.
csomar 8y ago
So is the cost of entry for an airline. Yet, it is a very competitive business.
return0 8y ago
similar apps have popped up in many places where uber is not allowed or limited. it doesn't look that hard.
- carb 8y ago
  > "where uber is not allowed or limited" Doesn't that strengthen the argument for the network effect? The only places there have been successful 3rd party launches are in markets without Uber or Lyft, where there is no network effect to compete against.
  - return0 8y ago
    Those markets are also lacking tons of cash to literally buy the market. And those competitors easily develop their own network effects. It doesnt look like there is huge lock in here, of the scale of e.g. facebook. There is a case to be made that uber is replaceable.
thatoneuser 8y ago
It's a big cost if you and I want to get in on it but probably not that great for a tech giant to invest a couple billion and skip the pre sdc years.

by tom-_- 8y ago

hn_throwaway_99 8y ago

I disagree. http://www.rideaustin.com/ http://www.rideaustin.com/ was launched in Austin a couple years ago when Uber and Lyft were temporarily kicked out of the city. The app had some growing pains but now I use them whenever I can in preference to Uber and Lyft because they pay their drivers more. If Uber and Lyft suddenly went away Ride<CityName> could easily pop up all over. Of course, Uber and Lyft right now ARE so big because of all the advantages you mention, but a lot of that is still due to boatloads of VC money that allow them to operate unprofitably.

largehotcoffee 8y ago
A service that exists in one city, (and can't even keep their appstore rating above 4 stars in that city) is not a good comparison.
- janfoeh 8y ago
  Yes, they are. I don't care whether a ride service is available in one, a dozen or three hundred locations. I care about the best option in my city, and I would bet dollars to donuts that this aligns with the market majority. A thousand local or regional competitors are just as much an existential threat to Uber as one or two big ones.
  - SOLAR_FIELDS 8y ago
    Agree, it’s definitely possible (and rather easy) for regional competitors to enter the market. I also live in Austin and when Uber and Lyft left I switched to Fasten and Ride Austin with absolutely no difference to the end user experience. If someone else came along at a significant discount to Uber and Lyft I would switch in a heartbeat. I often converse with drivers about it and they have the exact same approach. Whoever pays the most for them gets their business, whoever charges the least gets the rider business. Ride sharing is basically a commodity right now and anyone who thinks otherwise and invests accordingly is going to get burned. The only thing that is going to change that IMO is autonomous vehicles.
    - bunderbunder 8y ago
      > Ride sharing is basically a commodity right now and anyone who thinks otherwise and invests accordingly is going to get burned. The only thing that is going to change that IMO is autonomous vehicles. TBH, I think that the autonomous vehicles is just a further illustration of the extent to which it's a commodity. To an approximation, the product is that you got from point A to point B for $dollars in #time. If you can get that sorted out, people will barely even care if the service is provided by JohnnyCab from Total Recall. It's exactly the same economics as govern airlines, which are famously the last place you put your money if you're trying to turn it into more money. There's some room for differentiation based on quality of service, but it's proportional to the product of the percentage of people who aren't spending their own money and the percentage of companies whose operations departments are on the ball.
      - SOLAR_FIELDS 8y ago
        You speak truth, but the weird reality that we live in seems to dictate that the first mover advantage in autonomous vehicle world suggests that the people who are able to bring this reality forward will own the space for at least a year or two. It’s an exciting time to be alive and witness this at least.
freewilly1040 8y ago
How is that a counterexample when they started when Uber and Lyft couldn't operate? Are there examples of local services that sprouted up and had to compete with Uber and Lyft and got off the ground?
- AlexandrB 8y ago
  No one can compete with Lyft and Uber because the latter are heavily subsidized - effectively providing $2 of service for $1 of revenue. Once they run out of runway - and the self-driving pipe dream hasn’t yet materialized - we’ll see a real competitive market emerge in the ridesharing industry.
  - RhodesianHunter 8y ago
    Somewhat ironically, one of the few cases where increased competition will not coincide with better prices for the consumer.
- hn_throwaway_99 8y ago
  You are implying an argument I did not make. I was replying to the statement "The cost of entry into this space is much greater than I think most people realize. It's not "building an app". It's building a balanced, efficient marketplace." My point is that building a balanced, efficient marketplace is actually not that difficult. The fact that Uber and Lyft can kill the competition now by burning through multiple billions in VC funding is irrelevant to that. In the end, I think the ride-sharing business will look a lot like the airlines: lots of people traveling, but not a particularly great business.
  - foobar1962 8y ago
    Most of the "cost of entry" - building the marketplace, approval from government etc - has already been paid by the earlier players.
- reubenmorais 8y ago
  Yes, Brazil/South America have 99Taxi and Cabify, although most drivers and users have 2 or 3 apps and switch around depending on promotions, price of a specific route, etc.

danvayn 8y ago

The cost of entry might be higher than other spaces but I think automating those aspects will become cheaper and easier to do over time. Actually the cost of entry being high seems like a good reason to go public "so quickly", atleast to me. I don't see any other ride sharing IPOs happening anytime soon and investors are desperate to buy into the concept of a stable active marketplace as a product.

csomar 8y ago

So is the cost of entry for an airline. Yet, it is a very competitive business.

return0 8y ago

similar apps have popped up in many places where uber is not allowed or limited. it doesn't look that hard.

carb 8y ago
> "where uber is not allowed or limited" Doesn't that strengthen the argument for the network effect? The only places there have been successful 3rd party launches are in markets without Uber or Lyft, where there is no network effect to compete against.
- return0 8y ago
  Those markets are also lacking tons of cash to literally buy the market. And those competitors easily develop their own network effects. It doesnt look like there is huge lock in here, of the scale of e.g. facebook. There is a case to be made that uber is replaceable.

thatoneuser 8y ago

It's a big cost if you and I want to get in on it but probably not that great for a tech giant to invest a couple billion and skip the pre sdc years.