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Shame. The article seems a bit weak - nothing on the actual costs and margins involved. Homejoy is the poster child of why these "middle man for the gig-workin

Shame. The article seems a bit weak - nothing on the actual costs and margins involved. Homejoy is the poster child of why these "middle man for the gig-working class" type businesses are going to struggle (in general) with perhaps the occasional winner takes all. If borrowing money becomes more expensive most of these kind of businesses will die as funding dries up.

rolltiide 7y ago
But if we make more companies at high valuations fast enough, foreign demand for dollars to buy into these companies will force the central bank to keep pushing the yield curve down in the process of creating more dollars to meet demand! I’m being facetious.... or am I
dmix 7y ago
I've never understood how you could create a company that operates on the economies of scale by faking the scale part with VC. That seems like an expensive and high speed runway that has tons of risk for failure. I presume the private equity industry has proven (repeatedly) what you can accomplish with plenty of Wall St capital and confidence alone, regardless of traditional business strategy. Now VCs want to do the same, but almost inverted. The big question is why can't we just transition from actual operational cleaning/maid companies today, combining the old business + technology, until it goes into a 100% technology based market? It seems Uber's business model is that the entire taxi industry missed the boat on using smartphones. Many city's taxi companies already had mostly contractors via 'broker' arrangements where drivers own the cars and the taxi companies do the phones/marketing (which most people don't know). I'm sure many of Homejoy's cleaners were independent or semi-independent already too, where it was a gig economy already, just not an efficient one. So most of the innovation was just the technology part, so why not underpin the new businesses with some actual scale by buying up some traditional market businesses? I understand why old entrenched industries completely fail to adapt, especially those protected by regulatory agencies and city governments. I guess it doesn't make much sense to buy those companies with so much baggage included - or expect the innovation to come from within. So we're only left with the option of x entrenched market + y technology market, until x doesn't exist anymore. Not some transition between x->y.
- Spooky23 7y ago
  The biggest issue is that low margin, capital intensive businesses don’t scale well in terms of valuation. It’s totally doable for a Chinese restaurant or pizza place to have a guy with a car delivering food. It is more difficult for McDonald’s to have 100,000 delivery drivers across its various channels and make money — which is why they didn’t do it. Most of the value of scaling these services is branding. That’s why franchises for the Merry Maids, Firestone Auto Service, or Roto Rooter exist. The rest of these businesses are just obviously dumb ideas burning cash for the off chance that it will work out somehow. Uber/Lyft are the big high risk ones that will either succeed or implode. As both companies race to the bottom, it’s a matter of time before people get killed by incompetent/unlicensed drivers or dangerous vehicles. Then the advantage of a national brand turns to poison.
  - fromthestart 7y ago
    >it’s a matter of time before people get killed by incompetent/unlicensed drivers or dangerous vehicles. Unlikely. We're talking about driving cars over short distances, something the vast majority of people can do (and do anyway) well enough, not brain surgery.
    - Spooky23 7y ago
      As the rates continue to drop, the quality of drivers and vehicles will continue to decline. The average human can handle driving, the problem is that controls don’t really exist to prevent known bad drivers. Even in commercial driving scenarios, the government expends a lot of resources enforcing driver and vehicle safety, and new, shitty operators emerge all of the time. (Google Chinatown buses) As a passenger of an Uber, you have no idea who is actually driving, if they are qualified (ie. licensed, sober, etc) or how safe the car is... and neither does Uber.
      - darkwizard42 7y ago
        This is patently false...the driver meets all the regulation set by cities and states. They also pass background checks and have continuous 6-12 month reruns on all those checks. You similarly have no idea if your taxi driver, bus driver, train operator is sober. Hell, most people recognize their friends or family are not sober and still knowingly get in the vehicle.
sumedh 7y ago
Homejoy was a bit different, once you use Homejoy to get a cleaner/plumber etc and you like him/her, you will just contact that person directly, no need to involve Homejoy again. You dont really etablish a relationship with your food delivery person so you always need a third party like Ubereats.
- n1c 7y ago
  Yeah I always thought they died of disintermediation.
lacker 7y ago
“Struggle in general with an occasional winner takes all” sounds bad. But think about a market like... search engines. They struggle in general; almost all of them from the 90s died. There was just the occasional winner, Google, that took it all. If you think about it that way, a market that can support even a single “winner taking all” is pretty promising and exciting.
- 9nGQluzmnq3M 7y ago
  The market and economics of search engines are wildly different from those of food delivery.
- zepto 7y ago
  It’s extremely problematic that google has no serious competition.

rolltiide 7y ago

But if we make more companies at high valuations fast enough, foreign demand for dollars to buy into these companies will force the central bank to keep pushing the yield curve down in the process of creating more dollars to meet demand! I’m being facetious.... or am I

dmix 7y ago

I've never understood how you could create a company that operates on the economies of scale by faking the scale part with VC. That seems like an expensive and high speed runway that has tons of risk for failure. I presume the private equity industry has proven (repeatedly) what you can accomplish with plenty of Wall St capital and confidence alone, regardless of traditional business strategy. Now VCs want to do the same, but almost inverted. The big question is why can't we just transition from actual operational cleaning/maid companies today, combining the old business + technology, until it goes into a 100% technology based market? It seems Uber's business model is that the entire taxi industry missed the boat on using smartphones. Many city's taxi companies already had mostly contractors via 'broker' arrangements where drivers own the cars and the taxi companies do the phones/marketing (which most people don't know). I'm sure many of Homejoy's cleaners were independent or semi-independent already too, where it was a gig economy already, just not an efficient one. So most of the innovation was just the technology part, so why not underpin the new businesses with some actual scale by buying up some traditional market businesses? I understand why old entrenched industries completely fail to adapt, especially those protected by regulatory agencies and city governments. I guess it doesn't make much sense to buy those companies with so much baggage included - or expect the innovation to come from within. So we're only left with the option of x entrenched market + y technology market, until x doesn't exist anymore. Not some transition between x->y.

Spooky23 7y ago
The biggest issue is that low margin, capital intensive businesses don’t scale well in terms of valuation. It’s totally doable for a Chinese restaurant or pizza place to have a guy with a car delivering food. It is more difficult for McDonald’s to have 100,000 delivery drivers across its various channels and make money — which is why they didn’t do it. Most of the value of scaling these services is branding. That’s why franchises for the Merry Maids, Firestone Auto Service, or Roto Rooter exist. The rest of these businesses are just obviously dumb ideas burning cash for the off chance that it will work out somehow. Uber/Lyft are the big high risk ones that will either succeed or implode. As both companies race to the bottom, it’s a matter of time before people get killed by incompetent/unlicensed drivers or dangerous vehicles. Then the advantage of a national brand turns to poison.
- fromthestart 7y ago
  >it’s a matter of time before people get killed by incompetent/unlicensed drivers or dangerous vehicles. Unlikely. We're talking about driving cars over short distances, something the vast majority of people can do (and do anyway) well enough, not brain surgery.
  - Spooky23 7y ago
    As the rates continue to drop, the quality of drivers and vehicles will continue to decline. The average human can handle driving, the problem is that controls don’t really exist to prevent known bad drivers. Even in commercial driving scenarios, the government expends a lot of resources enforcing driver and vehicle safety, and new, shitty operators emerge all of the time. (Google Chinatown buses) As a passenger of an Uber, you have no idea who is actually driving, if they are qualified (ie. licensed, sober, etc) or how safe the car is... and neither does Uber.
    - darkwizard42 7y ago
      This is patently false...the driver meets all the regulation set by cities and states. They also pass background checks and have continuous 6-12 month reruns on all those checks. You similarly have no idea if your taxi driver, bus driver, train operator is sober. Hell, most people recognize their friends or family are not sober and still knowingly get in the vehicle.

sumedh 7y ago

Homejoy was a bit different, once you use Homejoy to get a cleaner/plumber etc and you like him/her, you will just contact that person directly, no need to involve Homejoy again. You dont really etablish a relationship with your food delivery person so you always need a third party like Ubereats.

n1c 7y ago
Yeah I always thought they died of disintermediation.

lacker 7y ago

“Struggle in general with an occasional winner takes all” sounds bad. But think about a market like... search engines. They struggle in general; almost all of them from the 90s died. There was just the occasional winner, Google, that took it all. If you think about it that way, a market that can support even a single “winner taking all” is pretty promising and exciting.

9nGQluzmnq3M 7y ago
The market and economics of search engines are wildly different from those of food delivery.
zepto 7y ago
It’s extremely problematic that google has no serious competition.