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The answer to "Why would I take a chance on you?" is simple: "I'm cheaper." Neither Uber's passengers nor their drivers are deeply loyal. They are for the mos

The answer to "Why would I take a chance on you?" is simple: "I'm cheaper." Neither Uber's passengers nor their drivers are deeply loyal. They are for the most part brought to the service by the value prop. Uber is of course an established brand, and that brand has some value, but the value is hardly infinite. A deep pocketed competitor could establish themselves.

nostrademons 12y ago
I assume by "it's cheaper", you mean that an Uber competitor would charge their customers $X, pay out $Y (> $X) to their drivers, and subsidize $Y - $X by pouring in cash from their other products. This sort of cross-subsidy has a poor track record when used against well-capitalized opponents. (In many situations, it's also illegal: see "dumping".) Unless you can complete wipe out the competition and force them out of business, you're pouring money down the drain, and building nothing of value with it. Bing Cashback resulted in most people doing their searching on Google, identifying what they wanted to buy, and then buying it on Bing so that Microsoft would pay them. You get very odd arbitrage situations that basically result in funneling money straight from the corporation that's being idiotic to a savvy consumer. If a company did what you suggest, I would immediately sign up with them, along with my fiancee. We would then use the app every time we took a trip together or picked each other up. Since one of us is the driver and one is the passenger and the driver earns more than the passenger pays, we'd be making money at this company's expense every time we drove somewhere. Now imagine every carpool, group of friends, or just random strangers who setup a business to exploit this arbitrage opportunity doing that.
- aetherson 12y ago
  Yep. And, just to be clear, that's what Uber does. Not in as simple and straightforward a way as you're suggesting, but at least large fractions of the time, it pays its drivers more than its passengers pay it (for example: it's constantly giving me $10 coupons. It has sign-up bonuses and income guarantees for drivers. Etc.) Of course, it's spending investment money, not money from its other non-existent businesses. So if you and your fiancee want to try this business, you can do it right now with Uber. Or Lyft. I suspect you will find that despite the fact that there is theoretically a fair amount of money on the table here, they've made it obnoxious enough to get that you won't bother with it.

nostrademons 12y ago

I assume by "it's cheaper", you mean that an Uber competitor would charge their customers $X, pay out $Y (> $X) to their drivers, and subsidize $Y - $X by pouring in cash from their other products. This sort of cross-subsidy has a poor track record when used against well-capitalized opponents. (In many situations, it's also illegal: see "dumping".) Unless you can complete wipe out the competition and force them out of business, you're pouring money down the drain, and building nothing of value with it. Bing Cashback resulted in most people doing their searching on Google, identifying what they wanted to buy, and then buying it on Bing so that Microsoft would pay them. You get very odd arbitrage situations that basically result in funneling money straight from the corporation that's being idiotic to a savvy consumer. If a company did what you suggest, I would immediately sign up with them, along with my fiancee. We would then use the app every time we took a trip together or picked each other up. Since one of us is the driver and one is the passenger and the driver earns more than the passenger pays, we'd be making money at this company's expense every time we drove somewhere. Now imagine every carpool, group of friends, or just random strangers who setup a business to exploit this arbitrage opportunity doing that.

aetherson 12y ago
Yep. And, just to be clear, that's what Uber does. Not in as simple and straightforward a way as you're suggesting, but at least large fractions of the time, it pays its drivers more than its passengers pay it (for example: it's constantly giving me $10 coupons. It has sign-up bonuses and income guarantees for drivers. Etc.) Of course, it's spending investment money, not money from its other non-existent businesses. So if you and your fiancee want to try this business, you can do it right now with Uber. Or Lyft. I suspect you will find that despite the fact that there is theoretically a fair amount of money on the table here, they've made it obnoxious enough to get that you won't bother with it.