3 ms·

I think you're significantly downplaying the network effects inherent in Uber's model. Yes, those network effects might be localized (each city is its own netwo

I think you're significantly downplaying the network effects inherent in Uber's model. Yes, those network effects might be localized (each city is its own network), but they're still incredibly strong. Drivers want to be where the riders are and riders want to be where the drivers and other riders are. (As a rider, I want there to be a healthy rider pool so I can do sharing.) Additionally, Uber doesn't have to jack up prices (with "monopoly pricing") to earn a healthy profit. In its mature markets, it's already quite profitable. Given that, where do you think there is an opening? If it's so easy to compete with Uber on a local level, why isn't Lyft beating it in any single market (despite $1b raised)?

danieltillett 11y ago
>Given that, where do you think there is an opening? If it's so easy to compete with Uber on a micro level, why isn't Lyft beating it in any single market (despite $1b raised)? The market is going through a lot of innovation right now and what the end result will be is not known. I just can’t see how even if Uber wins that they have a way of preventing competition eroding their margins. All the regulation in the taxi industry was driven by the players wanting to control the cut-throat competition that existed before regulation. Competition is great for consumers, but not so good for the owners of taxis.
- morgante 11y ago
  > All the regulation in the taxi industry was driven by the players wanting to control the cut-throat competition that existed before regulation. The difference is that traditional taxis had no monopoly power. They were (and are) undifferentiated commodities—I don't even have any idea who owns a cab I'm in. Uber's network is a substantial moat which protects it from undifferentiated price competition. Again, how do you propose that a competitor would build a viably competitive network in an Uber city?
  - danieltillett 11y ago
    >Again, how do you propose that a competitor would build a viably competitive network in an Uber city? I would pick mid-size markets and optimise for unit costs. I would settle on a single fuel efficient car model (or two) and then work on making my capital and servicing costs as low as possible. I would use trained and experienced employees and implement tracking technology to ensure that the drivers are polite, prompt, efficiently located, and don’t drive the vehicles like taxi drivers do (helping keep wear costs down). I would then bombard the local media market to achieve name recognition and app take up and then run a price war to gain market domination. Since I had optimised for unit cost I should be able to defend this domination against new entrants as long as I kept my pricing at just above my costs. I would make little profit, but my market would be defendable. Rinse and repeat in each new markets. I don’t think such a business is worth the effort, but all it take is one person who does.
    - morgante 11y ago
      I don't think that's a viable strategy. If it were, Lyft would be successfully deploying it. Namely, I see 3 primary flaws: 1. A marginally lower price is not by itself enough to achieve market penetration. If it takes 5-10 minutes longer to get a ride on your platform (due to fewer drivers), I'm not going to use it—even if you are 20% cheaper (wiping out Uber's entire margin). 2. You're ignoring the pooling savings which come from being able to easily coordinate shared rides due to a huge installed rider base. 3. Uber can spend you into the ground. They have a massive war chest and continued huge revenue from their mature markets—enough to undercut you until you run out of oxygen. The biggest flaw of these 3 is that I just don't think price alone is sufficient to overcome network effects. If it were, the $100+ vouchers which I see also-ran competitors giving out would have made a dent in Uber's market share. Competing against Uber in even a single city would require hundreds of millions in capital to basically buy your entire network overnight, and once you succeed in that market you'll enjoy less profitability than Uber does today. There's a reason that crappy marketplaces like Ebay and Craigslist are incredibly sticky—networks are overwhelming. A monopolist doesn't have to make its moat unbreachable, it just needs to be insufficiently profitable to overcome. The only possible risk I see to Uber is from corrupt politicians.

danieltillett 11y ago

>Given that, where do you think there is an opening? If it's so easy to compete with Uber on a micro level, why isn't Lyft beating it in any single market (despite $1b raised)? The market is going through a lot of innovation right now and what the end result will be is not known. I just can’t see how even if Uber wins that they have a way of preventing competition eroding their margins. All the regulation in the taxi industry was driven by the players wanting to control the cut-throat competition that existed before regulation. Competition is great for consumers, but not so good for the owners of taxis.

morgante 11y ago
> All the regulation in the taxi industry was driven by the players wanting to control the cut-throat competition that existed before regulation. The difference is that traditional taxis had no monopoly power. They were (and are) undifferentiated commodities—I don't even have any idea who owns a cab I'm in. Uber's network is a substantial moat which protects it from undifferentiated price competition. Again, how do you propose that a competitor would build a viably competitive network in an Uber city?
- danieltillett 11y ago
  >Again, how do you propose that a competitor would build a viably competitive network in an Uber city? I would pick mid-size markets and optimise for unit costs. I would settle on a single fuel efficient car model (or two) and then work on making my capital and servicing costs as low as possible. I would use trained and experienced employees and implement tracking technology to ensure that the drivers are polite, prompt, efficiently located, and don’t drive the vehicles like taxi drivers do (helping keep wear costs down). I would then bombard the local media market to achieve name recognition and app take up and then run a price war to gain market domination. Since I had optimised for unit cost I should be able to defend this domination against new entrants as long as I kept my pricing at just above my costs. I would make little profit, but my market would be defendable. Rinse and repeat in each new markets. I don’t think such a business is worth the effort, but all it take is one person who does.
  - morgante 11y ago
    I don't think that's a viable strategy. If it were, Lyft would be successfully deploying it. Namely, I see 3 primary flaws: 1. A marginally lower price is not by itself enough to achieve market penetration. If it takes 5-10 minutes longer to get a ride on your platform (due to fewer drivers), I'm not going to use it—even if you are 20% cheaper (wiping out Uber's entire margin). 2. You're ignoring the pooling savings which come from being able to easily coordinate shared rides due to a huge installed rider base. 3. Uber can spend you into the ground. They have a massive war chest and continued huge revenue from their mature markets—enough to undercut you until you run out of oxygen. The biggest flaw of these 3 is that I just don't think price alone is sufficient to overcome network effects. If it were, the $100+ vouchers which I see also-ran competitors giving out would have made a dent in Uber's market share. Competing against Uber in even a single city would require hundreds of millions in capital to basically buy your entire network overnight, and once you succeed in that market you'll enjoy less profitability than Uber does today. There's a reason that crappy marketplaces like Ebay and Craigslist are incredibly sticky—networks are overwhelming. A monopolist doesn't have to make its moat unbreachable, it just needs to be insufficiently profitable to overcome. The only possible risk I see to Uber is from corrupt politicians.