Uber’s core Rides business has huge margins and one of the most powerful network effects in business (that’s why you see only 1 or 2 neverchanging players in mature markets).
Source? And what do you mean by margins specifically?
> one of the most powerful network effects in business
Disagree. One result of a very strong network effect is that it means higher switching costs for customers/users.
- Rider switching costs are near zero. For example, it's as simple as downloading a new app. If I switch from Facebook to Path (if it was still around), I have to re-establish all of my connections again, which is a massive amount of friction.
- It has one of the frailest controls on its sourcing. Drivers switching costs are near zero (unless of course the drivers are sucked into preferential leasing by the rideshare company).
Ridesharing will become a race to the bottom. Stronger network effects imply margin expansion (see what Facebook did to its gross margin circa 2013-2017).
the definition of a network effect is that the users themselves make the network more valuable, if the network effect is meaningful they do so in an exponential way and the network is hard to break up.
Uber has virtually no network effects. One driver is just one more driver without any effect on other drivers or users, in contrast to say, user-driven content generation on tiktok or youtube.
In fact, due to the natural constraints on supply in cities if anything there a negative effect to growing the business, which is of course why there has never been a taxi monopoly, to begin with, and transportation is a traditional small business, high competition sector.
No offence and I don't intend to be rude but literally everything in your statement is comedically wrong. They don't make any money, there are no tech margins because drivers, regulation and advertisement cost pile up linearly, and the competition is brutal. How Uber got butchered by Didi in China is only one example of it, but the ride-sharing industry has had many victims already. Just look at bike-sharing in China.
They have a network effect. If a car is not available or I have to wait too long then I will consider some other option. The number of cars available is a function of the number of users.
that's not a network effect, that is just supply. If the gas station runs out of gas you also go to another gas station, that doesn't mean there's a gas network effect.
There would be a network effect if them having more cars would make it much more likely for them to get even more cars, or add value in some other way beyond the fact that they have one additional driver. That is not the case.
For facebook say, it's much easier to get more users because each user themselves increases the value of the business, because the users interact. You don't care if Uber has ten thousand or ten million drivers, it does not improve the service (significantly) apart from increasing supply.
> Uber has virtually no network effects. One driver is just one more driver without any effect on other drivers or users, in contrast to say, user-driven content generation on tiktok or youtube.
How does youtube have a network effect then? Using your language, youtube has a supply of viewers and a supply of creators. More videos on youtube do not beget more videos, and likewise more viewers do not beget more viewers.
In the same way that the userbase is what gives youtube value in the eyes of the creators, the passenger base gives uber value in the eyes of the drivers.
>More videos on youtube do not beget more videos, and likewise, more viewers do not beget more viewers.
Given the virality and the way video creators interact with their audience and other video creators I don't think that statement is true. Youtube is not just a one-sided tv channel, it's also a community-driven social network which makes the network defensible.
If your favourite content creator is on youtube or twitch (or your audience if you are one) is on the same platform there's a pretty bad collective action problem to get you to move to a less popular platform.
On a ridesharing app, there's no social interaction, you don't care who drives you and every driver can easily drive for every competitor.
My favourite content creation platforms all have unique creators that I would miss, so I can't leave. Every ridesharing app I have ever used is utterly interchangeable. Not even the theoretical benefits from scale like say better service where ever noticeable.
There is absolutely a gas network effect, which is why Tesla has spend millions on building out a Supercharger network.
I prefer Lyft, and still take Uber anyway in parts of the country where there aren't enough Lyft drivers. It can make a meaningful difference in wait times. I'm also unlikely to check back later, unless I think of it.
>Any kid can see that Uber is a 2 sided market place with typical market place network effects
Uber is not a two-sided market place at all. Two-sided market places are characterised by increasing gains from size, because it improves the functioning of the marketplace and discovery.
For ride-sharing businesses, this is only true for very small sizes, as they grow the size of the platform doesn't deliver any significant additional returns, whether you wait 2 minutes on uber or 3 minutes on left is largely immaterial. So its an asymptotic marketplace, which is vulnerable to competition.
Even the characterisation of a marketplace is dubious because there's no price discovery between drivers and customers or much other interaction, it's more like a matchmaking site, so there isn't really a lot of unique features to differentiate one from another.
