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In Search of Uber’s Unicorn

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Re: In Search of Uber’s Unicorn

#31

Post by mchusma »

JumpCrisscross wrote: post #7
jordanpg wrote: post #3

Unless I'm missing something, the claim that becoming a taxi driver can become a well-salaried, middle-class job for a significant number of people is patent nonsense . There is a reason that taxis look the way they do and are driven by the people who currently drive them, and regulations and licensing is only a small part of that. Uber might disrupt the taxi industry, maybe for the better, but once equilibrium is re…

> Given the sheer volume of demand for rides, the relative ease of copying this service, and the number of cars owned by Americans, I don't see how their large revenues can be anything other than temporary. I think the investors are playing the short game. The long game is in capitalizing on (a) network effects and (b) the effects of changing technology on consumer behavior and market structure. Start with network ef…

Driverless cars is exactly the play. Once driverless cars arrive, their margins will jump from 20% to something like 50-80% overnight.

Re: In Search of Uber’s Unicorn

#32

Post by ForHackernews »

potatolicious wrote: post #27
ForHackernews wrote: post #22

Earlier quoted context omitted.

I think you're misunderstanding what "network effects" means. A product or service benefits from the network effect when it becomes more useful the more users it has. For example, a telephone by itself is completely worthless. A telephone when all your friends also have telephones is great. Uber doesn't benefit from this effect in any meaningful way. If my friends all use Uber, that doesn't make Uber inherently more…

You need to look at it the other way - it's really a two-headed network effect: there are two classes of users, drivers and riders. The more drivers they have the more useful it is to riders. There more riders they have the more useful it is to drivers. Whether this is sufficiently far from the original meaning of "network effect" that we need another name for it, maybe. Given how obvious this effect is, is there an…

> Given how obvious this effect is, is there an existing name already for it?

It's a marketplace.

As a seller, and a buyer, you generally benefit from going to a larger marketplace. But that analogy breaks down for ride-sharing because there's nothing preventing drivers from being simultaneously available on multiple ridesharing services, and it's trivially easy to switch between them. So there isn't any true isolation between different services, and it makes more sense to think of them as part of a single, larger ride-sharing marketplace.

Re: In Search of Uber’s Unicorn

#33

Post by xorcist »

pshin45 wrote: post #20

This is not based on any kind of deep analysis whatsoever, but I'm starting to get the same vibe from Uber as I got from Groupon several years ago. Groupon's promise to local business owners was that offering a Groupon deal was an easy way to attract new long-term customers en masse, despite the sizable up-front loss. History showed that that did not happen for many businesses who used Groupon. Similarly, so much of…

> offering a Groupon deal was an easy way to attract new long-term customers en masse

What does that even mean, at scale? If it is a money printing press for everyone involved, you have to postulate either that the entire market grows rapidly (for "local businesses", no matter what they do, in this case) or you've (at best!) created a middleman to tax all transactions in the system.

Re: In Search of Uber’s Unicorn

#34

Post by SilasX »

ForHackernews wrote: post #22
JumpCrisscross wrote: post #7

Earlier quoted context omitted.

> Given the sheer volume of demand for rides, the relative ease of copying this service, and the number of cars owned by Americans, I don't see how their large revenues can be anything other than temporary. I think the investors are playing the short game. The long game is in capitalizing on (a) network effects and (b) the effects of changing technology on consumer behavior and market structure. Start with network ef…

I think you're misunderstanding what "network effects" means. A product or service benefits from the network effect when it becomes more useful the more users it has. For example, a telephone by itself is completely worthless. A telephone when all your friends also have telephones is great. Uber doesn't benefit from this effect in any meaningful way. If my friends all use Uber, that doesn't make Uber inherently more…

>Uber doesn't benefit from this effect in any meaningful way. If my friends all use Uber, that doesn't make Uber inherently more useful to me than Lyft (or a cab). Its utility is totally divorced from the number of other people using it.

True for the general model, but IIRC they're adding (or have added) features that do exploit network effects:

- The fare-splitting feature [1] gets more useful as more of your friends have Uber.

- The carpool service [2] will be more economical the more people you can find on the same route.

[1] http://blog.uber.com/2013/07/15/faresplit/

[2] http://blog.uber.com/uberpool

Re: In Search of Uber’s Unicorn

#35

Post by xorcist »

cissou wrote: post #28
jordanpg wrote: post #12

Earlier quoted context omitted.

But neither network effects nor technology will change overall number of people who need rides (demand) and the fact that driving cars is unskilled labor. If Uber pays more, taxi drivers will make rational decisions and become Uber drivers. Or Lyft drivers. Or whatever other competitor. If Uber has nicer cars or more efficient service, taxi services will adapt or go out of business. The drivers will go elsewhere, not…

That's the amazing thing about Uber: it does increase demand. By making it easier and simpler to ask for a cab, and actually providing an enjoyable experience in a market where expectations are very low, they managed to attract people who didn't really "need a ride" before.

This does come up in every thread that touches Uber, posted from different accounts. But do you have any idea if this is actually the case? It sounds a bit implausible that measurably more people would suddently get a burning desire to call a cab just because the app is so cool. Numbers, or any facts at all, could certainly help make your case.

Re: In Search of Uber’s Unicorn

#36

Post by acchow »

xorcist wrote: post #33
pshin45 wrote: post #20

This is not based on any kind of deep analysis whatsoever, but I'm starting to get the same vibe from Uber as I got from Groupon several years ago. Groupon's promise to local business owners was that offering a Groupon deal was an easy way to attract new long-term customers en masse, despite the sizable up-front loss. History showed that that did not happen for many businesses who used Groupon. Similarly, so much of…

> offering a Groupon deal was an easy way to attract new long-term customers en masse What does that even mean , at scale? If it is a money printing press for everyone involved, you have to postulate either that the entire market grows rapidly (for "local businesses", no matter what they do, in this case) or you've (at best!) created a middleman to tax all transactions in the system.

You bring up a fundamental difference between Groupon and Uber. Car riding services are actually increasing the size of the taxi riding market.

Re: In Search of Uber’s Unicorn

#37

Post by jordanpg »

JumpCrisscross wrote: post #24
jordanpg wrote: post #19

Earlier quoted context omitted.

If Uber significantly affects demand, then we might see seismic shifts in the demographics of drivers. As for the existing drivers, my point is that the effects you're touting are temporary. Taxi companies that provide a lesser service will die off and be replaced by others that follow the example of Uber. The overall economics of the thing will not change unless there is a significant change in demand. I don't think…

> Taxi companies that provide a lesser service will die off and be replaced by others that follow the example of Uber. I don't think Uber in its present form will shift the demand curve dramatically. Driverless cars will. A world with driverless cars could follow two models. Let's call them Apple and IBM. Apple: each household owns a driverless car. Perhaps it can be occasionally rideshared via UberX, Lyft, etc. In t…

You are far more optimistic than me about the future of driverless cars. Given N driverless cars, some fraction p will eventually run over and kill small children. Stand back and watch the hysteria and the end of driverless cars.

Also, before driverless cars become widespread, they will need to be first proven and then regulated. Imagine the fantastic force of the driving lobby that will oppose that from happening: taxi drivers, truck drivers, fleet drivers.

Why do trains and subways still have a human sitting in them?

Re: In Search of Uber’s Unicorn

#38

Post by 2pasc »

pshin45 wrote: post #20

This is not based on any kind of deep analysis whatsoever, but I'm starting to get the same vibe from Uber as I got from Groupon several years ago. Groupon's promise to local business owners was that offering a Groupon deal was an easy way to attract new long-term customers en masse, despite the sizable up-front loss. History showed that that did not happen for many businesses who used Groupon. Similarly, so much of…

Quite honestly - do you believe that making more than $50,000 per year for a HS grad is a bad thing? I am not saying that they should not make more, but for most non college educated individuals - $50,000 is above US average income. Uber may have shady tactics, and might be deceiving drivers - that's true. But the reality is that the opportunities they are giving drivers are not insignificant. Unfortunately - these drivers are paying with their wages the price of a market equilibrium that has not been found yet in terms of finding the right pricing model to match supply and demand. This is the problem that has existed in all major Internet marketplaces where you deal with people's businesses - with eBay, Uber, Amazon, oDesk, etc....

Re: In Search of Uber’s Unicorn

#39

Post by acchow »

ForHackernews wrote: post #22
JumpCrisscross wrote: post #7

Earlier quoted context omitted.

> Given the sheer volume of demand for rides, the relative ease of copying this service, and the number of cars owned by Americans, I don't see how their large revenues can be anything other than temporary. I think the investors are playing the short game. The long game is in capitalizing on (a) network effects and (b) the effects of changing technology on consumer behavior and market structure. Start with network ef…

I think you're misunderstanding what "network effects" means. A product or service benefits from the network effect when it becomes more useful the more users it has. For example, a telephone by itself is completely worthless. A telephone when all your friends also have telephones is great. Uber doesn't benefit from this effect in any meaningful way. If my friends all use Uber, that doesn't make Uber inherently more…

> Uber doesn't benefit from this effect in any meaningful way. If my friends all use Uber, that doesn't make Uber inherently more useful to me than Lyft (or a cab). Its utility is totally divorced from the number of other people using it.

The larger the rider base, the more drivers the service will have. Higher driver density certainly leads to a better product.

Ebay experienced something similar.

Re: In Search of Uber’s Unicorn

#40

Post by krapht »

mchusma wrote: post #31
JumpCrisscross wrote: post #7

Earlier quoted context omitted.

> Given the sheer volume of demand for rides, the relative ease of copying this service, and the number of cars owned by Americans, I don't see how their large revenues can be anything other than temporary. I think the investors are playing the short game. The long game is in capitalizing on (a) network effects and (b) the effects of changing technology on consumer behavior and market structure. Start with network ef…

Driverless cars is exactly the play. Once driverless cars arrive, their margins will jump from 20% to something like 50-80% overnight.

I sincerely doubt that. I believe once driverless cars come around, there will be nothing to differentiate Uber from any other app from an established fleet management company like Avis, Hertz, or Enterprise.
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