Big tech is built on predatory pricing
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Big tech is built on predatory pricing
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Re: Big tech is built on predatory pricing
#2What Uber is doing here should absolutely not be allowed. Whenever you go to a city where Uber is in it's first year of operations the prices are insanely low. This also happens when Uber launches a new product like Pool. This enables them to crowd out any competition and then raise prices once they've got control of the market.
I have a friend in SF who takes Uber to work every day. It's about 3.5 miles. I assumed he was dropping boatloads of money but he told me it's $2.50 each way! The IRS estimates vehicles costs alone at about $0.55 a mile and that's not including actual pay to the driver and Ubers cut. Offering a service at this price is not only unfair to for-profit competitors but messes with public transport as well. It's using VC money to crowd out the market.
Unlike with cloud services (the other example) it's much harder for competition to Uber to reappear once it's disappeared. There's a fixed supply of willing drivers and big network effects at play.
Re: Big tech is built on predatory pricing
#3Great research and writing. The inevitable conclusion is that Amazon and uber are either doomed or are doing to jack up pricing some day.
Re: Big tech is built on predatory pricing
#4What Uber is doing here should absolutely not be allowed. Whenever you go to a city where Uber is in it's first year of operations the prices are insanely low. This also happens when Uber launches a new product like Pool. This enables them to crowd out any competition and then raise prices once they've got control of the market. I have a friend in SF who takes Uber to work every day. It's about 3.5 miles. I assumed h…
> big network effects at play
What is Uber's network effect? Most people I know will use whatever app gives them the cheapest ride / will drive for multiple companies.
There might even be an opportunity for a $1 app that tells you which service you should use at any given time/location.
Re: Big tech is built on predatory pricing
#5What Uber is doing here should absolutely not be allowed. Whenever you go to a city where Uber is in it's first year of operations the prices are insanely low. This also happens when Uber launches a new product like Pool. This enables them to crowd out any competition and then raise prices once they've got control of the market. I have a friend in SF who takes Uber to work every day. It's about 3.5 miles. I assumed h…
> big network effects at play What is Uber's network effect? Most people I know will use whatever app gives them the cheapest ride / will drive for multiple companies. There might even be an opportunity for a $1 app that tells you which service you should use at any given time/location.
You need enough drivers to get a ride on demand at any time/location and enough riders to keep them busy.
Too few drivers you get long waits or surge prices. Too few riders and the drivers start to disappear...
Re: Big tech is built on predatory pricing
#6Ironically, if they charged more, the odds are there would be scores of articles about how they are making TOO MUCH profit and should give the money away to worthy causes instead of being "greedy" and keeping the money for themselves.
In truth, people will always complain about something when you are successful. This probably means Amazon is doing something right.
Re: Big tech is built on predatory pricing
#7Earlier quoted context omitted.
> big network effects at play What is Uber's network effect? Most people I know will use whatever app gives them the cheapest ride / will drive for multiple companies. There might even be an opportunity for a $1 app that tells you which service you should use at any given time/location.
You need enough drivers to get a ride on demand at any time/location and enough riders to keep them busy. Too few drivers you get long waits or surge prices. Too few riders and the drivers start to disappear...
That's called a two-sided-marketplace. It quickly saturates (i.e. you need some minimum number of drivers and riders to bootstrap the marketplace).
Network effect is when each user brings additional users (or each user prevents other users from leaving).
Re: Big tech is built on predatory pricing
#8Regarding Amazon, I seem to recall reading similar accusations leveled at Wal-Mart around the turn of the millennium. Their low prices were going to destroy local small retail businesses, then they'd reap monopoly profits after the competition died.
It looks like the first thing happened but the second didn't. Prices might have rebounded a bit at a Wal-Mart after their initial arrival in a community, but they didn't rebound enough to match (much less surpass) the old prices of Bob's Local Hardware Store or Alice's Wine and Spirits.
It's hard to tell if Amazon's retail aim is genuinely predatory the way the author accuses it, or if Amazon's just planning to legitimately, sustainably live with lower margins than other retailers, by dint of huge scale and long term cost-containment efforts. They're investing in roboticized warehouses and have no brick-and-mortar retail locations apart from Whole Foods.
Re: Big tech is built on predatory pricing
#9Ironically, if they charged more, the odds are there would be scores of articles about how they are making TOO MUCH profit and should give the money away to worthy causes instead of being "greedy" and keeping the money for themselves. In truth, people will always complain about something when you are successful. This probably means Amazon is doing something right.
Alternatively people are complaining because Amazon is doing something bad.
Imagine if you're trying to sell lemonade on the street at a reasonable price, and the rich kid down the block sells at 50% the cost of goods. And all that just being funded by their dad.
At one point they're going to be the only lemonade salesperson on the block, and those subsidies are probably going to end. Meanwhile a market was up-ended and everyone who isn't the "winner" ends up losing.
Short term, customers are happy because someone is just giving them free money! But in the end it's not sustainable.
If we think we should let VCs subsidize services, we can just cut out the middlemen and tax their money away instead of playing these kinds of games.
Re: Big tech is built on predatory pricing
#10Regarding Amazon, I seem to recall reading similar accusations leveled at Wal-Mart around the turn of the millennium. Their low prices were going to destroy local small retail businesses, then they'd reap monopoly profits after the competition died. It looks like the first thing happened but the second didn't. Prices might have rebounded a bit at a Wal-Mart after their initial arrival in a community, but they didn't…
Thing is, the profit margin is still there or even greater for Wal-Mart than 'Bobs Local Hardware Store'. Wal-Mart items are generally poor quality (cheaper) and they are notorious for bullying manufacturers and distributors for meeting a target price. They often win in these cases, which keeps their prices lower. But make no mistake, some of the cheaper items are not the same items you would get from even another big box retailer, let alone the mom and pops that used to be in business.