I dont think Uber is going anywhere soon. It has such a strong brand. Everyone I know trusts uber a lot more than there local cab companies.
Will you still use Uber? Probably. But many who started using Uber instead of, say, taking their own car or using public transport, just might go back.
The problem is not that you can't extract the price elasticity from the surge pricing of an Uber-like service, it is that you might not like the answer. Down rounds are not nice to founders.
My feeling is that the taxi-like market is a commodity market, but if I was going to invest at a $50 billion valuation I would want Uber to tell me that have looked into this in detail and can provide me with some hard data.
That's an excellent question and the answer is it wont be cheap. That's why, in countries where Uber operates, a clear legal framework is needed so that Uber doesn't end up with a monopoly. If Uber is allowed to operate somewhere then anybody should be able to do that without the need for an army of lawyers and lobbyists or it's just replacing the old boss with a new boss and in the end nothing's going to change for the consumer. That's what I hate with the whole situation.
I can imagine this argument holding true for resource-based businesses, say, oil and gas. I can't imagine a taxi services aggregator having that substantial an impact on a nation
They have to consistently provide a good experience for both drier and riders, who can switch literally by opening a different app on their phone.
Uber probably had the market strength to contractually demand that you couldn't be on the Lyft network while on the Uber network. If they had done that, they would have lock-in effects. Maybe they didn't because they were afraid of monopoly accusations.
Uber already has competitors in major markets. The market has very low switching costs. A new competitor doesn't even have to educate the customer on what to expect, or how it works, or even how to find drivers. All this has now been worked out, so any price gouging can be easily competed with.
I can only conclude those who want to 'regulate' Uber for the 'betterment of society' are severely long Taxi licences, or are hardcore socialists who abhor any economic freedom of agency, or maybe both.
That's a pretty stupid thing to say.
Regulation of taxi services does exist for a reason other than corruption or general malfeasance. On the one hand, deregulation might increase competition and reduce fares. On the other, regulation might help to avoid price gouging or ride refusals. There's a coherent discussion to be had there.
Your shallow dismissals of all attempts as regulation as by 'hardcore socialists' or 'Taxi licenses' contributes absolutely nothing.
Do you have any evidence of that? I'm 99% sure Uber is profitable on a unit and customer basis.
I'm sure they are making money in markets where the existing taxi service was truly dreadful and where they don't have to compete on price and have been able to raise their rates to on par or higher than taxi rates, but they are definitely paying a price for expansion.
Of course, that's the whole reason to raise capital (so you can expand rapidly on a model which has attractive unit economics).
The point is that we don't have to speculate about what will happen once Uber raises prices. Just look at their mature markets, where pricing is on par with taxis, and you can see a profitable model.
It's ironic because if the cities where Uber is madly profitable actually responded to their criticisms and reformed their protectionist taxi regulations, Uber would lose much of their pricing edge to competition.
They have a bunch of other expenses, but those are expected to lessen in the future. Training (of both customers and drivers) should fall to near-zero, for example, over time.
They seem to be following the same pattern as large supermarkets:
- Move into an unserved area
- Offer goods/services at rock-bottom prices
- As competition reduces, increase prices and squeeze suppliers
- Profit, profit, profit!
An interesting example of this is Tesco (https://en.wikipedia.org/wiki/Tesco), who at one point were receiving one pound in seven spent in the UK. According to the wiki, that's now widened to one in every ten pounds.
The other interesting angle is that Tesco have been hugely profitable until this year, when they reported a loss of nearly six billion pounds. We'll have to see what happens next.
Uber's app history of tracking people is also not great. I use Lyft when I can. Last time I used Uber was in New Orleans, and even then I used the mobile web version.
It is no use half switching, if you have an app which has 50% of your friends and another with 100% which will you use? * that for every person and your retention drops and you end up with a feedback loop which is negative(churn) instead of positive (growth).
Now with Uber the switching costs are low (currently), you can just as easily request a lyft and drivers can use both apps.
The long term play of uber though will make it difficult for others to compete since network effects will kick in. If you have more passengers and drivers, it makes it that much easier for you to do real ridesharing I. E 2-3 people per a car driving down costs. Once you add additional revenue streams like last mile delivery + passengers + ondemand x and I can see why they are investing this much in owning the market.
if all drivers (who aren't uber employees) and all users can be part of multiple networks (bootstrapped from mobile phonebook and almost zero cost to both) how can uber maintain a dominant position?
I personally don't care which taxi company carries me on my journey.
I think icpmacdo's comment stands, though. Uber have built an amazingly strong brand that people do care about. To the point where I am willing to wait a few minutes for an UberX to reach me rather than hailing one of the taxis passing by.
Even though UberX is a bit inconsistent in quality, it is at least consistently better than taxis.