Ride-sharing is not an area that can be monopolized. As soon as companies like Uber and Lyft stop subsidising rides, competitors will spawn up like mushrooms.
Unless Uber/Lyft manage to create fully automated self-driving cars AND find a way to OWN all those cars, they will never have a monopoly.
The people who own the cars will have the freedom to switch to any ride-sharing network they like (or even multiple networks).
Then there will be new kinds of ride-finder apps which will allow people to select between multiple providers/networks - A bit like how Expedia lets you select between multiple airlines.
The Airline business is very competitive and low-margin these days, I think it will be the same for companies like Lyft and Uber.
It is very close. There are massive network effects and it will be hard to unseat an incumbent.
The more riders there are, the more revenue is available for the service provider (eg drivers). More riders means average waiting time is lower because more vehicles will be around. More riders means less downtime between riders since the next rider will be closer. More time in revenue service lets you spread fixed costs over more riders, reducing the fixed costs per ride (economies of scale).
This all means an incumbent will provide better service especially as reduced waiting times, and will be able to provide that service more cheaply due to greater utilisation. Their drivers/owners will also make more money due to greater utilisation. Newcomers will end up providing worse service (longer waiting times etc) and cost more!
This battle will play out city by city, which just reduces the barrier to entry for smaller operators. All in all, I think Uber's defensibility is fairly poor.
I disagree. A driver will prefer as little time between the end of one ride and the beginning of the next, since they don't get paid for down time. Whichever service has the most riders is most likely to have the next closest rider.
You are right that at the end of the first ride, the driver could examine all services to see who has the closest next rider, giving a new service a shot, although the new service riders are far less likely to be the closest one. Uber (incumbent) for example already counteracts this by giving drivers bonuses for picking up more riders in certain timeframes, so the driver picking the less popular service will also be giving up on those.
There are also penalties it seems for not picking up the next ride that requests you as soon as possible. I'm not sure how hard it is time-wise for the drivers to switch between the apps and add up to consistent time and money but I would think you would try and batch your time for each. An hour or an hour there.
"In one offer, Uber is now guaranteeing $2,000 a week in gross earnings for new drivers who work 60 hours a week. Another, more-extensive program for existing drivers promises bonuses based on how many trips they complete. For 100 trips in a week, they get an extra $350, for instance."
If a driver can already easily meet those then great. But it wouldn't be that great to spread yourself amongst the services and avoid the incentives. And remember the larger incumbents have more wiggle room in terms of incentives and changing them based on real world driver behaviour.
* shorter wait times for riders (better customer experience)
* more money for drivers (shorter waits between riders, so more paid time)
* cheaper fares (fixed costs spread over more riders, reducing per rider cost)
* more effective loyalty programs (improved ways to earn and spend on them)
A larger incumbent can be attacked, with the simplest way of doing it to go more niche - eg serving a smaller area better. Even then the incumbent should have greater ability to react.
The hardware manufacturer/owner will fight tooth and nail to prevent this. They'll probably write a clause into the user's contract that says "If you use an unauthorized ride share network, we will delete your account with us and remotely disable your hardware."
It's the same school of thought as Google deleting your gmail for reselling a Pixel phone at launch.
If I'm not mistaken Tesla might have already written this clause into their contracts.
Any reference for this? I think you are referring to [1], but that was not because somebody sold their Pixel phone, but because a company was reselling a large number of Pixel phones from New Hampshire to avoid sales tax (which is against the ToS, and probably borderline illegal).
Also:
"Many of the accounts suspended were created for the sole purpose of this scheme. After investigating the situation, we are restoring access to genuine accounts for customers who are locked out of many Google services they rely on."
https://www.theguardian.com/technology/2016/nov/17/google-su...
>> "The people who own the cars…will have the freedom to switch to
>> any ride-sharing network they like (or even multiple networks)."
> "The hardware manufacturer/owner will fight tooth and nail to prevent this"
> "It's the same school of thought as Google deleting your
> gmail for reselling a Pixel phone at launch."
> "If I'm not mistaken Tesla might have already written this
> clause into their contracts"
[1] http://www.techtimes.com/articles/186353/20161119/google-sus...
[2] http://thenextweb.com/insider/2016/10/20/tesla-dont-use-your...
Ride-sharing is not an area that can be monopolized
I could not build a clone of an Intel chip in any amount of time - Even with a team of 100 engineers - The capital cost is just too massive.
People said the exact same thing about Twitter (and every other popular app), but it isn't true. There's a lot more to building a successful company.
Just the other day I talked to the owner of a taxi company, going through their cost structure. We concluded that, if taxes are included, 90% of their costs can be reduced on a per-trip basis.
It was his opinion that it would make the most sense that the future is some sort of public-private partnership model where the cars are owned by the city, but operated by some SaaS company, in order to get rid of taxes and further reduce costs. Without that tax reduction, he said we would see a similar situation as airplane ticket costs in the EU vs US (3-10x price difference due to taxes). Cities with 5-10x lower individual transport costs would actually have a competitive advantage. In the US this problem should be compounded as cities aren't as much cities as big villages with people thinly spread out. Thos cost reductions become even more important.
It feels like Uber & Lyft are spending money on the wrong problem atm. This is just a transitionary stage in the transportation world.
Yes, and, like you, I think Uber & Lyft are wasting money in the wrong problem while the innovation landscape is quickly changing towards self-driving things.
This is a common misconception. Uber poached several engineers from NREC, which technically belongs to CMU, but for all practical purposes is an independent entity. And of their original ~40 engineers, not many had any real previous experience on self-driving cars. Almost all of the engineers from the DARPA Grand/Urban Challenges had already left (many went to Google). NREC had nothing to do with any of those competitions.
So what happened to CMU's self-driving car research department? Well, initially it was funded by GM. But it spun off into a company called Ottomatika which was later acquired by Delphi.
Uber hired a bunch of great roboticists. They didn't hire a team that had any real experience with self-driving cars.
Self-driving things are being built everywhere, so I don't see the competitive advantage they have in AI because they built an app to get a car! Two very different things.
if ifs and buts were candy and nuts, we'd all have a merry Christmas