It's the playbook of any well funded organization trying to break into a new market. This is the entire premise of loss leaders, and they're effectively risking their entire capital.
For example, console hardware is loss leader for console makers because they make up for it for every game sold. Google Chrome and Android are loss leaders for Google, but are strategic assets protecting its revenue business.
In both cases, these companies can continue to do that indefinitely (as long as it makes business sense).
Venture-backed companies that are burning cash, on the other hand, are pursuing an unsustainable strategy of predatory pricing to kill off competitors and grab the most of the market.
(obviously, it's not either-or, you can easily name examples from long standing companies or startups doing either)
Really, from the pov of Travis Kalanick and the original funders, Uber is a fabulously successful business.
The original founders and the venture predators made their money. The professional execs at the top running the business now are also making lots of money. It doesn't matter to any of them what happens to competitors, employees and current shareholders.
Yup, that's the entire point of the paper (and it's really clearly written and approachable by non-experts!)
Parent was equating predatory pricing (in general) with loss-leaders, which have nothing to do with the subject of this paper.
Ones higher risk but quite similar.
Not sure what your point is to be honest
Surely, selling at a loss is a risky endeavor, but we see it time and time again that companies selling at a loss get more funding due to their inflated numbers from selling at a loss. Or, it’s only those companies that make headlines and we don’t hear about all the companies going bankrupt selling their services at a loss.
These companies are not profitable. They are still in the loss-making market share acquisition phase. They might be profitable at some point, but that would likely be by increasing pricing to something far less desirable to consumers, negatively impacting growth. AirBnb recently turned a profit but is now more expensive than hotels with often worse service, and they're being regulated out of some markets, so we'll see how it works out for them. Would DoorDash with a minimum $15 delivery fee survive? Uber if it's more expensive than a cab?
Don't get me wrong, I'm happy living large off of VC fund's money. But I'm not brand loyal to any of this stuff.
IPO bag holders, too bad, and I don't see any regulatory need to protect them.
I thought "loss leaders" were specific products sold below cost so customers would buy accessories or subscriptions that have nice profit margins. Like selling cheap printers but expensive ink.
That's different from "sell a dollar for fifty cents until all competitors are dead".
There's also loss leader applied to things like consoles, where they lose money (at first) but make it back on the games.