Uber and the Delicate Business of Creating a Platform

Uber's dynamic pricing is an interesting system, and I think some of it's subtler points are overlooked in this article. Uber did a poor job of providing good messaging about what prices would be last New Years Eve. That's changed. They're a startup and they seem to be learning as they go.

The article argues that overall prices should be increased to help offset costs for high demand times. That's missing the point of dynamic pricing (or "surge" pricing). The point is that you can almost always reliably get a ride, regardless of demand, but at times with the highest demand (like New Years Eve) you have to pay more for that. In return, Uber is able to pay their drivers more, and are able to better fill those high demand times (otherwise you'd just sit around waiting for a car, but would never get one because they're all already filled). It's the right move from a platform perspective. It's not putting the interests of drivers above passengers, but instead balancing both sides (passengers have an increased chance of getting a ride if they absolutely need it, but may have to pay more for that).

To those who read the comments before the article, this is really about building a market, not a platform in the sense that the word is usually thrown around here.

Not to down play the consumer experience issue, but I couldn't help but chuckle a bit when the author spoke about the issues on NYE.

"Consumers who were used to easy clicking missed the notice and became (reasonably) upset when the bill arrived."

I wonder how many drinks those consumers has consumed when they were ordering their ride home.