Groupon doesn't have a network effect. Uber has a VERY strong network effect. In fact, it has the type of network effect that can keep its advantage over competitors (see Facebook versus Google+).
Unlike Facebook, Uber is easily replaced. I can't convince my friends to change to a Facebook competitor, but for Uber I don't have to. I don't lose out by using an Uber competitor. With Microsoft in the 90s I couldn't share or read documents if I used a competing OS. I literally had to use Windows.
Right now, Uber is paying lobbyists and lawyers squirming around the issues with braking taxi laws, labor laws, tax laws etc. And they are paying for marketing to teach us to order cabs using apps. And then, local competitors can make apps that are as good and the business model is easy to compete with.
If I travel to London I might not know what the local competitor of Uber is called and I may wanna go with Uber or a conventional taxi. But back in my city, Uber is just one of a bunch, soon one of many. That's, by the way, a difference from AirBnB who is only used by people who are out of town.
If you want bad service (long wait times, high prices) then your argument makes sense. However, the more people that use Uber will lead to better service levels and lower prices. Drivers benefit by minimizing wait times and being able to depend on the money.
And if you went to London, you get the convenience of not having to download a local app. You simply use Uber (what you're used to, what you depend on, what you trust), and you have one less thing to worry about in your travels.
Considering how many drivers are signed into multiple apps (and that will be the law of the land if Uber wants to keep them as independent contractors), there's also a bit of network subsidy - top network adding liquidity to its competitors.
>However, the more people that use Uber will lead to better service levels and lower prices.
That would be very bad for Uber. Lower prices would mean that they are constantly operating at a loss against traditional taxis and other competitors or apps.
Your argument fails to support that there is a network effect that would raise the cost of switching to alternative means of transport and incorrectly assumes that uber is able to operate at a loss constantly as the network size grows.
Take a look at the airline industry. The first guys to do it are nowhere. Everyone is undercutting each other because customers are not locked into one airline and are price sensitive.
Uber doesn't own any cars. How would better service and lower prices be bad for Uber? It wouldn't. The more activity they generate, the better off they are. They simply get a cut off everything. It would be wiser to compare to VISA/MasterCard. Those are software companies with huge network effects similar to Uber. Could anyone just go out and create their own payment network? Sure. Are prices per transaction competitive? Sure. Do VISA and MasterCard make a TON of money? Absolutely. And in this case (the more accurate comparison), the first guys to do it are still the main players, and they haven't needed to truly innovate in decades.
I think a lot of people tend to forget that these valuations aren't just some people out there being euphoric about the future. These valuations come from experienced investors, using real money, making thoroughly calculated guesses.
Airlines get squeezed by airports and manufacturers (Boeing, Airbus, etc). Uber doesn't get squeezed by anything. They don't have the same risk to oil prices, and they certainly don't have to worry about covering MASSIVE fixed costs like airlines. Uber simply gets a cut of every transaction, and those transactions will continue to flow. They don't have to schedule anything with anyone (100% on demand), they aren't subject to airport fees, they don't have to worry about $billions of planes, and they don't even provide the service (the driver does - he is the one operating the vehicle and arranging the pickups/dropoffs).
Uber's software does all of this already. They just need to maintain a certain level of marketing and overhead to support the whole shebang, while collecting boatloads of cash.
Nothing suggests they are like Mastercard company, rather the logistics company line is a better explanation of their high valuation. But network effect or lock in? It simply doesn't happen by purchasing more assets because the customer simply does not care in a price sensitive market.
Logistics companies are an ok comparison, but not really. A higher number of people that use a certain logistics company doesn't necessarily translate to better service. FedEx/UPS would be a better comparison (more people utilizing their capacity will reduce shipping rates and increase service levels, i.e. delivery times), but they own inventory, so it's not a perfect comparison.
There is nothing that suggest Uber has a network effect that locks in a user to use Uber. You are talking about a quality effect from the assumption that more assets will lead to a lock in effect but it's hopeful at best. There are no barriers to entry to erode future Uber profits if they make money and no perceived cost of using new entrants services or existing ones.
It's as simple as this: the more users Uber has, the more drivers it will have. The more drivers Uber has, the better the service and the lower the prices. Therefore, a greater number of users leads to greater value of the product (service) to other people.
"You are talking about a quality effect from the assumption that more assets will lead to a lock in effect but it's hopeful at best." I think you're totally missing here. Why is everyone talking about Uber and not Lyft or some other company? Why would anyone switch from Uber to another app if he/she is happy with Uber? Why don't you or anyone else write an app and go create a network of drivers? Because no one will switch, that's why. And that's the effect of the network.
Facebook didn't have any more assets than Google+, except for the users. How is this any different from the "quality effect" you are talking about?
If a yellow cab owner from NYC decided to expand to Tucson or Kansas City, you'd expect him to do okay with his background in the ins and outs of the business, but expecting total domination based on his knowledge of NYC market is bit of a stretch.
I'm not sure I understand your yellow cab comparison. With Uber, no one needs an understanding of the local markets (aside from the laws, which can be done at the corporate level). Uber just shows local drivers how to make money, and they take a cut because they have a strong technology, brand, and user base.
As far as international expansion, I agree it would be much tougher. But even if they aren't successful outside of the U.S. (which I still think they will be), they will cash in billions.