
Why “Uber for X” companies are struggling even as Uber thrives - dankohn1
http://www.vox.com/2016/4/19/11439558/uber-model-regulatory-arbitrage
======
johnloeber
Most "Uber for X" companies are not actually "Uber for X". That's why they're
struggling. "Uber for X" does not mean "on-demand for X". On-demand has always
been a tricky business. SpoonRocket, one of the companies mentioned in the
article, is clearly "food on demand", not "Uber for food".

What are the essential differences? Uber delivers a simple product, a car
ride, that even a minimally skilled contractor can complete. SpoonRocket
delivers pre-made meals. Complication is added in having to design, cook, and
package pre-made meals.

For SpoonRocket, overhead costs exist in the forms of delivery fees: for Uber,
no such fees exist. The delivery itself is the product. For SpoonRocket, the
real product is the (instant) meal, not the delivery. SpoonRocket had so many
costs that in order to turn a profit, they ended up trying to save on meal
quality -- and in turn promptly lost their userbase.

SpoonRocket cannot meaningfully differentiate itself from its competitors: who
really wants to try another service for delivery meals when you could just
order GrubHub or Seamless? The folks at SpoonRocket were effectively trying to
start a restaurant, which is a hard business with tons of near-equivalent
competition. On the other hand, Uber clearly and meaningfully beats taxis,
both in terms of price and experience.

We know that on-demand businesses are hard. We know that food businesses are
hard. Combining them, guess what? Not easy.

Let's talk about an _actual_ "Uber for X" companies that is doing well: take
Airbnb. Airbnb allows you to take your existing property (spare room, couch,
whatever) and with extremely little effort begin renting out access to that
property, but only when you want. This is similar to Uber, which allows you to
take your existing property (car) and make some extra money by driving every
now and again.

The conclusion here is that Uber is an on-demand service from the customer
side only. From the service-providing side, Uber is among the very first of
its kind (you can tell that from the fact that Uber has completely subverted
the employee/contractor distinction -- there's extremely little legal
precedent for a business like Uber).

Thus, it is a severe mistake to look at other businesses that provide on-
demand services from the customer side, and to conclude that such a business
is "Uber for X". It's only "Uber for X" if it's similar from the service-
providing side, which very few businesses are.

~~~
refriedbeans3
Great points.

Also important to note, that Uber does a few things exceptionally well that
most other "Uber for X" companies fail with at least one or more:

1) Dramatically increase convenience / quality of service

2) Lower or comparable costs to alternative (esp UberX vs Taxi and vs your own
car)

3) Have a demo-able product. Viral word of mouth is so simple when you can
literally take your friend for a ride.

Most other on-demand services fail at one of these. Spoon rocket in your
example, first started as a more expensive convenience play, then as they
tried to scale up, lowered quality (violating #1) in order to compete on price
(#2). This is why I stopped using them and also why I don't use their
competitors like Sprig and Munchery, just too expensive for what it is.

~~~
drewrv
I'd add 4) Flagrantly violate existing regulation.

Uber/AirBnB just straight up ignored laws regulating their industry. They bet
that regulators wouldn't crack down too hard and they were right. But not
every industry is regulated like taxis/hotels. Imagine a food startup that
violates health and cleanliness regulations, or a finance startup that ignores
the SEC.

~~~
mcpherrinm
I think the food startup equivalent to Uber would be people preparing meals in
private homes/kitchens: There's certainly regulation around commercial
kitchens, but it's not obviously bad if a home kitchen is used to prepare a
meal: I do that all the time for my friends. But there's a lot of things that
can go wrong in a home kitchen too as they don't have a lot of the normal
commercial food storage stuff like a blast chiller, so I think that type of
startup would definitely invigorate the same kind of regulation fight Uber
did.

~~~
wuliwong
I was thinking about this recently. A friend of mine started selling cupcakes
and made a website to do it. I don't really know what it takes for Little
Debbie to get a new product approved but I would assume some regulatory body
has to be appeased before they start selling. I can't imagine my friend went
through any of that. If anyone knows about the regulations in this area, I'd
love to hear. I'll dig around and report back if I find anything of note.

~~~
wuliwong
This basically addresses it [http://www.moneysideoflife.com/cottage-food-
law](http://www.moneysideoflife.com/cottage-food-law)

Looks like in 2012 Georgia was "pending." I'm in Atlanta, so there were no
regulations in place when my friend started.

------
seibelj
I don't think the article fully articulates many people's visceral hatred for
medallion cabs. Everyone I know who used to take cabs regularly has a horror
story. It was an industry begging and pleading for someone to disrupt them.
Most people don't feel the same way about restaurants and grocery stores.

~~~
fiatjaf
The article addresses this by remembering the reader that the taxi industry is
a cartel controlled by the government. All horror stories and other bad things
are implied.

~~~
msellout
If that was the author's intention, I don't think it was very effective. The
fire department is controlled by the government. Does that imply horror
stories and other bad things?

~~~
fiatjaf
Yes, of course. Don't you see buildings in flames and people dying everywhere?
You just don't have anything to compare. The fire department is just there and
it is the nature of things.

Since I'm not a fire specialist, let's look at the police department: you will
agree with me that the police is corrupt and incapable of arresting anyone,
they're just a bunch of lazy guys!

Hear this podcast: [http://tomwoods.com/podcast/ep-597-can-the-private-sector-
pr...](http://tomwoods.com/podcast/ep-597-can-the-private-sector-protect-
against-crime-this-case-study-will-blow-your-mind/)

~~~
msellout
I'm having trouble determining if you're being sarcastic.

~~~
fiatjaf
Really?

------
slg
I think this article is missing a big part of Uber's success. Uber has three
main factors going for it.

1\. The preexisting regulatory capture that is mentioned in the article.

2\. The service they provide is commoditized making customer to employee
relationships irrelevant.

3\. They connect people who are looking for a service with unskilled
contractors who can provide that service.

Ideas like Uber for food or Uber for housecleaning don't work because they
fail all three of those conditions. Companies that meet multiple conditions
tend to be more successful. Postmates for example meets 2 and 3. Airbnb meets
all three of the conditions (depending on user preferences) which is why it is
the most successful Uber for X (or is Uber the Airbnb for X).

------
benten10
This will be off topic, but I'd like to hear others' thoughts on the issue.

I _really_ _really_ dislike, the taxi industry. I have ridden a cab at 2am,
and paid 4x what I regularly do, in cash, because 'the machine is broken'. I
hate running after them. Finding cabs after hours is _hell_.

But I find Uber super-duper scummy. It's just the general...everything about
it. That when you need it the most, it jacks up its prices, breaks laws like
it's no one's business, and then spends SHIT TONS of money in lobbying to
change them. Etcetera. But I do like the _much_ improved transportation system
it's led to. It's like day and night.

So... why doesn't anyone (or even a regulatory agency!!!) create an open
marketplace for transportation services, where riders and drivers can bid, and
all the 'services' are just middlemen between the marketplace and individual
agents? Sort of like... email, but for Uber?

~~~
DanielDent
The few times I've been asked for cash because the credit card machine is
'broken', I've offered (a) they can use the swipe machine and run the card
later, or (b) they'll need to come back when it's fixed and I'll gladly pay
them at that time.

They aren't always happy about it, but somehow they typically fix their
machine. Within seconds.

------
peterjlee
Uber provides a better service at a lower price than it's alternative(taxi).
Most Uber for X companies are just providing a delivery service at a higher
price.

~~~
ghaff
>Most Uber for X companies are just providing a delivery service at a higher
price.

They're providing a delivery service for which they have to charge a non-
trivial amount. The problem is that the mainstream population is mostly not
willing to pay for what delivery costs. As an add-on to some restaurant
businesses, it seems to work but that's the main exception.

------
akgerber
Lyft just sent me a push notification telling me that rides will be half-off
this week. Thanks for subsidizing my lifestyle, venture capitalists!

------
gcatalfamo
It is not about regulated vs. unregulated industries: it is about centralized
vs. decentralized regulations.

The main reason - I can't remember the source where I read it, somebody please
share it if you know it - is that Uber exploited the decentralized regulation
of taxi companies.

Other companies - like Theranos, regardless of their actual efficacy in what
they do - had to fight against centralized, national regulations in their
specific industries and regulated statewide, therefore making them effortless
against the entire country as opposed to Uber, fighting against local
municipalities.

edit: typos

~~~
LukaAl
Even if agree with you, centralized vs. decentralized makes a lot of
difference, this is not the main point of the article. Centralized vs.
decentralized influence your go-to-market strategy and probably your
probability to succeed, but not directly your business model.

The point made in the article is that the biz model of the "Uber for X"
businesses is not very strong unless X is a heavily regulated market and you
are able to skip part of the regulatory burden to provide a far better
service.

What's missing in the article, is the effect on the market size. Uber and Lyft
changed the market size. I've taken probably a cab five times in my life
before Uber existed, probably I'll use Uber five times before this week ends.
And the same goes for many people. What about SpoonRocket, for example? Well,
I ordered food delivery before it existed. Probably having an app and many
more restaurants to order from increased my consumption of food delivery
service, but just a 10 - 15% more. Not enough to sustain new players and make
enough people switch fast enough to build a sustainable barrier to entry.

Not sure I'm clear: Uber provided a service so much better that increased
greatly increased the market size and captured a lot of new users (and old
users were fast to switch). Other services failed to increase the market size
and didn't provide existing users enough benefit to switching, so no barrier
to entry for competitors, a lot of competition, a lot of startups that fails.

I have a doubt, though. We are seeing a lot of Uber for X failing, but that's
because a lot of them were competing for the same (in the US car-hailing
market there was just Uber, Lyft, and Sidecar). That doesn't mean that one or
two company will survive in the end.

~~~
gcatalfamo
I definitely agree with you, but I didn't feel the point of the article is
entirely on point, because of a very simple reason.

You ordered food before Spoonrocket while Uber greatly improved an industry
ripe for disruption: isn't that the point of startups anyway? While you are
completely right, your point is not about "Uber for X" startups not working
out, but ALL startups that are somewhat missing the right place in their
markets...isn't it?

~~~
LukaAl
A little bit more complex, I guess I wasn't clear enough. But I agree with
you.

------
BrandonWatson
I'm calling it now...we are going to see a rise in the "uber for chat bot
servicing" =)

~~~
strictnein
And there goes my secret Y Combinator Winter 2016 idea.

------
nate_martin
I wonder if Uber will ever offer a programmatic courier service. It seems like
the "Uber for X" companies will struggle to make money if they have to
maintain their own delivery fleet, and tapping into a large pool of Uber
drivers could allow smaller companies to auto-scale their business just like
with cloud compute.

~~~
akgerber
They do: [https://newsroom.uber.com/us-new-york/a-reliable-ride-for-
yo...](https://newsroom.uber.com/us-new-york/a-reliable-ride-for-your-
deliveries/)

~~~
ebola1717
Though they just cut out the food delivery focused version of that
[http://ny.eater.com/2016/4/19/11457620/ubereats-instant-
deli...](http://ny.eater.com/2016/4/19/11457620/ubereats-instant-delivery)

------
tomjacobs
Uber: a clever hack. That people loved. Using new tech.

Airbnb: a clever hack. That people loved. Using new tech.

Sprig, munchery, doordash, postmates, spoonrocket etc don't feel like a clever
hack. Just a business.

Both hacks were tricks to get around regulation put in place long ago to
protect various financial interests. Once the people have spoken about what
they love, it all topples down.

What other regulation / situation seems "dumb" at the moment (but is being
held in place by $/power protecting it) ?

Data download limits, speeds, etc, i.e. consumer fixed and mobile internet
seems like a big one.

The other huge one is the SF housing supply market. Heavily restricted because
of various interests protecting value. Once a group figures a clever hack
around not being able to supply more units of housing, and people LOVE it, and
tech scales it, it all topples down.

------
amelius
It's about time somebody wrote an "Uber for X" generator.

~~~
LoSboccacc
[http://tiffzhang.com/startup/](http://tiffzhang.com/startup/) is almost what
you are looking for. interesting part is some are actually believable and also
saw a couple good ideas in there

------
znebby
Despite all the negativity around food delivery startups - I see them getting
funded almost every week. Europe, North America, Asia, South America, all over
the world.

------
djschnei
If people still think over regulation isn't a problem in this country... or
that the answer is just more of "the right kind" of regulation... I just...
idk...

~~~
fiatjaf
I understand you. People are stupid. They want laws. I don't understand
people.

Today in Belo Horizonte a bill is being voted forbidding markets and grocery
stores from opening on sundays.

------
matzipan
Uber thrives?

~~~
twinkletwinkle
All snark aside, isn't Uber the highest-valued startup in the world? Sure,
that's thriving.

~~~
onion2k
Startup valuations are mostly a stab in the dark by whoever invested last
multiplied by the terms set out by all the people who invested before. There
is nothing concrete about Uber's valuation. They're doing some amazing
business and building a valuable company, but how valuable _exactly_ is
dictated by an exit, not a funding round.

~~~
twinkletwinkle
Sure, the valuation isn't concrete. It's also in a different league from the
other startups in the article which are shutting down.

I think the person I originally replied to was trying to make an ironic point
but to me it fell really flat.

------
ben_jones
Because Uber is a multi-billion dollar behemoth that can bend the will of
industries through sheer force, and your mac book pro sitting in a coffee shop
can't do that no matter what the genius said.

