
User/Subscriber Economics: An Alternative View of Uber's Value - prostoalex
http://aswathdamodaran.blogspot.com/2017/06/usersubscriber-economics-alternative.html?utm_campaign=Mattermark%20Daily&utm_source=hs_email&utm_medium=email&utm_content=53704562&_hsenc=p2ANqtz-8aO8oqX9iKe3J2cLMbDTuSDlkmrJXvrnBjpzHyksOBSOddJQ405B1KSSkV3ls_OnvZKMOza20CnIjGqVEHX4xInIIqEw&_hsmi=53704562
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VHRanger
The main question, remaining unanswered, for Uber's success is if the network
effects for Uber will be as powerful as for, say, Facebook. This is what
they're banking on with the current loss leader strategy -- drive out the
early competition to establish a long run profitable monopoly.

It's a basic result in industrial organization theory that the predatory
pricing strategy generally doesn't work except in extremely narrow cases.

I personally think predatory pricing won't work out for Uber. Ridesharing is
fundamtentally a local enterprise the way Facebook isn't -- I have most of my
value from Facebook from relatives living far away from me whereas I do not
care at all about Uber drivers or passengers more than 10km away.

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dajohnson89
But if I fly to another city (or country), it's easier for me to just use Uber
to get around since I have the app already installed, my CC is linked, etc.
Not to mention, there's a higher probability that Uber will be in the new city
than a less popular service.

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SilasX
Someone could still create a single app that plugs into many cities' existing
ride services. It may not be as uniform an experience, but it saves the
headache of downloading and setting up a new app for each city.

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kbenson
Yes, a ride share arbitration service would solve a lot of the problems. The
question is, does Uber have enough market in enough places or enough of a name
that they can resist _fully_ tying into a service like that.

Think Apple. They have enough market share (even if not a majority), and
enough brand loyalty, that they don't need to adhere to existing standards if
they think they can resist them and use that to their advantage. Think iChat,
and compare to the original XMPP google chat. It was trivial to talk to gchat
friends on an iPhone, but hard or impossible to talk to friends over iChat
from an Android phone. By resisting making iChat open, Apple created an
advantage for iPhone users. Eventually Google redoes google chat with
Hangouts, and guess what? They close the protocol. Sharing is only beneficial
for you if it's reciprocated.

Does Uber have the clout or loyalty to get away with this? I doubt it,
especially since the bar for drivers to drive for multiple services is so low.
But if the arbitration service was created without provisions to account for
this (e.g., you must partake in the system to use it as a provider), it would
be trivial for Uber to fill gaps in their coverage through the service while
preventing other apps from doing the same with Uber drivers.

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SilasX
I don't follow. I wasn't suggesting that Uber would be forced to tie into such
a service, only that this would eliminate their advantage in that respect.

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kbenson
My point is that unless locked down correctly, and depending on the specific
market conditions, a service like that could be used by Uber to their
advantage. If the Uber app gives you rides from Uber or from other providers
when an Uber isn't available, but the other app only does other providers,
it's beneficial to use the Uber app instead of the other ones, and Uber can
then provide better placement to their own drivers.

It's a common problem between open and closed systems in markets.

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SilasX
That would explain how Uber would mitigate some of the resultant competition,
not why it would eliminate their "only need one app" advantage.

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kbenson
I think we are addressing slightly different things. I wasn't specifically
addressing the concern of one app, but what that implies (the service that
aggregates ride providers). A service like that does mean a single app might
yield good results in the majority of situations. That lessens the advantage
Uber has. I was just noting that Uber might still be able to play that into an
advantage for themselves, so while it might lessen the advantage, it wouldn't
eliminate it, in that case (since Uber's app would always be _at least_ as
good in that scenario).

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JohnnyConatus
Your Mobile OS's Maps App + Your Mobile OS's Payment Provider == No advantage
for customer's already having Uber's app.

Uber and everyone else will be intermediated.

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malandrew
You mean do exactly what Microsoft did with Internet Explorer? The parallels
will be uncanny and will certainly attract the attention of the DoJ.

