Hah. I think that's a pretty good example in other ways, too. Uber is losing money hand over fist- if you really want to be driven to work everyday, they are by far the cheapest way to get that done, presumably because they are willing to lose that money.
Uber is trying to pull the same trick AWS did. I mean, I don't know if AWS was bleeding money at first, but in 2008, they had pretty good prices. Hard to compete with. I tried. But the thing is, especially their bandwidth prices? to this day, they are "okay, if it's 2008" I mean, north of ten cents per gigabyte transfer is kind of a lot.
(even in 2008, their bandwidth prices weren't great. I mean, they weren't bad, but their bandwidth prices were never really a lot below what you could get elsewhere. Their compute prices, on the other hand, were really competitive, if you scored them against the same ram at another Xen based VPS provider.)
This is an absolutely standard hosted infrastructure play. The standard VPS business model is to break into the market with really low prices, get a lot of customers, and then sit on those prices for as long as you can, while your costs fall, making your margins grow. I mean, most companies eventually are forced to lower prices again, so you get this cycle of high growth/no margin and then growing margin/bleeding customers.
(Interestingly, of late, the velocity with which hardware prices fall has decreased pretty dramatically, making this model less viable, or at least making it take longer.)
Amazon took this business model to the next level, in the way that VPS companies could only dream about. People voluntarily lock themselves into services on amazon that aren't particularly standardized, that would be quite difficult to shift onto competitors. This is very good for the amazon bottom line.
Uber is trying to pull the same trick AWS did. I mean, I don't know if AWS was bleeding money at first, but in 2008, they had pretty good prices. Hard to compete with. I tried. But the thing is, especially their bandwidth prices? to this day, they are "okay, if it's 2008" I mean, north of ten cents per gigabyte transfer is kind of a lot.
(even in 2008, their bandwidth prices weren't great. I mean, they weren't bad, but their bandwidth prices were never really a lot below what you could get elsewhere. Their compute prices, on the other hand, were really competitive, if you scored them against the same ram at another Xen based VPS provider.)
This is an absolutely standard hosted infrastructure play. The standard VPS business model is to break into the market with really low prices, get a lot of customers, and then sit on those prices for as long as you can, while your costs fall, making your margins grow. I mean, most companies eventually are forced to lower prices again, so you get this cycle of high growth/no margin and then growing margin/bleeding customers.
(Interestingly, of late, the velocity with which hardware prices fall has decreased pretty dramatically, making this model less viable, or at least making it take longer.)
Amazon took this business model to the next level, in the way that VPS companies could only dream about. People voluntarily lock themselves into services on amazon that aren't particularly standardized, that would be quite difficult to shift onto competitors. This is very good for the amazon bottom line.