[cstejerean]

bootstrapping both sides of the marketplace at once is very expensive. They need drivers before riders will bother using their service, but drivers will only sign up if they get paid. So uber has to heavily subsidize the drivers to stick with their platform while they then ramp up customers usage. Over time organic customer demand should be sufficient and drivers shouldn't need subsidies but that can take a while and in the mean time you are burning a lot of cash.

[nradov]

Why shouldn't drivers need subsidies? In high cost areas, the subsidies are the only reason that drivers are willing to work. If the pay dropped much they would be better off finding other jobs, or not working at all.

[cstejerean]

They pay doesn't need to drop. Ridership needs to increase. As long as drivers are driving and not staying idle they should be able to earn enough to sustain itself. But early on there is a lot of idle time and that's where subsidies are important.

[bryanlarsen]

Always having idle drivers available is crucial to keeping wait times low.

[cookiecaper]

I wonder if Uber shouldn't stay hyper-focused on markets where people usually don't have cars or where using a car is pretty difficult. In most of America, people already have their own vehicles which they prefer to drive. Occasion to use an Uber/cab is fairly rare for most people. At least, it doesn't seem like the same hyper-expansion strategy that works in carless areas like NYC or areas with horrible parking like LA would necessarily be applicable to the rest of the US.

[cstejerean]

There are a lot of reasons to use Uber even in areas where people generally have cars. For example to get rides to/from airport, get a ride back from a bar instead of driving, get a ride to a popular event or a crowded part of town to avoid dealing with parking, etc. All of the reasons why cabs exist can be served by Uber better and cheaper.

[cookiecaper]

Yeah, I'm aware of these -- that's why I said there's 2-3 occasions per year when Uber might be useful. Most people don't go to the airport every week or even every month (and even then, a lot of them will ask a friend or family member to drop them off and save the money). Most people don't go to the bar to get drunk every weekend. Most people don't go to crowded events that often, and if they did, they would probably rather spend 5-10 minutes looking for parking and get to enjoy the comfort and freedom of their personal vehicle on the drive over rather than paying an extra $50 just for someone to drive them.

>All of the reasons why cabs exist can be served by Uber better and cheaper.

I don't necessarily agree here, because Uber always has to have drivers standing by. If usage in the area isn't high, average people won't become reliable drivers because their app will usually be empty and they'll give up. Thus, Uber would probably be more efficient if they paid the same small subset of people to be available at set intervals, and at that point, what's the difference between Uber and a typical cab company?

In markets that aren't hot enough to get normal people in the driver pool, Uber may do better just to open their platform to local cab companies.