[xbzbanna]

Offerings like Uber Pool and Lyft Line are the future of the business and depend entirely on economies of scale. Putting multiple paying passengers in the car at once and reducing driver downtime completely changes the economics, but only if there is a high density of riders and drivers.

Edit:

There are two possible stories here about Uber and Lyft's losses, and we can't tell which is right from the outside.

1. Uber and Lyft are in a price war death spiral, heavily subsidizing all rides to compete. Their only hope is for all competitors to die, so they can take over the whole market and raise prices. Then vague hopes of lowering costs with self-driving tech and take the surplus as profit. The plan doesn't seem viable, since they have no moat and they can't outspend GM and other self-driving players.

2. Uber and Lyft can actually make a profit in mature markets, but choose to subsidize rides in growing markets, on the theory that growing the market size increases the long term profit opportunity. The data we need to evaluate this idea isn't public, however Uber did a "prove it" quarter in 2016 where they turned the spigots to be profitable in the US. They are now pursuing growth in the US again, expanding to a larger territory and expanding Pool and other offerings like flat-rate passes in mature cities. Under this model, Uber could at any time decide to become profitable, but the revenue growth would stop, placing a cap on the valuation. Notably, there is no "predatory pricing" here.

With internal finances, we could easily tell whether option 2 is valid. You can bet Uber is constantly doing experiments on price elasticity of demand and knows exactly where the truth is. You can bet Softbank has seen numbers we have not. If Uber wants to IPO, I would expect them to provide additional public info, possibly pivoting to profitability again in the US. But doing a pivot like that permanently reduces the size of the opportunity, allowing Lyft to capture that new market instead, so they may be reluctant to do it large scale.

[wpietri]

True, but that doesn't necessarily make a company hard to start. There are a zillion niches in transport that could be profitable places to get traction. Uber Pool and Lyft Line might be the future of cheap transport, but as Uber itself shows, you can have a decent business just at the high end of the market. There are several companies in the rides-for-kids department. Taxis do a significant business in hospital-specific transport, both of patients and of urgent medical delivery.

To start a rideshare company, you only need to do reasonably well in one segment in one geographic market. Then you have a basis for expansion into other areas, other segments. Contrast this with a search engine, where people really expect you to be good for everything and covering the entire internet.

[jsonne]

The problem though is that they led the way by breaking down all the regulatory barrier to entries. Whats to stop anyone from starting a ridesharing company tomorrow?

[lev99]

The network effect.

You have the give your drivers a reason to use your app instead of uber.

You have to give riders a reason to use your app instead of uber.

The two reasons have to be good enough to build a large enough network for the rideshare system to work.

[lenley]

I would argue there isn't really a network effect for lyft or uber or any ride-sharing company for that matter. There might be brand and price effects for the companies to battle over amidst both riders and drivers.

I'd say there is a network effect for ride-sharing in aggregate, neither Lyft nor Ueber has been good at locking drivers and riders in with loyalty programs to try to keep people solely on their platform.

[xbzbanna]

More drivers means faster pickups for riders, and more riders means less downtime for drivers. Drivers doing more rides per hour means they can be paid less per ride, lowering the price of a ride and further increasing demand. Sounds like a network effect to me. Offerings like Lyft Line and Uber Pool multiply both of these effects.

[Marazan]

There is no cost for a driver to use multiple apps. There is no cost for a user to use multiple apps.

[throwaway2048]

those reasons have largely boiled down to "lose money on each ride", that's not going to last.

[malandrew]

Please name one comparatively successful ridesharing company founded in 2013 or later in any global market. I'll wait.

[jsonne]

Here's a list of them in fact. Literally the top result on my Google SERP for "local uber competitors" http://mashable.com/2017/08/16/uber-global-rivals-didi/#vCa1...

[malandrew]

Yes, and which were started after 2013 or even as early as 2013?

The truth is that all the viable competitors are likely already out there and it's going to be very very difficult to replicate what these incumbents have without burning ridiculous amounts of capital.

If the Softbank deal closes, we'll likely see a wave of consolidation with Softbank orchestrating acquisitions by Uber. It's very common for relatively young markets to consolidate over time.

No one in their right mind would start a new company to compete with the existing TNCs in 2017.

[wpietri]

Just looking at the ones active in Austin, Fasten, Chariot, and InstaRyde were started in 2014; Fare in 2015; Ride Austin in 2016.

Ride sharing is essentially a local business with very low barriers to entry. You don't need to replicate what the incumbents have right away. You just need a modest number of drivers (who can also be driving for the incumbents) and a modest number of customers.

[malandrew]

Do you have any data to support the position that any of those three are not irrelevant from a market share by rides given or by industry profits?