Hacker News new | ask | show | jobs
by kszxgz 2580 days ago
Network effects in social media are high and protect Facebook from competition.

Barriers to entry in the taxi industry are lower.

1 comments

"Uber incurs huge start-up costs with each new city and country it enters."

In other words - people won't use the next Uber unless it has drivers available every time you open the app, but drivers won't be available unless they know there will be riders paying them fares. To fill in the gap, rideshare apps have to pay drivers when they enter a market, even if there are no riders yet.

This is also covered in the article - it costs uber huge sums of money to enter a market because they offer driver incentives that are uneconomical, they have a huge advertiser budget and they use below market rates to achieve growth. It also costs them a lot because they don't move into a market to be in that market, they move into a market to dominate it.

That dynamic isn't true for its competitors. Any current driver for Uber can go "fuck this" get an off-the-shelf taxi company app and start working for themselves. Since Uber is paying minimum wage and still making a loss, there's a strong incentive to do this the second Uber raises prices in an area. At which point Uber has to go back to its incentives to regain its dominant position in the market. The result is they can't sustainably raise prices or lower costs without destroying the growth that justifies their tech-like valuation.