[icebraining]

The network effects will take care of the competition.

Will it? Why? Unlike social networks, I don't see why would Uber benefit particularly from network effects; it doesn't even have switching costs, since the consumer can use both concurrently.

[hristov]

Each Uber user benefits when there are more Uber drivers. They can get rides faster and more conveniently. Each Uber driver benefits when there are more Uber users. They can get clients faster and closer to their current position and thus make more money with less downtime. These are the network effects.

A consumer can use Uber and a competitor. This, however, is not unlike social networks, it is entirely like social networks. A consumer can use two social networks as well. However, in practice if one car service or social network does a good enough job the consumer is unlikely to use another.

[icebraining]

Each Uber user benefits when there are more Uber drivers. They can get rides faster and more conveniently. Each Uber driver benefits when there are more Uber users. They can get clients faster and closer to their current position and thus make more money with less downtime. These are the network effects.

As nickpinkston said, those are economies of scale, which is a related concept, but not the same.

A consumer can use two social networks as well.

Yes, but this is where the difference highlighted above kicks in: in a social network, the total number of users is not as relevant as the number of connections the user has, so the user can be "stuck" even if he feels the product is not good enough. In a product like Uber, there's no such effect; people can switch as soon as they feel like trying the alternatives.

[hueving]

>As nickpinkston said, those are economies of scale, which is a related concept, but not the same.

This is still network effects, just with two different parts. The drivers benefit when there are more users, and the users benefit when there are more drivers. It falls clearly into the definition of network externalities when you take the drivers into account.

[eridius]

This is not true. Users and drivers benefit when the number of drivers and the number of users are in a good enough balance, such that there are enough free drivers on the road to be able to have one near to each prospective user, but not so much as to be wasteful.

But the absolute numbers of each do not matter. Adding more drivers does not benefit existing users if more users are added as well to cause those drivers to be active on trips whenever a new user tries to book a trip. And adding more users without adding more drivers is, of course, bad for the users, because it produces a scarcity of cars.

This is pretty much wholly unrelated to the idea of network effects.

[robrenaud]

Even if the drivers/users ratio is constant, raw #drivers does matter, given a fixed amount of space. As you get more drivers in the same amount of space, the minimum average distance from a user to a driver decreases.

[eridius]

Any driver that has a passenger is, for all intents and purposes, nonexistent when it comes to new passengers placing calls. You could have one million drivers in SF, but if 999,999 of them are on an active trip, and only 1 driver is free, then the fact that there's a million drivers makes no difference whatsoever.

[nickpinkston]

And that's true for the riders and the drivers - the opposite of network effects. I think he meant economies of scale.

[qeorge]

But the drivers might not. There is likely an exclusivity clause if you want to be an Uber driver.

If all the calls are going to Uber, the drivers will too. If Gett/others have no drivers, they won't be able to build a base of customers.

I believe this is what the OP was referring to with network effects.