Ha! I didn't even realize they were already going this way (car-pool coordination). Thanks for bringing them up!
UberPool and Lyft Line seem like exactly the sort of quick innovations on the matchmaking side that can provide real value for customers, especially if they act as escrow and clearing house to automatically split fares among carpoolers. Looks like Lyft Line is trying to eat the upside by just providing a slightly discounted fare. Can't tell how UberPool is handling it from my quick scan.
They're both basically hoping to increase their margins while still providing substantive savings to their passengers. So, for a $20 ride, they basically want to charge each passenger about $12 (thus saving the passenger $8) and thus increase their net take from $20 to $24.
The complicating factor is that they're also trying to provide passengers an incentive to try out the service before it gets good, so they offer some discounts even for rides that they think they will not actually be able to find an additional passenger for.
It's a very cool innovation. I hope it works out. It remains to be seen if passengers want to deal with sharing a car in enough quantity to make the services work out. If it does work out, then rides-for-hire will, in this sub-space at least, become a genuine network effect business, and there will be one hell of a brawl.
Because having enough drivers with their own cars available to pick up rides is totally not a network effect business. See I can make snarky sarcastic comments too.
You're correct: having a large supply does not mean that you are in a network effect business.
Tostitos has a large supply. This is not without value! It is indeed the case that a customer in search of tortilla chips can reliably get Tostitos when they might not be able to reliably get a smaller brand of tortilla chips. Tostitos is a big business that can get their brand into more stores than smaller competitors, too.
But I assume that we all agree that Tostitos is not a network effect business.
People pretty routinely confuse the advantage of "being big" (and being somehow involved with computers) with a network effect. This is bad both from a pure terminology reason (ie: we don't need a new term for "being big and somehow involved with computers," while we do need a term for actual network effects), and also in terms of confusing people about the merits of a business -- to whit, we should not assume that the rides-for-hire business is naturally going to become a monopoly because of a "network effect" when there is no network effect. In contrast, we should assume that social networks are naturally going to become monopolies because of a network effect.
Rides-for-hire-hailed-with-a-smartphone is a few things. It's a threshold business -- you need a certain density of drivers in a service area in order to offer quality of service to your passengers. If a rival of Uber can't get a certain number of drivers, they can't provide good service. But whatever that magic number is, it's also actually bad for them to have MORE drivers than that, until their passenger demand also expands. Much of the business problem of rides-for-hire is, unlike a traditional network effect business, where it's "stay bigger than your rivals," matching driver levels to passenger levels. If your number of drivers is too low, your quality of service goes down. If your number of drivers is too high, your drivers don't earn enough to continue with you, stop bothering to log in, etc.
Can you try at least for one or two comments to dial down the snark. Seriously, I don't live in the Bay Area anymore so my tolerance for it is pretty low these days.
Anyhow, it's not a threshold business. The idea that there will eventually be a "number of drivers" that is too high is without any case study of modern business I can recall. Maybe you can enlighten me on some examples(see I can do that passive aggressive snark too!). I can't remember a single instance of over supply that destroyed the market maker's position. Sure many in the supply side(drivers in this case) lose their shirts, but the market makers typically do very well. The network is drivers and riders. Just like a dating site as a matchmaker. We all know that is lead by female adoption. Same analogue of driver adoption. Once you have enough network on the supply side you end up with a dominant share of the demand side which comes back around and gives you leverage over the supply pricing. That's where the profit happens.
Maybe you should dial down both the snark and idealism and read up on the historical business fundamentals at play.
For example, explain to me the several periods where eBay increased its margins to the determent of sellers and did not lose its dominant market position. Or 1 degree of separation, explain how PayPal continues to dominate.
I don't see snark in those comments. I see someone disagreeing with you and you taking it personally. Also, I still live in the bay (and like it here very much). You're generalizing about those of us who live here and it wasn't called for or on topic.
UberPool and Lyft Line seem like exactly the sort of quick innovations on the matchmaking side that can provide real value for customers, especially if they act as escrow and clearing house to automatically split fares among carpoolers. Looks like Lyft Line is trying to eat the upside by just providing a slightly discounted fare. Can't tell how UberPool is handling it from my quick scan.