One thing I don't understand with these "fake markets" (ride-sharing and food delivery) is what's the end game? It seems like there is no path to profitability.
I think for both of these companies, the path to profitability is eventually cutting out the human aspect for automated delivery. Self-driving cars is a good vision for the business and a very end-result. And for food delivery, I'm seeing more of those robotic carts that contain food driving around sidewalks in the Bay Area.
It's pilot-scale, relies on human labor, and has some obvious problems which would break down immediately at scale. Plus they're annoying to navigate around. But they do exist.
No path to profitability. A path to growth, and a path to publicly traded company, and a path to VC's getting lots of money from that process.
Also a process for new companies to emerge to put the now-struggling attempted-profitable public companies out of business as they seek a business model.
The obvious one is bringing costs down by automating labour, with self-driving cars etc.
There also may be a 'change the world' sort of outcome, where consumers en masse like the product so much that they change their behaviour and lifestyles, even if it eventually turns out that they spend more overall than they might have before - if people stop owning cars, cease cooking at home, taking away revenue from supermarkets and auto manufacturers. Although this doesn't appear to hold up in the first analysis, second-order effects might start to appear - e.g. if consumers change their lifestyles, can you capture the value that they would have invested in owning a kitchen, or a garage and driveway?
This is all very speculative, I'm not claiming Uber etc can achieve this, just that different equilibria are possible - for instance, I gather that in some Chinese cities street food is incredibly good and cheap while density is high enough to make owning good cooking facilities a real pain.
The company may lose money and ultimately fail, but you're still getting paid.
You also get to call yourself an entrepreneur / founder / investor / whatever for your next thing.
The point of these kinds of businesses isn't to build skyscrapers that last 100 years, it's to build a pretty sandcastle, get paid and go do something else when the tide comes in.
Raise the price? For Uber/Lyft the only thing keeping the price low at this point is competition with each other. So as soon as one buys the other they can raise the price. It's not like anyone wants to go back to using a taxi.
They might go back to using black cars. Or they may decide to rent a car, drive themselves, or take public transit (or just not go out). There are a lot of options to Uber/Lyft at 2x price.
>It's not like anyone wants to go back to using a taxi.
To some extent. A city I normally fly into frequently, I usually grab a cab because it's just there even though Lyft is cheaper. If I were more price-sensitive I would probably wait for a Lyft but if pricing were similar, certainly not.
Haven't basically every single taxi company got apps too? Uber raised the bar, but haven't fundamentally changed the market. (The excess supply financed by VC money led to more traffic, but that's it.)
