Here’s what people miss (for a crowd so anti-MBA, they could benefit from a few online classes)

Where these businesses aren’t profitable at the unit economics level it’s because they are trying to gain share of the total addressable market

Someone who lives in a city and tips generously on orders/rides is certainly profitable, but there’s only so many of people like that and in the current environment, incentives are skewed to be a large high-share company.

So these companies then try and make the service work for people in the suburbs, people who are more cost conscious, etc.

The general rule of thumb for consumer tech businesses is that as you grow, the quality of the incremental user gets worse and more expensive to acquire, but due to economies of scale, that can sometimes work out (a great metaphor for this is the mainline airlines missing out completely on the Southwest/Spirit/Frontier/RyanAir market segment)

So to your point, Uber and DoorDash can 100% be profitable businesses (much to the chagrin of GP), but from a strategic standpoint, management needs to run the company in a way that strikes the balance between gaining as much share as possible without burning too much cash (which leads people to believe that unit economics are broken when they are certainly not).

That’s not to say some businesses don’t have broken unit economics, but anyone who actually track DASH and UBER isn’t worried about whether the core product can ever achieve profitability (they already have), it’s just a question of how big is the market for customers with good unit economics (probably less than previously assumed!)

   > Here’s what people miss (for a crowd so anti-MBA, they could benefit from a few online classes)
   > Where these businesses aren’t profitable at the unit economics level it’s because they are trying to gain share of the total addressable market

I don’t think anyone’s missing that. That’s just a restatement of what people in the thread have been describing as broadly using VC money to undercut people with actually profitable unit economics and drive them out of business.

No, you keep acting like unit economics are evenly distributed, when they are not and that is the point.

People show average unit economics and people assume that the average applied to every transaction, when it is actually a distribution.

Expanding into new segments and markets almost always leads to temporary negative unit economics, but that's just what growth looks like.

The trick is to not take that too far and enter markets/segments with unit economics that will never be positive (like on-demand dog walking)

Literally no-one is assuming that average unit economics apply to every transaction.

Read up the thread my guy.

>Gonna be very unpopular here, but the sooner gig companies like Uber and DoorDash collapse, the better. The business model of these so-called unicorns is effectively a Ponzi scheme where the end goal is for early investors to cash out with the IPO. However, unlike a Ponzi, these companies also rip off their contractors so most restaurants and drivers actually lose money by being involved with their "service". Straight-up middlemen who skim off the top behind a veneer of tech that can't even turn in a profit. Build a real business. If you can't be profitable without eliminating all the competition by first undercutting them, then jacking up prices on users, then you shouldn't exist

[Edited the last sentence for punctuation]

There is no moat. How many people are "loyal" to uber/dd/etc? Most people just order from whoever is cheapest.

Therefore, it is a race to the bottom and you have to spend tons of money on marketing/promotions to gain customers. The app with the deepest investor pockets will win out.

If there was only one app for delivery and they didn't have to spend any money on marketing/promotions then I bet they could offer a profitable service for a reasonable price.

There’s a moat, but not a big one: Smaller restaurants aren’t going to have the appetite to integrate with many different delivery services. If (big if) you can get a critical mass of those, then you can sell that service to chains that would otherwise do their own delivery.

What's expensive for them is a bunch of things that really shouldn't be part of their business anyway.

Marketing.

Setting price markups.

Researching new technologies to do God knows what.

The only expense that makes much sense is app development, and honestly, that sounds like it should be done by another company. Just expose an API and let restaurants and their partners handle the UI layer. There are tons of lightweight ordering platforms that could easily plug into a delivery service service.

Human doing the delivery. And with restaurants outside a few categories margins themselves on food are low.

The drivers and customer support.