# Driving all competition out (Uber's strategy)



## Route9 (Oct 29, 2014)

My guess is that Uber is not trying to drive away drivers. But they are trying to drive most taxi companies out of business in most market that they have. 

Best Buy did this years ago with CompUSA and other competition, and became the one stop shop for everything. Once they drove out all competition they raised prices through the roof. Most taxis will not be able to compete and will shut down. Also, Lyft does not have the drivers to compete in many markets.

I think in 1-3 years most competition will fail. They will get people hooked on Uber and rake them over the coals when there is no other competition.


----------



## John William (Jan 7, 2015)

You're being kind of paranoid. Yeah, Uber would love that, but the government protects us against unregulated monopolies. Most of the time, anyway.


----------



## elelegido (Sep 24, 2014)

John William said:


> You're being kind of paranoid. Yeah, Uber would love that, but the government protects us against unregulated monopolies. Most of the time, anyway.


Uber's not a monopoly. People can take a cab, or the bus, or the subway, or their own car, or get a ride from a friend, or take their bicycle, or motorcycle, or pedicab, or walk.


----------



## Driver8 (Jul 29, 2014)

No, it's exactly right. Uber keeps getting round after round of investment dollars, specifically in order stay in business while they keep spending money to hurt the competition.

Company A has $15 million in cash, courtesy of investors, that it can do whatever it wants to with, in addition to its revenue from operations.
It can use that money to give away its product for free, to entice potential customers to try it.
It can use that money as signing bonuses to lure away drivers from company B.
It can use that money as a rainy day fund to pay its other employees to stay on, when business is slow to grow and take hold.
They can operate at a loss, for a period of time, to keep their costs down (to consumers) until there's no competition left. 


Company B is running solely on its revenue from operations.

That's it. Unless B can get an influx of cash to fend off A's predatory practices, it's only a matter of time before they go down.


This is the going model for the past 20 years.


----------



## Lidman (Nov 13, 2014)

People seem to misuse the word "monopoly" quite often. I guess if there's a word to describe Uber, Lyft, Sidecar.... it would be a tripoloy. (If such a word exists).


----------



## Driver8 (Jul 29, 2014)

"slant drilling operation" would be a better description.


----------



## elelegido (Sep 24, 2014)

Lidman said:


> People seem to misuse the word "monopoly" quite often. I guess if there's a word to describe Uber, Lyft, Sidecar.... it would be a tripoloy. (If such a word exists).


Cartel


----------



## Route9 (Oct 29, 2014)

Yes, exactly. They keep getting extra funding. It can only be to out spend the competition to drive them under.

Uber had fierce competition in Anchorage. What did they do?
They gave 10 free rides to every new user. The cabs could not compete.
Funding let's you operate at a loss until the competition buckles.


----------



## UberHammer (Dec 5, 2014)

Lidman said:


> People seem to misuse the word "monopoly" quite often. I guess if there's a word to describe Uber, Lyft, Sidecar.... it would be a tripoloy. (If such a word exists).


Colonoscopy


----------



## Lidman (Nov 13, 2014)

UberHammer said:


> Colonoscopy


that sounds about right, uber does clean out it's system by crapping all over the drivers


----------



## John William (Jan 7, 2015)

Driver8 said:


> No, it's exactly right. Uber keeps getting round after round of investment dollars, specifically in order stay in business while they keep spending money to hurt the competition.


What makes you think Uber can do any lasting harm to the competition? Is Lyft facing cash-flow problems? Is their platform falling behind in functionality? Is Uber creating strong relationships with its customer or driver bases, such that they would hesitate to toss it aside? I know I wouldn't. Uber is the biggest player in the market right now, but they still provide transportation, a product that just _loves_ to be substituted. And ****, these are service companies we're talking about! A differentiated product is already baked-in.

Uber has scale efficiencies going for it, which means a higher margin, and so they get to toss their weight around in their small corner of what is really a much larger market. In terms of the transportation market, the product they offer is too mundane to ever wield significant power. It can be copied, profitably, by anyone. Without control over entry to the market, talk of a monopoly is nonsense.


----------



## Driver8 (Jul 29, 2014)

Yes, it can be copied by anyone ... but as long as Uber (or any company - in this case, it happens to be Uber) has the greater ability to rake in investor dollars, and retain control over the social networks (consumer behavior), Uber increasingly, effectively controls the market. 

With internet companies, monopoly is more or less the rule. Amazon. Wikipedia. Craig's List. Yes, there are others, but overall, it's the one that gets the biggest push in FUNDING that gets to own the market. There are dozens of way to control market entry to competitors, not the least of which includes buying someone out or partnering with them.


----------



## Route9 (Oct 29, 2014)

The conomic term is penetration pricing. 
Taken to the extreme, penetration pricing becomes what is called predatory pricing. This is illegal is some markets. However, many economist consider predatory pricing to be favorable to competition and a benefit to the consumer. Walmart has used it in many markets and drove many stores out. Some Walmarts were forced to raise prices in Germany.


----------



## John William (Jan 7, 2015)

Lidman said:


> People seem to misuse the word "monopoly" quite often. I guess if there's a word to describe Uber, Lyft, Sidecar.... it would be a tripoloy. (If such a word exists).


The situation described by the OP, wherein Uber has priced-out their competition and has the power to gouge consumers, is a monopoly. If the current peer-to-peer driving platforms were a discrete market (which they are not), then we would use 'oligopoly' to describe that market.


----------



## Driver8 (Jul 29, 2014)

Good article + discussion here -

http://www.nakedcapitalism.com/2014/04/matt-stoller-how-uber-creates-an-algorithmic-monopoly.html


----------



## Route9 (Oct 29, 2014)

Awesome article. 

Many never expected the failing of Blockbuster, Borders Books, Radio Shack, Kodak and Blackberry. But we live in times in which the rules of business are changing month by month. Sure there are plenty of taxis out there. But most will probably close in 2-3 years at that rate of change.

Uber ridership is growing at about 26% per month. 
So conversely Taxi use must be shrinking at a phenomenal rate.


----------



## LookyLou (Apr 28, 2014)

Driver8 said:


> Good article + discussion here -
> 
> http://www.nakedcapitalism.com/2014/04/matt-stoller-how-uber-creates-an-algorithmic-monopoly.html


"And let's be clear, when a company offers low cost financing for capital investment for independent contractors and controls all aspects of the transaction and customer relationship, these are no longer independent contractors. They are employees. Only in this case, they are employees who have taken on debt to work for Uber. Uber has figured out that it is cheaper to trick people into thinking they are independent contractors and get them to risk their capital. Then Uber can happily take the profits. I guarantee you, if Uber thought its capital would be best used to run a fleet of cars, it would simply hire people straight out to be drivers. That it's not doing that suggests something."


----------



## FlDriver (Oct 16, 2015)

This is not happening.

Uber will not put taxis out of business, but not all. I see taxis all the time. How is that possible, if evil Uber is destroying them?

Customers will put some taxis out of business by choosing Uber and other services. Some people will always prefer a regular marked taxi. They will think it's unsafe to get in a stranger's car that's not marked. Some don't have smartphones or aren't tech savvy enough to figure out the app. Or they'd just rather wave down a taxi when they see one nearby.

Best Buy didn't put Circuit City out of business. CC led to its own demise by being poorly managed.

Amazon is the largest online retailer, but it's hardly put the others out of business. There are new online stores popping up every day.

Seems to be a lack of understanding of how business works around here.


----------



## doyousensehumor (Apr 13, 2015)

Thead back from the dead!

Think of transportation as a whole.. almost everyone drives or is driven.. Uber is after a big slice of this sector. Even some car manifactures are concerned.

Uber has a formula they use every town they set up shop in... 

Phase 1 includes free promo rides because people are hesatant to try them. They skirt the local laws by using a play on words (IE they are an app company not transportion) they gain enough support/frustration locally the laws are changed to Ubers favor, with the help of lobbists and positive press. Even drivers, they are making decient money, for now. When Uber has ensured that there are as little rules as possible to keep the driver flocking in then they can go to the next phase.

Phase 2 is all about quanity, not quality. Lower prices until Uber rules a bigger chunk of the transportation sector, and more safe ride fees. Also this looks good to investors. The supply of drivers is "unlimited" for now, because like what was said in another thread, every 7 drivers that quit there might be 9 ready to take their place. This is largely because of the marking they are using to tell potental drivers. Lyft is considered 2nd place, and brings some concern, but taxis are a distant 3rd.

This is where we are now. I don't believe Uber is doing shit randomly. I think everything they do is planned and heading to a bigger goal as a business. I think there is a phase 3, 4, and 5. Might involve self driving cars, and competing against car ownership itself.


----------



## doyousensehumor (Apr 13, 2015)

FlDriver said:


> This is not happening.
> 
> Uber will not put taxis out of business, but not all. I see taxis all the time. How is that possible, if evil Uber is destroying them?
> 
> ...


The better cab companies will evolve. The attitude "its a cab, what do you expect" will have to go. They will improve service, which is more important than just adding an app. I too think there would be less cabs, but still there. The lesser ones may go out of business. Part of thier appeal may be they are more professional and experienced. Rideshare is more like your "friend or neighbor" As long as cell phone batteries die, and people use cash there will be taxis.


----------

