The Uber model, it turns out, doesn't translate

(Andrew Chen) #1

Why “Uber for X” turns out to be super hard.

The NYT covers it:

(Phil Anderson) #2

This isn’t surprising to me, Uber and AirBnB work well because they are undercutting a government regulated service. When prices/standards become regulated by the government, you can disrupt them with lower prices and better service. They were also taking on activities that people were already doing and not served well in many markets; taking taxis and staying in hotels.

Things like grocery delivery are unregulated and not currently an existing activity. So there is nothing to undercut, it’s purely a luxury service. The main twist between this idea that also came up in the last dotcom boom (Webvan) was that we’re not buying dedicated trucks and warehouses, but using existing infrastructure. That makes it better for the business, but not the consumer.

With Uber, my taxi ride is cheaper and more convenient.
With AirBnB, my hotel is cheaper and nicer.

There are nothing but positives for the consumer in both of those business models. With Instacart or Postmates it’s awesome for me, but a luxury, which limits it’s growth. And even with luxury pricing, it’s still razor thin margins for the workers which makes the supply-side hard.

Startups that aren’t providing these values will only be able to cater as a luxury.

(Andrew Chen) #3

Absolutely. Sarah Tavel make similar points here:

(Declan Dunn) #4

Always interesting to see the venture cleansing that happens. One of the most obvious, and overlooked, points for me in the article is the fallacy of applying a mass model with high margins to “low-frequency and low-value areas.”

When investing gets hot, details fade, and words like Uberfication almost become bullet point validation - fascinating how this repeats, though one original idea might create a good business, it also creates 1000 cliches who try to copy parts of the model - an inherent part of networked economies, and a great way to get money in focused investing periods.

I’m the Uber of this or that sounds silly now…I’m old enough to remember a company who said they were going to be bigger than the Alta Vista of search engines…wait, that was Google. So it’s always possible that one of these ideas explodes, what’s intriguing is how the Uber concept became the starting idea for so many businesses, regardless of margins or frequency which are core elements…

Perhaps we have to overhype a model often to create a few breakthroughs, though it’s interesting how the lack of learning in markets like food delivery, and service delivery, are repeated. Reminders of Webvan’s promise and demise, because food delivery only works in a few cities, become lost in the Uberfication of business focused on the many ways to deliver food, or get you from place to place.

In the end, it’s attempting to discount your way into a business with investment funds, and when that ends ironically prices rise and quality falls.

Amazing how one idea can be used as validation for so many others
(this graphic from those early days includes so many derivations)

It’s not my intent to bash any of these companies, it’s easy to look back and say
it doesn’t work. You can’t pivot out of a bad business model, that’s how we learn.

And we’ll all try to remember that when we’re using another company’s
name as a verb for what another business does, that we really understand
how that other business did it, by margins and frequency.

(Kedar) #5

Agreed. Right now the economy is doing well, but when we inevitably hit the next recession period, there’s no way (especially millennials with entry level positions/low salaries) will continue to pay $12 per meal delivery and the premium fees for grocery delivery.

Something that (I think) is not emphasized often is that Uber had an incredible team from the absolute beginning. Even with its instant product fit, there’s no way some college CS major was going to develop a fully functional ridesharing application, and have Sacca and co being the first users. They had the proper means and network to get it off the ground way faster and effectively.