On the Ride-Sharing Economy...
Originally posted as a Tweetstorm here.
Lyft is going public (S1 here), which gives us an opportunity to peer into the future of ride sharing globally. Time to whip up a palantir and guess how this might evolve.
My initial guess: there'll be other big players in the space.
Ride-sharing is a riders <> drivers/cars marketplace w/ network effects, but with nuances:
Supply (vehicle time) expires if unused
Local, trading is in a small set of zip codes
Real-time;
Similar to travel/hotels/other marketplaces like digital advertising. Further, Uber and Lyft are ‘Blind marketplaces’, connecting riders and drivers, earning an unstated a.k.a blind arbitrage (Check this out). Uber/Lyft are best served by owning the relationship + pricing with both the rider and driver (vs. letting rider/driver agree on price).
“Blind” Revenue sharing, as run by Uber/Lyft
Competition is low here. At the same time, in many geographies, Uber etc. co-exist with local, old “yellow cab” companies. These are mostly cab aggregators with a driver-friendly setup & expensive rides, but availability is high for users that pay a premium. No real "Rider-aggregator" anywhere. In this environment, platforms like Uber/Lyft acquire demand/supply & build a marketplace. But a blind arbitrage has inefficiencies:
Some users feel overcharged/drivers feel underpaid;
Some will want to pay a premium to get prioritized;
Drivers without riders might want to drop prices further etc.
Eventually, riders will want a ‘Rider Platform’ to compare options + find the cheapest ride available i.e. the ‘Expedia of cabs’. Users do this manually, almost always, and Google maps already does a basic version of this. I believe there will be several 3rd party platforms.
Drivers will gravitate to ‘Driver platforms’ that standardize the driver experience like old yellow cab cos. did, but will compare options to get the highest price (i.e. the ’Marriot of Cabs’) No player who does this in the US today, though there’s aggregation globally.
Meanwhile, Uber/Lyft will stay averse to "baggage" of demand or supply-side assets as neutral marketplaces, i.e. exchanges. Whether they’ll be “open” exchanges for other Rider/Driver platforms to plug-in is a separate matter: other companies like them globally might.
Irrespective, rider platforms will aggregate from Uber, Lyft (if possible), and possibly other local competitors to bring users a price comparison and options: Pooling, fixed price/premium pricing, membership, app UX etc. Who wouldn't like an app that pools riders better? Additionally, Driver platforms should emerge and solve for price comparison on the other side in a similar manner, and additionally: driver training, premium experiences, revenue sharing w/ drivers, loyalty programs, rider experience standardization.
Rider and driver platforms should ideally plug into a central set of “exchanges” (a-la Uber/Lyft) through APIs to clear real-time transactions. It appears these APIs exist in some form, though I could be quite mistaken about their function.
With real-time clearing and matching across all riders/drivers enabled, the issue of ‘blindness’ will resolve itself; Additionally scaling globally with little or no localization becomes possible for Uber/Lyft and other similar companies.
All said, unlikely Uber/Lyft will become open marketplaces for the standard car-share anytime in the near future. More likely this will play out in other parts of the market: non-standard ride exp. etc., spawning companies along the way.
Thoughts? How right/wrong is this read?
