UBER & LYFT remind me of the Airlines.
Despite their natural oligopoly, most Airlines have Bankrupted several times over the past 30 years ..... Why?
Because both have massive fixed costs, and Airlines used to compete on Revenue/miles flown rather than managing their PNLs to a rational ROIC. If one undisciplined player irrationally lowered prices to gain share, everyone else had to follow
Airlines and Ride Sharing have no barrier to entry: THE CONSUMER WILL CHOOSE THE LOWEST COST PROVIDER in getting from point A to point B Airline history has shown where profitable routes exist, boutique competitors will pop up to arbitrage the spread
Price wars are great for the Consumers, not great for the Workers who provide the service, and Catastrophic for the balance sheets of Companies. In order to maintain share, companies burn cash, take on debt, and earn negative ROICs until they are forced to restructure
Typically, recessions hammer consumer usage of elective transportation, which causes enough cash bleed to catalyze an industry restructuring
As opposed to Google, which is a winner take all network for search ads (like V/MA in payments), Ride Sharing networks are very different. Like Airline and Car Rentals, it’s too easy to compete in profitable markets
Bring on the WeWork!