Uber in the Light of Informational and Direct-Benefit Effects
Uber is a ride-sharing company that launched in 2009, that had many doubts and concerns about its outlook in the start. However, at 5 years old at 2014, the company had reported value of $40 billion, and is still growing in terms of market size and popularity. Uber heavily benefits on the informational and direct-benefit effects, especially since it is the middle-man who connects owner-drivers to customers, and thus dealing with two groups or networks of people.
Informational effect, as we learned, induces the conformity of the people in a network through the behavior of others and the information that they convey in their behaviors. Thus, the people who did not conform already finds the appeal in the information the conformed people convey. This effect provides Uber significant benefits. Since it is the intermediary in which recruits drivers to accommodate the customers, the information that the company is growing in size, and that the demand for this service is rising would attract more drivers to join the company, hearing about the profits other drivers make under Uber. In turn, the increase in the number of drivers would attract the users in the area through direct-benefit effect. Users would want to use the service more if there are more drivers, since the wait time and the availability and accessibility to the service would be reduced. Thus, for their own benefit in using Uber, compared to any other modes of transportation, they would be inclined to use Uber even more. Lastly, completing this ever-beneficial cycle, more drivers would be inclined to join Uber for their own benefit, as the number of users of the service, and the market as a whole is growing. Thus, as an intermediary, Uber benefits significantly from these crowd behaviors between the drivers and the users.
Article Link: http://www.nytimes.com/2014/06/14/upshot/ubers-real-challenge-leveraging-the-network-effect.html?_r=0