Uber’s Network Effects and Marketing Strategies of Competitors
Uber has become one of the fastest growing startups in the world. Uber is an online transportation network company that manages the Uber application. The Uber application allows its users to request or share rides from Uber drivers. As of now, the application is currently in 66 countries and 507 cities. Uber is
Uber is slowly expanding city-to-city as the value of the product is dominated by network effects. When there are network effects, a customer’s willing to use or pay for a ride is based on their own personal interest in using the application and the number of other people using the application. Uber becomes more valuable when there are more people, specifically more drivers, using the product. If there are more drivers, users have a shorter waiting time for rides. There is also a sort of indirect network effect if there are more users and not just drivers using in the application. As more users bring more drivers to the application, it is beneficial for more users and not just more drivers to use the application. Uber’s growth cannot just be attributed to network effects. They offer a real solution to real problems, making a customer’s own personal interest, or reservation price before network effects, to be quite large. Then with network effects, the customer’s reservation price to use the service is quite high.
To create network effects however, Uber utilized a strategy of “early adoption” to get past the “tipping point” of growth. They did this by sponsoring tech events, providing free rides, and relying on word of mouth. Once Uber was able to get past the “tipping point” they started growing towards “q double prime”.
Despite Uber’s hold on the mobile ride-sharing market, there are many emerging startups which are utilizing similar market strategies that may lead them to challenging Uber in the future. A new startup called Juno is offering lower commissions and equity to its drivers. This is clearly an attempt to get past the “tipping point” in growth and to take advantage of network effects to further expand growth. It remains to be seen is Juno or any other competitors are able to get past the tipping point, however.
https://www.bloomberg.com/view/articles/2016-06-29/uber-isn-t-going-to-conquer-the-world
https://growthhackers.com/growth-studies/uber