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Why Your Next Package Will Be Delivered By An Uber

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TechCrunch

[tc_contributor_byline slug=”ryan-petersen”]

Geographic saturation is the key to network effects and profitability in the ridesharing business.

The more drivers Uber or Lyft have in a given region, the faster the pick-up times, the better the customer experience and the more rider demand — which in turn allows drivers to earn more money and attracts more drivers to the network.

David Sacks best illustrated Uber’s positive feedback cycle last year:

If Sacks is right, that the ridesharing provider with the most geographic saturation ends up with the lowest costs and best rider experience, then the strategy is clear: Raise as much money as possible to subsidize both supply and demand in what, to some observers, appears to be a winner-take-all market.

But do Uber’s network effects really scale infinitely, or will they reach a point of decreasing marginal returns? Could…

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