Thread by @OmgItsSmart

To me, the critical long-term question for $LYFT / Uber is whether they can ultimately raise price without A) killing demand elasticity & B) inviting new entrants. The latter depends on how strong ridesharing network effects are... & I’m increasingly unsure about this. 3 issues:

1) Ridesharing networks are local, not national.

This one is obvious to anybody’s who’s taken Via or Juno in NYC. Not necessarily a dealbreaker - Yelp is local too and they’ve been fine + there are some advantages to a national ridesharing network too (i.e. when I’m traveling)

2a) Ridesharing networks are rivalrous

This is critical: there is a local maxima in utility. Beyond a certain scale, wait times / utilization depend on the *relative* number of riders to drivers, not the absolute.

2b) In NYC, even small entrants like Via can easily hit the local maxima. Wait times are the same as in Uber... and 5 minutes is “good enough”

Meanwhile, non-rivalrous networks have far more runway: Yelp in NYC still gets better every day as consumers write more reviews

3) Ridesharing networks coordinate commoditized supply and demand. One ride is the same as another

Other rivalrous marketplaces like AirBNB and Expedia still have runway to improve over time by acquiring *diverse* supply (e.g. by pricepoint, amenities, neighborhood, etc.)

I doubt Uber / Lyft will be threatened with imminent competition at current prices - Juno looks to be struggling, etc.

But if their master plan is to ultimately raise prices by 50% (the most obvious way for Lyft to get to its 20% EBITDA margin target)... well, I’m concerned