Can Uber ever become profitable?

11

October

2022

5/5 (1)

Uber is a company that has been talked about a lot. When we talk about platforms in business schools, Uber is one of the most frequently cited examples. We might think of Uber as a successful company because we have heard about it so often, but I would argue that this is not the case. In fact, Uber has suffered immensely with profitability. Despite having its best ever quarter in terms of revenue in Q2 2022, it still racked up losses of 2 billion dollars (Browning, 2022). So let’s look at a couple of possible explanations why Uber is struggling with profitability.

First, Uber is a two-sided platform, with drivers on the one side and riders on the other. One of the reasons why Uber has struggled to make a profit is that people on both sides can switch between different platforms easily. For example, in the US it is not rare to see drivers with both Uber and Lyft logos on their cars (Santoro, 2018). The drivers have both apps and can easily compare to see which one offers a higher fare. If they are not happy with Uber, they can change to Lyft in a few seconds. Same goes for the riders. I find myself doing this quite a lot as it takes only a minute to check across multiple platforms for the cheapest ride or the fastest pick up time. Because the switching costs are low, Uber faces a problem of retention and has to compete for both riders and drivers.

Second problem with the Uber business model is that it is fairly easy to imitate and barriers to entry are low (Cohan, 2019). We have seen lots of local competitors copying the business model. Examples of these are Yandex in Russia, DiDi in China, and Bolt, an Estonian company, with strong presence in Europe (Keane, 2022). Tough local competition combined with low switching costs means that prices are pushed down, customer acquisition becomes more expensive, and Uber (along with the whole industry) faces challenges with profitability. Due to these reasons I believe that Uber will continue to struggle with profitability in the foreseeable future. Do you think that the business model and industry characteristics are such that there is no way for Uber to achieve sustained profitability? Or do you see Uber sustaining profitability in the near future?

Browning, K. (2022, August 2). Uber Posts Record Revenue but Loses More Money From Investments. The New York Times. Retrieved October 8, 2022, from https://www.nytimes.com/2022/08/02/business/uber-quarterly-earnings.html

Cohan, P. (2019, April 13). Why Uber Lacks A Sustainable Competitive Advantage. Forbes. Retrieved October 8, 2022, from https://www.forbes.com/sites/petercohan/2019/04/13/why-uber-lacks-a-sustainable-competitive-advantage/?sh=17c3307f2065

Keane, J. (2022, March 1). Uber And Bolt Sever Links To Russia But Didi Stays Put. Forbes. Retrieved October 8, 2022, from https://www.forbes.com/sites/jonathankeane/2022/03/01/uber-and-bolt-sever-links-to-russia-but-didi-stays-put/?sh=2553c50c75c4

Santoro, P. J. (2019, June 11). Uber Switching Costs Could be A Lyft. C[IQ] Customer Intelligence Solutions. Retrieved October 8, 2022, from https://www.c-iq.com/blog/2018/11/2/uber-switching-costs-could-be-a-lyft

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Can Signal disrupt Whatsapp?

2

October

2016

No ratings yet. A few weeks ago I heard a friend of mine: “I am now using Signal instead of Whatsapp, because Signal is more secure.” Then I thought by myself is it really that bad to still use Whatsapp?

When you look at the properties of Whatsapp and Signal they are pretty much the same. The only thing that differs is the fact that Signal is an open source platform. Herewith, they want to guarantee security by enabling anyone to audit the code.

Signal makes it seem like they are the only platform that really protects messages from users by using end-to-end encryption. This means that you and other participants of the conversation are the only ones who can see the messages. But Whatsapp also uses end-to-end encryption. So why should Signal be safer to use than Whatsapp?

I don’t know why. One thing I do know is that Whatsapp still has a lot more users than Signal. Therefore, Whatsapp has a larger network effect compared to Signal; the value of Whatsapp is much higher because they have more users. That’s also why I am still using Whatsapp because all my friends are using it. When I decide to switch to Signal it takes a while for I can take advantage of that again. Furthermore, I am used to work with Whatsapp. Switching costs are high; because when I switch to Signal I have to learn how to work with it (although it will probably work almost the same).

Another communication app, Telegram, also tried to disrupt the market but they not really succeed. They could not compete against big competitor Whatsapp. Now I am wondering if Signal will be a failure too or can it push Whatsapp out of the market? If yes, how long will it take? What do you think?

Sources:

https://itunes.apple.com/nl/app/signal-private-messenger/id874139669?mt=8

https://androidworld.nl/apps/signal-private-messenger-snowden/

http://www.nu.nl/apps/4207675/whatsapp-heeft-1-miljard-gebruikers.html

http://www.pcmweb.nl/nieuws/privacy-vriendelijk-whatsapp-alternatief-heml-stopt-ermee.html

https://theintercept.com/2016/06/22/battle-of-the-secure-messaging-apps-how-signal-beats-whatsapp/

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