> but that booking a ride costs Uber pennies. Their share of the ride revenues is dollars. How is that not going to be super profitable once new market development costs ramp down?
Yes, booking the ride costs pennies, but actually providing the ride costs them dollars. The question is how many dollars do they need to charge customers and pay drivers to maintain them both, and whether that calculation leaves Uber (or any other of these services) any profit. This is where the 'low barrier to entry' argument comes into play; it is so easy to enter this market combined with the fact that both drivers and customers can (and already do) swap to the service with the best financial benefit to themselves. It remains to be seen what the steady state of this equation is.
Booking rides doesn’t cost them dollars. Whatever the customer pays, Uber skins a few bucks off of and sends the rest to the driver. The entire costs of providing the actual ride falls on the driver, Iber just pays the cost of their software platform, which again, is pennies per ride.
Ultimately drivers will make what the market will bear. If they don’t make enough, driver count will fall, Uber will raise rates to compensate, until equilibrium is reached. And the business will go on, every ride costing Uber a few cents to dispatch, and then still skimming a couple bucks from the amount paid the driver.
Yes, booking the ride costs pennies, but actually providing the ride costs them dollars. The question is how many dollars do they need to charge customers and pay drivers to maintain them both, and whether that calculation leaves Uber (or any other of these services) any profit. This is where the 'low barrier to entry' argument comes into play; it is so easy to enter this market combined with the fact that both drivers and customers can (and already do) swap to the service with the best financial benefit to themselves. It remains to be seen what the steady state of this equation is.
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