When Sidecar, a top three player in the market, shut down earlier this year and sold its assets to General Motors，Many people think that the war in the shared travel market seems to be over，The common belief is that Uber is destined to become a market monopoly。

But recently，Lyft and Didi receive billions in investment,Many people have questioned this view，And start thinking: can there be multiple players in this market?

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The New Yorker had an article earlier this year arguing that technology-driven industries cannot support multiple players，Competitive trends in Silicon Valley point to a monopoly winner。

The main reason for this is the network effect economy - that is, the value of a product or service increases with the number of people using it。Network effects on Facebook 、Companies like eBay and Skype are everywhere，Each is a monopoly in their own field。

The second reason for the existence of Internet monopolies is zero marginal cost distribution - providing an additional unit of goods or services does not increase the total cost。Except for the negligible cost of increasing bandwidth， Google and Snapchat cost essentially zero to serve a new user。

These two forces together，Form a virtuous cycle。Once the service becomes popular，It creates more consumer demand。Since the cost of providing the service is largely zero，It is easy to attract new users to the service。These new users make the product more valuable，In reverse，Attract more users。This cycle，Making the Internet a breeding ground for unfair competition。

Mentions of technology companies，Law professor Tim explains: “In the long run，Competition is an anomaly，Monopoly is the norm”。This is why we see so many near-monopolies on the Internet，Like Facebook 188bet sports betting app download 、Google、Wikipedia、 LinkedIn、Craigslist、Amazon and Twitter 。In fact，At first glance，The technology industry is really a “winner takes all” market。

This view largely supports why Uber is valued at 12 times that of its rival Lyft，And its revenue is only 4 times that of Lyft。

New counter-arguments

With the recent total financing of Lyft and Didi exceeding US$2 billion，It seems investors are not ready to admit defeat，This may be wise，Uber is flawed on both key points supporting the “winner takes all” theory discussed above。

As pointed out in the Quartz article，The first mistake is not understanding that there are two different network effects。

The first type of network effect is called "demand side network effect"。In demand-side network effects，Every new user added，The value of the product or service will directly increase due to the increase of this user。Facebook is a perfect example—you join Facebook，Because all your friends are there。From an economic perspective，Demand-side network effects are the game changer，Because even a small competitive advantage can quickly snowball into a deep-rooted competitive advantage。

Another type of network effect is called "supply-side network effect"。In the network effect on the supply side，Increased use of product or service，No impact on direct utility to users，But it produces valuable free products and services。A good example of this is the mobile phone operators。The more users an operator has，The more they can afford infrastructure investment。The better the infrastructure，The better the service quality。In this case，The number of users indirectly affects customer choice: people join an operator not because their friends are there，But which operator has the best service。

Uber’s example is the same。The company’s competitive advantage mainly comes from the number of drivers on the road and the number of cities in which it operates。Both of these are supply-side benefits。

However，Although the network effect on the supply side has its own advantages，This is not an insurmountable competitive advantage。In this particular case，The way to challenge it is to buy scale — attract more drivers，Open to more cities，etc. ...

Competitors such as Lyft，Doing something like this，And has raised 2 billion US dollars。

In fact，Lyft CEO John thinks，188bet app download "In the transportation industry，Especially our business，Has a strong network effect，But only to a certain extent。”Specifically，John discovered，"Once you can pick up customers within 3 minutes，There are no additional benefits to having more people on the network。”

The second mistake of the “winner takes all” theory is，Unlike many technology companies，Uber does not have a zero marginal cost effect。While the company’s business model has eliminated many of the costs associated with the traditional taxi business，Such as vehicles and vehicle maintenance、License、Insurance、Gasoline and driver’s salary and benefits，Marginal cost still exists。

A look at Uber’s leaked financial data，We found，In the second quarter of 2014 their “cost of sales” and “operations and support” totaled $49 million，The corresponding income is only 58 million US dollars。Traditional accounting standards treat these as variable costs，This and the additional 1 are charged as fixed costs.$1.5 billion marketing cost、R&D and general overhead are separate。

Although the document does not list the cost line by line，But it’s easy to speculate，A large part of these expenses are directly related to the expansion of their service products。For example，Uber launches in every new city，It must create a local team to deal with specific politics、Regulations and Consumer Preferences。Uber may also spend a lot of money to acquire new drivers，includes marketing、Rewards and bonuses、Screening and background checks。final，Uber wants to provide insurance for drivers，This is also the direct marginal cost。

And if rulings like the one in California—where a judge found that Uber drivers were actually employees—are adopted across the country，Then marginal costs may soar。According to some analysts，If medical care is provided、Unemployed、Work injury，Payroll tax、 401K 、Vacation and mileage reimbursement、Gasoline and tolls，Marginal cost will increase by an order of magnitude，The company will pay an additional 1 for each driver.30,000 US dollars (i.e. 4.1 billion US dollars per year)。

So，Although zero marginal cost is one of the main factors for technology companies to obtain monopoly status，It does not exist in the shared travel industry。

188bet app In summary，Investors are beginning to realize that Silicon Valley’s view that the shared mobility market is a “winner takes all” market has two flaws: 1) There is no demand-side network effect; 2)The actual marginal cost is not low。

But Uber is far from a taxi service，Uber can do more!

Some Silicon Valley experts would say，It is myopic to focus on the ride-sharing market，Uber will evolve into a universal “technology tool”，Will rekindle the virtuous cycle of network effects，Has reached global monopoly。

For example，Many people in the industry believe that，Uber can create a full-service “urban logistics network” ，Fully own the coveted “last mile” of delivery services 。With UberRUSH (Express)， Launch of UberEATS (food delivery) and UberCargo service (movement)，The company seems to be heading in this direction。

But even Uber can realize its dream of owning the “intersection of lifestyle and logistics”，Does this change the underlying economic principles?

Will Uber gain immediate demand-side network effects??Most people don’t care who provides the service，As long as they can get there on time。So this brings us to where we started......Have scale advantage，But they come from the supply side。Considering the experience and scale of existing players in the market such as FedEx and UPS，Competition may not disappear as soon as many Uber bulls believe。As FedEx CEO Fred Smith said: "I think it's just an urban myth，Saying that Uber has changed the basic cost structure of the logistics industry to some extent。”

Will Uber achieve zero marginal cost immediately?No，It will face the same cost structure issues as discussed above。

Some people think，Autonomous vehicles will become the key to gaining monopoly status，But even this is not a panacea。If Uber continues on this road，and owns these assets，Then the cost may increase。If it takes the path Lyft is taking，Outsource car ownership to someone else，Some costs still inevitably appear somewhere in the value chain。In the words of Milton Friedman (Note: Nobel economist)，There is no such thing as a free lunch，No matter what type of vehicle you use for transportation, it goes against the principle of zero marginal cost distribution — even solar-powered self-driving cars。

Once Uber expands its current 188bet online sports betting service categories，Competitors will have time and space to complete their own logistics framework，And build advantage in areas Uber missed。Is it FedEx， UPS ， Instacart ， Deliv ，It doesn’t matter whether Amazon or Lyft — the real question is that there’s still room to compete。

Anyway，The maturity of technology and other derivative services will provide opportunities for more players to enter this industry，instead of less。

Value investing in Silicon Valley?

When Uber’s slogan changed from “Everyone’s Personal Driver” to “The Intersection of Lifestyle and Logistics”，Without a doubt，It does this to position itself as a technology company，Like Facebook、LinkedIn is the same as Twitter，Thinks that it can easily use the virtuous cycle of network effects to monopolize the market。

But，Let’s think about it for a second: this is 2016，Any company that has a chance of long-term success，This or that，Both are a technology company。If you don’t take advantage of technology，You are already dead。

Therefore，While the ride-sharing market and logistics may have evolved beyond being a strictly analog market，(for example，It will not go through history in our hotel、The level of competition seen in the airline and/or car rental company market)，But it is not strictly a “digital” market。As long as network effects remain on the supply side，As long as expansion requires marginal cost，As long as the threat of regulation remains，Then Uber cannot become a true monopoly，Like some Silicon Valley insiders hope。

In fact，As John pointed out，Lyft “is gaining increasing share in all top 20 markets”，If one player has a complete monopoly，This can’t happen。

Therefore，Given all this potential competition—in fact，Both the shared mobility and logistics markets may be able to support multiple competitors，What impact does this have on Uber?Is it worth the price of 70 billion US dollars?

Okay，I will not comment on this now，But what I want to say is，Many investors，Even the notoriously conservative NYU professor Damodoran ，Seems to think so too。

But，Perhaps the more important question in all this is: if you believe Uber is reasonably valued (or at least close to it)，So why Lyft，The valuations of Didi and GrabTaxi are much lower than it?

After all，These companies have 188bet Online Sports Betting and Casino established similar infrastructure，Lyft controls more than 40% of the market in San Francisco, Uber’s home base，Income is 1/4 of that and valuation is 1/12 of that; Didi is known as (Note: because Joy Capital invested in China Private Car，To remain neutral，I can only chuckle，"known as") has 87% market share in the lucrative Chinese market，The valuation is 1/3 of Uber ; Ola，claims to have 80% market share in the Indian market，The valuation is similar to Lyft。

Considering these differences，Maybe old-school value investing has its place in Silicon Valley...

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