I don't think this is true. I think that the ridesharing market will become split between many interchangeable ride-sharing services. Three main reasons: (1) the barriers to entry for this market are actually very low, (2) it's hard for even a dominant company to differentiate itself from the competition, and (3) it is easy for both drivers and consumers to use all ridesharing services, to optimize pricing and wait times.
> the barriers to entry for this market are actually very low
How so? First you have to line up enough drivers to make it worthwhile, and then get enough app downloads by consumers to make it worthwhile for drivers.
Both groups will inquire about your differentiating factor, and to sign up on either side you would have to promise higher payouts to the drivers or lower prices for consumers, both at expense of your margins, which limits the scale of your deployment.
> First you have to line up enough drivers to make it worthwhile, and then get enough app downloads by consumers to make it worthwhile for drivers.
You're assuming that drivers/consumers will be exclusively using your service.
Few drivers are going to drive exclusively for your service. The assumption is that your drivers will already be driving for Uber, Lyft, etc. and will sign up with your service just in order to marginally raise their expected number of rides per hour (hoping that your service might get them a ride when business is slow on Uber, etc.).
Similarly, few consumers are loyal to exclusively one service. They don't care about the difference between Uber and Lyft, they care about getting a cheap ride, quickly. They'll try Uber for a ride. Maybe Uber will be surge-priced. They'll try Lyft, which might not have any drivers on the road. They'll try your service.
I'd say that, while this almost sounds like a reasonable argument to put forward, it isn't probably going to work that way.
Case in point: Gett in NYC. They are running a $10 flat fare anywhere in Manhattan, and promising drivers double pay for three months already. That should undercut incumbents as well as cause drivers to flee, right? Why is Uber and Lyft totally winning NYC while Gett is not even operating at 1/10th the scale?
I think it's got to do with liquidity and reliability. Even if the driver has 10 apps running, the probability that the driver gets the first/most ping from the app with the best client liquidity is extremely high. As long as he's constantly engaged, there is no need for him to open another app. On the flip side, when you're small, your supply runs out quick. If clients opening the app constantly see that, they'll eventually not open your app and go to one with the most supply liquidity. There are strong network advantages in this game. Your paper mostly discounts that.
Right, I'm not saying that acquiring both is impossible, I'm just saying it's not free - someone has to recruit drivers, hopefully in more than one city, someone has then to recruit their first thousand of consumers, make them aware of the app, possibly expand by introducing a referral program and giving away the first ride (seems to be the incumbents' preferred technique, so it probably works).
Which tends to involve human costs, so for anything of scale this is not a low-barrier business to enter.
You can probably start a regional competitor fairly cheaply though, as examples of GrabTaxi, Gett or Yandex.Taxi show.
Not free: okay, sure. But the barriers aren't that high. Let's take a look at the capital expenses: setting up some re-targeted advertisements isn't very expensive at all, and giving away a thousand rides at an average ride-cost of, let's say, $25, is only a $25k expenditure.
To recruit drivers (maybe in more than one city) might be a little expensive, just in terms of a time cost. If you're paying recruiters, that might cost a month or two of salary for every city you're launching in. Alternatively, some of these employees might just take an equity share in your startup.
The last big part is the design of an app: this could take a handful of competent engineers perhaps one or two months. This might be your biggest expenditure (a team of 10 might cost you $100k/month), but it might also be possible to pay them (partially) with equity.
I would wager that you could start up a competitor regionally (or perhaps even in a small number of cities) for less than $1M, which is a modest amount in the current tech. climate (specifically w/r/t/ venture capital). Especially considering the potential returns, it seems likely that some entrepreneurs will go for this.
And concerning regional competitors: yes, certainly. And it only takes a couple of competitors in every major city to make it very difficult for Uber to hold on to a monopoly or majority market share... :-)
I wrote a piece on this just a few days ago. You can read it here: http://johnloeber.com/w/uber.pdf