http://www.usatoday.com/story/tech/columnist/2016/12/26/how--save--world-uber-and-amazon/95757208/
BOSTON - During a recent ride with ride-hailing service Lyft in Boston, one of us struck up a conversation with the driver, Victor, about how he liked his job. His enthusiasm seemed genuine.
He talked the entire way to the airport about the glories of Lyft - about how it cared about its drivers and wasn't just transactional, like its competitor, Uber. Lyft paid more, for instance. But not if you drove just a little, only if you logged nearly a full time job's worth of hours. So naturally Victor was working for Lyft exclusively and reaping the benefits.
Lyft had Victor right where it wanted him. It had turned him into a "single homer," as economists who study platform businesses would call him - a person who uses one service exclusively.
It's where every platform business - services that connect users on two or more sides of a market, like Facebook (users and advertisers), Apple's iPhone (users and content producers), and Amazon (sellers and buyers) - would like to have each of us: locked in, and at their mercy. But we'd all be better off if Victor and the rest of us would go from being single homers to multi-homers. Here's why.
Lyft doesn't pay near-full-time drivers like Victor more than Uber out of the goodness of its heart. Nor is it why credit cards offer cash back. No company wants to be your friend. Each is trying to keep you captive on their app, site, or card.
Platforms' search for ascendancy in any category involves a "virtuous" cycle of ever-more customers, making your platform ever more attractive than alternative options. Think of the telephone: one is useless for making calls, two is only slight more useful ("Mr. Watson, come here, I want to see you."), but a few million, and you have a network that everyone wants to join. Amazon is your go-to e-commerce destination only if it really is the Everything Store, and indispensable to merchants precisely because it's your go-to e-retailer.
Amazon could be a lot bigger than we think
Despite its $300B+ valuation, the company goes through streaks of making slim or even no profits, . Yet it continues to invest in efforts like Prime. Why? Most likely it's because once it's got enough of us locked in, Amazon is going to raise prices (in fact, it already has for free-shipping minimums).
Because once a platform is indispensable to both sides of a transaction - to the providers of a service and the purchasers - you have a license to print money. But it's even more insidious than that. Once a platform vanquishes its competition, it's near-impossible for a start-up to come in and challenge its dominance.
Continue reading beloow
You don't see Airbnb offering big discounts, because it doesn't have to.
AFP/Getty Images
We see the homesharing platform Airbnb exploiting its dominance already. It doesn't offer sweet discounts to lure customers or hosts, because it doesn't have to. It's already at least twice as big as the nearest homesharing competitor, HomeAway, so even without a discount it provides more value, given the greater choice offered to both hosts and guests.
So we, as participants in platforms' fight for world domination, have two alternatives. First, you can succumb, paying a little more for the convenience that loyalty to one platform can bring. Sure, things will eventually get worse and more expensive - perhaps at the same time. But you're willing to forego future choice for immediate convenience. Think about a world where every service is run by the equivalent of your Facebook newsfeed algorithm.
Then there's option 2. Each of us can do our part to make sure Amazon and others never get to the point of ubiquitous domination. It might introduce a bit of hassle and inconvenience into your life, but only a tiny bit. But by taking on this challenge, you'll be doing the job that antitrust authorities, in an ideal world, might take care of on our behalf - ensuring that consumers and workers, rather than the owners of capital and algorithms - get a piece of the surplus that's created by new business ideas.
Option 1 presents us with a pretty dire picture of what the future might look like. And option 2 - multi-homing - comes with very little downside, it's easy to do, and can also help us to overcome our inertia to find ourselves better deals. Think about those credit card teasers we all get. As long as we keep businesses thinking they need to chase after us to try to lock us in, they'll keep on handing value to us rather than using it to pad their bottom line
BOSTON - During a recent ride with ride-hailing service Lyft in Boston, one of us struck up a conversation with the driver, Victor, about how he liked his job. His enthusiasm seemed genuine.
He talked the entire way to the airport about the glories of Lyft - about how it cared about its drivers and wasn't just transactional, like its competitor, Uber. Lyft paid more, for instance. But not if you drove just a little, only if you logged nearly a full time job's worth of hours. So naturally Victor was working for Lyft exclusively and reaping the benefits.
Lyft had Victor right where it wanted him. It had turned him into a "single homer," as economists who study platform businesses would call him - a person who uses one service exclusively.
It's where every platform business - services that connect users on two or more sides of a market, like Facebook (users and advertisers), Apple's iPhone (users and content producers), and Amazon (sellers and buyers) - would like to have each of us: locked in, and at their mercy. But we'd all be better off if Victor and the rest of us would go from being single homers to multi-homers. Here's why.
Lyft doesn't pay near-full-time drivers like Victor more than Uber out of the goodness of its heart. Nor is it why credit cards offer cash back. No company wants to be your friend. Each is trying to keep you captive on their app, site, or card.
Platforms' search for ascendancy in any category involves a "virtuous" cycle of ever-more customers, making your platform ever more attractive than alternative options. Think of the telephone: one is useless for making calls, two is only slight more useful ("Mr. Watson, come here, I want to see you."), but a few million, and you have a network that everyone wants to join. Amazon is your go-to e-commerce destination only if it really is the Everything Store, and indispensable to merchants precisely because it's your go-to e-retailer.
Amazon could be a lot bigger than we think
Despite its $300B+ valuation, the company goes through streaks of making slim or even no profits, . Yet it continues to invest in efforts like Prime. Why? Most likely it's because once it's got enough of us locked in, Amazon is going to raise prices (in fact, it already has for free-shipping minimums).
Because once a platform is indispensable to both sides of a transaction - to the providers of a service and the purchasers - you have a license to print money. But it's even more insidious than that. Once a platform vanquishes its competition, it's near-impossible for a start-up to come in and challenge its dominance.
Continue reading beloow
You don't see Airbnb offering big discounts, because it doesn't have to.
AFP/Getty Images
We see the homesharing platform Airbnb exploiting its dominance already. It doesn't offer sweet discounts to lure customers or hosts, because it doesn't have to. It's already at least twice as big as the nearest homesharing competitor, HomeAway, so even without a discount it provides more value, given the greater choice offered to both hosts and guests.
So we, as participants in platforms' fight for world domination, have two alternatives. First, you can succumb, paying a little more for the convenience that loyalty to one platform can bring. Sure, things will eventually get worse and more expensive - perhaps at the same time. But you're willing to forego future choice for immediate convenience. Think about a world where every service is run by the equivalent of your Facebook newsfeed algorithm.
Then there's option 2. Each of us can do our part to make sure Amazon and others never get to the point of ubiquitous domination. It might introduce a bit of hassle and inconvenience into your life, but only a tiny bit. But by taking on this challenge, you'll be doing the job that antitrust authorities, in an ideal world, might take care of on our behalf - ensuring that consumers and workers, rather than the owners of capital and algorithms - get a piece of the surplus that's created by new business ideas.
Option 1 presents us with a pretty dire picture of what the future might look like. And option 2 - multi-homing - comes with very little downside, it's easy to do, and can also help us to overcome our inertia to find ourselves better deals. Think about those credit card teasers we all get. As long as we keep businesses thinking they need to chase after us to try to lock us in, they'll keep on handing value to us rather than using it to pad their bottom line