Overview and Future Development of the Ride-Sharing Market: BlaBlaCar and Uber
BlaBlaCar and Uber are two comparable examples of platform-mediated networks that have revolutionized parts of the transportation industry by connecting drivers with passengers for travel purposes without owning a car fleet. In essence, the platforms offer means of communication between the drivers and co-drivers to agree on transportation activities. Thus, positive cross-side network effects are predominant, when considering that passengers benefit from a higher participation of drivers, since it increases the number of possible rides. Hence, an increased user base helps the companies to set themselves apart from competitors. Nevertheless, switching costs are considered to be very low if rivals enter the market. Overall, the platform’s value is exchanged in a triangular set of relationships between demand-side users, i.e. passengers; suppliers of the service, i.e. drivers; and the platform itself. The platform hence takes a role of network orchestrator bringing together supply and demand for car rides.
To the present day both companies have mainly build on word-of-mouth and social media advertising.
They focus on offering low transportation costs when compared to other travel services and have gained high media attention in the relative recent past. This was mainly brought about by vast financing rounds as well as their current company valuations.
Nevertheless, the companies’ offerings differ with regard to their users’ transactions. On the one hand, BlaBlaCar connects drivers to share their pre-planned long-distance rides with fellow passengers in order to share their costs. In general, BlaBlaCar benefits from the growing trend of sharing between private individuals. On the other hand, Uber offers a platform connecting drivers with passengers who wish to be transported from A to B.
These differing models entail divergent legislative and competitive environments. Since BlaBlaCar circumvents legal issues by not allowing drivers to make a profit, competition is increasing in this field. This will in turn lower the firm’s margins in markets, where it charges service fees, if it cannot outperform its rivals by an unbeatable user base or other valuable features. In contrast, Uber has faced various legislative issues up to the present. In particular, it has faced ongoing protests and legal actions against it operations. Among the main arguments against its service offering are: unsafe conditions for customers, unfair competition, uninsured drivers and non-transparent operations. Consequently, the future of the market highly depends on how the legal framework is shaped by governmental institutions. Moreover, competition arises in those countries and cities, where no legal constrains exist. Hence, the future development of Uber depends on the company’s ability to maintain a high-quality service offering that provides value added in comparison to cheaper copycats. Once competitors strengthen their position in Uber’s markets, the company will have to adjust its margins in order to stay price-competitive in the long run.
Technology of the week, Team 44
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