This is very much a theory. If the companies are not able to create a network effect, much of their valuation is not defendable.
I personally believe they do not have a significant network effect. They have a brand. But they do not have a network effect.
When I search for flights, I start with JetBlue. I have the most points there, I generally have good flights, and they have the most flights out of my local airport. That's the power of a brand. However I'll go to Hipmunk and start looking for alternatives if the JetBlue options don't look great. If something is better, I'll buy that.
On the other hand, I really don't like Facebook. Yet, there is nothing I can do about dragging my friends to an alternative. That's a network. There is literally no value for me to be on a Facebook alternative because my friends are not there.
From my experience taking rides in Uber/Lyft, it seems like many drivers are using both. Customers are often aware of both. I have used both.
While it is true you need a minimum network size to ensure that rides are available, I don't think the network is exclusive. You need a minimum amount of capital to buy airplanes and setup of a network of flights, that doesn't naturally lead to a single airline.
It's interesting to see the difference in branding effects in reference to price and "decisioning time". Take potato chips for example. We are probably willing to invest maybe 15 seconds into the decision about potato chips. We generally stick with whatever branding is freshest in our minds because the cost of choosing the wrong one is negligible. Meanwhile, we are willing to spend hours comparing airfare across the half dozen different portals/airlines.
I would suggest that branding is much more effective than pricing is for potato chips than it is for air travel.
Where do Uber/Lyft fall on that spectrum? My guess is that if prices are low enough there are plenty of brand based decisions. If the prices go up then people will open both apps and compare.
There is no Hipmunk for Uber/Lyft. That's one reason the network effect is stronger. And while many people check both services now, that's because they are both still floated by tons of VC money.
One we reach the tipping point -- let's say Uber wins -- you will be as likely to check Lyft as Sidecar. When was the last time you checked Sidecar? Exactly.
I think there is a huge difference between being a monopoly and a duopoly. The fact that Lyfy can exist, and it is (at least currently) easy for both drivers and passengers to switch, makes it so uber cannot institute monopoly pricing. The best example of a network that can would probably be Ebay. Uber is definitely no Ebay, and I doubt it ever will be.
It is not going to be a duopoly forever. The current duopoloy is sustained by massive VC funding. In time the network effects and other advantages of size will lead to one winner taking all (in theory).
I personally believe they do not have a significant network effect. They have a brand. But they do not have a network effect.
When I search for flights, I start with JetBlue. I have the most points there, I generally have good flights, and they have the most flights out of my local airport. That's the power of a brand. However I'll go to Hipmunk and start looking for alternatives if the JetBlue options don't look great. If something is better, I'll buy that.
On the other hand, I really don't like Facebook. Yet, there is nothing I can do about dragging my friends to an alternative. That's a network. There is literally no value for me to be on a Facebook alternative because my friends are not there.
From my experience taking rides in Uber/Lyft, it seems like many drivers are using both. Customers are often aware of both. I have used both.
While it is true you need a minimum network size to ensure that rides are available, I don't think the network is exclusive. You need a minimum amount of capital to buy airplanes and setup of a network of flights, that doesn't naturally lead to a single airline.