Sidecar and the ride sharing wars

As the ride sharing wars begin, one thing I’ve been wondering is whether we’re headed toward a monopoly like situation where one well branded and quickly scaled company with a great user experience dominates the market.

I ponder this question the week after Ridesharing startup Sidecar announced that it had picked up $10 million in new VC, atop the $4 $10 million it had already taken in. The company is competing against Uber and Lyft as the ride sharing market begins to get staked out.

Union Square Ventures’ Fred Wilson went right at this very question on his blog. USV is an investor in Sidecar:

While we believe in network effects and the defensibility and leverage that comes from them, we have never subscribed to the popular theory that one single company can leverage network effects to “run the table” on a large market on the Internet and Mobile.

I have had concerns that the share economy in general is vulnerable to one fast moving startup with a great user experience locking up a market due to network effects, and access to supply.

This is what is effectively happening in vacation sharing where Airbnb is slowly dominating the market, country by country (Some would argue that Home Away and VRBO offer competition though both tend to be high end vacation rentals, and aren’t focused on urban areas the way Airbnb is. 9Flats and Wimdu exist but not really in North America, and are fighting tough battles in Europe with Airbnb, battles which I think they may well lose.)

But at the same time Sidecar announced the capital raise, it also announced changes to its platform. Sidecar’s app allows riders to favorite drivers they like, see pricing up front, and choose the type of car they want as well as amenities. The idea is to create a more personalized, tailored service. The platform also gives drivers filters to choose where and when they drive, as well as the ability to market themselves.

The classic business school case response to a monolithic market leader like Amazon, Airbnb or Uber that is using scale, pricing, and network effects to dominate is to specialize and offer services, often at the higher end. This allows a company to peel off customers that have sensitivity to certain product offerings. And this is exactly what Fred Wilson is thinking, drawing an analogy to Amazon and Etsy, that there are room for both.

I think there’s one other difference when it comes to ride sharing. The ease of mobile and GPS allows users to quickly visualize available rides across more than one app in under a minute. That is important during times of peak usage and trains consumers to consider different options. There are, after all, many different taxi companies in an urban area.

In the end, Sidecar is smart to begin distinguishing itself with a more personalized customer experience because it may well be the only strategy that will work right now and because it’s the right one. Using a “favoriting” system is an attempt to build strong relationships between consumers and the product, and amenities could be one way for the service to distinguish itself.

Will someone just trying to hail a ride care about the services Sidecare offers? Most won’t. But there is likely a small fraction of the market that will only use a ride sharing service if they really trust the driver and can be guaranteed amenities like water and even a specific car model.

One of the clichés of business is to know your customer. And this is Sidecar’s mission, to both find that niche customer and train that customer to be sensitive to its service offerings (remember when people thought buying bottled water was crazy). It’s certainly not an impossible task as long as it’s understood that Sidecar is going after a smaller slice of the market, and stays focused on finding creative ways to distinguish itself.

Relevant Analyst
lesser_profilepic14bc7fcadf2acb41d74be5ed84e63558-avatar2

Adam Lesser

Cleantech Curator Gigaom Research

Do you want to speak with Adam Lesser about this topic?

Learn More
You must be logged in to post a comment.
No Comments Subscribers to comment
Explore Related Topics

Latest Research

Latest Webinars

Want to conduct your own Webinar?
Learn More

Learn about our services or Contact us: Email / 800-906-8098