Over the last 20 years, there have been signature companies that have completely transformed paradigms and platforms that redefine the way we consume products and services - three examples would be AAPL, AMZN and Uber. As other companies rise up and look to gain prominence, the natural tendency is to call themselves the AAPL of ____ or the AMZN of ____, and most recently, the Uber of ____ [Insert industry or geography]. An example of this 'phenomenon' would be the consumer electronics company, Xiaomi, which has effectively branded itself as the AAPL of China. Companies that have branded themselves as the "Uber of ____" have, in most cases, found that replicating the business model does not equate to replicating the success.

The business model can be replicated.

A company that calls itself the "Uber of ____" is effectively saying it is replicating Uber's labor-driven marketplace business that matches a very large supply base of drivers with a healthy demand of riders in an on-demand way and at a low price-point. This business model can certainly be replicated in other sectors beyond transportation such as food and product delivery (DoorDashPostmatesInstacart, etc.), assistance with everyday tasks (TaskRabbit), and house cleaning. These companies ("market-makers") all fundamentally rely on the ability to connect independent contractors, who can flip on their availability and desire to work at-will, to satisfy consumer demand for their services. Like any marketplace, the transaction price fluctuates based on the balance of supply and demand. The market-maker, for the most part, scrapes a small percentage fee off every transaction.


Marketplace businesses require a huge amount of scale as each transaction yields a small % of the actual price paid by a customer. Most companies account for this on a net revenue basis where, for example, $100 million of transactions (volume) may only yield $15 - $20 million of net revenue and that's before accounting for any G&A costs.

Labor-driven marketplace businesses are unique in the sense that in order to build scale, they rely on BOTH healthy supply and demand, neither of which can be directly controlled by the market-maker. However, the market-maker can indirectly control supply and demand with incentives and promotions (e.g., incentive fees to the labor supply-side with higher % payouts and discount promotions to the demand side). This sounds great, but the reality is that these types of promotions that are required to get both sides of the market hooked to the service create a hugely unprofitable business initially, even at the net revenue level - essentially, you pay out more to your labor supply than you collect from the customer demand side. However, once you establish a healthy market, you can essentially 'flip-on' profitability by reducing subsidies to your labor and eliminating discounts to your customers. It doesn't happen overnight and both sides of your market tend to be fickle, especially if competing market-makers exist.


Given the costs associated with investing in markets (through subsidies and discounts) to build scale, companies need an enormous amount of capital to stay afloat. Even those that can generate positive net revenue (customer collections minus labor payouts), still have to cover a lot of other costs (marketing, corporate salaries, servers, investments in new technology), etc.). These below-the-line costs inevitably create companies that blow through capital faster than it can be raised.