In the last few weeks, both Lyft and Uber rolled out (very different) subscription pricing models.

Lyft’s All-Access Plan offers 30 rides per 30 days (up to $15 per ride) for $299. This is basically a bulk purchase option. A Lyft power user would save $150 per month by subscribing instead of paying per ride. (30 rides * $15 per ride— $299 subscription price =$151 savings)

Uber’s Ride Pass, by contrast, is essentially insurance against surge pricing. For $14.99 per month, Uber users escape the risks of surge pricing, plus they save approximately 15% off of normal fares. A user would probably need to spend $100 or more per month on Uber to come out ahead.

Each of these offers is a tiny, baby step toward all-you-can-eat subscription ridesharing. The marginal cost of each ride probably prohibits Lyft and Uber from diving headfirst into all-you-can-eat ridesharing. Hopefully self-driving cars will lower that marginal cost to the point that it becomes feasible.

My first professional job was with America Online, now AOL. I joined as a college intern in 2001, but there were still veterans around who could recall AOL’s switch from hourly to unlimited pricing.

22 years ago, AOL switched from plans that allowed for metered hourly Internet usage to plans that allowed unlimited Internet access. The pricing change brought in a wave of new customers, along with per-user usage increases that overwhelmed AOL’s infrastructure. It was one of the most significant things AOL ever did.

Ridesharing is getting closer to its all-you-can-eat moment.

The Cubs-Giants game went thirteen very long innings last night and ended in heartbreak (for me, at least), with the Giants knocking in a walk-off run in the bottom of the 13th inning.

It was also 11:45pm and the game had been going on for five hours.

As I stumbled out of the stadium, I realized my phone was totally dead. Five hours of emails and web browsing between innings had drained the battery.

If my phone had been working, I might have just hailed an Uber home and tucked into bed. But my phone wasn’t working.

No worries, though! In San Francisco, the train station is just blocks from the ballpark. I hustled on over to Caltrain, waited forever for the train to leave, and then learned I got on the wrong train. The train I was riding wouldn’t make its first stop until 8 miles past my house.

I disembarked the first chance I could and walked into an empty parking lot at the Belmont Caltrain Station at 12:45am. No taxis.

A gas station light flickered across the street and I rolled over and begged the attendant to call a cab. No cabs available.

Then I bought a charger from the station’s inventory and hailed an Uber, which took twenty minutes to arrive, being past midnight in the suburbs.

I finally tucked into bed at 1:30am.

So what’s the moral of the story?

Mostly that I shouldn’t have totally drained my phone battery, and I should look at train schedules.

But also that, in the days before ride-sharing, it was more common to have taxis circling around and you didn’t need a phone to hail them.

The world today is a better place because of Lyft and Uber, but it does require a phone to navigate.

In business school we did a case on eBay that was teed up perfectly for the professors to disabuse students of a cherished notion.

The central question was what makes eBay such a successful marketplace? And the intuitive answer is “network effects”. The more people are using eBay, the more the next user wants to join eBay, instead of a competitor.

And the professors loved this answer because it is so easy to pop a hole in it.

Buyers don’t want to be with other buyers — the competition just drives up prices. And sellers don’t want to be with other sellers — the competition just drives down prices.

Instead, the professors argued, it was eBay’s reputation metrics that really drove its success. Buyers and sellers want to transact with counterparties that have solid reputations, and only eBay can provide that.

This is a good and correct answer, but it’s always seemed incomplete to me. eBay has a couple of other strengths:

1. eBay has a thick market. There is no other market where you can find the Danish Christmas ornament from exactly 28 years ago that you just shattered and need to replace.
2. eBay has an incredible brand.

The point about branding is especially easy to ignore, in business school and elsewhere, because it is so close to magic. How do you build a good brand? How do you know if you have one? How do you know if one brand is stronger than another brand? How do you quantify when a brand is strong enough to support a monopoly?

Warren Buffett was a famously late in life convert to the power of branding, in all its mystery.

Which brings us to ride-sharing and Uber.

Uber, like eBay, has power in its reputation metrics, in the thickness of its market, and in its brand.

So how do these stack up to eBay?

1. Uber’s reputation metrics are less important than eBay’s. Uber’s ride-sharing flow is simpler than eBay’s asynchronous process of buying, and paying, and shipping, and receiving, so counterparty reputation matters less.
2. Uber’s market thickness is more important than eBay’s. If an Uber driver or rider can’t find a match at any given moment, they’re much more likely to give up on the service altogether, than if an eBay buyer or seller can’t find a match.
3. Uber’s brand is as important as eBay’s. But Uber hasn’t locked up the market yet. Lyft is on their heels. The question is, unlike with online auctions, is there room for two players?

One last note is that while eBay does not have a direct competitor, Craigslist serves as an alternative, albeit a distinct one.

Lyft is much more of a direct competitor to Uber than Craigslist is to eBay, but the existence of Craigslist raises the possibility that two firms could survive in the market.

H/T to Jared Myer and Daniel Pryor’s post in Forbes, which inspired this.

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Originally published at www.davidincalifornia.com on February 16, 2016.

Fortune runs with a story about Lyft and Uber and the merits and demerits of vertical integration:

“From a purely technical perspective, it’s unlikely that Uber’s in-house mapping efforts will be able to compete with the massive scale of Waze’s crowdsourced information. Waze is something like the Wikipedia of mapping with, as of last year, almost 300,000 editors worldwide contributing regular updates — all for free.”

Of course this is to some extent a matter of options. Uber has raised enough money to at least attempt building its own features, whereas Lyft is more cash-constrained.

But, as Malcolm Gladwell will tell you, sometimes being smaller comes with surprising advantages.

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Originally published at www.davidincalifornia.com on February 1, 2016.