What's probably true is that they probably have to raise prices and deal with decreased volumes in at least many markets to do so--and probably grow more organically. And it won't be the kind of profitability that's expected from VC-funded companies.
- relatively easy for new entrants to enter the market
- lots of consumer substitutes
- lots of customer buying power
- lots of competitionUber really disrupted that as it rolled out across the US and other countries by basically rolling out illegally and then getting customer support to change laws.
That doesn't quite right to me. A market with the smallest profit opportunity of a selection (say worse that government bonds) wouldn't see investment to correct that inefficiency. Zero may be 'best' case, practically speaking though no one's going to arbitrage an opportunity, that's less than the opportunity cost.
So it seems to me the optimal market would a profit opportunity somewhere between being the 2nd best profit opportunity and zero profit opportunity, depending what you set the opportunity cost at.
But a perfect market is a mathematical model, not something that you would see in real life. As you note some entrant is not going to jump into a market and undercut the competition by 1 cent (from 2 cents) and immediately capture all of the market share.
But this does illustrate the dangers of making a more efficient marketplace if your goal is to make profit.
If we ever reach a so called "optimal market" as you describe it then GDP growth will also stop, as will personal income growth and all manner of things..
I imagine cab companies are in roughly the same position as people who own a bunch of fast food franchises. The owners can earn a reasonable living but it's mostly not the sort of income stream that people in Silicon Valley dream about.