On the surface, Nigeria’s ride-hailing market seems ripe for disruption. Drivers continue to complain of tightening margins from dominant platforms, while riders constantly seek better prices. It is the perfect setup for a nimble challenger to offer a more equitable deal and win the day.
But so far, Nigeria’s startup landscape is a graveyard for ambitious ride-hailing apps. An estimated 2,500 such apps have launched over the past decade, only to become obscure weeks, months or years later.
This consistent failure has been framed as a story of startups being outspent by global giants, like Uber, Bolt, and inDrive. But that view is simplistic. The critical challenge is not just access to capital, but the punishing economics of creating what truly matters in a platform business: the network effect.
Network effect is a powerful phenomenon where a product or service becomes more valuable as more people, users, and service providers use it. Each party adds compounding value in a sort of positive feedback loop. For instance, the more riders express interest in a ride-hailing service, the more drivers join the network and vice versa. The concept of a network effect is the engine behind successful digital platforms, from social networks like WhatsApp and LinkedIn, to e-commerce platforms like Jumia, Selar, and Chowdeck, and ride-hailing networks like Uber, Bolt, and LagRide.
Getting started: Building an atomic network
Within the concept of a network effect, the first dilemma every ride-sharing app faces is the classic “chicken-and-egg” problem: a platform needs drivers to attract riders, but drivers will not join without a critical mass of riders. A rider doesn’t care about a new sleek app or comfortable car options if the nearest driver is almost always 40 minutes away. They will leave for apps with shorter wait times and may never return. Likewise, drivers will leave, even if offered lower commissions, for platforms where the demand is constant.
The solution, experts argue, lies in creating an atomic network—the smallest viable network where enough riders and drivers are present to ensure everyone sticks around. Attracting and retaining the “hard side”—the drivers, who generate most of the platform’s value—is critical to building this network.
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