Market size and business models

Something that is very obvious and hits you when traveling to a heavily populated city like Singapore, is the size of the market and how the most niche kind of businesses survive at street corners. Singapore has some 5.6 million people living on the small island. That’s more than the population of whole of Finland.

This difference enables a lot of things to take place from a market perspective. I stayed in Singapore for about 3 full days. I had a dozen or so meetings all over the city and commuted to those, with an exception or two, with Uber.

First of all, whenever you open the Uber app – you see about dozen cars rolling around a few blocks from your location. If it’s peak time, you might see less, but they’re still there.

It usually takes a few minutes to secure a ride and they are very cheap. A 5-10 minute ride might cost you 4-8 SGD, which is about 2.6-5.3 euro. Not a lot, but more than a few times I received a reservation from a driver who was still dropping off his previous passenger somewhere close by.

What this basically does to the driver is that the Uber “software” (for the sake of the argument) keeps drivers constantly driving and earning. When the demand is this high, it doesn’t really matter that you only make less than 10 SGD per ride. It adds up and you can make money on it.

This of course is only possible when the market size is great and demand and supply enable opportunities like this.

Kristo Ovaska and Tuomo Riekki from Smartly, a Finnish Facebook advertising company, noted in an interview in Helsingin Sanomat recently that building the company was tough in Finland. Soon they figured most of their business was international and today of their 17 million euro turnover (2015) only 2% comes from Finland.

Another clear example that market size and its dynamics basically make or break the company.

I believe that in the future, more and more businesses will become instantly global to even enable their business model to work.