Comment by eddieplan9 | Hacker News Reader

Comment by eddieplan9 | Hacker News Reader

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According to leaked financial in [1], Lyft is expected to generate $32M of net revenue on about $158M of fare, while losing $50M per month. If everything stays the same, Lyft would have to raise rate by 156% to break even. Also, Lyft's growth is mostly purchased:

> While rides increased about 11 percent from April to May, fully paid rides, without the use of a coupon or a credit, grew by only 5 percent in that period.

They recently launched in 50+ cities simultaneously, which means they will bleed cash faster in hope of generating some growth number.

In comparison, according to [2], in Q3 of 2016, Uber collected 5.5B of fare, and after paying drivers, had a net revenue of 1.7B (30%) and a loss of 800M. If everything stays the same, Uber could break even by raising rate by 47%. If you consider that most of the loss is from developing markets, it's actually not that hard for Uber to break even in the U.S.

[1] https://mattermark.com/lyft-financials/ [2] https://www.bloomberg.com/news/articles/2016-12-20/uber-s-lo...

Edits: grammar

Uber was in a similar situation to Lyft not too long ago. Uber's also already said that they're cash-positive in the US, and Lyft is focused on the US for now.

It's not hard to imagine that after this multi-city expansion, costs will go way down.

I wouldn't qualify the growth as "mostly purchased" when it's... 50/50 couponed/full? That seems to be more a consequence of the multi-city launch than anything.

I'm pretty optimistic of Lyft's chances here (politically motivated by Uber's attitude, granted). They're spending a lot of money to capture parts of a well-defined market (US carsharing), and have a PR edge with informed riders.

Uber could theoretically start couponing to hell and back in the US again, but they're going to run out of money someday.

> I wouldn't qualify the growth as "mostly purchased" when it's... 50/50 couponed/full

If most of their customers are buying only because they are selling under the market price, then it doesn't matter if the subsidy is 5% or 50% or 100%; their sales are "mostly purchased".

Imagine you open a store tomorrow and sell gold for 1% under the market price - suddenly your sales blow up to $1 billion in a day. You have purchased all of your sales, with just a 1% coupon.

thats the price of acquiring a customer. for my saas the cost to acquire a customer is X, X is multiple of montly fees. so only after couple of months im going to be on 0. The cost for me could be adwords, running a free plan, or something else.

how is this different. I assume that they hope to convert some of those to regular customers.

The difference between an acquisition cost per customer but making money on each transaction and losing money on each transaction is that the first can be a viable business if you can retain customers long enough while the second will always lose money.

Offering below-cost deals to all customers for a time (to acquire them) then raising prices to a profitable level is different from either. Unlike the second, it might make money in the long run. Unlike the first, the ability to make a profit hasn't been demonstrated yet.

"We'll sell at a loss but we'll make it up in volume."

Selling at 1% under market price is only a loss if you're acquiring from the same market.

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