Lyft Files for IPO
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I don't think there are many people who doubt that ride hailing apps can be done profitably. I think the big question is (a) is it a commodity business (I personally believe it is) and (b) can potential profit margins support their astronomical valuations.
I think the main problem (though MUCH more so for Uber than for Lyft) is that it is valued as a "network effects" business, e.g. something like a Facebook or a Google with substantial pricing power, but I think the reality is that it will turn out to be much more like the airline business - basically a commodity business where raising prices is extremely difficult.
I believe you are onto something there. What did people do before Lyft/Uber? They walked more. They biked. They took public transportation. Maybe they drove themselves. Maybe they drove/carpooled with a friend. Maybe they took a good old fashioned taxi.
Faced with a price hike attempt, those options are again always on the table.
But I feel like the Lyft/Uber mode of transport is generally more spontaneously and is therefore generally more elastic. Sure, there are undoubtedly some inelastic use cases, like regular commutes, but there are also some very elastic use cases, like a ride home from the bar or a rescue from the rain. I am definitely interested to see how the breakdown of these different use cases turns out to be, but for me and my friends and peers in the SF Bay Area, the latter use case definitely dominates.
However, my sense is that for at least certain locations/demographics, that's probably changed with Uber/Lyft. I don't personally use them much but anecdotally a lot of people have started using them as an alternative to public transit or just because it's easier if they're going out for a night on the town. And I work with a lot of people for whom the reflex seems to be to pull out a smartphone anytime they need to go more than a few blocks while traveling. I expect those behaviors would change if the price suddenly went to 2X. (It also definitely makes a difference at the margins when renting cars and that's mostly a straightforward price calculation.)
They manage demand via surge pricing, I thought. So is it really elastic?
The basic economics of Uber/Lyft-style transportation is very profitable. The biggest economic challenges are 1) entering a market and 2) pools. And Lyft & Uber fighting each other.
The drivers gladly use multiple apps so these businesses don't really hold much power in terms of lock-in.
1. Start in one city only and concentrate on that. 2. Get your service listed in Google Maps. 3. Gradually expand.
Job done. The only real defence against that is that Uber/Lyft could probably afford to undercut you until you go out of business, Walmart-style.
I wonder if people who say things like this are actually drivers, because every driver I know has a car full of random stuff that lives permanently in it incase it’s needed. No one is going to carry all that with them; if they did it wouldn’t live in the car in the first place! Ownership isn’t going anywhere, or taxis would already have killed private ownership (and hotels would have killed the housing market...)
Taxis have killed ownership in places where taxis are more convenient than car ownership. As ride sharing becomes more ubiquitous—especially as self driving vehicles move into the space—that's going to become a reality in more and more locations.
Do I need to keep all that in my car? Probably not and maybe I wouldn't if I lived in a city and just needed a car for basic transport now and then. But it's convenient and it describes how pretty much everyone I know uses their car--especially if they have kids.
And, as I said elsewhere, I actually expect self-driving will tend to cause people to spread out more and create even more incentive to make cars a customized self-contained work and entertainment space.
Added: More transportation options definitely make a difference at the margins, whether it's a second family car or dropping an infrequently used automobile in the city. I know a couple in SF who don't own a car but depend heavily on a combination of biking, short-term car rentals, regular rentals, and Uber/Lyft. Pre-Zipcar and Uber/Lyft I'm guessing they'd still have a car. On the other hand, I live in a semi-rural area and I'm going to own a car pretty much no matter what other options you introduce.
They just don't carry them. If it starts raining and you didn't bring an umbrella then oh well, you get wet.
Besides lunch of course, because we're not savages. We enjoy our lunch sitting down at a restaurant. ;)
- mess cleanup (paper towels, wipes, windex)
- small tool kit (leatherman, couple wrenches, battery post brush, duct tape)
I think there’s more but that’s off the top of my head.
Note for example Amazon, which didn't turn a profit for years, had extremely good unit economics and invested in growth.
Unit economics always matter, at least after a certain point (and an IPO would definitely be that point).
> Ownership as we know it will become meaningless.
Do you really want to rent everything instead of owning it and pay everyone for their work rather than doing it yourself?
Certainly there are many people that prefer to own condos/cars/phones/books.
To pore is to think deeply about to something, to dwell on it.
A pour-over is a type of coffee.
I’ve learned something new today. :)
“Pour over” is the sense you describe would be a metaphor.
Ok, I still think it’s an unusual example but you’ve convinced me.
I retract my earlier comment and replace it with a “today I learned” for me. :)
The only thing I usually correct is jibe vs jive....
Uber has a global operations, is in multiple streams of business and has diversity across business lines and countries so even if there's a recession in one country, it might be made up for in other countries.
So what's the investment story then for Lyft?
From an outsiders view, Lyft looks much more operationally focused. Instead of legally battling a bunch of different countries, it eyes only the biggest market, allowing it to slowly expand after it sees how Uber fares in each country. Instead of settling a lawsuit over allegedly stealing self-driving car technology, it is focusing on its core product. Instead of buying 19-month-old scooter company for $2B, it is spending money on its core value proposition.
At some point, investors might not hand over Uber any more cash. Meanwhile, Lyft could get to profitability more quickly while Uber deals with acquisition/project "hell" as Elon would say. As an outsider looking in, Lyft looks like it is playing the long game, drafting behind Uber until Uber catches another edge and slips.
Here is a press release from Zimride sent circa Thanksgiving 2008 (after they had been underway for about a year):
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STUDENTS TO FIND RIDES HOME FOR THANKSGIVING ON FACEBOOK Useful Facebook application, Carpool, helps match students for rides home
Finding a ride home for Thanksgiving with friends and classmates has never been easier. Students can conveniently use a Facebook application to share rides home for some home-made turkey. The application built by Zimride is called "Carpool", and having launched in 2007, it has become the most popular online ridesharing service in North America.
Carpool on Facebook is especially popular among students on college campuses, where it has replaced traditional ride boards at student centers with a more convenient online interface. Over 25,000 rides have been posted on Carpool in the last four months. "The growth is unprecedented," comments Logan Green, a co-founder of Carpool. "It shows that not all popular Facebook applications have to involve ninjas and vampires. An application like Carpool helps students find safe rides in addition to cutting their gas expenses and reducing CO2 and it's clear students value that."
The Carpool application uses Google Maps technology to match students traveling in the same direction. After the trip, users are encouraged to leave feedback, to help inform future Carpool users. The application makes ridesharing a more social experience. "It really feels like I'm part of a community," says Corey Earle a student of Cornell University. "I could never trust an anonymous service like Craigslist because I wouldn't know anything about the other users. Using Carpool on Facebook, I can choose to ride with people in my school who I know I can trust.' Carpool on Facebook was built by a team of recent graduates who saw an opportunity to make carpooling more popular at universities across the country. John Zimmer, a co-founder of Carpool, says, 'We're thrilled that university students and administrators are reaching out to us to help make ridesharing become a part of mainstream culture on college campuses." Zimride has worked with over 20 universities since creating the service to build custom systems for their campuses.
If you have a car, offer your carpool today. If you don't have a car, find a ride and get home to the home cooked turkey, stuffing, gravy and cranberry sauce…don't forget to share!
To try out the Carpool on Facebook: http://apps.facebook.com/carpool
For more information on Zimride visit: www.zimride.com
===
Here was a sample use of a version of the product in a 2011 email:
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Subject: [Reuse-sell] Ride from MIT to NYC or [city] NJ, Depart Oct. 21 1pm, Return Oct. 22 10am
I have rented a car for a trip to [city] NJ.
I am leaving from MIT at 1pm on Fri. Oct. 21.
I am returning from [city] NJ at 10am on Sat. Oct. 22
If you want to share the ride on either of the two directions let me know. I expect the total rental plus gas to cost me $120. I am looking for someone to pitch in $20 for each one-way journey.
I have posted on zimride too: http://zimride.mit.edu/ride/share?ride=[id]
Thanks, [name]
===
I think the deal is that the company pivoted mid-2012 to an Uber clone and sold the Zimride subsidiary to Enterprise in 2013.
I wonder how much of the Zimride engineering team went to Lyft during the pivot.
I wonder who has the longest tenure at Enterprise's Zimride subsidiary and how they feel about working there vs. working at Lyft.
Any rides I have taken where Lyft is available, I ride with Lyft. Else, Uber. (mostly NYC/NJ/Toronto areas Lyft has been consistently cheaper for me).
Cheapest rideshare wins. race to bottom. Only way Uber / Lyft can avoid death, is with business rides and lockin. There no one is price sensitive, and they can make money off of business rides (Lyft is doing this really well, in nudging users to have more business rides).
Lyft was the one to fight the battle of having 'ridesharing' become a thing. Uber didn't mind if the decision went one way or another as they already had a lockdown on the "professional driver market".
>> Instead of buying 19-month-old scooter company for $2B, it is spending money on its core value proposition.
Lyft aquired a scooter company Motivate, and announced the plans in June about their bike and scooter strat.
>>At some point, investors might not hand over Uber any more cash.
Lyft has raised 4.9B. It's the unicorns of Unicorns with a burn rate to match.
I agree with the OP, am pessemistic of an IPO, and would say it has the possibility of failure. I don't think that will happen, but an IPO flop of this scale would have major repercussion on the funding market in general. Again with the Hauwei arrest today, and the stock market in a major flux as tensions rise with China it has added risk.
But Lyft has a self-driving car group in Palo Alto, and it bought the bikesharing company, Motivate.
Actually, Lyft has a scooter program that is the result of an acquisition.
"It wasn’t until July, when Lyft acquired Motivate, the nation’s largest bike-share operator, that the company began to send signals that it was considering joining the frenzy."
https://www.theverge.com/2018/9/6/17824040/lyft-electric-sco...
This can be a reason why one would be more interested in Lyft. Uber seems like a distracted player who's losing money on many other markets and businesses, not to mention hundreds of millions of dollars on self-driving cars (and flying cars?!). Lyft is much cheaper (15B valuation), while Uber is much more expensive (120B?). If I invest 1B in Uber, my money would vanish in 1 quarter (yes they're losing 1B/quarter). Those 1B dollars would be split to invest in flying cars, uber eats freight bike/scooter, battles in India Middle East. On the other hand, if I invest 1B in Lyft, I'm sure those 1B would go towards gaining market shares in the US which is by far the most important market for the two players.
Second of all, personally I think if Lyft failed and the stock dropped by half. Some other dominant players would look to acquire Lyft. I'm thinking about Google's Waymo One plus Lyft's network. Apple seems to have a lot of cash to burn also, and they're also developing SDC. On the other hand, Uber's share price has to drop more than 10x in order for it to come close to a reasonable acquisition price.
1) The market can support multiple players running profitable (i.e it's a 2 player or 3 player market). Think of the drugstore industry (Walgreens & CVS). 2) Lyft focuses on profitable higher income markets like the US and Canada so they can have a higher margin and not get into pricing wars with massive foreign players (Didi, Oola, etc.). Uber is bleeding cash in their foreign markets. 3) Lyfts valuation is more reasonable relative to their numbers than Uber's. At the end of the day your investment thesis should not be just on the company but also the price you are buying at. 4) Lyft could manage their costs better and hence be closer to profitability to Uber (this is a pure guess but seems possible)
I have been pretty successful investing in 2nd players when they are priced correctly.
This, I think, is more important than many people realize.
When I was driving for Uber and Lyft (for about eight months, two years ago), Lyft had an entirely different clientele.
Uber was for the poors, the frat boys, and the average Joe Lunchbucket. Lyft was a decidedly better class of passenger, paid more per mile, the people tipped more and more often, and the passengers were 953% less likely to throw up in your car.
Drivers on their way to an Uber pickup would drop the fare if a Lyft opportunity came in.
Lyft doesn't capitalize on this perception that it is "better" than Uber, but my sense of the situation from talking to dozens of drivers and hundreds of passengers is that both the drivers and the passengers knew it.
Lyft could really differentiate itself in the market, if it decided to go this route (so to speak). The same way that Apple positions itself as a premium brand.
Is Lyft more expensive in your locale?
I’m in a new Lyft market, so their pricing makes them the cheapest with their discounts often.
Lyft's Android app just works, and is reasonably usable. I've been burned by Uber's app crashing after an update.
I keep using Lyft over Uber; most drivers I see in my area (NYC and Brooklyn) have both apps installed. But many seem to have the Lyft-specific sign under the windhshield, but rarely an explicit Uber sign.
As a corporation, Lyft seems to be much less showy, and does not seem to be losing gargantuan sums on pie-in-the-sky projects. They project a nicer, if understated, image; this is also somehow attractive, and likely says something about the way the company is run.
My guess is that people who could pay more for Lyft did. I gave a lot of homeless people rides through Uber, but never through Lyft.
( Sorry Lyft was never in my region )
Uber has all kinds of crazy promotions, like paying a flat $6 per ride for a whole month, or paying $25 up front for ten rides, no matter how long they are. Of course, there's also surge pricing that everyone knows about.
The worst is that Uber charges passengers more if they're traveling to or from "rich" ZIP Codes. In theory, Uber is doing this because we were supposedly carrying rich people around who could afford it. But more often than not, we were transporting low-wage maids and other service people from one job mucking out toilets to another. So Uber was actually hurting the people who could least afford to pay more.
I'm so glad to not be associated with Uber anymore.
Lyft frequently gives me offers like "10% of your next 10 rides" and "25% off this weekend!". I think it's because I'm only an occasional rider (1/month or so unless I'm traveling). Uber does not give me any promotions.
Uber doesn't have a massive moat. Drivers can have both apps, users can have both apps. You attract drivers by paying them more, you attract riders by charging them less. Uber for now can afford to beat everyone on both those fronts, but eventually they will have to start making a profit. When that happens Lyft is best placed to take advantage.
As someone who drove for both platforms, this is not true. Lyft pays drivers more than Uber in the market I was driving in.
Most drivers would abandon Uber in a heartbeat if Lyft just had more users. The problem was that for every Lyft request that came in, you'd get 10 to 20 Uber requests.
Lyft has an actual balance sheet Investors can understand.
Fun fact, I was an early and enthusiastic user of Zimride (for making a long distance relationship work between the Bay Area and SoCal). I liked the product and once upon a time drafted an e-mail applying for a position there. I assume I would have been employee like ... 5 or something. Never sent it and it hung out in my Gmail for many years. Decisions, decisions :-)
To me, the key change deserving a new term was allowing completely independent, non-professional drivers, and I think Lyft beat Uber to that. (Heck, some purists would say "ride sharing" should be reserved for cases where the driver doesn't make an wages, just reimbursement for costs.)
Uber launched UberX in June 2012. Lyft launched in June 2012.
Give Sidecar credit where it's due.
Then Waymo dozes over both of them while destroying a large chunk of the "gig economy".
The network effect favours the larger player: less dead-heading between rides and better “pool” load-factors.
It can focus on profitable markets, and leave it up to Uber to fight City Hall and spend the money habituating new regions to the idea of ride sharing.
From a user point of view, the product is indistinguishable from Uber. If I had to own shares in one company, it would probably be Lyft.
Uber's last private valuation was, what, $60 billion? How much ROI do you think the LPs in the last round want to see from that investment after a few years? That sets the lower boundary for Uber's IPO price so unless Uber does a down round (which wont bode well for investor confidence), they're going to have to deliver a hell of a lot more value for their share price than Lyft, which means their is a lot more risk attached to them than lyft.
Buy low, sell high.
The story is simple. The second largest ride sharing company. Underdog against evil Uber. Could become number 1 or could grow the market.
There can be more than one successful company in a segment.
Also, well, you can't invest in Uber.
Haven't worked there in 2 years though.
Fingers crossed.
An IPO isn't a bet, like at a racetrack, the money raised is actually used to further the business. It's quite possible this will give them the fuel for that expansion you mention.
Is it, or is it just used to pay back the early investors who want to exit?
For example, it's impossible to invest in just AWS without AMZN's other business. However, AWS is far less susceptible to the current macro geopolitical instability than AMZN's retail business.
Uber has a brand people hate, and is losing market share to Lyft. They have room to shrink.
Meanwhile, Lyft has a brand people love, is taking market share from Uber, and is starting to expand internationally (Canada). They have room to grow.
The most obvious reason to invest in the Lyft IPO instead of the Uber IPO is that there is no Uber IPO.
If you're asking whether Lyft and Uber can achieve simultaneous financial success, the answer is yes.
Basically if you believe that ride hailing apps will succeed as a sector and that there is room for two companies in the long-term, then Lyft gives you a much better "value" investment in terms of the ratio of the company's valuation to the number of customers or dollars of revenue.
In a word... price. Lyft's IPO will give public markets access to a rapidly growing industry at a lower valuation than Uber.
Post IPO I would guess being publicly traded would be an advantage for Lyft because they will have a broader base of stakeholders who benefit from their success.
well, marketshare (a percent value) is by definition a zero-sum metric. however, what you mean to say, that every new customer of lyft is a customer less for uber, is false. there is no network effect, like social networks or marketplaces. new customers for uber may also be customers of lyft, and in a true rising tide, and one company may prime the market for the other.
Anyway, as the smaller player, given the lack of rider network effect and the clearly established lack of driver loyalty, they could quite easily see much faster growth. (going from 1->2 is much more significant that 100->110, eg). And growth rate, not absolute market value, is what investors really care about.
Taking Lyft to be a single-purpose undiversified company, isn't the opposite true? I'm no economist nor MBA, but aside from cashflow wouldn't a smaller company be more resilient to conditions due to lower resource demands?
every point of marketshare they get is a zero-sum game against Uber
Is this...true? First, because there's more than two players in the industry, and second because there can be more demand than cars among all of them.
As for your second point, you might be right. It's not EVERY point of market share, but it must still be a significant number that is wrested from Uber with great difficulty.
Does Uber operate in any markets that wouldn't be catastrophically affected by a crash of the US economy?
Competitors exist, and they sometimes do things better.
If you invest in a gold company, do you want them hedging the price of gold?
Some corporations function as diversified quasi-portfolios. But it's often far easier to analyze and model pure plays. Plenty of pure-play securities on public markets.
Vancouver is so backwards :(
I'd prefer driver compensation to be worked out on Uber's end of things rather than being passed to the consumer. I know that's what tipping is - but I'm against payment structures that require tipping. I still tip because I don't want to put it on the driver/waiter/whatever, but I'd prefer for the price point to be higher and to not tip.
Why? If you're not concerned about the driver's pay, you shouldn't be concerned that they might feel stiffed.
Also, who says Uber drivers are getting stiffed? One of my really good friend does Uber full time in Toronto right now and takes home around $4.5k/month (before tax). He drives around 6 hours a day, 5 days a week.
Pretty optimistic of you to assume that "no option to tip" means "drivers are paid better up front."
It's not zero-sum, given every car on the road can potentially be replaced by freelance drivers moving people and goods.
Is there no price at which Lyft stock would be a good investment relative to Uber?
Also revenue. They has it.
I can more easily see how a public market shareholder would make money in a lyft holding, than in an uner holding. This isnt about getting married to a stock and putting the share certificate in a frame, this is about growth and potential addressable market, which is easier to see.
The new book by Reid Hoffman, Blitzscaling, was an eye-opener for me as to how these companies operate and what seems as incredibly inefficient now will all be but forgotten tomorrow when they have complete monopolies over all transportation... The nature of technology makes it winner take all almost always, it's only a matter of time until they can offer other forms of transportation to people. Perhaps people someday won't even own any cars at all especially if it's cheaper to call an autonomous one from your device whenever you need it.
These are interesting times we are living in and these business models are completely counterintuitive to traditional norms of taking small risks and that much is obvious from seeing the business models of Uber/Lyft, WeWork, Airbnb, etc.
In NYC I think there's at least 4 ridesharing companies and I usually choose which one based on which one has given me a promo.
To start a new ridesharing company, you have to get drivers and riders. You'd have to offer them a ton of incentives to start driving/riding with your service, when the existing options are well established.
For drivers, Lyft and Uber have incentives (lower fees) if you do the majority of rides with their service, which incentivizes you to only drive with one service.
When's the last time you downloaded a new app on your phone? For me it's been weeks, maybe months. For so many people, it's easier to just not try your new rideshare service.
To start a new ridesharing company all you have to do is attack and carve off the most profitable element of the big company's product mix.
All you need is to undercut them in certain high profitability routes, like airport runs, or luxury vehicles for executives, or anything, and you have a toehold.
There are some positive network effects, but there are also negative network effects. Having more users doesn't mean you always win as the big company.
For example if you have no customers all you have to do is be outside of a stadium at the end of a show, or waiting by an airport during a busy landing period, and have rudimentary abilities to let people know you exist, and you'll get defectors.
The reality is that both are true.
There are multiple positive network effects at work, as it's evidenced by the growth of these companies.
However the barrier to entry is super low, so competition can be quite high. Like you said, just by subsidizing rides/drivers you will start gaining some market share.
In the end it's all gonna be about who has the most cash and whose efficiency is the highest. Yeah you could hire a promoter and give out flyers outside a venue, but if you check the data, the ROI is abysmal.
This is bad for customers.
It's pretty easy to have a network that's not very big that always has someone at the airport, or always is available for trips that stay within a specific neighborhood, or can always be arranged with a little more advance notice, or whatever.
And the relevant part of pointing this out is that as long as that's true, which is forever, then these large companies will never be able to extract monopoly pricing.
As soon as they start gouging customers people will immediately flood in to siphon off the lowest hanging fruit or easiest segments of their customer base.
That dynamic will never go away, it's not at all clear what the point of all this buying of market share is, given that it will never be truly defendable.
There are entire chapters dedicated to talking about each group of adopters, and you saying that no one is in the "early adopters" group is simply not true.
Because service like Lyft depends on more than just the software to provide the end service so the product is not substantially better. For the most part the drivers are also working for the competition, the time to get to the destination, and the overall cost will be similar. At some level the network effect is part of both the barrier to entry, and the quality/value of the product but it is not clear if this is enough to end up on top of a winner take all market.
It can be handy when you're not in a hurry, but as long as people are involved, and they aren't always where they say they are going to be, there's a pretty hard upper limit to how efficient things can get.
I did it a few times. But usually when I need a ride, it's because I'm in a hurry, and paying $5 more is no object. Else mass transit suffices. This only works in urban areas, but it's where the most profitable ride-hailing markets seem to be anyway.
If "no one would use the app due to high wait times" then your driver would always be available and ready to go. So someone would be happy to use it whenever the dominant app is having trouble keeping up with demand. Which will always happen from time to time as long as demand has occasional peak periods and supply has some practical constraints, which a fleet of cars always will.
If all of my friends are using Uber and I'm using Lyft, I get the same amount of value out of Lyft whether anyone else is using it or not.
Now, there is some network effect with new drivers signing up for a more dominant platform, making it harder to use others. Since drivers can (and usually do, in my experience) sign up for multiple platforms. That effect is greatly diminished.
If more of your friends use Uber than Lyft, that suggests that there are more customers on Uber.
This means Uber is more valuable for the drivers as a platform.
This means more drivers will driver for Uber.
This means Uber has better availability.
This means Uber is more valuable to customers.
AirBnB can make recommendations based on past experience. Uber/Lyft are one-time transactional commodities. There's no loyalty incentive.
AirBnB is a reasonable example because there are fairly strong network effects (as with e.g. eBay--especially in the old flea market days).
There are definitely some network effects with Uber and Lyft but they're mostly local and most people do most of their taxiing locally. There's some benefit to brand and there's some benefit to amortizing the back-end but taxis/ride-hailing is mostly a local business.
Citation? I am having trouble thinking of a major market where there's some company with 100% market share. Software has hudnreds of multi-billion dollar companies. Autos has hundreds? Until your scope gets very narrow, there's tons of competition.
No way I'm going to pay Uber for the right to use my bike.
A confidential filing with the SEC of an offering is a new thing. Until 2017, you couldn't do that. It's limiting in some ways. Lyft now can't say anything more about an IPO. If they do, the confidentiality can disappear.[1]
[1] https://www.sec.gov/corpfin/voluntary-submission-draft-regis...
Presumably all of those costs would disappear once someone wins the market or a "truce" is called. Right now both teams are spending like crazy in those areas because they need to have best numbers at IPO time. But once they both go public and the stock prices stabilize I suspect the spending will go down and they will be more profitable.
I'm not sure any single company ever truly wins this market because, as others have mentioned, the barriers to entry are pretty low. Raise VC money to subsidize the most lucrative rides/markets and Lyft & Uber will never be able to stop their spending (either through advertising or through acquiring new entrants).
The ride-share market may wind up like the airlines: heavy utilization but not amazing businesses.
I think that's more or less what I was trying to get at. Once you build your place in the market, competition can and will come along, but you'll be so entrenched, just like the airlines, you can just cruise along (no pun intended) with very little spent on ads or customer acquisition.
It's not like Uber and Lyft aren't still a useful service at 1.5x to 2x current pricing (or whatever is needed to achieve profitability). Traditional taxi services suck in a lot of places. And, OK, at that point the users who only take Uber because of the VC subsidies end up going back to taking the bus. But who cares.
>destroy all local taxi services
Except they haven't. There are still taxis where they make sense as well as private car services. It's hard to see giving it a few more years is going to make much of a difference.
I'll let someone chime in who understands the taxi business financials better. But in my observations, Uber and Lyft are only slightly cheaper than taxis. If prices go up, taxi companies will cut into their profits.
I'll also say we (as a society) are very lucky that Lyft emerged as a real competitor to Uber. If one of Lyft or Uber had failed a few years ago, we'd be in a total monopoly situation by now, and "Uber" would have similar meaning as "Kleenex" or "Scotch tape" -- that is, there's only one kind of smartphone ride hailing service and everyone uses it. Maybe that was the play of both Uber and Lyft all along -- stay alive long enough to force the other out and get to monopoly well before autonomous vehicles enter. And they failed. Both are still alive. There is no one firm with a monopoly.
I'm sure it varies. I don't use them much when I travel but my perception is that they're maybe 70% or so of the price of a taxi. So not a huge difference but enough that I usually default to Lyft if there's no reason not to.
I agree about the competition. Though that's US-specific. Uber may operate under more regulation generally in Europe but I don't have a lot of personal experience.
A taxi from my home to/from the airport is $50-$55 with tip. Uber is $20-$25 non surge (which is most of the time). Before Uber, on an outbound I would always have a friend take me or drop me at BART. On the return, since the taxi is right there, I would take it about half the time.
Now I take Uber/Lyft almost all the time. I'm not sure what I'll do when/if Uber goes up to $50.
Taxis can't undercut them. Even if Uber were 2x as expensive, that would be ok because Taxis are 4x worse.
It really depends. One city I travel to fairly regularly, I tend to take Lyft because it's cheaper but I'm really indifferent to taking a cab vs. taking a Lyft for any other reason. In fact, I sometimes take a cab from the airport if there's no line and cabs just sitting there because it saves a few minutes.
Yes, taxis are generally bad in quite a few cities but it's not universal.
None of this is to argue against the sustainability of the model, just to point out that no one has any idea what would happen. Network effects matter.
I.e. while someone earning $200K might decode they can afford $20 rides rather than $10 ones, someone making $50K might think differently. The "who cares" when people go back to riding the bus is Uber.
Drivers could have something similar where they see all the opportunities and potential fares across platforms in one app. What do they need? A list box to select the fare, then a map with reasonable routing, and a pay processor.
I think the endgame is to dump the stock on the public market so investors and execs can cash out and mission accomplished. I don't think there is any viable long term plan.
If you subsidize driving and subsidize riding significantly, people will sign up. A $40 bonus covers several rides for a customer so they'll hold onto the app at least until they've used their initial free offering.
Lots of people are still going to own cars, especially as you get to less dense areas where parking isn't difficult or expensive and cars are needed on a daily basis to go places, store things, etc.
What possible advantage, other than fleeting brand recognition, does Lyft or Uber have in a world where self-driving is a standard car feature? Why wouldn't Avis, Hertz, National, <insert new or existing fleet management company here> operate those short-term rentals? Or even the car manufacturers--although based on past behavior--they probably are primarily interested in building cars.
i understand people in dense cities may drive less and some not have a car at all, but a car is people important to anyone outside a city in ways ride share will not replace easily. this has nothing to do with lack of public infrastructure, it’s the benefits of being in control of your time
If you live somewhere that parking's easy, there are a lot of reasons to own your own vehicle which mostly depreciates based on how many miles it's driven anyway. In addition to always having the vehicle available, you can customize it for your needs (sports, kids), use it as a sort of mobile storage locker, install a nice sound system if you're so inclined. If you don't need to drive, I'd expect more people to want a customized work/media entertainment space in their vehicle, not fewer.
Massive fleets of autonomous vehicles transporting people.
People often fall into the trap of seeing Uber and Lyft as a taxi service, they are absolutely autonomous vehicle companies. The human drivers are simply there to collect massive amounts of data, and build brand recognition, while the autonomous vehicle technology comes to maturity.
A self-driving taxi company is going to look a lot like a car dealership that doesn't sell cars, or a lot like a taxi company that doesn't have any drivers. They're going to have a huge number of cars, parking lots to store cars that aren't in use, and technicians to service, clean and fuel vehicles periodically.
Uber has none of these.
Meanwhile, they're blowing through most of their venture capital selling rides below cost.
This does nothing for their self-driving goals, because they aren't acquiring a "market", because there is no stickiness in taxi customers. It just wastes capital they will one day need to buy a huge number of self-driving vehicles and their maintenance facilities throughout the world.
They would be better off sitting on that giant pile of money, or operate as a cash-losing taxi company so they can build out their maintenance facilities with venture capital while having regular drivers drive regular cars (which could also be serving as platforms for data gathering and training machine learning models).
No? You'll need charging stations to charge vehicles and will have enough to meet typical demand, when a large event is expected you have vehicles come in from other areas (Indy 500, Superbowl, etc). If vehicles aren't driving people or charging you use them as courier vehicles.
Yes you'll still maintain some in parking structures at some hours but with no driver needed you can pack considerably more into the same space as a vehicle that would require a human being to enter and exit the vehicle to move it.
Kids in their teens and early 20's are losing their desire to drive, individuals are getting their licenses much later. This is already a sign that a carless society is a very real possibility. These companies know that, they're working on taking the human driver out of the equation, they're building brand recognition, they're getting people comfortable with using a driving service (a large portion of the population has never used a taxi or even public transportation, yet within a few years hopping in a car with a stranger became normal) and they're collecting more data on driving and human movement via vehicle than ever before.
>Meanwhile, they're blowing through most of their venture capital selling rides below cost.
They are investing money in collecting data. The data alone they are collecting is worth the money they are burning through. You can't go buy that data from someone because it has never been collected and there's many ways to exploit that data to generate revenue both now and in the future as technologies become available like autonomous vehicles.
Re: venture capital use, there are currently 65,000 Uber-affiliated cars in NYC alone, according to a random search. If you were to replace all of those with self-driving cars at $50,000 a pop, that would be $3 billion right there. You can argue they'll only need a tenth that number because of self-driving efficiencies and because most Uber drivers aren't constantly driving (for comparison, NYC allows ~13k taxies) and claim they'll be able to manufacture a self-driving car for half that, but you're still talking hundreds of millions of dollars for a single market.
To replace their current fleet of sub-contracted drivers with self-driving cars is going to cost billions and billions of dollars. Uber currently has something like $7B on hand and is burning through nearly a billion a quarter.
So 2021 comes around, and self-driving technology has been perfected by Uber, Google, Tesla and Ford.
You are a VC -- or a regular investor if Uber is public -- looking to invest in a self-driving taxi company.
Two companies are seeking $10B to build out their world-wide fleet of self-driving taxis. Would you rather invest in Uber, which has a successful ride-hailing App and an internally built self-driving car and is $20B in the hole on VC investment already, or would you rather invest in a newly formed corporation, Bob's Friendly Taxi Company, which has nothing, and is going to use its VC funds to buy a bunch of self-driving vehicles and develop a new ride-hailing app from scratch?
The only theoretical differentiator is price. At the moment VC subsides are removing that as well
People seem to implicitly assume that autonomous driving will make getting driven around really cheap. But all you're really doing is taking a ~minimum wage driver out of the loop. A good starting point for costs is the $0.50ish/mile IRS mileage deduction which is maybe about half Lyft/Uber pricing today. That's a significant difference but I'm not sure it's a radically alter everyone's behavior difference.
The main difference between Uber and Lyft is that Uber is already in a lot more cities than Lyft, so if Lyft wants out of the subsidizing game, they either have to settle for being in less cities or somehow significantly outdo Uber in terms of growth cost efficiency when penetrating new cities where Uber/others already operate.
As many others here have noted (and other disputed) there doesn't seem to be an actual viable business model here. So there would be a distinct first mover advantage for getting in your IPO in, lest the other one tank the market for you as it starts to hit reality, such as actually having to have a sustainable business no longer fueled almost exclusively by investor money.
ADDED: And as maxxxxx wrote, it seems as if there are a lot of risks for the general economic picture and I'd expect both Lyft and Uber to be hit pretty hard in any significant downturn as they're luxury goods to at least some degree.
The stock market is at a high and looking pretty shaky. Time to cash out before things go downhill.
I've never heard that phrase and I like it. I'm sure we'll start to see it more.
Then, who has the best self driving route/priority for the fastest tap to destination time :-)
But the alternative seems to be "ride-sharing", which is utter feel-good bullshit outside of the small percentage who use Uber Pool or Lyft Line, so I suppose it's the best we've got.
Don't they? The app experience certainly feels like hailing. The app provides a virtual line of sight that shows me a map of my surroundings with nearby available vehicles, when I make a booking I can track the vehicle as it approaches my location.
edit: No, it looks like they filed confidentially.
[1] https://www.sec.gov/divisions/corpfin/guidance/cfjumpstartfa...
At the same time, it's far harder to provide great compensation to your employees if they can't sell their shares in the market, and at some point, your investors might be screaming for liquidity. But staying private as long as you can get away with is a good idea: It's just that few companies planning to be huge can.
Being private means the company doesn't have to follow compliance rules strictly. A good example of that is accounting rules.
There are tons of companies out there which show non-GAAP profitability. But non-GAAP actually means companies can ignore stuff like ESOPs etc to create their balance sheets.
When it comes to creating GAAP reports these same companies tend to be unprofitable by a large margin.
Then there is the flip side too. Even if the company is profitable but not profitable enough. Let's say a hypothetical $1 in profit. And then company needs more than $1 to keep it afloat but no investor is interested. Then they have two options - raise debt or go public and raise money. Out of the two going public is slightly better.