The end game was supposed to be autonomous taxis (cutting the driver out). I don't see how that's going to happen before they run out of money unless they 1) significantly raise prices or 2) take increasingly bigger cuts from drivers.
Personally I will be shorting as soon as I can.
I don't see how this works out for Lyft or Uber. To me it just looks like they'll both eventually run out of money and get squashed. Maybe I'm missing something?
I believe Lyft has significant financial ties with GM, who has Cruise, so maybe they'll be able to navigate it from a partnership angle.
That said, given the dynamism of markets, there's nothing to indicate that Lyft/Uber will have any huge advantage when the time comes.
But this is a game of musical chairs - early investors need to create the biggest, most miraculous but 'believable' story so they can pass the bag onto retail investors long enough to cash out.
If retail investors were able to do their homework, or rather, if their advisors at Morgan Stanley etc. were to do their jobs, I think that they'd see there is far more risk in these things than the valuations imply.
The problem is of course is that Morgan Stanley private wealth managers, managing for all those doctors, dentists, lawyers etc. only make money if there is buying action. And the emotional excitement of 'getting in on an IPO' is just too much to ignore.
The 'bragging rights' value of your dentist in Akron Ohio being able to tell to his buddies on the golf course that 'he has an 'in' on the Lyft IPO' (not really of course, he's at the tail end), is just worth more than a scrutinized deal.
Also - notice the PR/branding for Lyft, it's so funny, like the opposite of Uber - and yet they are for all intents and purposes the very same thing.
I used to say this too, when companies sold stock to the public at outrageous valuations.
I thought it was insane to be the retail "dumb money" left holding the bag on companies like Amazon, Google, Facebook, Netflix, Twitter and Snap.
So will Lyft and Uber be more like Snap or the others on this list?
Amazon went IPO very early and had a very long term vision.
Lift and Uber, it's hard to say and also depends on price.
Lyft is SaaS (technically a platform) and doesn't really have more operating expenses than any other internet company.
Companies like Lyft/Uber also have a much higher % of their full time staff in "ops" roles that are driver-facing (support, onboarding, offboarding, marketing, acquisition, etc.)
So long as their business is extracting maximal fees from each fare (thus keeping driver pay low) this cycle will go on as long as it can, and acquisition costs will continue to be high.
There's nothing fundamental about a ride share company that requires high driver acquisition costs. They are a result of a bunch of companies trying massively grow in the same space. Once Lyft stops trying to grow so rapidly and the industry settles they will not have to spend as much on driver acquisition. Indeed, it's already happening as their cost of advertising as a percentage of revenue is dropping dramatically.
> Support needs are naturally high and things go wrong all the time because you're dealing with real people in the physical world - it's not just some bugs here or there on a computer screen.
Why do you think support needs are naturally high? Higher than say what Ebay provides to sellers or what Dropbox provides to their enterprise customers?
>Companies like Lyft/Uber also have a much higher % of their full time staff in "ops" roles that are driver-facing (support, onboarding, offboarding, marketing, acquisition, etc.)
Higher than who? And what are you basing that on?
>So long as their business is extracting maximal fees from each fare (thus keeping driver pay low) this cycle will go on as long as it can, and acquisition costs will continue to be high.
If it does, that's only because it's more profitable for Lyft to cycle through drivers than pay more to retain them.
These are just pyramid schemes disguised as companies.
Are you saying taxis can't exist?
As far as I know, any taxi dispatcher take a similar cut (30%) as them and their cost seems way higher (no automation at all, require people on phone, etc..).
Theses loses are either because they are considered unlawful somewhere (I never heard of this issue with Lyft but I guess that's may be happening) and have to fight for it, or because they are trying to expands. If they stop both of theses (operating everywhere they are considered unlawful and stopping to expands) then their cost remaining are pretty similar to any Taxi dispatcher but they require much less staff.
Lyft and Uber have higher cost basis than taxi companies because they don't leverage economies of scale of car ownership and insurance via shared fleet as taxis do. Then they also charge less to riders. There's also no guarantee people would continue to use Lyft or Uber if they raised their prices to above the cost to provide the service, particularly when that number is actually higher than a taxi.
To my knowledge, Uber has a -61% profit margin. You give them $10 and they spend $16 to provide you the service.