Lyft Raises $530M in Fight with Uber | Hacker News Reader

Lyft Raises $530M in Fight with Uber

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222 pointssethbannon113 comments

This is great. More competition is great for me, the consumer. Recently Lyft and Uber have bother offered flat rate rides for $5-7 anywhere in SF. When people ask me how it can be so cheap, I always joke it's because it's a $15 ride but you're splitting it with a venture capitalist.

I wonder if either company has any serious long-term plan to make sure they are not competing in a commoditized space. Currently the services are basically indistinguishable. Sure most people have a preference one way or the other, but it's not a preference they'd stick to if the other service was a few bucks cheaper. They seem to be in lock step, doing the same things and alternating who makes the first move.

If they're not careful they will become like the airline industry. 40 years ago airlines were a glamorous new way to travel. Now they are reduced to who can offer the cheapest point-to-point ticket with 17" of leg room, customer service is an unexpected bonus.

"San Francisco is an assisted living community for the young." -- Startup L. Jackson

https://twitter.com/StartupLJackson/status/40813723253330329...

Startup L. Jackson is so awesome.

The difference is there's a network effect. Uber & Lyft are not actually transportation companies anymore than Airbnb is a hotel company. They're networks.

So it's not just about price. It's about the size of the network, which means availability -- how fast can you hail a ride. The more drivers on the network the better the availability, so that's where the consumers look first, and so that's where the new drivers join, and so on in a virtuous cycle. Once one network reaches a tipping point and becomes dominant it will be harder for upstarts to enter the market and match the availability of the winner's gigantic network.

That's the theory at least. All this VC money is about trying to get to that tipping point where one of them takes the whole transportation network.

This is very much a theory. If the companies are not able to create a network effect, much of their valuation is not defendable.

I personally believe they do not have a significant network effect. They have a brand. But they do not have a network effect.

When I search for flights, I start with JetBlue. I have the most points there, I generally have good flights, and they have the most flights out of my local airport. That's the power of a brand. However I'll go to Hipmunk and start looking for alternatives if the JetBlue options don't look great. If something is better, I'll buy that.

On the other hand, I really don't like Facebook. Yet, there is nothing I can do about dragging my friends to an alternative. That's a network. There is literally no value for me to be on a Facebook alternative because my friends are not there.

From my experience taking rides in Uber/Lyft, it seems like many drivers are using both. Customers are often aware of both. I have used both.

While it is true you need a minimum network size to ensure that rides are available, I don't think the network is exclusive. You need a minimum amount of capital to buy airplanes and setup of a network of flights, that doesn't naturally lead to a single airline.

It's interesting to see the difference in branding effects in reference to price and "decisioning time". Take potato chips for example. We are probably willing to invest maybe 15 seconds into the decision about potato chips. We generally stick with whatever branding is freshest in our minds because the cost of choosing the wrong one is negligible. Meanwhile, we are willing to spend hours comparing airfare across the half dozen different portals/airlines.

I would suggest that branding is much more effective than pricing is for potato chips than it is for air travel.

Where do Uber/Lyft fall on that spectrum? My guess is that if prices are low enough there are plenty of brand based decisions. If the prices go up then people will open both apps and compare.

There is no Hipmunk for Uber/Lyft. That's one reason the network effect is stronger. And while many people check both services now, that's because they are both still floated by tons of VC money.

One we reach the tipping point -- let's say Uber wins -- you will be as likely to check Lyft as Sidecar. When was the last time you checked Sidecar? Exactly.

I think there is a huge difference between being a monopoly and a duopoly. The fact that Lyfy can exist, and it is (at least currently) easy for both drivers and passengers to switch, makes it so uber cannot institute monopoly pricing. The best example of a network that can would probably be Ebay. Uber is definitely no Ebay, and I doubt it ever will be.

It is not going to be a duopoly forever. The current duopoloy is sustained by massive VC funding. In time the network effects and other advantages of size will lead to one winner taking all (in theory).

> You need a minimum amount of capital to buy airplanes and setup of a network of flights, that doesn't naturally lead to a single airline.

Not as much as you might think. Ryanair started with a share capital of £1.

http://corporate.ryanair.com/about-us/history-of-ryanair/

share capital is not the same thing as capital - there's no way you can run an airline on £1 of capital.

Uber is more vulnerable to external price competition. Airbnb doesn't set the price of accommodation across the network and so there's not much of a risk of a competitor entering the market at a lower price point. Internal price competition is as intrinsic to their model as price uniformity is to Uber.

I'm not at all suggesting Uber adopt a "Drivers Set Prices" feature but rather pointing out that companies that adopt an internal market have providers that are competing with one another and against other companies on price. Having an "internal monopoly" means the entire company is vulnerable to a lower priced competitor.

That's not quite right. Airbnb may not set the price of accommodations directly, but their cut does influence the prices that its providers are able to charge. A competitor who takes a smaller cut will be able to have cheaper accomodations in their network, yet Airbnb is still a monopoly.

Here's another way of thinking about the difference between Airbnb and Uber. Let's say you are building an Airbnb competitor, and you found a way to attract 25% of Airbnb's providers to your service, likely by taking a smaller cut. That's still not good enough, because users will overwhelmingly prefer the service with the majority of providers, even if yours is a little cheaper. You die and Airbnb returns to dominance.

Contrast the situation with building an Uber competitor. To compete with Uber, all you need is some minimum number of drivers to be able to provide service to your initial users, and this is relatively easy because drivers can quickly switch between networks. The users do not care if you only employ 25% of the drivers, since that's still enough to provide good service. Make your service cheap and the users will flock to you, so now you can compete with Uber on price.

> The users do not care if you only employ 25% of the drivers, since that's still enough to provide good service

I question that assumption. Once one service reaches a tipping point it may be able to deliver a standard of service that will be very hard for upstarts to match. As an illustration, if Uber wins we may come to expect rides within 1-2 min anywhere in the city and to commonly match riders on Uberpool. Maybe 25% gets you there but at that scale 25% could mean hundreds of active drivers which is very expensive to muster with driver incentives. Also it will be easy for Uber to run promotions to starve competitors of their sole benefit, lower prices, until they run out of capital. That threat will discourage investors.

This is why they are fighting so hard right now. It's winner take all.

You bring up good points, but I still think 25% of drivers (or even fewer) would be enough to compete with Uber, and here's why. If you've got a new startup and you want to match Uber's response time, you don't need to have nearly as many drivers as Uber, because you will initially be be serving a small number of customers in a geographically restricted area (if you're smart). Your first customers may actually get better response times than Uber, merely by having a higher initial ratio of drivers to riders. So once you've got that toehold, you can grow your service gradually, while maintaining the same response times that Uber does.

It's true that Uber could try to run promotions to starve competitors, but could Uber keep this up forever when it's so easy to compete? They have deep pockets, but not infinitely deep.

EDIT:

On second thought, your point about Uberpool is more compelling. Whoever has the higher density of riders in a given area will be able to do pooling better (although with diminishing returns as density increases past a certain point), and this could be hard for a newcomer to match. On the other hand, if you can reach that threshold by competing on non-pooled service, you may be able to roll out a competing pooling service later. It seems more surmountable than competing with Airbnb, because you could start by targeting a small geographic area, but I can see this driving some of Uber and Lyft's valuation.

Thankfully, newcomers will always be able to compete on price with regular (non-pooled) taxi service, so we can expect those prices to stay low, effectively setting a ceiling on pooling prices.

great point. it is massive difference between airbnb (i a a huge fan) and uber/lyft.

Whatever network effect exists is very weak. Look at it mathematically. Say there are two social networking sites A and B, of equal size. If you combine A and B into one, the number of users doubles, but the number of potential individual connections quadruples. That's important, because what you care about in that space is being able to connect any two specific people. So there's a huge benefit to combining even when both networks are very large.

Now, say you have two cab hailing apps. Combining doubles the number of users and the number of drivers, but if both are large to begin with, there's probably a negligible benefit in terms of reduced hailing times. Thus there is little pressure forcing a "winner take all" outcome.

By itself, there are no network effects, but they're offering special deals that do depend on network effects. For example, the carpooling services[1] scale disproportionately to the number of users, because that increases the probability you can find people on similar start/endpoints to split the ride with.

Ditto for bill-splitting functionality for the rides, where you care about whether the other person uses the service.

What I want to know is, how long until someone writes a wrapper around all these services so you have a one-stop deal for selecting from all of them?

[1] UberPool and Lyft Lines, and now Lyft hotspots, which ingeniously tries to concentrate people at nodes, which makes carpooling aggregations trivial.

That's assuming everyone's in the same spot. But if there's an Uber driver closer to a Lyft rider, combining would have a non-negligible improvement on wait times.

Also don't forget the carpooling service (Uberpool/Lyft line). The network effect is super strong there.

It would be interesting to attempt to express mathematically expected hail times based on driver & rider density. Obviously the gains to adding density start out very big but then, as you say, decrease. But when exactly do you get past the elbow on the curve?

There's no elbow, the curve looks the same all the way down. And it's a square-root relationship. That is, you need to increase number of drivers by a factor of four in order to reduce the expected distance between a driver and a passenger by a factor of two.

Even leaving aside the assumption of uniform distribution, hail time isn't only a function of distance. Once you get below a 5-minute expected hail (which happens regularly with Uber in the middle of DC), a substantial portion is eaten up by the driver simply orienting himself after accepting a hail, then trying to find the passenger when he arrives.

It doesn't actually assume uniform distribution, it assumes that the distribution pattern doesn't change as the number of drivers goes up. Which from my experience is a good assumption over reasonable amounts of changes in driver numbers. It might change if you start to recruit some new demographic of drivers.

Drivers who are close to you having a hard time getting to you is definitely one of the tough algorithmic problems in this space! At Flywheel, we kept mentioning it, like, "Okay, what if we tried to take into account one-way streets and driver heading," and ultimately we were (when I was there at least) just too resource constrained to try to take on such a fiddly complex data-intensive problem.

One thing I don't really like about Uber is that they have All The Money In The World and yet I feel like they don't have a lot of ambition to deliver a really good app experience. Like, I get a weird loading screen every time I bg/fg my app. What's up with that? This is Android, the app can just fuckin' run while it's bged. And they aren't tackling the "driver who can get to you soonest" problem (as far as I can tell from the perspective of a passenger) or the "how to help a driver figure out who you are in a crowd" problem or any of the other cool stuff in this space.

Like, what's the point of being a $all the billions company if you don't deliver a really good app?

At which point we get to sit around with one company having 90%+ of the market for the next couple of decades until some VC wants to sink another few billions into doing the same thing again.

Wait, why's this situation better than the taxi industry again?

Except that it's not hard for drivers to sign up with both. I've seen so many drivers operating dual phones in their cars.

It might end up like the DVD burner format wars, where nobody won or lost because the burners all ended up supporting every format.

Many drivers drive for multiple networks simultaneously.

Some do. Some people list on Airbnb and competing services simultaneously too. But once that tipping point is reached then the competing networks collapse and it's not even worth bothering with them.

Case in point: Airbnb's direct competition (listing services) are totally ineffective at this point. "105bookings with Airbnb, 1 with Roomorama, 0 with with the others"[1]

[1] http://www.quora.com/Who-is-Airbnbs-biggest-competition

this may be true in some cities and for some top hosts, but for the rest of vacation rentals owners Airbnb is just another provider. It's an extremely fragmented space.

I think the issue there is that car-hailing networks lack exclusivity and have limited lock-in. This suggests a race to the bottom is inevitable: customers want faster rides and lower prices; drivers want more customers (either larger networks or fewer drivers) and high rates; the network wants to share as little of the price as possible with the driver. In other words, the network is in the position of having to attract both customers and drivers, and price/reimbursement are the primary tools.

Eventually, this should drive the margin for car-hailing networks to a stable low point, because if the price is too high customers will go elsewhere, and if the driver share is too low drivers will go elsewhere. Only by building its own fleet or by maintaining an artificial lockin of some sort (and I would classify brand/marketing dominance as being an artificial method of maintaining market power) can an intermediary network manage any level of bargaining power.

>This is great. More competition is great for me, the consumer. Recently Lyft and Uber have bother offered flat rate rides for $5-7 anywhere in SF. When people ask me how it can be so cheap, I always joke it's because it's a $15 ride but you're splitting it with a venture capitalist.

Competition to reduce prices by increasing efficiency is great for the consumer. Competition to increase market share by offering things at below market value by burning VC money or taking advantage of drivers is fine in the short run, but will have long term problems.[1] The other shoe has to drop, and it will either look like a huge price increase to make these companies profitable or investors losing a bunch of money.

[1] see Groupon et al.

I wouldn't compare cabs to airlines. 10% price difference between one airline to the other can be 100 to 200 dollars in a single buy , where in cabs it could be spread out in an entire year.

I agree that airline competition has been so price focused that value to consumer has been eroded, but cabs are fundamentally a simple, less pricey , decision.

I hope they become commodities regulated for safe driving and rather modern cars (no older than x years). The rest really IS icing on the cake.

I would argue airline competition focus on pricing is due to the marketing/purchasing methods presented to consumers when they go to buy a ticket. Expedia, Orbitz, Priceline, etc all show a big graph listing the prices of all flights taking place on the dates you want to travel. If you list a comparison of any product to consumers with little information about the varying products other than price, most consumers are going to make their purchasing decision based on price alone.

Having said that, I'm not at all arguing that price isn't important in the airline industry. $200 is a big chunk of change for an airline ticket. However, consumers might be a little more flexible about price if they had a better idea of what other value they are getting on the trip.

One decent bet about this market is that it will become a true ride sharing(UBERpool And liftLine are working on that) market. That market have pretty decent network effect(because you need that shared trips will be as optimal as possible for all users, and people will be quite sensitive to longer AND more expensive trips, and it could also help if you met fun people,etc). Some also say that many ,even with self driving cars might use shared transport. Hard to tell.

I think this is a mis-read of the market. First, if they can get many/most of their rides to include 2+ passengers, $14/trip is easily supportable without VC subsidies.

Next, if you study Lyft a bit harder you will see that is expending a lot of energy in differentiation and getting good results, especially around driver and rider experience.

Following your airline analogy, Lyft hired Virgin America's creative guy.

the competition is an illusion. The airlines are shafting customers while making more money than ever before. There isn't serious competition domestically in the US like there is in europe. There is no Ryanair here.

http://hub.aa.com/en/nr/pressrelease/american-airlines-group...

http://www.latimes.com/business/la-fi-airlines-fuel-hedging-...

http://aviationblog.dallasnews.com/2014/09/sevem-u-s-carrier...

If it was a honest competitive market the fuel cost savings would be passed on to the customers.

>The airlines are shafting customers while making more money than ever before.

Air travel in the US is hardly a lucrative business. It's a tough racket:

"Domestic passenger airline operations lost $10 billion from 1979 to 1989, made profits of $5 billion in the 1990s and lost $54 billion from 2000 to 2009. To put these numbers in context, at the end of 2009, the entire book value of U.S. passenger carriers’ assets was about $163 billion and the book value of shareholder equity was $10 billion. Even at the end of 2000, after six consecutive profitable years, their assets were $159 billion and shareholder equity was $40 billion."

http://freakonomics.com/2011/06/24/why-do-airlines-always-lo...

> If it was a honest competitive market the fuel cost savings would be passed on to the customers.

This, in fact, did happen during the oil boom of the mid-to-late 2000s. Southwest had the foresight to purchase a ton of oil futures back when it was cheap, and nearly slaughtered the primary carriers by pricing fares at levels they couldn't hope to match in the current market.

http://www.nytimes.com/2007/11/28/business/worldbusiness/28i...

With respect to "shafting consumers," airfare is cheaper than it's ever been. And if you've ever followed the market, airlines have rarely been steady bastions of profit like banks or (recently) Apple or Google - it seemed like at least one was going bankrupt every year until recently.

http://www.aei.org/publication/even-with-baggage-fees-the-mi...

Spirit is the US equivalent of Ryanair.

http://www.spirit.com/ http://www.npr.org/blogs/money/2014/02/14/276973956/episode-...

United Airlines, for instance, made about a 3% profit in 2014. Not exactly raking in the dough.

https://finance.yahoo.com/q/is?s=UAL+Income+Statement&annual

No discussion is complete without Philip Greenspun's piece on unions and airlines: http://philip.greenspun.com/flying/unions-and-airlines

Merging?

My car's in the shop getting fixed so I've been using Uber and Lyft in the suburban south bay--a market of long roads, horrible traffic conditions, and high rate of personal car ownership.

Since the past week I've learned a few things:

- all the drivers have both apps running and have no loyalty

- drivers prefer uber customers, however

- drivers don't like lyft's demo of college kids and local rides, it earns them no money

- lyft drivers think uber is evil, uber drivers thinks lyft drivers are hippies

- all the international travelers coming into silicon valley have uber and used to uber service

- uber dispatches to lyft dispatches are a 5 to 1 ratio

- drivers always complain lyft keeps them afloat but doesn't get them ahead

- uber, whether intentionally or not, actually has viable career plan. an uber black driver i rode with on the lyft service explained how after selling his real estate company and investing in three lincoln escalades was able to make his money back on one of the cars after 7 months.

- all the drivers concur uber is pretty evil, don't like the 1099 relationship, hate how uber corporate doesn't support the drivers over customers or incidents, yet sadly resign and accept the situation. it's oddly depressing talking to a uber driver.

Over half a billion dollars at the E round is quite a lot to drop into a "community" instead of Uber's business.

Hopefully the money is put into innovating locally instead of international expansion because they're definitely losing the game. And when the automated cars are here it would have been the tech game's worst investment cycle.

"all the drivers have both apps running"

"lyft drivers think uber is evil, uber drivers thinks lyft drivers are hippies"

Sounds about right from my experience.

In SF I have noticed the first part to have changed over the past 6months. I used to see a lot of drivers with both apps, now I see it less.

The rest makes sense those. Even for those that have both apps, you can tell that their personality fits with either uber or lyft.

It's like brand allegiance in consumer brands. You might be a Apple user but have to use Windows to make a living.

Re: Investing in the Escalades, can you explain how that business model works?

Does the owner of the vehicles lease the vehicles out to drivers who then use them to provide Uber Black-car service?

He sold his real estate business to fund his first car, after driving for a few months he invested in two additional cars qualifying for the Uber Black service. He gives these cars to his cousins to drive, taking 10% gross. He's now working with his friend from back in the Arizona metropolitan area to repeat the process with more cars.

some of your statements seem contradictory. I'm in the bay area - I'll offer my perspective.

- all the drivers have both apps running and have no loyalty

Lyft offers a very strong driver incentive, and that has kept me off of the uber platform since I moved to oakland (and drive in SF) in december.

- drivers prefer uber customers, however

In San Diego (a different market) I really hated the uber customers and preferred the college demo. In SF, I never liked the uber customers, either, and I really liked the lyft demo, so I dropped uber.

- drivers don't like lyft's demo of college kids and local rides, it earns them no money

I think that's a south bay thing. One afternoon after a meeting in Palo Alto, I attempted to escape back to the city and wound up getting vortexed into Stanford, so I just got out of there.

- lyft drivers think uber is evil, uber drivers thinks lyft drivers are hippies - all the international travelers coming into silicon valley have uber and used to uber service

Shrug

- uber dispatches to lyft dispatches are a 5 to 1 ratio

This is a function not only of demand but also supply. In particular, in San Diego, I found that the dispatches were in a 2:1 ratio, BUT if I favored lyft rides over uber rides by strategically turning the app off, I was making significantly more per week, because lyft's "loyalty program" is strong.

Well if this guy had some initial capital beforehand a 'real estate company' this doesn't mean much. It might be more difficult to bootstrap this from scratch, which is what you are suggesting when you say 'viable career plan'. This is also contradicted by your projection of automated cars.

By contrast, during my down time from lyft, I'm running a nonprofit research organization and also coding a backend for a startup.

Lyft has this 1099 relationship too, and it makes it for very tough running sometimes. But you just have to roll with the punches and keep hustling.

I've ridden/driven for both Lyft and Uber in SF and it was crystal clear that more people actually like the Lyft experience. And that both riders & drivers generally choose one or the other and stick to it.

<< and investing in three lincoln escalades

Lincoln Navigator, or Cadillac Escalade perhaps? Interesting points though, even if a lot of them are contradictory. In Los Angeles, I've similarly observed most drivers using both Lyft and Uber. I imagine that the Bay Area market is more saturated and that a driver could be kept busy on just one service, but I get the feeling it's not quite up to that level in LA.

Lyft, with a valuation of around 5% that of Uber, is clearly losing this battle. However, its mere existence is causing something that is rarely seen: the transfer of billions of dollars out of the bank accounts of absurdly wealthy investors, almost directly into the hands of people at the lower end of the economy. After all, the vast majority of this money is going into incentivizing drivers to sign up/stay, and subsidizing rides.

As long as this battle goes on and investors are willing to fund it, I'll be a fan of both companies. Sadly, it won't last forever.

> the transfer of billions of dollars out of the bank accounts of absurdly wealthy investors, almost directly into the hands of people at the lower end of the economy.

Aren't those AKA paychecks?

Yes, but no tech startup has ever employed this many non-Stanford/MIT grads at relatively high wages. Most Lyft/Uber drivers would be laughed at if they tried to apply for a job at Google or Facebook. Yet some drivers are earning more than entry-level engineers at these companies.

Normal, everyday people with or without degrees are the recipients of most of this VC money at the moment. The fight for both drivers and riders is so fierce that drivers are being overcompensated and riders are being undercharged at the expense of investors hoping that these businesses will one day be profitable.

I don't disagree with your premise, but it's a slight exaggeration and isn't factually correct.

> Yes, but no tech startup has ever employed this many non-Stanford/MIT grads at relatively high wages.

They are contractors.[0] There is a big difference here, as a Stanford/MIT grad contracting would easily make 2x that of an Uber driver.

> Yet some drivers are earning more than entry-level engineers at these companies.

Proof? My understanding is that the rough maximum you can make driving is $25/hr. Most junior web developers contracting make $40+/hr in SV.

[0] - http://www.reuters.com/article/2015/03/12/us-lyft-drivers-id...

I said that some drivers are making that much. This is anecdotal, but here is an interview with a Lyft driver (in front of Lyft's CEO) saying that she was surprised that she was making $300/day ($90K/yr....relatively close to the $40/hr you claim a junior web developer makes in SV when they have work):

http://www.bloomberg.com/news/videos/2015-03-06/heard-lyft-w...

A) $300/day is not 90k/yr unless you are working 6 days/week and 2 weeks off the whole year.

B) There are significant direct costs that come out of that $300, it is not even $300 before taxes, it's $300 at the top of a Schedule C.

I think many of these drivers simply have not done the math.

One thing Lyft has going for them is that the entrenched interests see them as the same as Uber. Signaling and all that.

Case in point: http://imgur.com/jbfcLpV.jpg

This makes me happy. After having been an Uber customer, then an Uber driver, and now a Lyft customer, I'm more than happy to transition my business to Lyft. Where Uber made me feel douchey, Lyft has made me feel part of a community. Even though functionally the two services are indistinguishable, I've always had better experiences with Lyft. Lyft feels more grounded. You have the opportunity, if you wish, to sit next to your driver and not treat them as a lower class citizen. I don't hear about Lyft employees being ruthless or money-grabbing. And generally all Lyft drivers I've met have been happy Uber driver converts. I totally buy the Southwest Airlines angle they are trying to achieve.

> I totally buy the Southwest Airlines angle they are trying to achieve.

I wouldn't compare any service I actually like to Southwest Airlines. Southwest seems to be one of the least appealing airlines in terms of comfort and quality.

My guess is that you're 30 or under?

Southwest during its rise to prominence in the 90's and maybe early 2000's had this friendly, relaxed reputation. It was definitely an economical option, but they tried to be friendly and jokey and get out of your way.

I agree that nowadays that has all gone away and they're just kind of cattle-cars.

Agreed. There was a time i wouldn't fly anything BUT southwest if i could help it. I don't fly enough these days to care that much, but back when I did fly a lot, I really preferred their approach.

As a mid-20s middle class guy, it's the only airline I fly. No-nonsense, good price, friendly people. No, it's not luxury seating, but I really like flying with them. They also haven't screwed up connections or held up my baggage, which US Airways and United have.

> And generally all Lyft drivers I've met have been happy Uber driver converts. I totally buy the Southwest Airlines angle they are trying to achieve.

I've noticed this too - the Lyft driver's are happier on average. And when you do get a rude Lyft driver, chances are they are driving for Uber too. At least this has been my experience.

I've heard this from drivers too. Lyft passengers are generally happier and more social, while Uber don't want to be bothered.

>You have the opportunity, if you wish, to sit next to your driver and not treat them as a lower class citizen

This might say more about you than Uber or Lyft. Why is sitting in the back treating them like a "lower class citizen"?

I consider it keeping things professional to sit in the back. They are being paid to performing a service for me; it's not like it's slavery. I don't find myself feeling guilty about not standing when a waiter comes to my table.

In the early days, Uber's slogan was “everyone’s private driver” while Lyft was “your friend with a car.” Uber's marketing was aimed at recreating the experience of a private chauffeur (which in certain older times would have been a member of the servant class), while Lyft's marketing was aimed at recreating the experience of carpooling with a friend.

Obviously neither marketing story was really true, but they did influence the way the customer experience was and is presented.

Same. The way I describe the difference is that I started using ride sharing services to avoid taxis. Then all the taxi drivers started driving uberx so I switched to Lyft. It's as much about the experience as it is the convenience.

Did you perhaps mean JetBlue? Southwest isn't well-liked.

> Southwest isn't well-liked

What are you referring to? Southwest is loved by customers and employees.

Southwest is still living on the goodwill they generated from their huge fuel hedge last decade. They don't allow their fares to be shown in the aggregators but they've convinced a large segment of the population to start their search at southwest.com rather than Orbitz/Kayak/Expedia because they believe WN will have the lowest price, but that's hardly ever true anymore.

Brilliant but hardly consumer-friendly.

I disagree. Myself as well as many people I know like the experience on Southwest. To me the best thing about them is their no-fee cancellation/change policy, right up to 15 minutes before take-off. To change a non-refundable flight on most other airlines carries a default $250+ fee. Being able to check bags at no additional charge is pretty awesome too.

I might be missing something here because nobody else brought it up: Is this not just a necessary move to salvage investments in Lyft? Assuming Uber won already, Lyft investors need to keep it dangerous enough to force a buy out or write it off completely. Keep Lyft alive until Uber is forced to buy it pre/post IPO? At some point the Lyft competition is going to cost Uber more than the price of just buying them out. Please note that I am not a biz guy so if I am wrong I would be very happy for an explanation on how/why.

The industry is big enough for multiple players.

It might be, but then it's a commodity! I think the valuation of Uber and Lyft is based very much on a winner takes all model.

Just because an industry supports multiple players doesn't make it a commodity. Commoditization is what happens when the product is widely seen as "good enough" that consumers don't value most of the industry's innovation anymore.

If Uber and Lyft run out of profitable ideas, and only have "reduce costs" left as a means to more profits, THEN it's a commodity.

To some extent those valuations are based on expectations for the future, where the companies don't even need to employ human drivers. Whoever owns the "Johnnycab" concept twenty or thirty years from now is going to be very profitable.

Is a strong brand much of a moat? It seems the only way there can be much pricing power is onerous regulation preventing others from stepping into the market.

(For example: Why wouldn't an airport charge local cab owners a small fee to be listed in their registry? Why wouldn't passengers access that registry to save $10?)

It seems the only way there can be much pricing power is onerous regulation preventing others from stepping into the market.

That could be another aspect of first-mover advantage: no latecomer will have the same opportunities for regulatory capture that Uber and/or Lyft will have.

It's not a question of if the taxicab incumbents will lose their grip on the regulatory process, but when. Whoever takes their place will be able to shut their competitors out, or at least make life hard for them.

Then someone should write a meta-driving-service app. I tell it where I want to go, and it picks which of the commodities is cheapest. Or I go out driving and it automatically shuffles through the apps to tell me where I can make the most profit.

Many competitors is good for the users. We have more choices and they will compete to provide the best to the users.

One doesn't chase losses with $540mm, generally.

It depends on the size of the game and this is a really big game.

don't you think it's dangerous to argue from a monopolist position? we have laws against the type of reasoning you think Uber should be using... I'm not sure they are in a position to do as you suggest.

I was more thinking about it like Peter Thiel's monopoly: http://www.wsj.com/articles/peter-thiel-competition-is-for-l...

Interestingly he is also a Lyft investor.

Im glad investors are backing Lyft even if today its the underdog compared to Uber. Its no secret that Uber's practices provoke disgust or discomfort, and that many would wish Lyft to do better just because at least in appearences they havent been behaving as douchey as Uber.

But I'm happy because no matter how you appreciate Uber as a company in spite of their practices, there should be no monopolies, and competition is often the most healthy result to great results to consumers and to CREATE VALUE.

I hope that ALL YC companies remember that the final destination to a profit driven economy is creating value to people. A large number of companies have made their cake and made their founders and investors very rich: stop looking at the bottom line and focus on creating value. Not things you can charge and make money of. Value.

I'm shocked. </sarcasm>

So, to ask the question that Thiel has asked, is this a market that supports a monopoly, or is it going to be a consumer-favoring highly competitive scene?

> Thiel is also an investor in Airbnb– yet another darling of the sharing economy, valued at a “mere” $10 billion compared to Uber’s $18 billion. Unlike Uber and Lyft, Thiel argued, there is no obvious competitor to Airbnb. That in and of itself makes it a more valuable company because of the distraction and profit erosion that he describes throughout his book.

Thiel seems to think that it doesn't support a monopoly, and I'd tend to agree.

So, assuming that it's a competitive market, and Uber and Lyft repeatedly copy the features of one-another, I'm very curious to see what kind of profit margins and therefore valuations are supported.

For a competitive market, it seems like the gap between Lyft's $2.5bn and Uber's $41 is bound to be reduced, one way or the other.

I support alternatives to Uber, not because they're bad or anything, but because I don't want to see a monopoly develop. Competition is the best way to ensure that we don't wind up with the next Comcast.

I found this analysis to be the most compelling thing supporting alternatives to Uber that I've ever read: http://www.interfluidity.com/v2/5822.html

I think Lyft is making a major tactical mistake by using surge-pricing, and in my experience, in many cases at rates that are higher than those of Uber. While this may ensure that their drivers make a comparable amount to Uber drivers, its at precisely the times that Uber is surge-pricing at 1.7x+ that people are most-likely to look at alternate options. Indeed I've witnessed many instances of friends doing just that- checking Lyft and realizing that the cost is actually higher than Uber's and just using Uber or (gasp) an honest-to-God cab. If Lyft truly wants to land-grab from Uber, that is the most opportune time to do so.

A secondary problem is that Lyft has far too few drivers (at least in DC) to realistically compete, which probably further compounds the aforementioned problem of constant surge-pricing. IMO to compete with Uber they should use this money to get more drivers on the road in major markets and do away with surge-pricing for some time until they have reached a higher market saturation.

Yeah, you could see something working with the passengers where you say, "Okay, we'll be 1.3x the price of UberX all the time, and so we'll grab customers from Uber when they're surging (which is, after all, when most people want cars)" and some percentage of those people will become loyal customers who won't care about a small surcharge during non-surge times.

But, realize, you're also competing for drivers. And at least a substantial fraction of your drivers are entirely willing to turn you on during the non-busy times and take advantage of your higher rates, and then switch to Uber during surge to take advantage of the temporarily higher rates there. Which can be a problem for you.

There's probably a finesseable option here where you offer drivers some kind of volume-based bonus that keeps them hungry for your rides during surge times, but doesn't mean you bleed money. But it's definitely hard to hit that mark.

Source: I used to work for Flywheel, which does "hail a taxi with your smartphone" and we spent a lot of time working through these kinds of scenarios.

I've never experienced significant (higher than 1.5x) surge pricing on Lyft but have frequently with Uber. The last time I was in New York the surge was 6x on Uber. This lasted for hours. The entire weekend I was there it never dropped below 2.1x. This was not during a holiday or bad weather. It was just the weekend.

In my experience both Lyft and Uber use surge pricing in NYC. I've seen Lyft as high as 2x, Uber much higher. But I usually launch both apps to see what level they are at.

Here in Salt Lake City, Lyft already won by a long shot. Its crazy, they got here like a week or two before Uber, but their arrival seemed to just not leave any room for a competitor.

Uber can rarely be found here, and if it can its always longer and more expensive than Lyft. Long live Lyft.

Also, thank god they got rid of the mustache thing and just put the pink sticker in their back window.

Hopefully Lyft puts some of that money towards supporting more platforms that could make it competitive with Uber. I would love to have alternative options, but unfortunately, it seems like Uber is the only service that offers a Windows Phone application and a Mobile site to order off of. While there aren't too many non iOS/Android mobile phone users, all of us are collectively tied to Uber.

I think this tells us something very interesting about the startup economy: your choice of car service is dictated by the brand of mobile phone that you own.

Totally agree.

I think it's extremely premature that people are saying Uber has won. These companies operate in a bunch of silo'd markets so for Uber to "win," they'd have to one by one take all the markets.

It's more appropriate to look at individual markets where both are competing and see how they perform relative to each other. I think Uber's higher valuation is probably due to the fact that they've aggressively expanded and are in more markets than Lyft, Sidecar, and others.

I'm a little worried. More Lyft drivers on the road might mean it's harder for me, a simple pizza delivery man, to deliver value across the city of Chicago. At the same time, I welcome Lyft to challenge Uber's dominant position - and hope they can gain market share while maintaining a stronger moral stance than the incumbent.

why do you mention being a simple pizza delivery man in all your comments?

One of your recent comments:

>Well, that's possible with compile-to-JavaScript languages. Also you have the option of plugins like Unity, if you're going for something graphically adventurous.

>That being said, JavaScript is a powerful tool, if wielded correctly. It's so flexible. In a lot of ways, it's like a pizza. One man orders a pizza with anchovies, another with green peppers. And on and on. Eventually it's like they've got two completely different dinners.

if you know about compile-to-JavaScript languages, and consider JavaScript a powerful tool and so flexible, why are you a pizza delivery man? (An unskilled job requiring no training.) Why don't you get skilled work as a programmer, even entry-level?

And why would you make an inappopriate pizza analogy in a thread about javascript, or mention

>When I knock on someone's door, and then hand them a hot box of pizza, they smile and often hand me money: $5's, $10's, sometimes a $100. I'm just doing my job, just like this Harlan "Father Time" Stenn. I suppose we take for granted, that which we can't see.

in a way that is completely unrelated to the story you posted it under? Are you using this as a 'novelty account'?

I, for one, value the contributions of the pizza engineering sector here on HN.

How does that affect your delivery business? Do you think more people take Lyft to get a pizza instead of waiting for delivery?

I just worry about the congestion. Then again, I'd rather be driving alongside a Lyft driver than a taxi driver, if you know what I mean.

I would argue that an increase in ride-sharing usage reduces traffic congestion.

I hope you're right. It definitely helps with parking.

I need more evidence to have an opinion on whether Lyft and Uber are good for the environment. It's really hard to tell because there are people choosing them over public transit, and people choosing it over car ownership.

I think this industry is going to end up exactly like the airline industry. IE: no margins to speak of really.

I just can't see how one company can ever have a long term competitive advantage. I think any current perceived advantage is down to the amount of VC cash flowing in and also how abysmal the old school taxi competition is.

When does Lyft expand internationally? The value of this kind of ride-sharing apps to me is primarily when I'm traveling. Getting reliable rides in a foreign country is such a gigantic hassle. Uber seems to be only international ride-sharing app nowadays.

More competition is surely better for the consumer. As I'm based in London, I'm very much an Uber customer but I hope to see the pink moustaches driving around Buckingham Palace soon! Will be interesting to see how they plan to expand to the UK...

For once I get to disagree with A16Z, "Scott Weiss, general partner at Lyft investor Andreessen Horowitz, sees the company beating Uber by emphasizing better customer service...he compares Lyft’s opportunity to Southwest Airlines and Virgin America"

I don't believe the comparison is correct. Catching an Uber is a quick decision process. I don't believe the change will be big enough to convert Uber users to install Lyft's app. They would have spend all that money raised and give it a way to get Lyft customer to refer friends with a free-ride coupon codes.

I'm curious where these companies and driverless cars intersect. I guess Uber transitions to driverless cars and cuts costs. It's crazy to think about. It's more or less cheap driverless taxis.

I still prefer Uber because it's nicer than Lyft. Not uberx of course, but even then uberx is basically on par with all Lyft drivers. If I'm paying for a car service, I don't derive much value from a fist bump. I want a bottle of water in the back seat, tinted windows and the door opened for me - and the few extra dollars is more than worth it. Yes competition is good, but which supporting demographic do you think will keep a company afloat? I'm betting on the people that fly business class. There are good reasons Uber attracts the big money investors.

I'm inclined to believe you simply based on evidence. Uber is till, by far, the choice for most. Moreover Travis Kalanick seems to have the passion for efficient transportation as Steve Jobs did for Apple products.

And I suspect there is some biased on Hacker News in favor of Lyft. Thiel is now even a partner of Y Combinator. And if I was Lyft, I'd rely on the passion of techies and engineers to push Lyft's "benevolent underdog" fight against the "evils of the goliath" Uber.

if self-driving cars become ubiquitous how does that change lyft and uber's business model? not unreasonable in a 10-20 year time frame right?

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