Leaked Lyft Document Reveals a Costly Battle with Uber(bloomberg.com)
bloomberg.com
Leaked Lyft Document Reveals a Costly Battle with Uber
http://www.bloomberg.com/news/articles/2015-04-30/leaked-lyft-document-reveals-a-costly-battle-with-uber
6 comments
There is no barrier to entry. Seriously. Mobile apps? Backend infrastructure? Trivial. I take that back; the biggest barrier to entry might be a massive trove of ride data for machine learning used to predict capacity requirements. In large metro areas, you might be able to get this data in an open format, obviating the need for you to gather the data yourself (the recently FOILd New York Cab Ride data comes to mind [1]).
Anyway! I see Uber going the way of webvan. Great proof of concept that VC money is going to burn through, followed up by some combination competitors, self-driving cars, and local/state government transportation agencies putting together federated/open APIs to perform the same services but in a regulated manner (or governments contracting with smaller players to perform the same services).
No amount of VC is going to remove a government's ability to regulate transportation (Montreal, Canada impounded 40 Uber drivers' vehicles the other day [2]). Then again, it shouldn't. Transportation should be regulated, but not for monopolistic reasons.
Anyone want to make a cheap long bet for funsies?
[1] http://www.andresmh.com/nyctaxitrips/
[2] http://www.cbc.ca/news/canada/montreal/montreal-taxi-bureau-...
Anyway! I see Uber going the way of webvan. Great proof of concept that VC money is going to burn through, followed up by some combination competitors, self-driving cars, and local/state government transportation agencies putting together federated/open APIs to perform the same services but in a regulated manner (or governments contracting with smaller players to perform the same services).
No amount of VC is going to remove a government's ability to regulate transportation (Montreal, Canada impounded 40 Uber drivers' vehicles the other day [2]). Then again, it shouldn't. Transportation should be regulated, but not for monopolistic reasons.
Anyone want to make a cheap long bet for funsies?
[1] http://www.andresmh.com/nyctaxitrips/
[2] http://www.cbc.ca/news/canada/montreal/montreal-taxi-bureau-...
I disagree. The network is the product, not the mobile app. Drivers won't switch to a new app that has no customers and customers won't want an app with no drivers.
Every driver I talk to has both User and Lyft installed. And I have have both Uber and Lyft installed. If one is surge pricing, I check the other.
Sure, you still probably need some capital to bootstrap the process. Guarantee an hourly rate to drivers for a short period of time, and offer really low prices for passengers.
Oh puh-lease! We hear this argument time and again, yet continue to hear anecdotes about drivers who drive for both Lyft and Uber.
There is zero friction to install a new app and accept fares via that app, except perhaps how many ridesharing apps you can run at once on your device for accepting passengers.
There is zero friction to install a new app and accept fares via that app, except perhaps how many ridesharing apps you can run at once on your device for accepting passengers.
The challenge is reaching critical mass, where you have enough customers to keep the drivers busy and enough drivers to guarantee a quick pickup.
The linked article says Lyft now have an average pickup time in SF of 2.5 minutes. Good luck bootstrapping to that kind of performance with a brand new ride share company starting from scratch.
The linked article says Lyft now have an average pickup time in SF of 2.5 minutes. Good luck bootstrapping to that kind of performance with a brand new ride share company starting from scratch.
You're competing on price, and drivers can use all services at the same time. If a driver gets more of the cut from another service they'll use that too - then they'll of course preference requests from the service that pays them more. It just snowballs - there isn't enough friction associated with switching services as a customer or as a driver to prevent competition on price point until the margins are razor, and then you're McDonalds. Which is fine, but you can't assume current margins.
Sure, I also hear anecdotes about companies that try really hard but are unable to compete with Craigslist or eBay or other big companies with a strong two-sided network effect.
Based on what I've seen, Hailo tried to buy their way into this market, albeit with the twist of using licensed cabs. Seems like they had little trouble signing up drivers (who were predisposed to distrust the UberTAXI) but my assumption is that they gave up in North America because they couldn't afford to keep giving away the free rides and discounts needed to build up a customer base.
Based on what I've seen, Hailo tried to buy their way into this market, albeit with the twist of using licensed cabs. Seems like they had little trouble signing up drivers (who were predisposed to distrust the UberTAXI) but my assumption is that they gave up in North America because they couldn't afford to keep giving away the free rides and discounts needed to build up a customer base.
Demand-side network is the most important. Supply side is relatively trivial compared to this. Look at LINE Taxi which launched in Japan using its demand side network via its messaging platform + instantly creating a huge supply side network via a partnership with existing taxi companies. You can buy supply side but can't buy demand side network.
Drivers using both Lyft and Uber is a perfect demonstration that they care most about the size and liquidity of the demand side of the market. They are using both in order to increase demand side liquidity from their perspective.
Drivers using both Lyft and Uber is a perfect demonstration that they care most about the size and liquidity of the demand side of the market. They are using both in order to increase demand side liquidity from their perspective.
You can buy demand, though. "All rides free for first month" plus a ton of money in advertising will get you plenty of people switching if there is enough supply as well. It's just perhaps too expensive to buy demand when in the end people can switch back to Lyft or Uber just as easily.
Sure there are risks. But assuming that lyft-line or uber-pool succeed in filing rides with few people in return for lower costs they will have an advantage, because average occupancy and a reasonable ride length is highly dependent on amount/density of users.
And BTW, according to some uncofirmed twit[1], more than 50% of lyft rides in sf are done through lyft-line, which is a pretty new service.
To a lesser extent, user density is also related(in theory) to driver ride time, both in reducing wait time, and reducing time from call to passenger.
Also there might be a possibility they can subtly incentivize drivers to only drive for them by giving complying drivers a bit more work, or better work.
And as for your risks lists,you can paraphrase it as: the hand of god(government), a darpa scale technology(self driving cars), very well resourced competitor.
But every company is under risk from the first 2, even for businesses with a strong competitive advantage.
[1]https://twitter.com/DavidELPC/status/593832295968059392
And BTW, according to some uncofirmed twit[1], more than 50% of lyft rides in sf are done through lyft-line, which is a pretty new service.
To a lesser extent, user density is also related(in theory) to driver ride time, both in reducing wait time, and reducing time from call to passenger.
Also there might be a possibility they can subtly incentivize drivers to only drive for them by giving complying drivers a bit more work, or better work.
And as for your risks lists,you can paraphrase it as: the hand of god(government), a darpa scale technology(self driving cars), very well resourced competitor.
But every company is under risk from the first 2, even for businesses with a strong competitive advantage.
[1]https://twitter.com/DavidELPC/status/593832295968059392
Uber is a classic two-sided network [0], like eBay or Craigslist. It is extremely difficult to displace a first-mover advantage. The hundreds of thousands of drivers are set up with Uber and will stick with it unless something new is meaningfully better (and Lyft is currently worse). Same with the users.
I think you can be legitimately critical of Uber's poor business ethics [1], but the sustainability of their current business model looks excellent, at least for each city in which they are established as the first mover.
[0] http://en.wikipedia.org/wiki/Two-sided_market [1] http://en.wikipedia.org/wiki/Uber_(company)#Sabotage_against...
I think you can be legitimately critical of Uber's poor business ethics [1], but the sustainability of their current business model looks excellent, at least for each city in which they are established as the first mover.
[0] http://en.wikipedia.org/wiki/Two-sided_market [1] http://en.wikipedia.org/wiki/Uber_(company)#Sabotage_against...
The problem is you end up with network effects on the drivers side per city. So 2020's Ultra startup can just displace Uber in say NY and ignore every other city. After winning that they can fight for DC etc.
Also, drivers are a commodity market which is much easier to displace. Amazon marketplace vs eBay's auctions.
Also, drivers are a commodity market which is much easier to displace. Amazon marketplace vs eBay's auctions.
The product is a bit more commoditized than with eBay or Craigslist though, right? Above some reasonable level of service, a ride is a ride. Assuming that the friction for switching services for the two sides is relatively low, it seems like there's a clear path to a new competitor starting slow and building both sides of the market at the same rate.
But for eBay, the products people want vary vastly from each other. I want to buy something fairly niche, so to save time it helps if there's one massive site where all of the people on the other side of the market are all located.
But for eBay, the products people want vary vastly from each other. I want to buy something fairly niche, so to save time it helps if there's one massive site where all of the people on the other side of the market are all located.
There's some variety there. Pet rides. Rides for those with mobility problems. Options for extra trunk space. Options for large groups. Free WiFi. Drivers that speak specific languages. Pickup within five minutes or the ride is free.
And there is always differentiation based on customer service.
I guess I'm saying that there are plenty of niches to fill.
And there is always differentiation based on customer service.
I guess I'm saying that there are plenty of niches to fill.
You just carve out a niche.
* Blacklane - cheaper than Uber Black, but the rides have to be pre-arranged (essentially a car service with UI)
* Wingz - cheaper than UberX, but only to/from airports
* Sidecar - cheaper than UberX, but with implied wait of up to an hour
* Leap buses - cheaper than UberX, but with set routes
If drivers are utilized at 100%, they will have very little reason to look around. But most of the services don't utilize (and hence don't pay) drivers for 100% of their time. Hence a myriad of phones with a bunch of identical apps on drivers' dashboards, and frantic search for 100% utilization (food delivery? shopping delivery? help with moving?) among the dispatcher services.
* Blacklane - cheaper than Uber Black, but the rides have to be pre-arranged (essentially a car service with UI)
* Wingz - cheaper than UberX, but only to/from airports
* Sidecar - cheaper than UberX, but with implied wait of up to an hour
* Leap buses - cheaper than UberX, but with set routes
If drivers are utilized at 100%, they will have very little reason to look around. But most of the services don't utilize (and hence don't pay) drivers for 100% of their time. Hence a myriad of phones with a bunch of identical apps on drivers' dashboards, and frantic search for 100% utilization (food delivery? shopping delivery? help with moving?) among the dispatcher services.
> Many times I call for an Uber and a cab comes first and then they lose my business to the cab, which kind of highlights the commodity nature of rides
In that scenario, Uber should be charging you a penalty for the cancelled ride.
> Right now, Uber can beat everybody on price and quality because they don't have to be profitable for a long time.
I certainly hope they're not losing money on each ride right now.
In that scenario, Uber should be charging you a penalty for the cancelled ride.
> Right now, Uber can beat everybody on price and quality because they don't have to be profitable for a long time.
I certainly hope they're not losing money on each ride right now.
> In that scenario, Uber should be charging you a penalty for the cancelled ride.
Which would drive users to Lyft or other ridesharing services.
Which would drive users to Lyft or other ridesharing services.
Lyft penalizes you $5 for cancelled rides after some amount of time, at least in SF. Also when the app makes a request on its own and you're not there.
As does Uber - they'll charge $10 if you cancel after 5 minutes after the driver is assigned.
http://blog.uber.com/2012/05/01/updated-cancellation-policy/
http://blog.uber.com/2012/05/01/updated-cancellation-policy/
Uber charges the same $5 after 5 mins, if cancelled.
>Maybe the long-term plan is de-regulate and re-regulate in favor of Uber?
That's one option. Grow until they are dominant, then support greater regulation. They can afford it, new competitors can't. Similar to Amazon and sales tax.
That's one option. Grow until they are dominant, then support greater regulation. They can afford it, new competitors can't. Similar to Amazon and sales tax.
Probably pivot or add another service that compliment its existing one.
I've heard they're beta testing package delivering over at reddit iirc.
An example would be Netflix, they had cheap license for old tv shows and dvd rentals. Now that production studios have squeezing Netflix in licensing deal with higher prices, they've pivot to becoming HBO like, with a smaller selection of tv shows and movies license.
I've heard they're beta testing package delivering over at reddit iirc.
An example would be Netflix, they had cheap license for old tv shows and dvd rentals. Now that production studios have squeezing Netflix in licensing deal with higher prices, they've pivot to becoming HBO like, with a smaller selection of tv shows and movies license.
The second line of the article states that growth is beginning to slow. It felt ominous, but buried in the 5th paragraph it says they are still expecting 512% YoY growth in 2015.
> Lyft projects $796 million for 2015, a slowdown in growth but still an impressive 512 percent jump from 2014
> Lyft projects $796 million for 2015, a slowdown in growth but still an impressive 512 percent jump from 2014
The crazy thing is how a relatively small miss on a large growth rate can cause big valuation problems. When the value of the company is in future revenue, this happens. (Look at Twitter)
> The $130 million in revenue for 2014 is based on the combined net revenue from Lyft Classic and gross revenue from Lyft Line during the month of December, which implies $10.8 million in revenue during that month.
What is this sentence supposed to mean?
What is this sentence supposed to mean?
They took the $10.8m in December 2013 revenue and multiplied by 12 to get the $130m number.
Also commonly referred to as "revenue runrate".
So taking into account these two facts:
> in 2014, it was 51,000 drivers and 2.2 million monthly rides, according to the document
> A ride booked in San Francisco through the Classic service generates a 92-cent profit for Lyft, including marketing costs but excluding corporate expenses, such as software developers and office space.
and assuming that all these 26.4 rides where Lyft Classic(which is of course foolish, but good for now), they would have around $24.28M for corporate expenses. Well and office in SF with ~500 people and all these perks in the heart of Mission district, makes me wonder if they are even profitable...
> in 2014, it was 51,000 drivers and 2.2 million monthly rides, according to the document
> A ride booked in San Francisco through the Classic service generates a 92-cent profit for Lyft, including marketing costs but excluding corporate expenses, such as software developers and office space.
and assuming that all these 26.4 rides where Lyft Classic(which is of course foolish, but good for now), they would have around $24.28M for corporate expenses. Well and office in SF with ~500 people and all these perks in the heart of Mission district, makes me wonder if they are even profitable...
You don't have to wonder. It says at the bottom of the article that Lyft is not profitable:
Though currently unprofitable, Lyft's ride economics appear to be going in the right direction.my bad, I was agitated from the graph above this statement!:) Thanks
Wow. Leave it to a startup to go into the red whilst providing 1) an app and 2) fluff mustaches and .. well not much more, really.
They're in a flat out race to gain market share with Uber. If they were profitable (rather than reinvesting revenue in further growth) their investors would rightfully be furious.
They are a middleman. Where exactly is the finish line of this particular race? Because it sounds very much like an antitrust lawsuit.
I keep hearing about this huge war between Lyft and Uber, but I don't see anything evidenced in the price to the user. Now, maybe I'm just naive, but shouldn't this kind of competition drive the prices down?
Have you used uber pool or lyft's equivalent? I can take a 45 minute ride in LA for $5. I've only had someone else get in the car once out of at least 20 rides. They're definitely losing some money there.
Prices have been coming down. Just look at UberX prices in the established markets.
Does anyone have a link to the actual pitch document? I couldn't find it in the article or on google. Interesting excerpts but I'm greedy and want all the context in the doc :)
Many times I call for an Uber and a cab comes first and then they lose my business to the cab, which kind of highlights the commodity nature of rides--especially in the unregulated environment they themselves advocate. Maybe the long-term plan is de-regulate and re-regulate in favor of Uber?
Just thinking out loud because I'm genuinely curious what the strategy is.