From a purely investment point of view, why would anyone invest in Lyft over Uber? Lyft has a smaller footprint and only operates in the US (except Toronto). They are more susceptible to economic conditions in a single country, the US, and every point of marketshare they get is a zero-sum game against Uber and presumably expensive because Uber won't give it up for free.
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.
Southwest Airlines for a long time just focused on point-to-point flights, avoiding money-losing flight patterns that routed passengers through a Chicago to New York type connection. Additionally, SWA only maintained 737's, and free checked baggage allowed for faster onboarding and deplaning, and therefore, faster turnaround times. Eventually, this little airline became the largest airline after the major airlines botched their oil hedging, customer service, etc.
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.
What a great example! I'm realizing that perhaps the "second mover advantage" may be more pronounced in markets with low switching costs. Flyers can easily compare airline prices against one another, and drivers are incentivized to boot up 2nd, 3rd and 4th driving apps.
Low-margin businesses can't afford to spend as much on R&D, make mistakes, etc. They have to win with small executional advantages.
IIRC, Lyft was the first mover, Uber shamelessly ripped off Lyft's model that anyone can be a driver and come out with Uber X. So, imo Lyft was the first mover, but was smart to let Uber face all the heat sacrificing short term growth for long term success. Uber has been in too many things for me to believe that they can sustain the business (I may be wrong)
Sidecar launched in 2011. Lyft nominally launched in 2012, but was really a continuation of the same product and company that the founders had been running since 2007, just under a different name.
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!
For more information on Zimride visit:
www.zimride.com
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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 don't think you are wrong. I have both apps, and my last 10 rides have been in Lyft, because it's consistently cheaper. If uber wants me back all they need to do is compete on price, but I think their operating costs are too high to do that, so they will eventually lose out from being too big and have to either scale back or implode.
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).
My employer has a business account with Lyft and I use it on all business trips. It's convenient because everything goes to our expense reporting system automatically. But businesses have no loyalty and would quickly shift to Uber for lower prices.
Lyft is consistently 30% or more more expensive for my apt-to-work route in SF. A few of my friends observe similar. Perhaps you have to look at things on a route-by-route basis.
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.
A small point, but Lyft acquired Motivate for $250m, which is a lot less than $2bn. Plus, Motivate has profitable bikeshare programs in various cities across North America, and have done for many years. They're not a flashmob, fly by night scooter rental company.
> 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.
But Lyft has a self-driving car group in Palo Alto, and it bought the bikesharing company, Motivate.
>Instead of buying 19-month-old scooter company for $2B
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."
Interesting. 2.5x revenue though and has exclusive city contracts. I still view this differently than paying $680M pre-revenue for Otto. On the scooter side, at $300/scooter, Uber could buy 100k scooters and stick an UberScoot button on their app and probably can more ridership than any of the year old startups.
This assumes those scooters aren't impounded, damaged or left with dead batteries. There are no human drivers constantly maintaining these scooters, at best a random person may come by and charge them (for a fee OFC), but no quality assurance or maintenance is happening in a timely manner. This is why scooter companies are seeing their average scooter break after 4 months, there is no maintenance plan and they aren't built to be on the street, unsheltered 24/7.
If Uber wanted to operate a scooter division, I still think it makes way more sense to do it themselves at this point given Uber has no barriers to enter this market. Millions of people already have Uber on their phone and a number of drivers are probably willing to pick up scooters to charge them or transport them for maintenance if needed. I'm just saying it seems way cheaper to roll out a pilot program with 10,000 scooters than investing hundreds of millions to a couple billion dollars in another company that effectively is letting you white label its scooters (that are manufactured by another company). Is a scooter maintenance company worth $2B?
Completely agreed. There's always a second-mover advantage for burgeoning industries in that second-movers can avoid the mistakes that the first movers have become entrenched in.
Lyft has gone through quite a few iterations of its own. Predecessors started before Uber but, even more recently, it moved beyond the pink mustache and fist bumping into being essentially an Uber clone. I (and apparently others) found the whole "be buddies with your driver" thing to actually be a real turn-off.
I agree, for me too. On the other side, the "we want to get rid of drivers" and "squeeze driver" type of stories I hear from Uber made me go to Lyft by default. Most drivers I ask which drive for both prefer driving for Lyft.
I use Lyft by default these days because of Uber sleaze factor. I'm not sure how big a difference there is and I don't use either much but small steps for whatever they're worth.
> Uber has a global operations, is in multiple streams of business and has diversity across business lines
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.
I can guess few of their story points (hard to know until they release their numbers):
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.
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
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.
Random guess: most of the pople I know who use Lyft do so because they've been put off at one point or another by one or more of Uber's scandals - Uber is widely viewed as the 'default', while Lyft is the more 'moral' option. If this pattern holds true, it means that the Lyft userbase will generally be a group that is A. better informed overall and B. more willing to make purchasing decisions driven by their ethics, which all in all suggests a more thoughtful clientele.
Lyft's fare is predictable, and rises little even at peak hours. The fares are mostly in the same ballpark as Uber's.
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.
Talking with a Lyft driver near Seattle the other day who drives for both, his perception was that Lyft was for weekday riders, Uber for weekend riders.
It's not really possible to make a direct comparison because Uber's rates (at least in my market) are a game.
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.
> 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.
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 takes the flack, gets the law changed, creates the market. Lyft sails in and gets most of the benefits, without those costs.
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.
Uber for now can afford to beat everyone on both those fronts
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.
A big reason I switched to Lyft was hearing consistently from drivers that they preferred it. This has the added bonus effect of meaning that wait times for Lyft are way lower than Uber on average IME, since drivers are more likely to pick up a Lyft fare.
Lyft used to be Zimride but Zimride was absolutely nothing like what we call rideshare today. More like a slightly more codified, less sketchy version of CL rideshare.
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 :-)
Uber (Founded March 2009[1]) created ride sharing in SF before Lyft (Founded: June 2012[2]). Uber just started with commercially licensed Black Car drivers and Lyft started with anyone with a car and a drivers license. Then Uber moved down market with UberX and Lyft moved up market with Lux.
I think this is just a matter of semantics. Are you saying we should call a black-car hailing service "ride sharing" simply because you booked it with a smart phone app rather than calling a number? (Remember that Uber didn't even use a novel business relationship; there have long been dispatchers with a single phone number that distribute the rides to multiple independent black car agencies.)
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.)
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.
The same reason you invest in anything else? You think you can make more money from it than the alternative within your investment timeframe.
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.
Former Lyft eng here of 2.5 yrs.. Lyft is kicking major a. Don't mean to hype it. Even if they weren't IPO'ing I can tell you they are firing on all pistons. I'm pretty sure the financials are in good shape too.
I am not sure if you meant that the other way around. In 1998, Microsoft was the larger company, with the more evil reputation, which seems to parallel Uber.
Lower price than Uber, potential for growth if they move outside the US, belief that ride share markets are not a zero-sum game and that two companies can more or less split the market...
Maybe because you believe that the investment of yourself and others will be profitably used by the company, and you'll be able to share in those profits.
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.
If you are long US and/or the logistics portion of on-demand, digitally assisted marketplace economy, it's not a bad idea.
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.
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.
"From a purely investment point of view, why would anyone invest in Lyft over Uber?"
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.
Uber's international focus hasn't been entirely successful, and I guess its more of a money drain as well. Why Lyft is ready for an IPO before Uber could have to do with them focusing on making US market profitable instead. Uber has a much steeper hill to climb (even if the summit is higher).
> every point of marketshare they get is a zero-sum game against Uber
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.
They are more susceptible to economic conditions in a single country
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.
Regarding your first point, the idea is that if the US economy tanked or crashed Lyft would be utterly screwed but Uber might be able to ride (haha) it out with revenue from its non-US markets. In reality, if anything that bad happened to the US the rest of the developed is most likely screwed too, but that's the concept.
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.
Uber is not a public company, so there isn't much alternative for investment in this space. Lyft has more room to grow and expand to profitable markets
Uber makes countries hate them and countries and cities are free to kick Uber or any business out. Lyft respects laws and so is less subject to legal risk.
Taxis doesn't seem like a business where there are economies of scale from having a larger global footprint. Uber may have a small advantage in software costs, but labor and equipment must be the largest costs, and the labor is bringing the equipment for the most part; Uber may be able to do better on leases than Lyft, but I'm not sure how much of their earnings are coming from that.
> Uber has a global operations, is in multiple streams of business and has diversity across business lines and countries [...]
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.
If you're bullish on ride hailing apps and bearish on Uber in particular, that gets you there. Plus there's generic diversification arguments - most returns come from a few companies that do really well, so you need to "buy the haystack" to ensure you own the needle.
As a customer experience I prefer Lyft because they let me give tips. I doin't think Uber drivers make a living wage, so I like trying to figure out what can be added to offset the low base/fees so the drivers can do okay.
Me too - now that the Uber app has tipping I choose to tip a nominal amount ($2 usually each trip). But prior to them adding it I was happy to not tip at all, even if in the end the price point for the trip was $2 higher.
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.
Because the tipping culture to me doesn't make sense? Not everyone is from NA, where it is mandatory to tip. I would rather pay more to Uber upfront and have them pay more to drivers than me paying extra on top.
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.
Why investing in any company? Because you expect them to use your money to increase its total earnings so they'll gladly pay back (on dividends or stock evaluation) more than you paid to them.
Room to grow for all of the reasons you mentioned? Alongside different/better governance and perception
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.
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?