As anyone who has used them before knows, apps like Uber and Lyft just provide the technology and system for connecting drivers and passengers. They don’t operate any of the cars, and are simply taking a cut on transactions. It’s not that different of a business model than what many of the major hotel chains have, whereby they basically just manage hotels and take a cut of the revenue in fees.
It’s easy to assume that these companies are hugely profitable, given that in theory they aren’t especially capital-intensive.
While Uber is by far the largest, Lyft also has a good amount of market share, especially in the US. Unfortunately that doesn’t mean they’re anywhere close to turning a profit. They’re trying to raise $500 million in capital from investors, though the private fundraising documents which have been made public reveal a dire financial situation.
Via Bloomberg:
The company lost $127 million in the first half of 2015 on $46.7 million in revenue, according to private fundraising documents obtained by Bloomberg.
In the first half of 2015, Lyft spent $96.1 million on marketing. That’s more than twice Lyft’s net revenue during the same period. In one document, Lyft promotes its ability to attract new drivers and riders, even as it does so at a sizable loss. Customer discounts represent a big portion of Lyft’s marketing costs. This year, Lyft has also purchased billboards in New York’s Times Square and on Market Street in San Francisco, in addition to paying drivers big bonuses.
Wow, spending twice as much on advertising as their total revenue? That’s rough!
With Lyft not projected to be profitable in the foreseeable future, I’m curious how much longer investors will pour money into them. I certainly hope they stick around, if for no other reason than to give Uber some competition. We’ve long heard people suggest that Uber is only so cheap so they can price the competition out of the market, and it seems like that might not be too far off, as Lyft struggles to compete.
First thing first, this unique promo code ST9283 gives your $40 free ride instead of $20 (had a friend who worked in the company with this valuable promotion code) for your first two free rides.
I was an avid Uber rider until two weeks ago when I start using Fasten (in Boston only) and it's AMAZING! The quality is as good as Uber, but the price is often 30% to 50% cheaper. I'm moving it,...
First thing first, this unique promo code ST9283 gives your $40 free ride instead of $20 (had a friend who worked in the company with this valuable promotion code) for your first two free rides.
I was an avid Uber rider until two weeks ago when I start using Fasten (in Boston only) and it's AMAZING! The quality is as good as Uber, but the price is often 30% to 50% cheaper. I'm moving it, and my wife and colleagues all start using Fasten :)
The car is very clean and nice, the drivers are always courteous (unlike some Uber drivers who only complain about how low they get paid!!!), and you just can't beat the price!
As a consultant, I have traveled and used Fasten in Boston, Cambridge, Brooklyn, and Charlestown; all seems to be perfectly well served for Fasten!
@Anastasia: If you're not getting fare estimates in the Lyft app, there's something wrong with your copy of the app or your phone. All you need to get an estimate in the app is to type in your destination.
As for rideshares, if you mean UberPOOL, Lyft Line came first and is available in all the cities that UberPOOL is in. It's true that UberPOOL was announced 24 hours prior to Lyft Line, but Lyft...
@Anastasia: If you're not getting fare estimates in the Lyft app, there's something wrong with your copy of the app or your phone. All you need to get an estimate in the app is to type in your destination.
As for rideshares, if you mean UberPOOL, Lyft Line came first and is available in all the cities that UberPOOL is in. It's true that UberPOOL was announced 24 hours prior to Lyft Line, but Lyft Line was open to the public when it was announced; UberPOOL didn't leave beta for a while longer. You don't code an entirely new routing algorithm in a day. Some insiders suspect that Uber caught wind of Lyft's plans and made the beta announcement to steal their thunder.
The other problem with lyft is that compared to Uber, they leave a lot to be desired in that they don't give you fare estimates, I'm not sure if they let you do ride shares, etc...which means that between Lyft and Uber I usually choose Uber.
Um... dumb question...but other than what's been mentioned in the article, where is Lyft advertising? I've not seen a single advert for them. Uber, yes, but nothing from Lyft.
Not surprised. Here in SF where Uber (and Lyft?) were born, nearly every Lyft car I've been in has been moderately clean or outright filthy, or "decorated" in such a tasteless manner that it was uncomfortable. Or the time I sat in a pile of Cheerios that the driver's kid had spilled the previous day. This typifies the Lyft experience.
Uber is killing Lyft because they provide multiple levels of service and a service standard...
Not surprised. Here in SF where Uber (and Lyft?) were born, nearly every Lyft car I've been in has been moderately clean or outright filthy, or "decorated" in such a tasteless manner that it was uncomfortable. Or the time I sat in a pile of Cheerios that the driver's kid had spilled the previous day. This typifies the Lyft experience.
Uber is killing Lyft because they provide multiple levels of service and a service standard based on what passengers are willing to pay. Lyft isn't doing that, or simply can't, and it's hurting their bottom line that their QC is non-existent. So to compensate they're trying to use loss leaders (steeply discounted rides and/or coupons) to make up in quantity what they can't charge for quality.
This is all before taking into account the $1000 bonus for new drivers earlier this year or the various promotions they've been pumping out.
It's a growth strategy. This is just the next round of funding....as someone already mentioned, this is not unusual at all. It took Amazon over 10 years to turn a profit. Facebook, many years.
Silly attention grabbing headline.
Here in Boston, a new ride-sharing app called FASTEN that is trying to target itself as the transparent, low cost carrier for both riders and drivers.
The rates for riders are about 20% lower than Lyft/UberX and they also do not have mandatory surge pricing (they have optional surge pricing to give you a better chance to get picked up). They are also offering right now that all rides under 20 minutes to be $5...
Here in Boston, a new ride-sharing app called FASTEN that is trying to target itself as the transparent, low cost carrier for both riders and drivers.
The rates for riders are about 20% lower than Lyft/UberX and they also do not have mandatory surge pricing (they have optional surge pricing to give you a better chance to get picked up). They are also offering right now that all rides under 20 minutes to be $5 (the company makes up the difference to the driver).
The drivers also can earn more as FASTEN only charges a $1 per ride and not a % like the others.
This company will have to rely on volume as they earn less per ride but they seem to be a disruptor inside the disruptor.
https://fasten.com
Uber has also been a big money loser
http://gawker.com/here-are-the-internal-documents-that-prove-uber-is-a-mo-1704234157
http://www.businessinsider.com/ubers-revenue-profit-and-loss-2015-8
I'm not surprised. When I checked my app the other day (I signed up a few months ago but didn't ride) I had 10 free rides up to $20 each and another 5 up to $15 each. I think I used about $220 of credit and spent $5 of my own money on top!
Taxis from my home to/from LAX run about $50, or a little more, with tip. The base price for Uber and Lyft has been low $20s. But with the 50% off promo that is going on now at Lyft, my trip to LAX on Friday was $11.35. It's great while it lasts ... but it can't last.
oddly, lyft is still running its huge driver sign up bonus promo http://slickdeals.net/f/7893891-new-lyft-driver-bonus-100-250-300-500-or-750
which the article says is one of the main drivers of its massive operating loss.
It's not surprising to see the 2x marketing spend, they're still trying to buy marketshare. But it's a tough market when you have to deeply discount the offering to get those customers, as soon as they quit doing that the customers will go elsewhere. Not to mention the driver incentives...
This isn't really surprising... young companies, especially in tech, spend way more than they take in. From 2012-2014 Uber lost almost $500M
Uber have been poaching drivers from other private cab companies for a couple of years now, offering them sign-up bonuses and all. No wonder the competition can't compete...
But the regulatory environment in Europe is going to drive them out of business in Europe. UberPOP is outright illegal in most countries here, and the other Uber services only work with a Private Chauffeur license which costs way too much to be able to live off what Uber pays.
Considering lyft is doing 50% off 4 rides (up to 25.00 off each ride) that start in NYC right now Monday 5AM-Friday 5PM until the 29th of November its no surprise. Turned a 55.00 ride into a 30.00 one for me last night.
Every few weeks I get a killer offer with a fairly short use window ($10 off/ride for 5 rides, free $30 ride, etc when used within 2 weeks). Without fail, a couple days before one promo ends, I get another one. They obviously are desperate for users if they keep giving me these promos after a year with an account and not a single ride (meanwhile, I've probably spent four figures with Uber).