Lyft boosted by Uber’s travails
Underdog ride-hailing service expands nationwide, gains market share as larger rival battles scandals
Uber’s upheaval has helped propel its underdog rival, Lyft. The smaller ride-hailing company has surged by several measures, including market share, number of rides and ride revenue, according to reviews of U.S. credit card data from Second Measure and Superfly.
“Lyft is currently gaining market share faster than they ever have,” said Ben Horowitz, a partner at Andreessen Horowitz who sits on Lyft’s board. The venture firm led a $60 million investment in the company in 2013 and, despite selling some of its shares last year, remains a major backer.
During Uber’s recent months of scandals, a #DeleteUber campaign and corporate turmoil that led to the ousting of CEO Travis Kalanick, Lyft’s growth accelerated, he said. Speeding things up: Lyft has expanded into more than 150 new markets nationwide this year.
Now Lyft is eyeing more ways to capitalize on the situation, seeking to raise awareness of its less well-known brand.
“A very unusual opportunity appeared out of nowhere be-
cause Uber is ... a significantly weaker competitor than they’ve been in the past,” Horowitz said. “That does create the opportunity to grow even faster ... and gain market share in a way we couldn’t before.”
Outside analysis shows a strong trajectory. Lyft’s share of the U.S. ride-hailing market grew from 12.4 percent in January 2016 to 21.7 percent in June 2017, according to Second Measure. (UberEats, Uber’s food-delivery service, is included in its numbers, exaggerating Uber’s market share for rides.) By Superfly’s numbers, Lyft’s U.S. market share went from 20 percent in January 2016 to 31 percent in June. Lyft says it has 30 percent of the U.S. ride-hailing market.
Even more striking, Second Measure shows that Lyft made significant gains in each of the country’s two dozen largest cities over the past 12 months. In Atlanta, for instance, Lyft almost doubled its share, going from 10.8 percent last May to just shy of 20 percent this May.
Its strongest market is Portland, Ore., where the year saw a 30.1 percent share turn into 46.8 percent, according to Second Measure. The next strongest are San Francisco (38.3 percent), Denver (34.4 percent), and Seattle (30.5 percent). Lyft says it has more than 40 percent share in several U.S. markets, but declined to name them.
“Lyft now in many places in the U.S. can be quite competitive in user experience,” said Jan Dawson, an industry analyst with Jack Daw Research. Lyft said its prices are on par with Uber’s and its average wait time nationwide is three minutes. That’s a significant marker, as consumers are known to switch to whichever service will get them a ride faster.
Even without Uber’s turmoil, Lyft would have had a growth spurt this year because it launched its service in about 160 new cities, entering smaller towns such as Springfield, Mo.; Jacksonville, N.C.; Dover, Del.; Erie, Pa., and the California towns of Redding, San Luis Obispo, Merced, Chico and Yuba City (Sutter County).
But Uber isn’t exactly holding still. It hit a jaw-dropping milestone of 5 billion trips worldwide in late May — less than a year after reaching 2 billion trips. In other words, it gave more than 3 billion trips over the past year, despite all its travails.
Some surveys, such as one last month from Kiip, a mobile-rewards advertising platform, show that many ride customers are indifferent to corporate shenanigans. Of 12,000 respondents, 70 percent said a company’s reputation doesn’t affect whether or not they use a ride-hailing service. Still, close to one-fifth (18 percent) said they follow the Uber scandals closely.
But for Bay Area riders steeped in the sagas of their hometown companies, reputation does matter, according to some drivers.
Charles Allison puts in 30 to 45 hours a week as a ride-hail driver in San Francisco. He noticed a drop in Uber rides after the #DeleteUber campaign in late January, and switched to driving Lyft exclusively.
“My earnings on Lyft were all of a sudden a lot more consistent and higher than they’d been prior to that point,” he said, so he’s stuck with Lyft.
Since then, hundreds of passengers have mentioned Uber’s issues, he said. “Some people have really strong opinions and will bring up that they’ve deleted Uber because they can’t stand the stuff going on.”
Erin Kennedy, who used to drive for both services, switched to Lyft only, in part because she was tired of riders asking her why she still drove for Uber. Many passengers have told her that they’ve deleted Uber’s app, but she wonders if that will last.
“It reminds me of when customers boycott a store or restaurant like Chick-fil-A or Walmart for their stance on something,” Kennedy said. “They go as long as they can until that’s the only restaurant in the area and they need to eat, or nowhere else has the pharmacy or tires they need.”
That’s why Lyft is making moves to increase its ubiquity and position itself as the kinder, gentler alternative to Uber. In March, it began a campaign to allow riders to round up fares to the nearest dollar and donate the difference to a charity. It ditched its familiar pink mustache for Amp, an illuminated dashboard device with a sleeker, high-tech image. Late last year, before the Uber scandals erupted, it took direct potshots at its rival in TV ads mocking tech bros at a fictional “Ride Corp.”
Will it go further this year to attack Uber? Lyft won’t say, but observers said it’s better off taking the high road.
“Lyft has been quite subtle in keeping with its positioning as the nice guy in the market,” Dawson said. “It will do best not by emphasizing Uber’s troubles but by being as good a service as it can and promoting that.”
In April, Lyft closed a $600 million funding round that brought its total backing to $2.6 billion and valued it at $7.5 billion. Uber is worth almost 10 times as much and has $8.8 billion in VC backing.
Observers say that both Lyft and Uber burn through venture capital by offering lucrative incentives for drivers and discounts for riders.
Horowitz said that Lyft is not subsidizing its marketshare gains this year. “They’ve not been buying these things,” he said. Still, expanding into new markets is expensive, he acknowledged.
In mature markets, he said, individual rides are profitable. Overall Lyft is on track to turn a profit in 2018. He and Lyft did not respond to inquiries about whether it will be truly profitable, as opposed to achieving positive cash flow through ongoing operations, a measure that ignores some costs public companies must factor into their financial reports.
For all Lyft’s successes, rumors persist that it could be an acquisition target. After Amazon bought Whole Foods last month, several observers said that the e-commerce giant might next scoop up Lyft to handle last-mile deliveries of everything from groceries to batteries. Or General Motors, already an investor, might buy the rest of Lyft to marry ridehailing to the self-driving technology being developed by its Cruise subsidiary, also in San Francisco.
Whether Lyft ends up owned by someone or stays independent, its founders see robot cars as the future. While Uber is trying to create its own autonomous-vehicle technology, Lyft has positioned its ride service as a platform for other companies to deploy self-driving technology. So far, partners include Waymo, nuTonomy and Jaguar Land Rover, as well as GM.
“We want Lyft to be the (operating system) for autonomous vehicles — the place where consumers come to access the best autonomous vehicles from a variety of partners,” Lyft said.
It’s a friendlier approach to partners, underscoring what may be Lyft’s mantra: Nice guys can finish first.