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Yeah except Snap didn't have nearly the revenue stream that Lyft does. I'm still not sure what Snap's main source of revenue is, but Lyft clearly has tons of re

by leesec 8y ago

Yeah except Snap didn't have nearly the revenue stream that Lyft does. I'm still not sure what Snap's main source of revenue is, but Lyft clearly has tons of revenue pouring in and you'd think they'd be able to dial back their rapid expansion at some point to become profitable.

bduerst 8y ago
Not to mention Lyft's revenue is growing fairly quickly, faster than their operating expenses. The GP's comment here is why it may be selling at a discount at IPO and then go up once it turns a profit and people like GP jump in. The cash injection can definitely help secure the revenue growth too.
- linuxftw 8y ago
  Even if they ever turn a profit (which is unlikely if they continue down the 'we're a self driving car company!' road), that doesn't make them a good investment. There are plenty of actually profitable companies that return decent dividends. There's no proof that profitability will result in an increase in share price. If they're not profitable today, I don't think they'll ever be profitable. It's a signal from the marketplace that 'on demand ride services' business segment is over saturated for market demand. They are not meeting an unfulfilled niche in the market, they are losing money to trying to become a dominant player. Unless the landscape drastically changes and people no longer actually have their own cars (which is their near-term pipe dream), they're going to lose a bunch of other people's money.
  - bduerst 8y ago
    A company that is not profitable now that is going to make a profit down the road is a good investment, since you'll be buying it at a discount on the market now. Why not also just hand wave that Lyft is a mere messaging app company that provides communication between people who need rides and drivers willing to give them? You can criticize the company many ways, but whatever they're doing is working because they're making $2.2B in revenue and growing rapidly. They're positioning themselves as a demand-provider to service the upcoming self driving markets, which is smarter than vertically integrating like some other hype machines out there.
    - linuxftw 8y ago
      It's not working. Anyone can spend $1 to make $0.50. > Why not also just hand wave that Lyft is a mere messaging app company that provides communication between people who need rides and drivers willing to give them? If this was their actual business model, they might actually be able to turn a buck. Drivers can pay a small monthly fee to be enrolled in the service, lyft takes a small cut + payment processing fee. Drivers paid weekly or after X amount of revenue, whichever comes second.
      - jhall1468 8y ago
        > Anyone can spend $1 to make $0.50. And very few can scale it to spend $0.50 to make $1.00. We aren't talking about a company selling a product for half what they pay. They are investing overwhelming amounts of money into growth. > If this was their actual business model, they might actually be able to turn a buck. Yes, just oversaturate the market with drivers and not enough passengers and you'll for sure make tons of money, constantly dealing with overages and shortages since you aren't managing supply in any way.
        toasterlovin 8y ago
        They're subsidizing the cost of rides. Lyft and Uber are already an extremely expensive transportation option. If the costs start to approach traditional taxi-cabs, then the default hypothesis should be that the market opportunity shrinks down to whatever the size of the taxi market was pre-ridesharing. There's a reason nobody gave a shit about the taxi market pre-ridesharing.
        ghaff 8y ago
        I’m not sure that’s quite true. App-enabled ride hailing is a much better service in many cities than taxis were pre-Uber. That in itself probably increases the size of the market. But I do expect you end up with pricing similar to taxis.
        8y ago
- asabjorn 8y ago
  Lyft is the second player in two markets. In Canada a distant second. Contrast this with Uber that not only has more business segments (eats, freight, etc in addition to rideshare), but is also the largest player in most markets its in. I simply don't see how Lyft can turn profitable without loosing marketshare when competing against a rival that has profitability it can reinvest from elsewhere.
bunderbunder 8y ago
The unstated major premise there is that Lyft would be comfortably profitable if not for money spent on expanding their business. I haven't looked at the balance sheet, but it seems like, if their path to profitability were anywhere close to being as easy as that, then you wouldn't have Horan saying that there is, "nothing in the document that suggests how that could be fixed."
- jhall1468 8y ago
  For starters, Horan is not a "transportation expert", he's never worked outside of the airline industry. His entire claim to fame is writing a multi-part story on why Lyft and Uber are never going to profitable, long before he knew anything of their finances. Not saying he's wrong, but I would take anything he says with a grain of salt. Especially considering it's pretty clear that Lyft is in a hyper-growth state, with huge revenues and their only major overhead is labor, hardware and the cost of entering a new market.
  - bunderbunder 8y ago
    > their only major overhead is labor, hardware and the cost of entering a new market. Two of those are not going to go away. And the cost of entering a new market should be relatively low for a company like Lyft. The nature of the business means they don't need to make any huge up-front investment in new real estate or equipment. It's mostly just running promotions to attract business and drivers in the new market. Last year they lost $911M on $2,160M of revenue. If handing out incentives really represents over 30% of their costs, which is what would be implied by the "they'd be fine if not for trying to grow so quickly", that would be pretty worrisome. It would imply that they're in the business of selling dollar bills for $0.75. That's not the kind of business that becomes more profitable as you attract more customers. One of the big subtexts here is that the standard tech "hyper-growth" business strategy is designed for businesses with very high fixed and very low incremental costs. Lyft has just the opposite: Low fixed and high incremental costs.
    - jhall1468 8y ago
britch 8y ago
Lyft has plenty of revenue to be sure. It also has lots of fixed costs. You can't just "dial back" paying drivers. I also get the impression that the costs of rides are artificially low right now. Lyft is subsidizing them to encourage use. If the true cost of a Lyft is about the same as a cab, I can say personally I'd be more inclined to take public transit or a cab than I am now.
- bunderbunder 8y ago
  I think you mean variable costs. Fixed costs are costs that are fixed regardless of the amount of goods or services provided.
- smileysteve 8y ago
  In the US, I'd prefer rideshare over taxi in most situations. Part of this is vehicle quality, route quality (guaranteed to use maps). The other big part is lessened tipping culture for now (if Uber and Lyft start suggesting 15+% I'd leave pretty rapidly.)

by leesec 8y ago

bduerst 8y ago

Not to mention Lyft's revenue is growing fairly quickly, faster than their operating expenses. The GP's comment here is why it may be selling at a discount at IPO and then go up once it turns a profit and people like GP jump in. The cash injection can definitely help secure the revenue growth too.

linuxftw 8y ago
Even if they ever turn a profit (which is unlikely if they continue down the 'we're a self driving car company!' road), that doesn't make them a good investment. There are plenty of actually profitable companies that return decent dividends. There's no proof that profitability will result in an increase in share price. If they're not profitable today, I don't think they'll ever be profitable. It's a signal from the marketplace that 'on demand ride services' business segment is over saturated for market demand. They are not meeting an unfulfilled niche in the market, they are losing money to trying to become a dominant player. Unless the landscape drastically changes and people no longer actually have their own cars (which is their near-term pipe dream), they're going to lose a bunch of other people's money.
- bduerst 8y ago
  A company that is not profitable now that is going to make a profit down the road is a good investment, since you'll be buying it at a discount on the market now. Why not also just hand wave that Lyft is a mere messaging app company that provides communication between people who need rides and drivers willing to give them? You can criticize the company many ways, but whatever they're doing is working because they're making $2.2B in revenue and growing rapidly. They're positioning themselves as a demand-provider to service the upcoming self driving markets, which is smarter than vertically integrating like some other hype machines out there.
  - linuxftw 8y ago
    It's not working. Anyone can spend $1 to make $0.50. > Why not also just hand wave that Lyft is a mere messaging app company that provides communication between people who need rides and drivers willing to give them? If this was their actual business model, they might actually be able to turn a buck. Drivers can pay a small monthly fee to be enrolled in the service, lyft takes a small cut + payment processing fee. Drivers paid weekly or after X amount of revenue, whichever comes second.
    - jhall1468 8y ago
      > Anyone can spend $1 to make $0.50. And very few can scale it to spend $0.50 to make $1.00. We aren't talking about a company selling a product for half what they pay. They are investing overwhelming amounts of money into growth. > If this was their actual business model, they might actually be able to turn a buck. Yes, just oversaturate the market with drivers and not enough passengers and you'll for sure make tons of money, constantly dealing with overages and shortages since you aren't managing supply in any way.
      - toasterlovin 8y ago
        They're subsidizing the cost of rides. Lyft and Uber are already an extremely expensive transportation option. If the costs start to approach traditional taxi-cabs, then the default hypothesis should be that the market opportunity shrinks down to whatever the size of the taxi market was pre-ridesharing. There's a reason nobody gave a shit about the taxi market pre-ridesharing.
        ghaff 8y ago
        I’m not sure that’s quite true. App-enabled ride hailing is a much better service in many cities than taxis were pre-Uber. That in itself probably increases the size of the market. But I do expect you end up with pricing similar to taxis.
        8y ago
asabjorn 8y ago
Lyft is the second player in two markets. In Canada a distant second. Contrast this with Uber that not only has more business segments (eats, freight, etc in addition to rideshare), but is also the largest player in most markets its in. I simply don't see how Lyft can turn profitable without loosing marketshare when competing against a rival that has profitability it can reinvest from elsewhere.

bunderbunder 8y ago

The unstated major premise there is that Lyft would be comfortably profitable if not for money spent on expanding their business. I haven't looked at the balance sheet, but it seems like, if their path to profitability were anywhere close to being as easy as that, then you wouldn't have Horan saying that there is, "nothing in the document that suggests how that could be fixed."

jhall1468 8y ago
For starters, Horan is not a "transportation expert", he's never worked outside of the airline industry. His entire claim to fame is writing a multi-part story on why Lyft and Uber are never going to profitable, long before he knew anything of their finances. Not saying he's wrong, but I would take anything he says with a grain of salt. Especially considering it's pretty clear that Lyft is in a hyper-growth state, with huge revenues and their only major overhead is labor, hardware and the cost of entering a new market.
- bunderbunder 8y ago
  > their only major overhead is labor, hardware and the cost of entering a new market. Two of those are not going to go away. And the cost of entering a new market should be relatively low for a company like Lyft. The nature of the business means they don't need to make any huge up-front investment in new real estate or equipment. It's mostly just running promotions to attract business and drivers in the new market. Last year they lost $911M on $2,160M of revenue. If handing out incentives really represents over 30% of their costs, which is what would be implied by the "they'd be fine if not for trying to grow so quickly", that would be pretty worrisome. It would imply that they're in the business of selling dollar bills for $0.75. That's not the kind of business that becomes more profitable as you attract more customers. One of the big subtexts here is that the standard tech "hyper-growth" business strategy is designed for businesses with very high fixed and very low incremental costs. Lyft has just the opposite: Low fixed and high incremental costs.
  - jhall1468 8y ago

britch 8y ago

Lyft has plenty of revenue to be sure. It also has lots of fixed costs. You can't just "dial back" paying drivers. I also get the impression that the costs of rides are artificially low right now. Lyft is subsidizing them to encourage use. If the true cost of a Lyft is about the same as a cab, I can say personally I'd be more inclined to take public transit or a cab than I am now.

bunderbunder 8y ago
I think you mean variable costs. Fixed costs are costs that are fixed regardless of the amount of goods or services provided.
smileysteve 8y ago
In the US, I'd prefer rideshare over taxi in most situations. Part of this is vehicle quality, route quality (guaranteed to use maps). The other big part is lessened tipping culture for now (if Uber and Lyft start suggesting 15+% I'd leave pretty rapidly.)