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An investment thesis for Lyft is if you expect Lyft to get acquired. If profitability is nowhere in sight, then the end-game is acquisition. Companies that migh

An investment thesis for Lyft is if you expect Lyft to get acquired. If profitability is nowhere in sight, then the end-game is acquisition. Companies that might want to get into ridesharing is long, and Lyft is the fastest (and probably cheapest if the stock tanks) path towards competing against Uber in the US market. Any company that is working on self-driving cars will want to acquire Lyft: Google, Apple, Tesla, GM, etc Any company that is in logistics space will want to acquire Lyft: Amazon, DoorDash, Grubhub, etc. Any ridesharing company will want to acquire Lyft: Uber (defensively), Didi, Ola, probably not Grab, etc. There will likely be a bidding war for Lyft because that's the only reasonable path towards competing against Uber unless you think self-driving car is < 5 years away.

mrnobody_67 8y ago
Why in the world would someone doing self driving cars want to acquire them? Self driving car companies be able to offer competing service for 70% cheaper per mile. Riders will migrate for the drastically better price. There's no long-term defensible asset in the Lyft driver network, and switching costs for riders are minimal.
- pgt 8y ago
  A customer base has value. Consider that Google bought YouTube for $1.65bn. There is little doubt that Google could build the necessary video streaming tech, but they still bought YouTube, and it was their best acquisition to-date.
  - whymauri 8y ago
    I thought YouTube is still not profitable? Like it provides a lot of value for their larger, long scale strategy but is bleeding money short term? I'm no expert, I just see this narrative parroted all the time.
    - SatvikBeri 8y ago
      As far as I can tell, Google hasn't disclosed whether YouTube is profitable. What we know is that most analysts predict YouTube makes ~$10BN in revenue, is growing 30%-40% per year, and is valued at somewhere between $75BN-$150BN (much more than Google paid for it.) But those are just analyst predictions, it's very hard to tell when Google's not saying anything.
  - linuxftw 8y ago
    They bought youtube because their video service was a big flop. Google might have smart engineers, but their user experience leaves a ton to be desired IMO.
  - prostoalex 8y ago
    Only after Google Video has been around and failed to reach the critical mass that Google hoped for. Customer acquisition in ride sharing space is a fairly well-trodden path - start with a high promotional credit for signups/referrals, gradually lower those as desired metrics are met. I guess in that sense an acquisition makes sense when the target is priced below the cost of customer acquisition, but I doubt that is the valuation Lyft/Uber are hoping for.
  - TheCoelacanth 8y ago
    So less than a tenth of what Lyft would probably want them to pay and only a year and a half of what Lyft loses (only half a year of Uber losses). Google isn't going to buy Lyft's customers for $20 billion plus the $1 billion a year that those customers are costing Lyft to keep.
  - smileysteve 8y ago
    Lyft, Uber, and Taxis aren't as sticky as YouTube though, the majority of both drivers and riders readily use all 3 varying only on convenience. Google even promotes this by having the ride hailing part of maps. The scooter business amplifies this even further, very few users or charges have a strong preference to a single brand. While YouTube had advantage in content, Vimeo had targeted commercial content, but very low stickiness.
  - B-Con 8y ago
    They already had built it. Google Videos (was that it's name?) was a thing and I remember it being turned down not too far from the YT acquisition.
- SatvikBeri 8y ago
  Lyft/Uber have 3 assets that I can see: 1. Driver network. This will go away with self-driving cars. 2. Rider network. This might take some time for Google etc. to acquire, but probably not nearly as long since they'll have a one-sided market (while Lyft/Uber had to deal with a two-sided one.) This might sell for a pittance relative to their current market cap. 3. Routing technology. Lyft & Uber have gotten much, much better at routing than they were just a few years ago – especially when it comes to multiperson rides. I could see this being pretty valuable, there's no need for Waymo to spend years duplicating the same thing when they could just buy it.
  - danmaz74 8y ago
    Google already has great routing technology, much better than Uber's according to their own drivers.
    - ashishb 8y ago
      And don't forget Google maps. They can just add a button on ride sharing tab in Google maps in cities where Waymo is launched (whenever it launches)
    - lizhang 8y ago
      So often I sit down in an uber and the driver instantly switches to Waze.
  - clairity 8y ago
    > "Lyft & Uber have gotten much, much better at routing..." i had to chuckle at that. i've had multiple experiences where my driver had to loop hack toward my origin to pick up someone else, literally passing my pickup point in some cases. other times drivers were expected to swerve off of a freeway with seconds' notice to pick someone else up. i think they have some ways to go in that regard. sure, they have a lead on an unprepared/undercapitalized competitor, but i'm not sure they'd have a lead on google (who also owns waze).
    - linkregister 8y ago
benatkin 8y ago
> Any company that is working on self-driving cars will want to acquire Lyft: Google, Apple, Tesla, GM, etc To me this is like expecting Netflix to want to acquire Blockbuster ten years ago. The investments Lyft has been making into self driving cars are mostly for show. Blockbuster was investing in the web back in 2009, but they were never close to catching up. If Lyft was far along in building self driving cars, they would be far along in other AI applications too. Everything Google and Amazon does that pushes the boundaries of AI makes them more capable of building a network of self driving cars. Google, Amazon, Apple, Samsung, Microsoft, or IBM might not build a self driving car network themselves, but if they're the kingmakers, will they want to help Uber or Lyft or other companies with more resources?
jonathankoren 8y ago
This is all predicated on someone thinking that the rideshare buisness is profitable. It hasn’t shown that it is. Uber is also losing money on every ride, isn’t profitable, and still has multiple rideshare options, and side hustles of food delivery and freight. Same is true with every other similar company the world over. Nowhere is there the indication that the industry will be profitable anytime soon. People have assumed that if you could just stop paying drivers, the profits will come. They might, but fully autonomous cars don’t exist, and also, they seem much further off than they did just two years ago. Even Andrew Ng publically suggested that pedestrians should just change their behavior, because the AI doesn’t work, and won’t work for a very long time.[0] So betting on magic cars to save the industry is a bit iffy. It’s certainly plausible that at some point, the companies simply burn through all their cash, and investors give up on expecting a return. That would kind of suck, but why keep throwing good money after bad? [0] https://www.bloomberg.com/news/articles/2018-08-16/to-get-ready-for-robot-driving-some-want-to-reprogram-pedestrians https://www.bloomberg.com/news/articles/2018-08-16/to-get-re...
- Marazan 8y ago
  Minicab firms are profitable. Using VC money to subsidise minicab rides (which for some reason is called ridesharing) isn't.
- linuxftw 8y ago
  People are convinced that autonomous vehicles are a 'data problem' and if we just log enough miles and 'train' our 'ai' enough, they'll be perfectly safe. I'm of the opinion it's literal fantasy. Maybe in 50 years, heck, maybe in 30. 5-10? I can't see it.
  - repsilat 8y ago
    That is a very strong statement -- what odds would you put on a "literal fantasy"? One in a thousand? One in a billion? I'd back "self-driving, in-traffic, no-safety-driver taxi service available to the public in 5 cities in 10 years" at even money any day of the week (so long as it doesn't mean losing half of any money in escrow to inflation...)
deleted 8y ago
[deleted]
opportune 8y ago
A lot of these companies (GM, Tesla, all ridesharing companies except Uber, Doordash, Grubhub) can't/wouldn't acquire Lyft anywhere close to its current valuation though. Maybe some of those companies could grow to the point where they could, but I doubt it. Realistically the only company which could and would acquire Lyft at its current valuation is Google - Lyft doesn't mesh very well with Amazon now, Apple won't get into rideshare, Tesla and everyone else doesn't have enough money.
onlyrealcuzzo 8y ago
Google or Apple don't need to acquire Lyft. They can just -- wallet style -- add an OS component to hail rides (using their own maps app). And they can even force it to be on the home screen at all times. Boom. They instantly have a bigger market share than Lyft. And, for Google, maybe even Uber. I would say Uber's biggest challenge is if Google and/or Apple decide to commoditize the ride hailing marketplace. The ride itself is already a commodity. They're both more or less testing this already. I could definitely see a foreign company buying Lyft, though.
- linkregister 8y ago
  There are already Google Maps integrations to hail a Lyft or Uber. Have you ever used them? I disagree they've got a ridesharing network in-a-bottle.
remote_phone 8y ago
Lyft wasn’t bought 2 years ago at $5B. What makes anyone think that they would pay $25B now? The only difference between two years ago and today is increased market share which is at best ephemeral. It can be taken away as easily if competitors drop their prices.

mrnobody_67 8y ago

Why in the world would someone doing self driving cars want to acquire them? Self driving car companies be able to offer competing service for 70% cheaper per mile. Riders will migrate for the drastically better price. There's no long-term defensible asset in the Lyft driver network, and switching costs for riders are minimal.

pgt 8y ago
A customer base has value. Consider that Google bought YouTube for $1.65bn. There is little doubt that Google could build the necessary video streaming tech, but they still bought YouTube, and it was their best acquisition to-date.
- whymauri 8y ago
  I thought YouTube is still not profitable? Like it provides a lot of value for their larger, long scale strategy but is bleeding money short term? I'm no expert, I just see this narrative parroted all the time.
  - SatvikBeri 8y ago
    As far as I can tell, Google hasn't disclosed whether YouTube is profitable. What we know is that most analysts predict YouTube makes ~$10BN in revenue, is growing 30%-40% per year, and is valued at somewhere between $75BN-$150BN (much more than Google paid for it.) But those are just analyst predictions, it's very hard to tell when Google's not saying anything.
- linuxftw 8y ago
  They bought youtube because their video service was a big flop. Google might have smart engineers, but their user experience leaves a ton to be desired IMO.
- prostoalex 8y ago
  Only after Google Video has been around and failed to reach the critical mass that Google hoped for. Customer acquisition in ride sharing space is a fairly well-trodden path - start with a high promotional credit for signups/referrals, gradually lower those as desired metrics are met. I guess in that sense an acquisition makes sense when the target is priced below the cost of customer acquisition, but I doubt that is the valuation Lyft/Uber are hoping for.
- TheCoelacanth 8y ago
  So less than a tenth of what Lyft would probably want them to pay and only a year and a half of what Lyft loses (only half a year of Uber losses). Google isn't going to buy Lyft's customers for $20 billion plus the $1 billion a year that those customers are costing Lyft to keep.
- smileysteve 8y ago
  Lyft, Uber, and Taxis aren't as sticky as YouTube though, the majority of both drivers and riders readily use all 3 varying only on convenience. Google even promotes this by having the ride hailing part of maps. The scooter business amplifies this even further, very few users or charges have a strong preference to a single brand. While YouTube had advantage in content, Vimeo had targeted commercial content, but very low stickiness.
- B-Con 8y ago
  They already had built it. Google Videos (was that it's name?) was a thing and I remember it being turned down not too far from the YT acquisition.
SatvikBeri 8y ago
Lyft/Uber have 3 assets that I can see: 1. Driver network. This will go away with self-driving cars. 2. Rider network. This might take some time for Google etc. to acquire, but probably not nearly as long since they'll have a one-sided market (while Lyft/Uber had to deal with a two-sided one.) This might sell for a pittance relative to their current market cap. 3. Routing technology. Lyft & Uber have gotten much, much better at routing than they were just a few years ago – especially when it comes to multiperson rides. I could see this being pretty valuable, there's no need for Waymo to spend years duplicating the same thing when they could just buy it.
- danmaz74 8y ago
  Google already has great routing technology, much better than Uber's according to their own drivers.
  - ashishb 8y ago
    And don't forget Google maps. They can just add a button on ride sharing tab in Google maps in cities where Waymo is launched (whenever it launches)
  - lizhang 8y ago
    So often I sit down in an uber and the driver instantly switches to Waze.
- clairity 8y ago
  > "Lyft & Uber have gotten much, much better at routing..." i had to chuckle at that. i've had multiple experiences where my driver had to loop hack toward my origin to pick up someone else, literally passing my pickup point in some cases. other times drivers were expected to swerve off of a freeway with seconds' notice to pick someone else up. i think they have some ways to go in that regard. sure, they have a lead on an unprepared/undercapitalized competitor, but i'm not sure they'd have a lead on google (who also owns waze).
  - linkregister 8y ago

benatkin 8y ago

> Any company that is working on self-driving cars will want to acquire Lyft: Google, Apple, Tesla, GM, etc To me this is like expecting Netflix to want to acquire Blockbuster ten years ago. The investments Lyft has been making into self driving cars are mostly for show. Blockbuster was investing in the web back in 2009, but they were never close to catching up. If Lyft was far along in building self driving cars, they would be far along in other AI applications too. Everything Google and Amazon does that pushes the boundaries of AI makes them more capable of building a network of self driving cars. Google, Amazon, Apple, Samsung, Microsoft, or IBM might not build a self driving car network themselves, but if they're the kingmakers, will they want to help Uber or Lyft or other companies with more resources?

jonathankoren 8y ago

This is all predicated on someone thinking that the rideshare buisness is profitable. It hasn’t shown that it is. Uber is also losing money on every ride, isn’t profitable, and still has multiple rideshare options, and side hustles of food delivery and freight. Same is true with every other similar company the world over. Nowhere is there the indication that the industry will be profitable anytime soon. People have assumed that if you could just stop paying drivers, the profits will come. They might, but fully autonomous cars don’t exist, and also, they seem much further off than they did just two years ago. Even Andrew Ng publically suggested that pedestrians should just change their behavior, because the AI doesn’t work, and won’t work for a very long time.[0] So betting on magic cars to save the industry is a bit iffy. It’s certainly plausible that at some point, the companies simply burn through all their cash, and investors give up on expecting a return. That would kind of suck, but why keep throwing good money after bad? [0] https://www.bloomberg.com/news/articles/2018-08-16/to-get-ready-for-robot-driving-some-want-to-reprogram-pedestrians https://www.bloomberg.com/news/articles/2018-08-16/to-get-re...

Marazan 8y ago
Minicab firms are profitable. Using VC money to subsidise minicab rides (which for some reason is called ridesharing) isn't.
linuxftw 8y ago
People are convinced that autonomous vehicles are a 'data problem' and if we just log enough miles and 'train' our 'ai' enough, they'll be perfectly safe. I'm of the opinion it's literal fantasy. Maybe in 50 years, heck, maybe in 30. 5-10? I can't see it.
- repsilat 8y ago
  That is a very strong statement -- what odds would you put on a "literal fantasy"? One in a thousand? One in a billion? I'd back "self-driving, in-traffic, no-safety-driver taxi service available to the public in 5 cities in 10 years" at even money any day of the week (so long as it doesn't mean losing half of any money in escrow to inflation...)

deleted 8y ago

[deleted]

opportune 8y ago

A lot of these companies (GM, Tesla, all ridesharing companies except Uber, Doordash, Grubhub) can't/wouldn't acquire Lyft anywhere close to its current valuation though. Maybe some of those companies could grow to the point where they could, but I doubt it. Realistically the only company which could and would acquire Lyft at its current valuation is Google - Lyft doesn't mesh very well with Amazon now, Apple won't get into rideshare, Tesla and everyone else doesn't have enough money.

onlyrealcuzzo 8y ago

Google or Apple don't need to acquire Lyft. They can just -- wallet style -- add an OS component to hail rides (using their own maps app). And they can even force it to be on the home screen at all times. Boom. They instantly have a bigger market share than Lyft. And, for Google, maybe even Uber. I would say Uber's biggest challenge is if Google and/or Apple decide to commoditize the ride hailing marketplace. The ride itself is already a commodity. They're both more or less testing this already. I could definitely see a foreign company buying Lyft, though.

linkregister 8y ago
There are already Google Maps integrations to hail a Lyft or Uber. Have you ever used them? I disagree they've got a ridesharing network in-a-bottle.

remote_phone 8y ago

Lyft wasn’t bought 2 years ago at $5B. What makes anyone think that they would pay $25B now? The only difference between two years ago and today is increased market share which is at best ephemeral. It can be taken away as easily if competitors drop their prices.