17 ms·

Lyft’s revenues double, losses quintuple and prospects darken

218 points by seagullz 7y ago

simonebrunozzi 7y ago
It's fun watching these "smart" economists trying to tell you what's going to happen, with Lyft and with the upcoming Uber. The reality is that many people will feel they're able to "beat the market", and they will try to get a chunk of the glory, mostly losing in the effort.
- mimixco 7y ago
  Indeed. A few at the top will get rich from both companies with lots of regular middle-income folks taking the fall. Reminds me of Enron.
jmull 7y ago
"...and prospects darken" It doesn't actually sound like that from the body of the article. I have no idea if this is true or not, but the story says most of the $1.14B loss was due to booking employee stock based compensation of $894M. I'm assuming that's come out of the IPO and is not a recurring cost. With revenues of $776M, which perhaps are mostly recurring, doesn't that seem to bode well for the future? Of course, I'm not sure what we can expect their actual on-going costs or revenues to be. I'm just not seeing any reason for concern in this article fter the headline.
- samfisher83 7y ago
  There total expenses was 1,932,917. Even if you remove stock comp they still lost money.
- marcinzm 7y ago
  >With revenues of $776M, which perhaps are mostly recurring, doesn't that seem to bode well for the future? Isn't the majority of that going to drivers which gives them a lot less room to maneuver financially?
  - jmull 7y ago
    Well, sure, maybe. It would just be nice if the article backed up the headline rather than leaving us to speculate.
- brentm 7y ago
  Most analysts are positive on company, media and market not so much. I think I'd bet on the analysts being right. I think eventually for Lyft & Uber prices will creep up, discounts & marketing decrease and plenty of money will be made on a small spread.
  - warp_factor 7y ago
    Analysts predict where the stock is going in the short term based on "sentiments" and "emotion". I wouldn't bet anything on them.
    - strikelaserclaw 7y ago
      if Analysts knew so much they would be rich instead of providing advice, which I've found to be hit or miss, to other people.
      - brentm 7y ago
        Of course, they might be totally off base and completely wrong and the company might go to $10 or $0. But when compared to the media who live and die by the dramatic story that garners the most interest and the markets which are amplified by many factors I personally prefer the opinion of those who at least spent time modeling it out. I also personally think transportation is a necessity and Lyft has levers it can pull which can make a big impact in their bottom line.
        asdff 7y ago
        What levers does lyft have? If they raise the price too high, there's a point where people will go back to cabs (yellowcab has an app now, believe it or not), and now they can opt to drunkenly ride a scooter or ebike for $2-5.
      - bduerst 7y ago
        Maybe they're on their way there? Gotta start somewhere. Maybe not ridesharing IPOs though.
- darkwizard42 7y ago
  Yes... this article's headline is absolutely off. The massive one-time compensation from IPO was unavoidable. Outside of that Lyft is now losing LESS money than it was before, beat on Passenger Growth AND beat on $/passenger. Overall, a good quarter but definitely still losing a LOT of money.
chollida1 7y ago
When Lyft was doing their road show there were a few analysts who had price targets of $45 as Lyfts fair value at IPO with an acknowledgement that the amount of shares available would double, and possibly triple when all shares were off restriction, meaning that the $45 price target was a best case and we would probably see far lower once people can sell. This is a company that has maybe 33 million shares outstanding now with about 27 million of them being sold short. So they have an enormous short bet against them. We see borrow rates as high as 30% for borrowing shares to short with no real stable borrow available. However, due to the enormous amount of those short shares being rehypothicated(relent), Lyft is vulnerable to a quick upwards price run if those long sellers ask for their shares back. That would cause a run on those shares as they may be lent out multiple times by the same bank. So whenever someone ask why you don't short an individual stock its always valid to answer that you believe you are right in the long term but the short term could wipe you out if you shorted. As a quick edit, uber is now indicating its opening at a range of 45.50-46.50, given that the IPO price was $45, it looks like the underwriters will have some work to do and will almost certainly exercise their green shoe option. So maybe wallstreet is wising up to money losing companies or Uber learned from Lyft that a slow and steady approach to their share price would be better long term for them?
- notahacker 7y ago
  > So whenever someone ask why you don't short an individual stock its always valid to answer that you believe you are right in the long term but the short term could wipe you out if you shorted. An example here, where everyone lost out https://ftalphaville.ft.com/2018/10/31/1540962002000/The-day-Volkswagen-briefly-conquered-the-world/ https://ftalphaville.ft.com/2018/10/31/1540962002000/The-day...
  - femto113 7y ago
    I had first hand experience with this in the early 2000s with CMRC (stock symbol for a company named Commerce One). Friends and I were confident it was overvalued and shorted it, but it continued up at an insane clip and we got margin calls from our brokers. Luckily we were able scrounge up enough cash to cover it and so didn't have to buy the stock at the higher price to cover, and I think within a few days it started to fall again and we were able to settle at a profit, but it was pretty white knuckle. Note that there was no business reason for the rapid gain, they didn't announce a sudden windfall, it was just a short squeeze. Company was never profitable and went bankrupt a few years later despite having a market cap that peaked at over $20BN. https://en.wikipedia.org/wiki/Commerce_One https://en.wikipedia.org/wiki/Commerce_One
olivermarks 7y ago
I previously submitted 'Uber’s enormous, vague IPO prospectus is an outrage (ft.com)' Well worth reading and quite ominous in light of Lyft performance IMO https://www.ft.com/content/60ab80e2-6a8b-11e9-9ff9-8c855179f1c4 https://www.ft.com/content/60ab80e2-6a8b-11e9-9ff9-8c855179f...
- npalmer 7y ago
  This is an image of the comment for those that don't have access to FT.com https://twitter.com/bytebot/status/1117323665865969664 https://twitter.com/bytebot/status/1117323665865969664
- SilasX 7y ago
  From the summary in the child twitter link: >We hope in the future there will be driverless cars and that we can then make money because no drivers but other people are developing them too. Nice! It's common to think that self-driving cars will be Uber's salvation, but even then, they'll have to come with other SDC providers, so there's no moat. They'd have lower costs, but so would everyone else, and so they'd have to cut fares proportionally. In theory, they can have such a lead time on a workable SDC that they get a great moat until everyone catches up. But that would be ~2 years at the absurdly optimistic end; not enough to pay back the costs of the program and throw off the huge returns investors demand. And in reality, Uber is lagging on this.
  - mimixco 7y ago
    The self driving car idea won't help Uber or Lyft for two reasons. First, neither company has the tech experience to build one. Second, and more importantly, both companies would have to buy and maintain the cars which isn't financially viable.
    - bduerst 7y ago
      They're hoping you'll buy a self-driving car and then let them pay you a minimal fee to use it when you're not. The problem is that self-driving cars will change car ownership needs, and that there could be entirely different companies in the space when it does finally come around.
whoisjuan 7y ago
The problem with Lyft is that they are in a poorly understood market, in second place and burning cash at neck-breaking speed. Even if they manage to start making progress towards profitability, they might need more than that. The reality is that ride-sharing probably needs another lustrum or so to solidify and that seems excessively long for Lyft in its current state. Uber faces the same challenges but its way more diversified and can scale down from certain markets and verticals. Lyft on the other hand has only one market (N.America) and only one vertical (ride-sharing). Doesn't take a genius to understand that scenario looks risky as hell. Especially when you're in a business with nominal differentiation.
- sovnade 7y ago
  And to top it off, this entire business model is temporary. The end game for all of these companies (and Tesla/etc as well) is to have autonomous fleets. They have to bleed cash to snap up as much of the market as possible before that happens so they're not starting from zero. At this point it feels like a game of who has enough funding to survive the interim to make it to a driverless service.
  - asdff 7y ago
    What's to stop Waymo with Alphabets deep pockets to cobble together an app (or waze update) once they get a decent self driving car produced? Alphabet isn't going to just give this market to uber/lyft after they burned so much money on engineering. Even if they licensed their cars it would be temporary until their own app comes out.
- jonathankoren 7y ago
  Uber’s multiple markets maybe an advantage. If they’re all equally unprofitable, perhaps not, but at least that’s plausible. Uber’s multiple verticals are dogs, and reek of money madness. Eats is small time and loses money. I don’t know it’s financials, but I find it hard that this ancillary business is in a healthier state than a competitor who has it as their core buisness. Uber ATG is as bad off as any other autonomous car program. There’s a growing realization that technology won’t be ready anytime soon. (See Andrew Ng’s comments about just redesigning cities to limit autonomous vehicles’ interactions) Uber Freight is a ghost town.[0] The of course there’s the buisness if renting and then discarding Xiaomi scooters. (Or is that not a thing anymore? I honestly don’t remember.) Sure, I understand the logic behind all of these. Once you have a system to tell a person “Go here, and take this here,” then you can plug pretty much anything into those slots. However. No one has shown that the way they’re doing it is a sustainable business model, and it looks like it’s not. [0] https://www.forbes.com/sites/stevebanker/2018/04/10/is-uber-freight-on-the-verge-of-going-out-of-business/ https://www.forbes.com/sites/stevebanker/2018/04/10/is-uber-...
wonderwonder 7y ago
Very interesting process going on right now with Lyft & Uber both losing money and some of their drivers trying to stage protests and strikes. The drivers appear to rely on the company as their primary source of income and want more money yet at the same time the companies are operating at a loss. Were they to increase wages (as % of every ride) it stands to reason the losses would widen. If they get to wide the company goes out of business and the drivers lose their jobs. I understand that this same standard can be applied at any company but this is a gig / 'work only when you want' job so it is different. The strikes were small so the effects on both companies were negligible. I would be curious to understand what changes the drivers (who work only when they want) expect and how they think a company running deep in the red could meet them. Not trying to pass judgement on the strikers just trying to understand.
- SilasX 7y ago
  That would only be true if their unit profits were low or negative. On each ride they make a lot of money. They lose money because of their huge, ride-count-independent fixed costs, like legal defense and marketing. So it's not necessarily true that giving the riders a larger cut would widen the loss, if it came with a scale-back on all the marketing.
  - beachwood23 7y ago
    I have the understanding that they actually lose ~$1 per ride.
    - SilasX 7y ago
      That figure comes from taking total losses and dividing by the number of rides. It's not the same as saying that the costs of providing the ride itself are $1 more than they charge for the ride. (The fixed vs variable distinction I was making above.) Uber's costs of providing a specific ride are: Driver's cut, maps licensing, cloud charges, data transfer. That is rarely more than the cost of the ride. Remember, Lyft took flack for the outrageously high 14 cents a ride in cloud costs.
return1 7y ago
Uber and lyft look like a charity set up by VCs to provide people with cheaper transportation. Who knows what will happen once they increase fares as they promise to investors
- swarnie_ 7y ago
  As soon as one of them increase prices to generate profit ill just move on to the next ride sharing app, then the next, then the next. You'd need a price fixing scheme worthy of British Airways make this work.
  - deleted 7y ago
    [deleted]
  - adventured 7y ago
    It doesn't actually work that way in reality. If it did, there would already be another massive Uber undercutting Uber in eg the US market and raising $10+ billion in VC money to do it. Because hey, a $75 billion valuation is sitting right there, so it's really easy: just put $10 or $20 billion into the company, undercut Uber, IPO, easy return. Everbody can do it, just add $20 billion. What's actually the case, is the next clone will need $20 or $30 billion to fight and undercut Uber's entrenched brand, functioning system and scaled up position. And even in that case, the odds of winning against the large incumbents is low. It will cost even more to beat Uber via the undercut game than what Uber has already spent, because you have to take the market away from them - always a dramatically more expensive and difficult proposition. VCs are not going to continue to burn massive amounts of capital trying to fund the next loss-making ride hailing company. The next $10 or $20 billion to put into an Uber clone in its major markets, does not exist and it will never exist. Few things would scare a VC more than having the pitch that your plan is to destroy twice as much capital as what Uber did, to unseat Uber's entreched position, with nothing to differentiate you other than the speed at which you destroy capital. That's why nobody is doing it right now. There isn't another Lyft, much less another Uber. Softbank isn't looking to drop $20 billion to fund the next Uber, to fight with Uber, in the US and similar markets that Uber dominates now.
strikelaserclaw 7y ago
I don't know what the end game for these companies is. Most average people would never use uber or lyft for transportation on even a semi regular basis if those companies didn't heavily subsidize the rides.
- m_ke 7y ago
  I'm convinced that the end goal is being the last one standing. Either one of them failing would guarantee a monopoly for the other and make it easier to play with the margins.
  - CPLX 7y ago
    > Either one of them failing would guarantee a monopoly for the other Why? Is there some reason someone else couldn't make a basic app-based service to get taxi rides?
    - jorts 7y ago
      They exist and they're terrible (at least in SF) as taxis still aren't reliable to pick you up.
    - m_ke 7y ago
      Because they'll be able to undercut any small competitor that attempts to enter one of their markets by subsidizing it with revenue from everywhere else.
      - CPLX 7y ago
        Not really. It’s a large market with almost no barrier to entry. Either they have huge margins or they don’t. If they do have large margins someone will come along and attack the most profitable segment of the business. That could be airport rides, or having extra cars outside the end of a sporting event, or whatever. As long as switching costs for customers are low then they can’t defend high margins. For monopoly to work you either have to corner supply somehow or lock the customers in. There’s no plausible mechanism for either with taxi services.
jkubicek 7y ago
> Most of that was down to booking stock-based compensation plans for employees, who earned $894m from Lyft’s initial public offering Could someone help me understand what this means? Is this compensation above and beyond employee stock options? If not, that means employees own ~5% of Lyft, which is much less than I would expect. As an employee of a pre-IPO startup, I'd love to get a better handle on the realistic value of my stock if we do reach an IPO.
- nytesky 7y ago
  0. It’s a lottery ticket. To be realistic. Esp with the DOW down 300 today.
  - jkubicek 7y ago
    Yeah, I've always considered it a lottery ticket, but I'd love to get a sense of whether I'm holding a $10k or $10mm lottery ticket. FWIW, I've done the math based on my percentage ownership, expected valuations, timeline to IPO, etc. The big unknown for me is dilution. I don't yet have a good sense of how much dilution I should expect as we move through rounds of funding into an IPO.
    - nytesky 7y ago
      Well in current environment I would expect a lot. Uber maybe the canary in coal mine and dry up VC funding unless with more favorable terms.
    - jkubicek 7y ago
      To clarify, I think I have a good sense of the dilution I should expect, but there's always stories about someone working for years, expecting a big payout after IPO, and ending up with $20k.
      - darkwizard42 7y ago
        When this happens it means that the investments that were made did NOT increase the value of the company. What you want are rounds that increase the value of the company beyond the initial valuation at which it was invested (aka growth)
hellllllllooo 7y ago
Is the plan for the original investors to sell their stock to regular investors before the whole thing tanks? They make their money and whoever followed is left holding the cheque. Seems like a Ponzi scheme as it's been clear for years these companies are not going to be profitable any time soon.
deevolution 7y ago
All these ride sharing companies are here to carry us seamlessly into the driverless future. Unless they're capable of pivoting to driverless technology they are mostly matching services for riders and drivers and Honestly, I dont think it should be uber or lyft's responsibility to build driverless technology - they should just focus on making the experience of getting a ride as excellent as possible. Leave driverless technology to other experts.
- asdff 7y ago
  And what happens to uber/lyft when the experts make their own rideshare app? Why license your tech to them? These apps can be cloned.
OliverJones 7y ago
Fundamentals question: Can somebody explain how these ridesharing companies expect to turn a profit, eventually? If you lose 50 cents on every ride, how do you make it up in volume? Every ride is subsidized by the Sand Hill Road crowd. They're a great deal. I took a 40-min ride yesterday for US$12.50 in a high-cost-of-living traffic-clogged city. How can that make sense? A ride in a sketchy 1970s-era New York City gypsy (no-medallion) cab would have cost more. And, without all the magic and overhead of some app. Oh, I get it. They're going to scale up using autonomous vehicles. But, that's also a problem. Right now their business model relies on independent owner-drivers. In other words, from the front office's point of view, their fleets fuel, maintain, garage, and insure themselves. How's that going to work when they replace the drivers' cars with their own capital equipment? Why should I invest for the long term in these companies?
- misiti3780 7y ago
  Not to mention autonomous vehicles are most likely years away from happening
  - return1 7y ago
    if at all, [except for people who absolutely can tolerate their problems, e.g. disabled or elderly]
- britch 7y ago
  The idea (urban myth?) I've heard for discussion's sake: The long term bet is on them becoming THE way to get around and monopolizing the market (or a chunk of it at least) and THEN jacking up prices. If you undercut cabs and public transit long enough, they'll have to react to lower ridership and reduce availability. Sorry, no late night buses, most people are taking a very inexpensive and convenient Lyft home. Now that there's no late night buses, we can charge 3X the cost.
  - asdff 7y ago
    Aside from NYC most cities do not have late night public transport past like midnight in most cases, maybe if you are lucky 2am. On top of that outside of NYC and maybe people commuting to DC, public transport ridership is pretty abysmal. Plus all the cabbies have to do is either assign drivers to third shift or not, it can be done on a whim as demand dictates.
dd36 7y ago
They just went public at $80b but are raising $8b, so per the chart in the article, quite a few recent investors are getting a haircut? Pre-money $72b valuation?
- jartelt 7y ago
  The investors from the last funding round paid about the same share price as the IPO price, so they haven't really made or lost any money. It certainly wasn't a good investment for them (0% return), but I don't think they have taken a haircut yet. It will ultimately depend on where the stock price goes.
  - dd36 7y ago
    What’s he hold period? 45 days? Seems like the $79b investor got a 10% haircut.
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nabla9 7y ago
Once the ride-sharing matures, 5-10 years from now, Uber, Lyft and new competitors are not going to take 20 to 25 percent per cent of drivers’ fare. If I had to guess, 10 years from now they take just 1-3% per ride and maybe ask few $100s upfront for each registered driver to cover fixed cost of handling new drivers. These valuation include hopes for fully autonomous cars and the fear of missing out.
- jjeaff 7y ago
  It won't get that low. That wouldn't cover cc processing. They also need to cover insurance and several other costs. But I could definitely see it settling around 10-15%
dwags 7y ago
now you need a new side gig to support your old side gig (main gig)
temp1292832 7y ago
I don't know what the bull case for Lyft is at all. They haven't expanded into other products or markets outside of pure U.S. ridesharing, which had already been plateauing for some time. Uber, OTOH, has years of experience operating and expanding internationally, has built UberEats into it's own mult-bil vertical on it's own, and owns substantial shares of dominant ridesharing cos in other markets like Grab, DiDi, now Careem, etc.
angel_j 7y ago
They should charge a service fee to the rider, for however much they need to be profitable; and let the drivers charge whatever they want (baseline auction). Now the customer knows how much they are paying to whom. Imho, Taking a cut of earnings is borderline unethical for a automated services, whether its lyft, upwork, or patreon. Charge a fee, know your numbers, give both sides of your service's users confidence in the service's stability.

218 points by seagullz 7y ago

It's fun watching these "smart" economists trying to tell you what's going to happen, with Lyft and with the upcoming Uber. The reality is that many people will feel they're able to "beat the market", and they will try to get a chunk of the glory, mostly losing in the effort.

mimixco 7y ago
Indeed. A few at the top will get rich from both companies with lots of regular middle-income folks taking the fall. Reminds me of Enron.

jmull 7y ago

"...and prospects darken" It doesn't actually sound like that from the body of the article. I have no idea if this is true or not, but the story says most of the $1.14B loss was due to booking employee stock based compensation of $894M. I'm assuming that's come out of the IPO and is not a recurring cost. With revenues of $776M, which perhaps are mostly recurring, doesn't that seem to bode well for the future? Of course, I'm not sure what we can expect their actual on-going costs or revenues to be. I'm just not seeing any reason for concern in this article fter the headline.

samfisher83 7y ago
There total expenses was 1,932,917. Even if you remove stock comp they still lost money.
marcinzm 7y ago
>With revenues of $776M, which perhaps are mostly recurring, doesn't that seem to bode well for the future? Isn't the majority of that going to drivers which gives them a lot less room to maneuver financially?
- jmull 7y ago
  Well, sure, maybe. It would just be nice if the article backed up the headline rather than leaving us to speculate.
brentm 7y ago
Most analysts are positive on company, media and market not so much. I think I'd bet on the analysts being right. I think eventually for Lyft & Uber prices will creep up, discounts & marketing decrease and plenty of money will be made on a small spread.
- warp_factor 7y ago
  Analysts predict where the stock is going in the short term based on "sentiments" and "emotion". I wouldn't bet anything on them.
  - strikelaserclaw 7y ago
    if Analysts knew so much they would be rich instead of providing advice, which I've found to be hit or miss, to other people.
    - brentm 7y ago
      Of course, they might be totally off base and completely wrong and the company might go to $10 or $0. But when compared to the media who live and die by the dramatic story that garners the most interest and the markets which are amplified by many factors I personally prefer the opinion of those who at least spent time modeling it out. I also personally think transportation is a necessity and Lyft has levers it can pull which can make a big impact in their bottom line.
      - asdff 7y ago
        What levers does lyft have? If they raise the price too high, there's a point where people will go back to cabs (yellowcab has an app now, believe it or not), and now they can opt to drunkenly ride a scooter or ebike for $2-5.
    - bduerst 7y ago
      Maybe they're on their way there? Gotta start somewhere. Maybe not ridesharing IPOs though.
darkwizard42 7y ago
Yes... this article's headline is absolutely off. The massive one-time compensation from IPO was unavoidable. Outside of that Lyft is now losing LESS money than it was before, beat on Passenger Growth AND beat on $/passenger. Overall, a good quarter but definitely still losing a LOT of money.

chollida1 7y ago

When Lyft was doing their road show there were a few analysts who had price targets of $45 as Lyfts fair value at IPO with an acknowledgement that the amount of shares available would double, and possibly triple when all shares were off restriction, meaning that the $45 price target was a best case and we would probably see far lower once people can sell. This is a company that has maybe 33 million shares outstanding now with about 27 million of them being sold short. So they have an enormous short bet against them. We see borrow rates as high as 30% for borrowing shares to short with no real stable borrow available. However, due to the enormous amount of those short shares being rehypothicated(relent), Lyft is vulnerable to a quick upwards price run if those long sellers ask for their shares back. That would cause a run on those shares as they may be lent out multiple times by the same bank. So whenever someone ask why you don't short an individual stock its always valid to answer that you believe you are right in the long term but the short term could wipe you out if you shorted. As a quick edit, uber is now indicating its opening at a range of 45.50-46.50, given that the IPO price was $45, it looks like the underwriters will have some work to do and will almost certainly exercise their green shoe option. So maybe wallstreet is wising up to money losing companies or Uber learned from Lyft that a slow and steady approach to their share price would be better long term for them?

notahacker 7y ago
> So whenever someone ask why you don't short an individual stock its always valid to answer that you believe you are right in the long term but the short term could wipe you out if you shorted. An example here, where everyone lost out https://ftalphaville.ft.com/2018/10/31/1540962002000/The-day-Volkswagen-briefly-conquered-the-world/ https://ftalphaville.ft.com/2018/10/31/1540962002000/The-day...
- femto113 7y ago
  I had first hand experience with this in the early 2000s with CMRC (stock symbol for a company named Commerce One). Friends and I were confident it was overvalued and shorted it, but it continued up at an insane clip and we got margin calls from our brokers. Luckily we were able scrounge up enough cash to cover it and so didn't have to buy the stock at the higher price to cover, and I think within a few days it started to fall again and we were able to settle at a profit, but it was pretty white knuckle. Note that there was no business reason for the rapid gain, they didn't announce a sudden windfall, it was just a short squeeze. Company was never profitable and went bankrupt a few years later despite having a market cap that peaked at over $20BN. https://en.wikipedia.org/wiki/Commerce_One https://en.wikipedia.org/wiki/Commerce_One

olivermarks 7y ago

I previously submitted 'Uber’s enormous, vague IPO prospectus is an outrage (ft.com)' Well worth reading and quite ominous in light of Lyft performance IMO https://www.ft.com/content/60ab80e2-6a8b-11e9-9ff9-8c855179f1c4 https://www.ft.com/content/60ab80e2-6a8b-11e9-9ff9-8c855179f...

npalmer 7y ago
This is an image of the comment for those that don't have access to FT.com https://twitter.com/bytebot/status/1117323665865969664 https://twitter.com/bytebot/status/1117323665865969664
SilasX 7y ago
From the summary in the child twitter link: >We hope in the future there will be driverless cars and that we can then make money because no drivers but other people are developing them too. Nice! It's common to think that self-driving cars will be Uber's salvation, but even then, they'll have to come with other SDC providers, so there's no moat. They'd have lower costs, but so would everyone else, and so they'd have to cut fares proportionally. In theory, they can have such a lead time on a workable SDC that they get a great moat until everyone catches up. But that would be ~2 years at the absurdly optimistic end; not enough to pay back the costs of the program and throw off the huge returns investors demand. And in reality, Uber is lagging on this.
- mimixco 7y ago
  The self driving car idea won't help Uber or Lyft for two reasons. First, neither company has the tech experience to build one. Second, and more importantly, both companies would have to buy and maintain the cars which isn't financially viable.
  - bduerst 7y ago
    They're hoping you'll buy a self-driving car and then let them pay you a minimal fee to use it when you're not. The problem is that self-driving cars will change car ownership needs, and that there could be entirely different companies in the space when it does finally come around.

whoisjuan 7y ago

The problem with Lyft is that they are in a poorly understood market, in second place and burning cash at neck-breaking speed. Even if they manage to start making progress towards profitability, they might need more than that. The reality is that ride-sharing probably needs another lustrum or so to solidify and that seems excessively long for Lyft in its current state. Uber faces the same challenges but its way more diversified and can scale down from certain markets and verticals. Lyft on the other hand has only one market (N.America) and only one vertical (ride-sharing). Doesn't take a genius to understand that scenario looks risky as hell. Especially when you're in a business with nominal differentiation.

sovnade 7y ago
And to top it off, this entire business model is temporary. The end game for all of these companies (and Tesla/etc as well) is to have autonomous fleets. They have to bleed cash to snap up as much of the market as possible before that happens so they're not starting from zero. At this point it feels like a game of who has enough funding to survive the interim to make it to a driverless service.
- asdff 7y ago
  What's to stop Waymo with Alphabets deep pockets to cobble together an app (or waze update) once they get a decent self driving car produced? Alphabet isn't going to just give this market to uber/lyft after they burned so much money on engineering. Even if they licensed their cars it would be temporary until their own app comes out.
jonathankoren 7y ago
Uber’s multiple markets maybe an advantage. If they’re all equally unprofitable, perhaps not, but at least that’s plausible. Uber’s multiple verticals are dogs, and reek of money madness. Eats is small time and loses money. I don’t know it’s financials, but I find it hard that this ancillary business is in a healthier state than a competitor who has it as their core buisness. Uber ATG is as bad off as any other autonomous car program. There’s a growing realization that technology won’t be ready anytime soon. (See Andrew Ng’s comments about just redesigning cities to limit autonomous vehicles’ interactions) Uber Freight is a ghost town.[0] The of course there’s the buisness if renting and then discarding Xiaomi scooters. (Or is that not a thing anymore? I honestly don’t remember.) Sure, I understand the logic behind all of these. Once you have a system to tell a person “Go here, and take this here,” then you can plug pretty much anything into those slots. However. No one has shown that the way they’re doing it is a sustainable business model, and it looks like it’s not. [0] https://www.forbes.com/sites/stevebanker/2018/04/10/is-uber-freight-on-the-verge-of-going-out-of-business/ https://www.forbes.com/sites/stevebanker/2018/04/10/is-uber-...

wonderwonder 7y ago

Very interesting process going on right now with Lyft & Uber both losing money and some of their drivers trying to stage protests and strikes. The drivers appear to rely on the company as their primary source of income and want more money yet at the same time the companies are operating at a loss. Were they to increase wages (as % of every ride) it stands to reason the losses would widen. If they get to wide the company goes out of business and the drivers lose their jobs. I understand that this same standard can be applied at any company but this is a gig / 'work only when you want' job so it is different. The strikes were small so the effects on both companies were negligible. I would be curious to understand what changes the drivers (who work only when they want) expect and how they think a company running deep in the red could meet them. Not trying to pass judgement on the strikers just trying to understand.

SilasX 7y ago
That would only be true if their unit profits were low or negative. On each ride they make a lot of money. They lose money because of their huge, ride-count-independent fixed costs, like legal defense and marketing. So it's not necessarily true that giving the riders a larger cut would widen the loss, if it came with a scale-back on all the marketing.
- beachwood23 7y ago
  I have the understanding that they actually lose ~$1 per ride.
  - SilasX 7y ago
    That figure comes from taking total losses and dividing by the number of rides. It's not the same as saying that the costs of providing the ride itself are $1 more than they charge for the ride. (The fixed vs variable distinction I was making above.) Uber's costs of providing a specific ride are: Driver's cut, maps licensing, cloud charges, data transfer. That is rarely more than the cost of the ride. Remember, Lyft took flack for the outrageously high 14 cents a ride in cloud costs.

return1 7y ago

Uber and lyft look like a charity set up by VCs to provide people with cheaper transportation. Who knows what will happen once they increase fares as they promise to investors

swarnie_ 7y ago
As soon as one of them increase prices to generate profit ill just move on to the next ride sharing app, then the next, then the next. You'd need a price fixing scheme worthy of British Airways make this work.
- deleted 7y ago
  [deleted]
- adventured 7y ago
  It doesn't actually work that way in reality. If it did, there would already be another massive Uber undercutting Uber in eg the US market and raising $10+ billion in VC money to do it. Because hey, a $75 billion valuation is sitting right there, so it's really easy: just put $10 or $20 billion into the company, undercut Uber, IPO, easy return. Everbody can do it, just add $20 billion. What's actually the case, is the next clone will need $20 or $30 billion to fight and undercut Uber's entrenched brand, functioning system and scaled up position. And even in that case, the odds of winning against the large incumbents is low. It will cost even more to beat Uber via the undercut game than what Uber has already spent, because you have to take the market away from them - always a dramatically more expensive and difficult proposition. VCs are not going to continue to burn massive amounts of capital trying to fund the next loss-making ride hailing company. The next $10 or $20 billion to put into an Uber clone in its major markets, does not exist and it will never exist. Few things would scare a VC more than having the pitch that your plan is to destroy twice as much capital as what Uber did, to unseat Uber's entreched position, with nothing to differentiate you other than the speed at which you destroy capital. That's why nobody is doing it right now. There isn't another Lyft, much less another Uber. Softbank isn't looking to drop $20 billion to fund the next Uber, to fight with Uber, in the US and similar markets that Uber dominates now.

strikelaserclaw 7y ago

I don't know what the end game for these companies is. Most average people would never use uber or lyft for transportation on even a semi regular basis if those companies didn't heavily subsidize the rides.

m_ke 7y ago
I'm convinced that the end goal is being the last one standing. Either one of them failing would guarantee a monopoly for the other and make it easier to play with the margins.
- CPLX 7y ago
  > Either one of them failing would guarantee a monopoly for the other Why? Is there some reason someone else couldn't make a basic app-based service to get taxi rides?
  - jorts 7y ago
    They exist and they're terrible (at least in SF) as taxis still aren't reliable to pick you up.
  - m_ke 7y ago
    Because they'll be able to undercut any small competitor that attempts to enter one of their markets by subsidizing it with revenue from everywhere else.
    - CPLX 7y ago
      Not really. It’s a large market with almost no barrier to entry. Either they have huge margins or they don’t. If they do have large margins someone will come along and attack the most profitable segment of the business. That could be airport rides, or having extra cars outside the end of a sporting event, or whatever. As long as switching costs for customers are low then they can’t defend high margins. For monopoly to work you either have to corner supply somehow or lock the customers in. There’s no plausible mechanism for either with taxi services.

jkubicek 7y ago

> Most of that was down to booking stock-based compensation plans for employees, who earned $894m from Lyft’s initial public offering Could someone help me understand what this means? Is this compensation above and beyond employee stock options? If not, that means employees own ~5% of Lyft, which is much less than I would expect. As an employee of a pre-IPO startup, I'd love to get a better handle on the realistic value of my stock if we do reach an IPO.

nytesky 7y ago
0. It’s a lottery ticket. To be realistic. Esp with the DOW down 300 today.
- jkubicek 7y ago
  Yeah, I've always considered it a lottery ticket, but I'd love to get a sense of whether I'm holding a $10k or $10mm lottery ticket. FWIW, I've done the math based on my percentage ownership, expected valuations, timeline to IPO, etc. The big unknown for me is dilution. I don't yet have a good sense of how much dilution I should expect as we move through rounds of funding into an IPO.
  - nytesky 7y ago
    Well in current environment I would expect a lot. Uber maybe the canary in coal mine and dry up VC funding unless with more favorable terms.
  - jkubicek 7y ago
    To clarify, I think I have a good sense of the dilution I should expect, but there's always stories about someone working for years, expecting a big payout after IPO, and ending up with $20k.
    - darkwizard42 7y ago
      When this happens it means that the investments that were made did NOT increase the value of the company. What you want are rounds that increase the value of the company beyond the initial valuation at which it was invested (aka growth)

hellllllllooo 7y ago

Is the plan for the original investors to sell their stock to regular investors before the whole thing tanks? They make their money and whoever followed is left holding the cheque. Seems like a Ponzi scheme as it's been clear for years these companies are not going to be profitable any time soon.

deevolution 7y ago

All these ride sharing companies are here to carry us seamlessly into the driverless future. Unless they're capable of pivoting to driverless technology they are mostly matching services for riders and drivers and Honestly, I dont think it should be uber or lyft's responsibility to build driverless technology - they should just focus on making the experience of getting a ride as excellent as possible. Leave driverless technology to other experts.

asdff 7y ago
And what happens to uber/lyft when the experts make their own rideshare app? Why license your tech to them? These apps can be cloned.

OliverJones 7y ago

Fundamentals question: Can somebody explain how these ridesharing companies expect to turn a profit, eventually? If you lose 50 cents on every ride, how do you make it up in volume? Every ride is subsidized by the Sand Hill Road crowd. They're a great deal. I took a 40-min ride yesterday for US$12.50 in a high-cost-of-living traffic-clogged city. How can that make sense? A ride in a sketchy 1970s-era New York City gypsy (no-medallion) cab would have cost more. And, without all the magic and overhead of some app. Oh, I get it. They're going to scale up using autonomous vehicles. But, that's also a problem. Right now their business model relies on independent owner-drivers. In other words, from the front office's point of view, their fleets fuel, maintain, garage, and insure themselves. How's that going to work when they replace the drivers' cars with their own capital equipment? Why should I invest for the long term in these companies?

misiti3780 7y ago
Not to mention autonomous vehicles are most likely years away from happening
- return1 7y ago
  if at all, [except for people who absolutely can tolerate their problems, e.g. disabled or elderly]
britch 7y ago
The idea (urban myth?) I've heard for discussion's sake: The long term bet is on them becoming THE way to get around and monopolizing the market (or a chunk of it at least) and THEN jacking up prices. If you undercut cabs and public transit long enough, they'll have to react to lower ridership and reduce availability. Sorry, no late night buses, most people are taking a very inexpensive and convenient Lyft home. Now that there's no late night buses, we can charge 3X the cost.
- asdff 7y ago
  Aside from NYC most cities do not have late night public transport past like midnight in most cases, maybe if you are lucky 2am. On top of that outside of NYC and maybe people commuting to DC, public transport ridership is pretty abysmal. Plus all the cabbies have to do is either assign drivers to third shift or not, it can be done on a whim as demand dictates.

dd36 7y ago

They just went public at $80b but are raising $8b, so per the chart in the article, quite a few recent investors are getting a haircut? Pre-money $72b valuation?

jartelt 7y ago
The investors from the last funding round paid about the same share price as the IPO price, so they haven't really made or lost any money. It certainly wasn't a good investment for them (0% return), but I don't think they have taken a haircut yet. It will ultimately depend on where the stock price goes.
- dd36 7y ago
  What’s he hold period? 45 days? Seems like the $79b investor got a 10% haircut.

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nabla9 7y ago

Once the ride-sharing matures, 5-10 years from now, Uber, Lyft and new competitors are not going to take 20 to 25 percent per cent of drivers’ fare. If I had to guess, 10 years from now they take just 1-3% per ride and maybe ask few $100s upfront for each registered driver to cover fixed cost of handling new drivers. These valuation include hopes for fully autonomous cars and the fear of missing out.

jjeaff 7y ago
It won't get that low. That wouldn't cover cc processing. They also need to cover insurance and several other costs. But I could definitely see it settling around 10-15%

dwags 7y ago

now you need a new side gig to support your old side gig (main gig)

temp1292832 7y ago

I don't know what the bull case for Lyft is at all. They haven't expanded into other products or markets outside of pure U.S. ridesharing, which had already been plateauing for some time. Uber, OTOH, has years of experience operating and expanding internationally, has built UberEats into it's own mult-bil vertical on it's own, and owns substantial shares of dominant ridesharing cos in other markets like Grab, DiDi, now Careem, etc.

angel_j 7y ago

They should charge a service fee to the rider, for however much they need to be profitable; and let the drivers charge whatever they want (baseline auction). Now the customer knows how much they are paying to whom. Imho, Taking a cut of earnings is borderline unethical for a automated services, whether its lyft, upwork, or patreon. Charge a fee, know your numbers, give both sides of your service's users confidence in the service's stability.