The value is in the network of riders and drivers not in the software. The big value for the drivers comes when you can minimize the time gaps between rides, and for riders to be able to get pickups down.
Lyft was actually the first mover on the the UberX product category, Uber was only doing premium service when Lyft started growing.
Ultimately this market is a race to the smallest commissions possible. There are costs involved like credit card processing, insurance, operations, etc. I could see commissions going down to 5%.
But I just wanted to point out how risky Lyft is compared to Uber. In some sense, Lyft is selling $1.67 for $1. But Uber is selling $1.18 for $1, which seems way easier to recoup and become profitable quite quickly.
I excluded R&D because I just wanted to focus on "selling $1.67 for $1". I excluded the other expenses because that's just financial structure which isn't relevant to this picture either.
Uber is a bit of a different beast. It's valuated much higher, and it banked a lot of that valuation (in my perception at least) on the perspective of getting self-developed fully automated driving capability to the market and thus having an edge (and an actual moat) to be used to finally reach profitability by eliminating the costly drivers.
Thus I would expect its valuation to stay high for a while, but drop sharply as soon as the "fully automated driving is right around the corner" bubble pops for real.
That's not all. Let's say that software developer would have produced $200k in value for Lyft. But that 200k could hire two more software developers! By induction, Uber has cost Lyft an infinite amount of money.
If this is a comparison between Uber and Lyft, I'm not sure I really get it.
Platform business models are essentially winner takes all. Lyft's value proposition is that they're number two in a market where anyone who isn't in the top 4-5 has almost no chance of winning.
This doesn't mean that they're doing enough to differentiate themselves from Uber, or that they'll ever be able to turn an actual profit, but for the short and medium term game they're more than capable of fending off Uber-copy #27.
I'm not sure what Lyft's story is, but Uber is profitable in developed market, but is pouring enormous amounts of cash into expanding as rapidly as possible. I believe that if they cut back growth efforts, they can hit profitability relatively quickly, but this would probably bring the valuation down from the sky high level that it is at the moment.
I think Uber (and Lyft) are absolutely adding value. I now regularly take ride shares when I would previously have driven or extremely reluctantly taken cabs. I also talk to my rideshare drivers and the platforms provide some much needed cashflow (and perhaps day-filling) for people who seem genuinely happy to avail themselves of the income opportunity provided.
I see no reason to think that those two companies couldn't be quite profitable in their core businesses in their established cities. (I think they already are.)
That said, their valuations in the market are comically/insanely/unjustifiably high, but that's quite different from saying they "add no value".
I think you're over thinking this. Suggesting that Lyft is worth a low price so that people think that means Lyft is worth more doesn't seem plausible. Why not just suggest that Lyft is worth $8 billion?
On the other hand, I could see Uber trying to devalue Lyft so that they could buy them for cheaper. Or so that Lyft has a hard time raising money at a higher valuation.
Imagine you're an investor in the last round who invested at $7.5 billion. Now, Uber buys Lyft for $7.6 billion. Are you happy with that return? Any sale, just by necessity really, would have to be for a significant premium.
I'm not sure it's a commodity. Riders are not necessarily willing to wait indefinitely for the driver. Economies of scale is a factor in ride hailing. Perhaps a ride hailing company with fewer drivers can out perform a larger peer through predictive analysis, putting drivers in the right areas ahead of time. That likely amounts to a neat trick when you think about the scale of Uber and Lyft.
Uber has had to close down operations in several countries as well as several cities here in U.S.. Each time losing investors hard earned dollars. Lyft is most definitely, as others mentioned, in the slipstream; benefiting from Ubers successes and failures.
Lyft is a brand people respect and love and Uber not so much; at least not here in the U.S.
Lyft also has partnered with Google's Waymo. I think that partnership is limited to testing autonomous ride share but Google is also an investor in Lyft. A future acquisition or partnership doesn't seem out of the question. I see room for a few players to own the market and if I were an investor I'd go with Lyft.
The valuations and conditions between Lyft and Uber are drastically different.
Lyft with the funding from GM has only raised $2B over it's lifespan which is comparable to that of Uber. Uber has raised nearly $13B and blown through most of it.
At their last round, Lyft is valued at about $6B and Uber is valued at $68B. One of these is reasonable based on the taxi market size (domestic $20B), the other is about 2x over the assumed value with decent market share and margins it could attain.
The only way for Uber to express the value on the books is to replace car ownership, which is unlikely with the turnover rate of individuals replacing their cars, they'll need about a decade or more runway to justify the current valuation.
Lyft and GM have an advantage in the race to replace ownership, with their partnership. Lyft gets a partner that can reduce cost of vehicle supply costs and maintenance, while GM gets a hedge against a possible headwind to their current business model.
Lyft and Uber, from a birds-eye view, do the exact same thing; and furthermore, neither is profitable, so the entire market is built upon potential future sales bases. Lyft is here valued at, generously, $7 billion. Meanwhile, Uber's valuation is reported variously, but a general Google search suggests its well in excess of $50 billion.
This exceeds any expectation of market craziness. Are these investors talking to each other? Are things so far gone that a vague promise of self-driving cars is worth almost a factor of ten valuation difference?
I mean. Objectively speaking and valuation aside, Uber's numbers are better than Lyft's. Unlike you, I would much rather take Uber over Lyft, given how extremely siloed is Lyft's market.
1.63 billion from Uber Eats is not a minor number and definitely a contrasting number that shows that at least Uber is trying to position itself as a logistics company instead of a mobility company, which really doesn't make sense (mobility is an abstract concept that I think can't be definied as an industry).
I honestly don't like either. But a plain analysis makes Uber more attractive by far.
If you’re in a mature Lyft/Uber market, it’s making money on you, possibly a lot. Both have healthy unit economics in modestly mature markets. The only time they lose money on rides is where the pooling is immature.
Lyft was actually the first mover on the the UberX product category, Uber was only doing premium service when Lyft started growing.
Ultimately this market is a race to the smallest commissions possible. There are costs involved like credit card processing, insurance, operations, etc. I could see commissions going down to 5%.
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