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Uber vs Lyft: Who’s the KING of Ridesharing?

17 December 2019

Rivalries are Always Enteraining but only some of them Get as Interesting as the Rift between Uber and Lyft. Here’s the story!

 

Hello and welcome to another article “Uber vs Lyft.” by Alux.com. There are many ways to get from here to there, but one of the most convenient is just pulling out your phone and requesting a ride from Lyft or Uber. You may have a preference or you might just go with whoever’s cheaper.

The companies appear to have the same types of services and infrastructure, but there are some differences that set them apart. They are definitely the two biggest competitors in the ridesharing market, but who is the king? We’re going to look at several factors to determine this today, but first let’s look at how these companies got their start.

The Beginning: Uber
The Beginning: Lyft
Going Public
Valuation and Revenue
Market Share and Growth
Controversies
Self-Driving Cars and the Future
Closing
Question

 

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The Beginning: Uber

Uber is the originator in the rideshare market. The idea for Uber came after founder Garrett Camp spent 800 dollars on a private driver for New Years. Amidst bringing in a New Year, he began thinking that there must be a cheaper way to offer direct transportation. This led to the founding of UberCab, which launched in San Francisco only in 2011. Shortly after the launch, they shortened the name to Uber after backlash from taxi drivers in the city.

At first, the company only provided luxury car service, but in July 2012, the company debuted UberX, which was based on individual drivers using their own cars to transport customers. This was a revolutionary concept in the transportation industry and a major blow to taxi services.

By the beginning of 2013, Uber had expanded to 35 cities. Uber had also grown internationally, with Paris, France, being the first city beyond the states to adopt the service in December 2011. They were growing exponentially when their biggest competitor hit the market in 2013.

The Beginning: Lyft

Lyft was founded in 2012 as an offshoot of an earlier established company called Zimride. Since 2007, Zimride had been offering long-distance carpooling services after being founded by John Zimmer and Logan Green. In 2013, Lyft sold Zimride to Enterprise Holdings and focused completely on growing the rideshare service.

Lyft’s early trademark was the bright pink furry mustaches that their drivers placed on the front of their cars. Lyft started out in San Francisco, just like Uber, but they were able to expand much quicker than Uber initially did since the market had already been established. Just one year after its launch, Lyft had a presence in 60 cities with 30,000 rides being given per week.

The two companies have been following similar paths while trying to dominate the market, including having their companies listed on the New York Stock Exchange. 

Going Public

Both Lyft and Uber filed the paperwork for their IPO on the same day—December 6, 2018. Lyft held their IPO on March 29, 2019, with class A common stocks listed at 72 dollars per share. They sold 32,500,000 shares of class A stocks in addition to nearly 5 million stocks sold to underwriters. Since then, Lyft stock prices have fluctuated with more negative trading days than positive. The stocks reached a low point in September 2019 at 44 dollars per share.

Uber’s IPO was expected to be one of the largest of 2019, but it ended up making history in another way. Some estimated that the valuation of Uber could reach up to 100 billion dollars following the IPO, but it ended up far short of that, and the entire IPO raised just 8 billion dollars.

Stocks were initially offered at 45 dollars a share, but shares quickly dropped 11 percent, leading to the biggest first-day dollar loss in US IPO history. Now let’s take a look at the two companies’ financials and see how they compare.

Valuation and Revenue

Neither Lyft nor Uber have been profitable since their founding. While Lyft has increased the profit margins of their rides up to about 40 percent, they are still not making enough to cover overhead costs, including costs associated with growth.

In 2018, Lyft’s net revenues were 2.157 billion, yet their net income was in the negative by more than 911 million. During its most recent funding round in 2018, Lyft was valued at 15.1 billion dollars. This valuation takes into consideration the fact that Lyft is increasing revenues at a relatively fast pace as well as the series of controversies Uber has faced recently.

On the other side, Uber’s valuation stands at 72 billion dollars, but this isn’t an accurate reflection of their recent monetary problems. Uber’s net revenues in 2018 totaled 11.27 billion dollars, but their net income was in the negative by 1.8 billion dollars. In the first quarter of 2019, Uber posted losses of one billion dollars, and things worsened in the second quarter with posted losses of 3.9 billion.

In the face of these losses, Uber laid off about 850 people from the marketing, engineering, and product departments. Yet Uber CEO Dara Khosrowshahi remains confident that they are still on the path to profitability. He said in August 2019 that “Scale is the primary driver toward profitability.” So now let’s take a look at how these companies have been expanding.

Market Share and Growth

Over the last several years, Lyft has doubled the number of rides given per week for an average of around 10 million rides per week given. By the end of 2018, Lyft had 29 million active users. However, Uber has them far outmatched in this area with 110 million users worldwide. Uber is currently growing at a rate of about 35 percent per year in terms of the number of trips given. Over 4 billion rides were given in 2018, far outpacing Lyft and their other competitors.

One of the big differences between the companies is their international presence. Lyft only operates in the U.S. and Canada, while Uber has a presence in over 900 cities across 85 countries on six continents.

In the United States market, Uber claims 65 percent of the market share, while Lyft claims the other 35 percent. Lyft does plan to expand more internationally in the future, but they have an uphill climb with Uber already well-established in so many markets. However, Uber can also be its own worst enemy.

Controversies

There’s no question that Uber is the king of controversies when it comes to the ride sharing market, but that’s a title they would gladly give up. 2017 was a particularly bad year for the company. In January 2017, Uber was forced to pay 20 million dollars to the US government in order to settle a complaint by the Federal Trade Commission that they misled their drivers about what they could potentially earn.

That same month, Uber was heavily criticized for continuing service at JFK Airport in New York City during a taxi driver’s strike in protest of President Trump’s travel ban on Muslim-majority countries. This led to the hashtag delete Uber trending and 200,000 users deleting the app. A few months later, a class action lawsuit was filed against Uber, alleging that drivers were not given the percentage of payment that they were promised.

In May 2017, another lawsuit was filed by the New York Taxi Workers Alliance, which led to Uber admitting that they had underpaid drivers in New York City by tens of millions of dollars over a time of less than three years. They ultimately agreed to give the drivers backpay plus interest. Two of their controversies have directly involved Lyft.

When Lyft started operations in New York City in July 2014, Uber put together a team of employees with the purpose of recruiting Lyft drivers and gathering information about Lyft’s launch plans.

Later that year, it was discovered that Uber employees had ordered and cancelled over 5500 Lyft rides with the goal of slowing down Lyft’s service and recruiting drivers. When they were called out for these actions, Uber’s management refused to apologize. All of these controversies and more have contributed to a greater number of people choosing to go with Lyft, but it’s impossible to tell if these types of controversies will continue to diminish Uber’s market share in the future. 

Resource: 15 Companies That Will Soon Go Bankrupt

Self-Driving Cars and the Future

It’s no secret that Uber has been researching self-driving cars, partly thanks to some negative publicity surrounding a female pedestrian being struck and killed by a self-driving Uber in Arizona. Their research and development began around 2015, and by 2016 they launched their first driverless car services in Pittsburgh, Pennsylvania, and San Francisco, California.

By the end of the year, they were forced to quit driverless operations in California, so they moved the program to Arizona. This is where the tragedy occurred of a woman being struck and killed by a driverless Uber as she was crossing the road. Uber immediately pulled all of its self-driving vehicles off the streets and reached a settlement with the victim’s family. They changed their approach to autonomous vehicles after that but are still pushing forward with their beta markets in Pittsburgh and Toronto.

Uber had projected that they would have 75,000 autonomous vehicles in operation in 13 cities by 2022, but more recently they have shied away from such bold projections.

Lyft has been researching self-driving cars as well ever since 2012, but their efforts got more serious when they partnered with General Motors to develop autonomous cars in 2016. In 2017, Lyft joined forces with a self-driving car start-up called NuTonomy with the expressed goal of one day putting thousands of on-demand self-driving cars on the road.

In 2018, Lyft launched a self-driving service in Las Vegas. By May 2019, Lyft’s fleet of 30 autonomous vehicles had made 55,000 successful trips, making it the largest self-driving service in the United States. We should note, however, that Uber and Lyft both still have backup drivers in their autonomous vehicles just in case. And you can be sure that both are competing to be able to launch a widespread autonomous rideshare service as soon as the right technology and infrastructure are in place.

Lyft seems to have a bit of an edge right now in this area, but it’s hard to say who will come out on top in the end. 

Closing

So who is the king of rideshare? It’s true that Lyft is growing more rapidly, appears to be closer to profitability, has had less controversies, and is making important strides with autonomous vehicles. But when you look at the sheer numbers, it’s impossible to give anyone else the crown but Uber.

Uber’s valuation is about five times higher than Lyft’s, they operate in 83 more countries and 5 more continents than Lyft does, and they have more than 80 million more active users. The fact that they claim 65 percent of the rideshare market in the United States is enough for them to claim the title of king. However, they shouldn’t get too comfortable.

Lyft isn’t going anywhere. They have proven their capacity for growth and aren’t intimidated by taking on the king head on. The key to who will be the dominant force in the future will likely lie in who has the most success with autonomous vehicles, so Uber needs to step their game up if they want to stay on top.

Question

Now that we’re wrapping up this article, we’d like to know: Do you have a strong preference between Lyft and Uber? Let us know what you think in the comments.