Larry Page Gives Uber One Billion New Reasons to Hate Lyft

If you thought the rivalry between Uber and Lyft was bad before, this week’s round up makes this rivalry even juicier. New funding from Google for Lyft has just upped the stakes between the two rideshare companies, but what does this mean for drivers and passengers? Today, senior RSG contributor John Ince distills what this new investment means, the rise of robots, and how ridesharing has affected public transit. 

senior RSG contributor John Ince distills what this new investment means, the rise of robots, and how ridesharing has affected public transit. 

Larry Page Gives Uber One Billion New Reasons to Hate Lyft –
A massive new investment values Lyft at $11 billion, just as Uber is stumbling. [Vanity Fair]

Sum and Substance: As Uber’s new C.E.O. Dara Khosrowshahi rushes to clean up the messes left by his aggressive, rule-bending predecessor Travis Kalanick, he also faces an increasingly formidable challenge in Lyft, the smaller, friendlier ride-sharing upstart that Uber repeatedly tried to sabotage. Google parent company Alphabet’s investment arm, CapitalG, has led a $1 billion investment round in Lyft, the companies confirmed on Thursday, raising Lyft’s valuation from $7.5 billion to $11 billion. Lyft’s new capital infusion follows a $600 million funding round in April.

Lyft’s new valuation is another black eye for Uber, which once boasted a close relationship with Mountain View. In 2013, Google Ventures partners David Krane and Bill Maris poured $258 million into Uber, a stake reportedly worth about 7 percent of the company at the time. But what was a promising partnership quickly turned rocky as Uber and Google became ostensible competitors in the self-driving and transportation spaces. Uber began heavily recruiting Google employees for a number of divisions within the company and Google chief legal officer David Drummond stepped down from Uber’s board last year as the two companies began racing to develop autonomous car technology. In February, Google self-driving car company Waymo sued Uber for intellectual property theft and patent violations; the trial, which is set to start December 4 and is expected to last for two weeks, could result in a multi-billion dollar judgment. (Uber has denied any wrongdoing.)

Despite its previous relationship with Uber, or perhaps because of it, Google has forged a close bond with Lyft this year, with Waymo signing a deal to work on self-driving car technology with Lyft. “We’ve announced some exciting partnerships over the last several months, with Waymo, nuTonomy,, and you’re going to start seeing those partnerships mature and come to life, and more people will get to experience a test ride on an autonomous vehicle,” Lyft C.E.O. Logan Green told me last month. “On the one-year horizon it’s still very much in the testing phase, where there’ll be safety drivers behind the wheel, but the technology is evolving quickly.”

Outwardly, Google’s new cash infusion into Lyft is a strategic investment, but it may also be fueled by spite. As sources told Axios last month, the push for Google to invest reportedly came from the highest levels, with executives like C.E.O. Larry Page driving the deal. As one Uber investor put it at the time: “That is seriously messed up.”

Uber, meanwhile, is trying to rebound from a series of scandals that exploded in early 2017, when a former engineer for the company wrote a blog post detailing her experiences with sexual harassment and retaliation there, and which continued even after Kalanick’s exit. The ugly infighting among Uber’s board has been made public, occasionally by its own board members, and the company is facing stricter regulations and restrictions in cities around the world, including Quebec and London.

Those obstacles have taken their toll: while Uber has been valued as high as $70 billion, that number could fluctuate pending an investment deal with SoftBank, the Japanese conglomerate that’s been eying a major stake in Uber. As Axios’s Dan Primack reports, Uber’s most recent formal report placed its valuation around $60 billion, but SoftBank originally proposed pricing Uber as low as $50 billion. Current shareholders aren’t likely to approve that deal, but it suggests that Uber might be overvalued just as its biggest domestic competitor is building momentum.

My Take:  We could all see this coming a mile down the pike. The article details the slow falling out between Google/Alphabet and Uber. Each step made it increasingly unlikely that the Google/Uber thing was workable.  So the question then is, where does Google now place its bets?

Voila: Lyftoogle, or the early investors in Lyft might see this as a huge Gyft – the valuation of their company has just grown by $4 billion from 7-11. Lucky them!

Meanwhile, Uber rolls the dice to snake eyes as their real valuation drops from 70 billion to 50 billion or so in the Softbank deal. But don’t tell anybody about that, because the deal is getting engineered to sell a small tranche of stock at $70 billion – just to keep the fiction alive for any stray global investors who may be looking to park five or ten billion for a few years.

Here’s what I’m wondering though – how much hard analysis did Google do before they inked this deal with Lyft?  As best I can tell, this business only becomes profitable when competitive conditions permit one player to be the clear market maker – and set fares with near monopolistic power. But with this Google investment and with Softbank’s $10 billion purchase of Uber stock, both sides are doubling down their bets – likely signaling the continuation of unsustainable subsidies to both passengers and drivers.

Masayoshi Son’s Grand Plan for SoftBank’s $100 Billion Vision Fund [New York Times]

Sum and Substance: When Eric Gundersen, the chief executive of a mapping start-up called Mapbox, met Masayoshi Son, the head of the Japanese conglomerate SoftBank, in late July, he expected to have to sell Mr. Son on what made Mapbox important. But Mr. Son, 60, did not need to be convinced that Mapbox’s technology — which powers Lyft drivers and companies like Snap and Mastercard — had value. After a whirlwind courtship, Mr. Son’s nearly $100 billion Vision Fund, which SoftBank unveiled last October with money from Saudi Arabia and others, led a $164 million investment in Mapbox that was announced on Tuesday.

In the process, Mr. Son also explained his grand plan for deploying the Vision Fund to Mr. Gundersen. The Japanese billionaire said he believed robots would inexorably change the work force and machines would become more intelligent than people, an event referred to as the “Singularity.” As a result, Mr. Son told Mr. Gundersen, he is on a mission to own pieces of all the companies that may underpin the global shifts brought on by artificial intelligence to transportation, food, work, medicine and finance.

“For Masa, his vision is not just about predictions like the Singularity, which has gotten a lot of hype,” Mr. Gundersen said. “He understands that we’ll need a massive amount of data to get us to a future that’s more dependent on machines and robotics.”

What Mr. Son laid out for Mr. Gundersen helps explain why SoftBank and its Vision Fund have invested billions of dollars in a seemingly random sample of more than two dozen companies since the fund was announced. The investments span robotics software start-ups like Brain Corp and the indoor farming business Plenty, as well as more prominent companies like the business software maker Slack. The deals have run the gamut from smaller investments in start-ups to larger deals with public companies….

Yet the companies all have something in common: They are involved in collecting enormous amounts of data, which are crucial to creating the brains for the machines that, in the future, will do more of our jobs and creating tools that allow people to better coexist. Most recently, SoftBank has been involved in a plan to buy nearly a fifth of the existing stock of Uber, the world’s biggest ride-hailing company and one that has changed the transportation industry. SoftBank is aiming to accumulate Uber’s stock through a tender offer that could value the company at a discount to its current valuation of $68.5 billion, according to people briefed on the negotiations, who spoke on the condition of anonymity because the details were confidential. The tender offer could still fall apart, one of the people said.

If it ends up being completed, Mr. Son would own significant chunks of ride-hailing companies globally because SoftBank already owns stakes in Uber’s rivals like Didi Chuxing in China and Ola in India. Altogether, SoftBank would have a network of companies that gather valuable logistics data and operate large, connected fleets that could work well with self-driving car technology.

My Take:  This is a fascinating piece of speculative writing that offers a very plausible explanation to the moves of the mysterious investment fund known the world over now as Softbank. The core argument is that Softbank sees more than urban transit services in Uber and other investments in Uber competitors.  Softbank sees data: he sees data collection nodes, he sees the creativity and talent to curate that data in more ways that can substitute for or complement what is now being performed by humans. Robots – that’s the future in Softbank’s world. I wonder what the robots will have to say to that.

Ride-sharing services like Uber cutting into public transit use in Chicago, elsewhere: study [Chicago Tribune]

Sum and Substance: Ride-sharing services like Uber and Lyft are cutting into public transit use in cities like Chicago, according to a new study.

The study by the University of California-Davis Institute of Transportation Studies found that after adopting ride-sharing services, there was a net 6 percent decline in transit based on of survey respondents’ changes in travel behavior.

“Data across the country has made it pretty clear that there are aspects of ride-hailing that are directly competitive with transit,” said Kyle Whitehead, government relations director with the Active Transportation Alliance, which advocates for transit, bicyclists and pedestrians.

The study concluded that ride-sharing is likely to contribute to growth in vehicle miles traveled in major cities, which means more traffic on the streets.

CTA spokesman Brian Steele said that both historically low gas prices and ride-sharing services have been factors contributing to the CTA’s recent ridership declines. To help the CTA, Mayor Rahm Emanuel proposed to the City Council on Wednesday a fee of 15 cents in 2018 and an additional fee of 5 cents in 2019 on ride-sharing trips, in addition to an existing 52-centfee. The fee, if approved, would make Chicago the first city in the nation to institute a fee on the ride-sharing industry dedicated specifically to mass transit, the administration said. The Emanuel administration maintains that the ride-sharing industry has drained $40 million from city and other local government coffers, in part by shifting some commuters away from the CTA.

While the UC Davis study reported a net drop in transit use, survey respondents who had adopted ride-sharing reported being 3 percent more likely to use commuter rail, such as Metra, indicating that they might be using ride-sharing services to go to and from train stations.

… The study found that …  if ride-sharing had not been available, up to 61 percent of trips would not have been made, or would have been by walking, biking or transit.

My Take: Right from the outset of ride-hailing 8 plus years ago, it’s just been assumed that services like Uber and Lyft are environmentally friendly – i.e. they reduce pollution, traffic congestion and make urban transit more efficient. This was a huge part of Lyft/Uber’s case to regulators.  It was integral to their brand building process.

Environmental-friendliness was their calling card with municipalities and their grassroots political campaigns.  It was their strategic weapon when mobilizing public support for their initiatives. At smaller scale all this might have been true. But now that Uber and Lyft have met and exceeded the growth targets they set – suddenly there are real questions surfacing about the overall affect of their services.

This study suggests that a whopping 61% of ride-hailing trips are taking passengers from urban transit or other even more environmentally friendly options like walking or riding a bike.  Suddenly with all the other shit hitting the fan for Uber their core arguments for the service are being questioned by reputable researchers.

Readers, what do you think of this week’s round up?
-John @ RSG