Harry here. This week we’re mixing it up a little with a bunch of stories on Lyft. It’s easy to get caught up in “Uber this” and “Uber that”, but let’s not forget about their closest competitor.
Today, RSG contributor John Ince breaks down some numbers that Lyft announced at a conference this week, Lyft’s new premium service and some skepticism about self-driving cars.
Enjoy!
Lyft President Says the Company Has More Than Enough Money to Break Even
Sum and Substance: Ridesharing startup Lyft has a very (very, very, very) deep-pocketed rival in Uber. The ride-sharing behemoth has raised so much money it’s hard to even keep track of it all. (Crunchbase puts the figure at $15.2 billion, including debt.)
It’s expensive to compete. Lyft’s differentiators, according to President John Zimmer, include its treatment of drivers (“better than any other rideshareing company”) and its fast response times (estimated times of arrival averaged three minutes across Lyft’s top cities, he said). His comments were made on stage Monday at Fortune’s Brainstorm Tech conference in Aspen.
Zimmer also emphasized his background in hospitality, going so far as to say that service will be Lyft’s differentiator when taxis are driven by autonomous robots. “As ETA and price becomes more equal, you can differentiate on experience,” he said. (Read more about Lyft and autonomous vehicles in Fortune’s latest cover story, “Some Assembly Required.”)
But service doesn’t change the cost of competing with Uber. According to reports, Lyft is losing as much as $50 million per month. When asked about that high sum, Zimmer said, “I would use the word ‘investing.’” Lyft believes there is a trillion-dollar opportunity in “transportation-as-a-service” market.
My Take: In the face of last week’s revelation that Lyft hired investment bank Qatalyst Partners to explore a possible sale of the company, it’s no surprise that Lyft’s CEO would make a statement to quell any speculation that Lyft is under financial stress.
One of the benefits of remaining a private company is that statements like this don’t have to be backed up by any figures. We have to take the CEO’s word on this, and that’s what Fortune (my former employer) did here by creating it a headline that seems to make all seem well with Uber’s smaller but feisty rival.
Left unanswered are more substantive questions: What assumptions is the Lyft CEO making in this projection? How much money is Lyft losing (or “investing”) now? How much money do they have in the bank? Just exactly how does this “trillion dollar opportunity” break down in specific industries and markets? Seems to me that both Uber and Lyft have largely been given a pass by the business media when it comes to digging deeper into their financials. We won’t know for sure what either’s financial situation is until one or the other goes public or gets acquired – whenever that may be.
Lyft debuts new high-end rides for business users
Sum and Substance: Lyft is launching a new high-end service aimed at business customers as it strives to carve out market share in the enterprise space. The service is called Premium, and is rolling out first in San Francisco, New York and Los Angeles, with other markets likely to follow based on demand.
This isn’t the first time Lyft has attempted a premium service model. Its first iteration of Lyft Plus, a feature that connects riders with SUVs with six seats, was marketed as a luxury service, but never caught on. Under that first version, 70 drivers were recruited and asked to buy SUV vehicles, and Lyft ended up partially compensating the drivers for the cost of the vehicles.
“I have been wanting an option like this for a while since many drivers invested in a nicer vehicle in order to stand out,” writes Christian Perea, a driver and contributor to the ride-hailing blog The Rideshare Guy. “There is a situational or niche market for these kind of fares, but I wouldn’t go out and buy a vehicle that applies for this unless Lyft really penetrates Uber’s share of the business market.”
In that effort, Lyft says it has recruited a larger pool of drivers who already happen to meet the criteria for the premium service. Those requirements include leather seats and and a newer model of a ‘luxury’ vehicles like Audi, Mercedes, Cadillac or high-end models of other brands like Toyota or Acura. The drivers will make more money per ride and be able to move between plus, premium and ‘classic’ ride options depending on their vehicle.
And this time around, the service is aimed at business customers who need a more impressive ride when hosting clients, the company says. As it races to compete with Uber, Lyft has increasingly sought out corporate partnerships to carve out market share. The company has won some corporate accounts, such as a partnership with Apple, Airbnb and Hewlett-Packard to provide rides to employees. And recently, Lyft also launched a scheduling program for pre-arranged rides.
Overall, however, the company has struggled in the business category, with only 4 percent of business rides going to Lyft, according to Certify, an expense tracking company, as of March 2016. Uber, by contrast, had a whopping 69 percent, according to the firm.
My Take: I’ve been hearing rumors for some time that Lyft will ultimately seek to differentiate itself from Uber by going for the high end of the marketplace. It’s a strategy that makes sense, but Lyft is clearly playing catchup. Uber is already well established in the high end with its Uber Select and Uber Black options. With this development Lyft shows that it is still very much a company in search of a viable business model.
The long standing differentiation on the basis of “treating drivers better” seems to be only moderately successful. Uber’s aggressive bonuses, guarantees and rewards for drivers, at least for the moment, are keeping their drivers out on the road usually with just one app on – and it’s not the Lyft app. Although I drive for both, in my area I rarely ever turn on the Lyft app because whenever I get a ride request, it’s from so far away that it’s not worth the drive. With Uber’s deep war chest, they can continue to bleed red ink and still remain financially viable.
Perhaps that’s why Uber last week closed another financial round, raising up to $1.15 billion in leveraged loans. Uber recognizes that the final battleground for this war is in their fundraising wherewithal. Maybe that’s also why Lyft is reportedly exploring a sale of the company.
Related Article: Lyft Premier is Launching in Several Select Markets
How Lyft’s Driverless Car Network Will Change Our Cities And The World
Sum and Substance: It’s only four years old, but Lyft is already proving it’s more than just a ride-hailing app—it’s a vision for the future.
In May, reports surfaced that the San Francisco-based startup and General Motors would begin testing a fleet of self-driving electric cars starting in 2017. The benefits of such a fleet would be numerous; increased driving amongst the visually impaired and decreased driving amongst the inebriated are among the better examples. Telling your car to go pick up mom and dad from the airport will also prove convenient (even if you really should just do that yourself).
With this future in mind, GM invested $500 million in Lyft as part of a shared mission to deliver autonomous vehicles worldwide. Not only will self-piloting vehicles change how we commute, they could affect how we craft our cities and even buy cars. If Lyft co-founder Logan Green has his way, car ownership and operation will be a luxury, not a necessity. We may even purchase cars like we purchase smartphones—discounted and attached to a network. And that could forever transform the face of our cities, suburbs, and cars themselves.
POPSCI: How will that change a landscape that’s built around cars that we own and drive?
Logan Green: A car is used, on average, only 4 percent of the time. When you start to imagine all of the idle vehicles disappearing—there’s a massive amount of room to make roads more efficient. Imagine a neighborhood that has no cars parked on the sides of the streets; those streets can then be narrowed. In a downtown area, you can have wider sidewalks. Cities can be built more around people. You don’t have to have thousand-car parking garages taking up entire buildings. In the suburbs, you don’t need a driveway taking up half of your front yard. You don’t have to have a massive parking lot in front of every shopping mall; you can have pickup and drop-off areas instead.
My Take: Here it is: a view of the future of driverless cars from the definitive source: Popular Science. Sorry folks, this short interview with Lyft CEO Logan Green is seriously lacking in specificity. He offers a utopian vision based upon good reasons why the current system of car ownership isn’t ideal, but he’s evasive when asked how all the logistical, regulatory and other details of a driverless world will work. My takeaway? Don’t worry folks: driverless cars and the infrastructure to support them are well off in the distant future, the very distant future.
Deputies: Uber driver arrested when he refused ride to blind man, service dog
Sum and Substance: An Uber driver in Florida was arrested after deputies say he refused to transport a group of blind people and their service dogs.
According to news outlets, citing an arrest report, 60-year-old Simon Pierre Andre Nau was picking up Robert Stigile, who’s blind, and other blind people in Stigile’s group Monday night in Orlando. Stigile says that when Nau showed up, he said, “I don’t take dogs.” Stigile explained the dogs were service animals and Nau allegedly replied “I don’t care.” Stigile says he was standing in the open door frame and felt the car move forward, striking him.
Orange County Sheriff’s deputies arrested Nau on charges of failure to transport a blind person with a service dog and battery. Deputies say Nau laughed about the incident as if he “didn’t fully understand that he had broken the law.” It’s unclear if Nau has an attorney.
My Take: Add this to the list of risks of being an Uber driver – you can actually get arrested and spend the night in jail if you refuse a ride to a disabled person with a service dog. Unfortunately, it’s unclear from this report whether the arrest was for the refusal to give a ride to a blind man or for swiping the man with his car as he drove off.
Related Video: Do Uber Drivers have to accept rides from passengers with service dogs?
Uber has found a clever way to bypass a roadblock in Argentina involving bitcoin
Sum and Substance: Uber is facing strong opposition in Buenos Aires, where the company has been operating since mid-April without a permit or tax-identification number. The massively funded startup is being sued by taxi unions. City officials have issued multiple injunctions attempting to bring its service to a halt. And credit card companies have been blocked from processing Uber payments on locally registered cards.
It takes more than that to stop Uber, however. The ride-hailing company is working with bitcoin startup Xapo to circumvent the credit card roadblock, one of its more pressing barriers to service in Argentina.
Xapo helps consumers buy, store, and spend bitcoin, a virtual currency. One of the ways it does this is with the Xapo card, a Visa-branded debit card that allows its holders to spend their bitcoin with any merchant who accepts Visa. That Xapo’s card uses bitcoin is beside the point to Uber in Argentina. (In fact, the company said in a statement that it does not accept bitcoin as a currency.) What matters instead is that the card isn’t issued locally, but out of Gibraltar, and therefore not blocked from accepting Uber payments under the city’s regulations. By the same logic, someone traveling to Argentina with a US-registered credit card should have no trouble booking and paying for an Uber in Buenos Aires.
That said, the Xapo card does offer a unique solution to a related problem for would-be Uber riders in Buenos Aires—how to get a non-locally issued card. “A normal Argentinian person cannot go and suddenly open a bank account in Gibraltar,” says Anni Rautio, who is based in Argentina and heads up Xapo’s debit card. But because Xapo’s card uses bitcoin, which is digital and not controlled by any country’s central bank, it can provide cards to account holders anywhere. (Bitcoin is being used for settlement purposes on the backend; the important thing for Uber is that the transaction is on Visa’s network.)
Uber declined to provide data on how many people in Argentina have signed up using Xapo’s debit card, but said it is currently doing about 18,000 trips a week in Buenos Aires. Rautio said Xapo has received “a lot of requests” from Argentinians about setting up a Xapo card now that they’ve “found an actual use to spend [their] bitcoins.”
My Take: Here we have a classic example of how Uber charges forward seeking to break down any door shut in their face, and it seems like a lot of doors are slamming in their face as foreign governments don’t take kindly to Uber’s tactics.
By going to these lengths to bypass local opposition, Uber is either very smart or very stupid. On its face it appears to be the kind of Rube Goldberg approach that is embraced by many in San Francisco’s techno-bubble chamber. Bitcoin’s technological and security challenges have been well documented over the years, and even with all the press it’s received, only a very small percent of the general population feels comfortable using it. So I can’t imagine that any significant number of people will avail themselves of this opportunity. But who knows? Maybe Bitcoin one day irons out the kinks and becomes widely accepted. Then Uber’s approach here starts looking like genius.
Related Podcast: Bitcoin Divided (Planet Money)
Readers, what do you think of this week’s round up?
-John @ RSG
reaSave
Save