Why Lyft Average Hourly Guarantees Are a Sham

Uber and Lyft have always had a supply imbalance during big festivals and holidays.  There’s a reason why LA drivers like me get tons of texts and e-mails encouraging us to drive all the way out to Coachella in Palm Springs every year.  Passengers need lots of rides during these times and in the past, this was a good thing for drivers because there was plenty of demand and lots of surge.

But over the past year, we’ve seen Uber and Lyft sign up hundreds of thousands of new drivers and due to lower rates and poor retention, many of them now only come out to drive on the biggest days like Outside Lands in San Francisco last weekend.  These big days are becoming more and more dissapointing for regular drivers and in order to inflate supply, Lyft and Uber have started offering hourly guarantees that appear attractive on the surface but can often be a fool’s errand.

Today, RSG contributor, Christian Perea, shares what his experience was like going after the guaranteed money during Outside Lands festival, and what his strategy for future ‘guaranteed money’ events will be.  This article is a bit long but there’s some great information that will help you avoid a lot of wasted energy and effort.

If you have ever talked to an OG driver for more than five minutes, they’ve probably mentioned the “good ol’ days” of sitting around in a parking lot and “collecting floor” when Lyft or Uber were first getting off the ground in their market.

They may even talk about making upwards of $1,500 a week with little to no effort. It hearkens back to the days when this was all new and Uber and Lyft were heaping money towards their drivers just to have someone on the road. If only we had gotten “in” that early right?

Today, hourly guarantees have become a different animal. With the goal being to artificially ramp up driver supply while also making drivers chase carrots to meet performance metrics. If you don’t meet the criteria of the guarantee, than you do not get paid. Simple as that.


Outside Lands – Lyft Average Hourly Guarantees

In the spirit of trying, I thought I would attempt to drive and focus on getting Lyft’s Average Hourly Guarantees for Outside Lands in San Francisco. I had never attempted to drive for an hourly promotion with Lyft before, so it was time to give it a shot.

I figured that although it would likely be slow due to saturation, I would be able to get my 2-rides per hour to meet their criteria for the guarantee and get paid.

I loaded up on water and snacks for the pax (for the first time in six months), I studied ingress and egress routes from the event, I got the car washed and got on the road on time to begin collecting that sweet, sweet hourly pay. I even made a handy-dandy schedule to capture the most hours!

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Guaranteed Bullshit

In order to earn an hourly guarantee with Lyft or Uber, drivers are required to meet a strict set of metrics that are often outside of their control. The most controversial amongst drivers is the hourly ride requirement. Lyft requires that their ride metric (1-2 rides depending on the promo) be met every hour. Uber averages out the rides over a block of “guaranteed” hours to be more realistic.

Both Uber and Lyft maintain requirements like this if drivers want to qualify for an hourly guarantee during a promotion. Often, the market will become saturated as a result of the promotion. Since the saturation leads to a lower utilization rate for drivers, they depend on the guarantee.

This translates into a whole lot of stress as drivers race around town to get a second ride within an hour, or end rides early in order to increase their chances of getting a second request. Even when a driver meets most of the stipulations for an hourly guarantee it becomes easy for some of them to be disqualified. The result was that many of the other drivers I spoke to were just happy to get SOME of the guaranteed hours that they honestly drove for.

Fine Print, Ambiguity, and Behavior Modification

Guranteed Bullshit
This is just the promotional material. The fun part comes when you begin to email support to clarify what constitutes being “logged in” for an hour means, or what happens if you accept a ride at 58 minutes into any given promo hour.

Fine Print/Ambiguity:

While driving the San Francisco Bubble, Lyft mandated that a driver had to accept two rides per hour in order to qualify for either a $40 or $45 per hour guarantee. This was almost impossible as the ensuing driver saturation created a situation where drivers had terrible utilization during the day, with heavy heavy latency.

Since more than half of all rides were ending at the same location (the festival), this meant that the vast majority of drivers had to spend 20 minutes driving to the other side of the city in hopes of catching that second (required per stipulation) ride. This meant that you had to “accept” two forty-minute endeavors an hour, unless you were lucky enough to get a short trip.

All in all, if you got a ride to Golden Gate Park from anywhere within the city, the ride would take an average of 20 minutes while the return trip for ride# 2 would also take 20 minutes for a total of 40 minutes. This meant that many could never hit that second trip, and that the hours you did get ride#2 involved taking a request before 10 minutes into the hour.

So the promo was setup in such a way that  many drivers would never be able to meet it in the first place. Unless they cheat…More on that later.

Uber had a similar guarantee in place for Outside Lands, but actually spent time in figuring out what utilization and latency would look like for drivers under an inflated supply scenario for the event. The result was that they required a 1.5 ride per hour average across the guaranteed hourly block. This meant that most of their drivers actually met the requirements for the hourly guarantee. In retrospect, I probably should have been on the Uber train that weekend.

That being said, they did setup stipulations saying that 85% of rides had to originate in SF city limits. Wanna guess what that led to in poor Oakland? It involves lightning bolts…

Behavior Modification:

Should we send this to Shannon Liss-Riordan?

Uber has a pretty dark history with their wonderful Winter Warm-Up Guarantee where they lowered prices in almost every market throughout the United States to insanely low levels and put everyone on an hourly guarantee. Because we all got into this to work hourly right?

This meant that the only way to earn an income for full-time drivers at that time was to play Uber’s Warm-Up game and to follow their requirements to a tee. The picture above shows how drivers were placed into a position to meet strict standards that really resembled being an employee in order to make any money. You still had the option to not play their game, but enjoy collecting $0.75/mile if you did!

So a lot of the Winter Warm-Up was effectively about seeing to what degree Uber would be able to control and predict driver behavior. It was about making a system where drivers were forced to log certain long hours in order to survive financially.

Winter Warm-Up forced drivers to accept calls that made no sense, often more than 20 minutes away. It forced drivers to take any call they could on a slow day no matter how shady or poorly rated the passenger was. All in the name of racking up enough rides during each promo block.

And unlike Lyft, Uber ran this S.O.B. for three months, then “raised” prices from disastrously low, to slightly lower than they were before. A sneaky price-cut drawn out over three months of uncertainty and stress for its poor contractor workforce, some of which were forced to stick around to meet their $200/week Santander S.A. Subprime Prius payments.

“We make music for fish” – Nathan Explosion

Hourly Guarantees Are Actually a Price Ceiling!

The more you drive, the less you bring home in profit. Here is a really basic graph I made. It’s not scientific. I didn’t gather lots of data on drivers or anything, its just a general outline.

Price Ceiling 3
To be honest, the “expense” portion is probably a little larger than it realistically is, and its different for each car.

You can see that by giving the least amount of rides/driving the least amount of distance that qualifies for the criteria, you are making the highest margin in profit. Few miles driven. Lots of “Guarantee” money collected. As you try to “beat” the guarantee you effectively lose money. Unless you give a large ride on high PT/Surge. Since all hours have only 60 minutes in them, you are limited in being able to beat it.

So for most hours, your guaranteed hourly will act as a a price ceiling. That is assuming you even qualify for it in the first place. If you don’t qualify because you didn’t meet the littany of requirements than you are stuck with giving basic fare rides in a highly saturated market for what is often less than minimum wage. Furthermore, if you qualify for the guarantee hours and give a big ride on one of those hours, it means nothing because it is used to subsidize the guarantee. It takes all the fun of driving around and hunting for whales.

The advertised hours NEVER include Lyft or Uber’s Commish.

This misleading marketing only drives home the point that hourly guarantees are deceiving.

If Lyft or Uber advertise that you can make $40.00 hour, what they really mean is $32 per hour after fees. If you are on Lyft, your Power Driver Bonus won’t wash these fees out either.

If you choose to not participate in the hourly and drive during these times, there is still a good chance that you will make less than $32 per hour because the added saturation creates huge latency between calls. If you happen to be one of the unlucky drivers who signed up for 30% commission recently with Uber, than you are having an even worse time and getting $28 of your $40 in fares (Minus the Lobbying Fund Safe Rides Fee of course).

Insane Driver Saturation

Drivers Assemble to collect their “Guaranteed” Hourly Pay after receiving texts and emails ALL WEEK.

Anybody who has ever signed-up to be a driver, has probably received a bombardment of texts and emails throughout the week hyping up how much money they would make at big events like Outside Lands.  These mega-events are important for Uber because it’s when their riders need them the most and they over-market it accordingly to drivers.

So if you have driven for an event in your city with hourly guarantees, you know where this is going.

The result is every person coming out to drive the event and creating some very heavy saturation. This meant that as literally thousands of drivers delivered passengers to the same location, the likelihood of getting that “second” request to qualify for an hourly guarantee was highly unlikely to happen until you  drove 20 minutes away from the festival.

This has been typical of past hourly guarantees. It was seen across multiple markets during New Years Eve last year and at Outside Lands in SF, there were lots of bored drivers who were upset that they were getting paid next to nothing. This led to…

Driver Shirking and Gaming

Once a bunch of drivers become disenfranchised with the promotions, they see no long-term value in driving for the platforms. They can care less if they get kicked off. All they see is that they just drove for little to no money, and have been *stipulated out of receiving their guarantees. So they cheat.

They see short-term value in manipulating the system. Especially if you have heard about “injections” in China.

Let’s commit fraud!

A driver can still make money by getting a group of drivers to stand around and request each other in order to meet minimum ride requirements. Hell, I have seen groups of 10-15 drivers each give each other rides around the block in order to qualify for their minimum ride count.

Sometimes Uber and Lyft will catch a driver and either deactivate or disqualify them from the bonus, but in most cases they never do. Catching scammers becomes tremendously harder when driver supply scales (exponentially) faster than support and monitoring systems.

This includes drivers who do more basic cheating like accepting rides and not moving until a passenger cancels on them. This is done so the driver can log their “Hours” while still collecting the hourly price ceiling. This of course frustrates passengers and leads to a terrible user experience.

Variations of this strategy include calling the passenger and asking them to cancel due to an “emergency”. Some drivers even go so far as to explain that they only accepted because if they don’t “They will get in trouble.”

The best Lyft and Uber can do is to implement security features that recognize when a driver requests themselves (on Uber) or when drivers give each other multiple rides per day (Lyft). Unfortunately, drivers adjust to this quickly and move on to new ways of scamming the guaranteed hours. This just means that the next set of guarantees has harder stipulations. The honest drivers get scammed out of the guarantee while the scamming drivers just adjust their tactics.

Talk about a bad time for the customer. They probably won’t even bother to use those free credits now.

New Drivers Discouraged

A lot of new drivers come out for their first time festivals and holidays with hourly guarantees or similar promotions. They are out there on their own, for their first time in their Prius away from their family on New Years Eve, July 4th, Outsidelands. They want to earn hard.

Then their first experience ends up being that of waiting around for calls to come in. Nothing. Maybe one an hour as the market is flooded with other drivers. The newbie thinks to himself “Well, at least Lyft/Uber is paying me an hourly guarantee, no need to stress!”.

After a few busy rides at the busy hour, the newbie goes home with only $140 to show for sacrificing their holiday. A few days later they get a Weekly Summary from Lyft or Uber that shows that they didn’t qualify for the hourly because they didn’t do enough rides. Even though they were logged in and looking for them.

Most new drivers are still trying to figure out the basics like navigation and how to end a ride in the app. Throwing in all of the fine details of achieving the hourly guarantee is often beyond them at that time. They are just focused on not crashing into things and trying to avoid getting tickets and appearing on TV as a bad driver.

I don’t know what the driver acquisition costs are for recruiting drivers, but I know that Uber and Lyft spend a lot of money in that department. It’s a shame that they burn through so many new drivers during these promotions. I wonder if they have considered spending more on the actual short-term payouts of these promotions to encourage long-term retention/brand loyalty. It wouldn’t appear so.

I feel bad for whoever has to manipulate driver retention statistics when pitching to venture and private equity firms.

My Advice to Lyft on Hourly “Guarantees”

As much as I didn’t like the program, many of those whom I spoke with had driven previous guarantees and already knew what to expect. They were generally O-K with only qualifying for a few hours of the guaranteed hours that they drove. I don’t think this is an excuse for not calling Lyft out, as it this logic basically relies on learned helplessness. That’s not why I started driving.

Don’t call it an “hourly guarantee”. Just call it a performance bonus or something. Or call it the “Christian Perea IS RAD A.F. Bonus Program“. Don’t sell it as an hourly guarantee since it clearly is not. It’s really that simple.

By trying to represent a marketing product as an “Hourly Guarantee” and setting so many (often new) drivers up for failure you are shooting yourself in the foot (just like with the $1,000 double sided bonus).

The perception of a lot of drivers I talked to is that Lyft is either demonstrating a lack of competence in developing and deploying this bonus or is intentionally attempting to deceive drivers with “gotcha games”. In either case, Lyft loses out on the drivers it is trying to retain and recruit.

OK. So now on to the positive stuff.

Adapt and Profit as a Driver During Guaranteed Saturation.

So now that I have written a lot about how hourly guarantees suck, let me give you some tips for profiting even when your market is saturated.

First, try to think of times where there will be rides but drivers won’t be available. You may stand to make money when everyone logs off. This means driving the hours that aren’t guaranteed. Sometimes it means building an entire schedule around the guaranteed hours.

Morning Rush: Hit the morning rush after a big event. Most drivers will be home sleeping their frustration off from the prior days guarantees. I saw the most money during the morning after events and holidays because there were far fewer drivers out trying to log hours and to meet the guarantee.

Airport Rush: Stake out hotels and areas with large concentrations of AirBnB rentals. Specifically, you can check AirBnB to see which rentals become available the day after a big event or holiday. Rentals becoming available indicate someone is leaving them soon. Those people need a ride to the airport and also happen to embrace the services we offer.

Sunday Night: All of the weekend-warrior drivers that came out tend to go home and rest a bit before starting their 9-5 jobs. This leaves those who drive full-time or who don’t need to sleep. Less cars equals more surge and prime-time.

Check Saturation via Passenger Side of App: If everybody is driving around one big event, or one area that favors the specific holiday (think beaches on July 4th), you should look where people normally need rides and how many cars are there. You may find that working those areas gets you more cash and occasional PT/Surge.

Doing it Right:  Jeffrey “The Senator” Fang.

We all actually call him ” 机器人 ”

I know Jeffrey Fang well. Anytime I think that I drive a lot of crazy hours, Fang puts me to shame. He made $1200 last weekend in ride fares, not including street-teaming in his downtime (an extra $150 for him totaling ~ $1400.00) and coaching other drivers on when and how to drive. This guy is a Beast.  This was compared to my $600 on days I followed the “Guarantee” (I eventually switched over to his schedule). He doesn’t use hacks or cherry-pick his calls. He doesn’t sit in a parking lot unless he intends to sleep or drink Starbucks.

Jeffrey played the right schedule. The one I knew in my heart I should have followed all along. The “No ****ing Guarantees in Life” Schedule.

“I drove the hours that usually have the most demand on weekends, I then only supplemented my schedule slightly around guarantees to take the best advantage of when I thought they were most likely to payout well. I actually slept through many of the guarantee hours so I could focus on when the market was less saturated. I made more money on the Monday morning after Outside Lands than I did during the actual festival.” Jeffrey Fang

Most hours are not “Guaranteed” hours.

Upon switching over I was back where I belonged. Not on an hourly schedule. Not following directions from the marketing department at HQ. We cleaned house and worked the nights when all of the weekend warriors went to sleep. I worked Sunday and Monday morning and evening. All was right in the world.

So if you get some promotional Hourly Floor/Guarantee/Ceiling emails and texts, think twice. Drive smarter and not harder. Or both if you are greedy 😉

***Disclaimer, I included Jeffrey Fang as an example of doing well when the market is saturated. He is in no way responsible, nor does he share my beliefs (publicly) about hourly guarantees listed above. So don’t send him hate mail.***

Drivers, what do you think about Uber and Lyft’s hourly guarantees?  Have you found a way to make money or do you often find that there are just way too many drivers on the road to make it worthwhile?  If you were at Outside Lands, I’d love to hear your strategy and what your experience was like?  Did you make more, less or about what you expected during the festival?

-Christian @ RSG