Lyft May NEVER Make Money --- According to LYFT!

Mr. Gig

Member
Dec 6, 2018
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In a pre-IPO filing Lyft has said - the unthinkable - that they may never make money.

That's a pretty standard disclaimer for an IPO filing but the fact is in Lyft's case it just might be true. And here’s why.

This is a story from 2014, so it’s pretty outdated. But it illustrates the point. A writer from Vox signed up with Lyft and drove for them for a whole week, totaling 50 hours. Now, that’s the way to do it I have to say. I’ve seen a lot of writers go out and drive for a few hours or even a whole day and then they come back to breathlessly share their experience with us! But their articles were vapid because you just don’t get that much insight into driving from a single day of it.

Anyway, this guy drove a pretty hard week and had some good insights and some stories that typify the experience. But one thing he shared that illustrates more than any other why Lyft will probably never make money is how much they paid him for a sign on bonus. Or, I guess I should say a sign on incentive because it wasn’t really a bonus.

They promised to guarantee his earnings at $30 per hour if he would drive for 50 hours. So he did all 50 hours in that one week. No doubt because he had to get back to his real job at Vox!

For the 50 hours he earned $600 or $12 per hour (before expenses making his real earnings far less than $10 an hour). Lyft then had to subsidize and pay him an additional $18 an hour for each one of the 50 hours he worked for a total of $900 in subsidies.

Now, it’s true, that Lyft nor Uber offer such generous and lavish guarantees anymore. But don’t be fooled – they are still subsidizing rides. You see this in the forms of boosts and bonuses and all kinds of catchy deals – like work in this area during such and such a time and you’ll get an extra $2 per trip. All these things that we as drivers think are so small as to be meaningless – are actually costing them billions of dollars a year.

And that’s why Lyft maybe just be right when they say they may never make money. Neither Lyft nor Uber has yet figured out the economics of this business in a way that would make them profitable. And it’s really amazing when you think about it because it seems so simple! Simply charge passengers more per ride, pay drivers a fixed percentage of their fare and keep the rest for yourself. Why is that so hard?

Well part of the reason, at least according to Uber’s ex – Travis Kalanick – is because Lyft came along and started undercutting Uber’s prices in markets across the country.

It is true that Uber had much higher prices, but at the time they were only uberBLACK – Uber’s luxury black car service. It’s Lyft who came up with the “uberX” idea – that Uber became much more famous for. So in fact it was Lyft that came into markets and grossly undercut Uber’s luxury prices. So, maybe they are to blame after all.

Check this out too. The graph below was from data Lyft has just released to the public (for investors' consumption). Look how their total bookings have remained virtually flat since 2017 - while Uber's has shown consistent strong growth:

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And this one showing how Lyft's revenue has also remained very weak in comparison to Uber:
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And last but not least - this sad graph showing both companies with losses. And losses in proportion to their size. Uber with huge losses and Lyft with much smaller ones.
1551923391663.png
 

Graham

Member
Feb 4, 2019
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What City & State do you work in?
Glendale AZ
Interesting.

So in a way, it's sort of a race to the bottom.
 

News Hound

Member
Jan 7, 2019
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What City & State do you work in?
The United States of America
I don't think any of them will ever make money. Because they've had a golden opportunity to do so already and they've screwed it up royally. How can you screw up - making anywhere from $3 to $25 on millions of rides a day? They don't have car expenses, they don't have employee expenses, nothing. This should have been an easy for-profit business.

Then you see them screwing around with all kinds of crazy ideas from self-driving cars to bikes and scooters. These guys just don't know how to make a buck. They experts at spending them though.
 

Graham

Member
Feb 4, 2019
141
10
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What City & State do you work in?
Glendale AZ
Well they do have SOME expenses. Don't they have to pay costs for insurance, platform maintenance, I'm sure there's licensing fees for some cities, etc.