Aug 8, 2019

Lyft eases off price war post-IPO

Photo: TIMOTHY A. CLARY/AFP/Getty Images

Since going public in March, Lyft is now easing off its price-cut war with rival Uber, instead competing on “brand and experience."

The bottom line: As part of its Q2 earnings, the company revealed that its sales and marketing expenses for incentives — meaning ride "coupons" — have dropped by 40% from the first quarter. It’s also quietly raising some prices at the end of June to improve its margins.

  • “More specifically, we began to adjust prices on select routes and in select cities based on costs and demand elasticities,” said finance chief Brian Roberts of the select fare increases. “We expect that these changes will accelerate Lyft's path to profitability, and further, we believe these price adjustments reflect an industry trend,” he added, hinting that we should expect Uber to be doing the same.
  • Lyft's sales and marketing expenses as a percentage of revenue dropped from 29% in Q1 to 19% in Q2. Lyft expects this figure to hover around the same level for the rest of the year.

And while Lyft previously expected to generate its “peak losses” in 2019, its revised outlook for the rest of the year means it now believes its biggest losses were last year.

  • It reduced its expected adjusted losses for the year by $300 million to between $850 million and $875 million.

The big picture: Lyft attempted to paint a picture of its “path to profitability” for investors on Thursday, emphasizing that it’s adjusting its margins by cutting costs, increasing revenue per active rider, and increasing more profitable rides like those to and from airports, in premium cars, for medical providers and corporate transportation.

Yes, but: Lyft is far from being out of the woods. It’s still much smaller than rival Uber and has very large losses.

  • Despite growth in Lyft's bike and scooter business, that faces a slew of challenges as well, from technical defects to an expected decrease in ridership during the winter.

Go deeper

Startup employees spend three times more on Uber than Lyft

While Lyft is slowly growing its share of work-related rides taken by U.S. startup employees, rival Uber commands about 75% of the total, according to data from Brex, which supplies credit cards to startup companies.

Why it matters: Business riders are an important — and lucrative — category of customers for ride-hailing companies. Workers often need transportation when they travel, to get to and from airports, for business meetings, and can be less price conscious since convenience is a high priority.

Go deeperArrowAug 8, 2019

Uber stock price drops after missed Q2 expectations

Photo: Jaap Arriens/NurPhoto via Getty Images

Uber's stock price dropped by more than 12% after its Q2 revenue and losses missed analyst expectations.

Tackling the task of deploying and routing self-driving cars

Photo: Erik Dreyer/Getty Images

Automated vehicles, when they are ready, won't magically deploy themselves into robo-taxi services. They will require sophisticated dispatch and routing software like Uber and Lyft use today to match passengers with vehicles and get them to their destination.

Why it matters: Most AV developers don't specialize in routing. They're focused on the AI and robotics necessary for vehicles to drive themselves.

Go deeperArrowAug 14, 2019