Lyft could once again drop its ride-sharing offering, just one of several changes the company’s new CEO could make in a bid to focus on its core ride-sharing business and become profitable.
David Risher, who will take over as Lyft’s CEO in mid-April, told TechCrunch in a wide-ranging interview that other features may be removed as well. For example, the Wait & Save feature, which allows passengers in certain regions to pay a lower fare if they wait for the best-placed driver, may end, he said.
“It’s possible that maybe we don’t need both anymore and we can focus all of our resources on doing fewer things better,” Risher, the former Amazon executive, told TechCrunch. “Maybe it’s time we said ridesharing was great for a while, but it’s time to let it slide.”
Lyft, co-founded by Logan Green and John Zimmer, launched ride-sharing in 2014 on a small scale before expanding the service. Uber launched Uber Pool the same year. Both companies dropped their ride-sharing services during the pandemic before reinstating new versions later. For Uber and Lyft, ride-sharing has historically been a money pit, a loss-making ploy to attract passengers with cheap fares.
While nothing has been decided yet, the potential move is an example of how Lyft’s new management hopes to stem its losses and eventually regain some market share from its main competitor and big brother Uber. Instead of adding new products like delivery or even selling the business (things Risher says won’t happen), Lyft goes back to basics.
“The first order of business here is to focus on rideshare basics,” Risher said. “The reason I say that is because in this type of market where you have competitors, you can’t lose share to the other person if you want to be around for the long term. And I think this duopoly is a good thing. In so many other markets, you really want, as a customer, some choice, and I think as a driver, you want choice. It keeps us honest and allows us to play with each other a bit.”
Uber, already a bigger company, has taken more of the American market share away from Lyft in recent years, through a do-it-all approach that includes food delivery and even transit services. Today, Uber’s market share has grown from 62% in early 2020 to around 74% today versus Lyft’s 26%, according to YipitData.
Another study of Similarweb shows that Uber is the leader in monthly active users (MAUs), and that leadership has grown over time. As of February 2023 alone, Uber had 9.4 million MAUs, a 62% lead over Lyft’s 5.8 million MAUs. At this time last year, Uber only had a 48% lead over Lyft. Similarweb data also shows that Uber outperforms Lyft in the Apple and Google app stores, and that over the past 12 months, its Android downloads were 22% higher than Lyft’s.
Uber has taken a different approach to Lyft in pursuit of profit. While Lyft has stuck with the ride-hailing service, Uber has expanded into delivery through its UberEats platform and added a host of new products as they aim to engage riders but also create a Closed commercial cycle in which each product feeds customers back to other Uber channels.
“We are actively selling to food delivery consumers on groceries, grocery consumers on alcohol, and indeed we are now back on the move,” Uber CEO Dara Khosrowshahi said during the earnings call. of the company’s third quarter of 2022, conducted on November 1. that we have across the platform continues to increase, driving new customers and also driving retention.”
Risher said Lyft won’t try to compete with Uber by introducing an in-app delivery product, in part because it doesn’t view delivery as a customer or driver decision.
“From the driver’s perspective, they’re now thinking between picking up a person and picking up a pizza,” Risher said. “And when I pick up a pizza, I have to double park at the restaurant with seven other people, then I get a ticket once every two weeks, then I have to get in my car again and drive, then go out and ring the doorbell. door. It’s a very different cycle than ‘I’m picking up people and I’m just transporting them.’”
He also said that passengers may not want to be in a car that just dropped off a couple of pizzas.
The first order of business
“I think for a lot of people, Lyft has gone from being a priority to being a bit secondary, so it’s our job to remind people that we exist and really give them a great experience,” Risher said.
That could mean making sure Lyft doesn’t charge more than the competition and that its drivers pick up and drop off customers on time. In the past, Lyft was an attractive option because it offered cheaper rides than Uber. Now, after the post-COVID driver shortage, Lyft’s average price per mile is on par with Uber’s, according to more research from YipitData.
Risher did not say whether Lyft will reduce its workforce in an effort to control costs. However, Chief Financial Officer Elaine Paul hinted at taking such steps during the company’s fourth-quarter 2022 earnings call. Paul also suggested that Lyft switch to hiring workers from outside the US who are less likely to expect equity as part of their compensation.
Risher seems more focused on creating more demand for the services, while making operations more efficient. Those efforts extend to increasing demand for Lyft’s micromobility business through some method of cross-pollination between the two verticals, according to Risher.
“I don’t think we’ve given cyclists or cyclists a good enough reason to come and try us out on rideshares, as an example,” he said, noting that he’s an avid cyclist. “If we have these two ways for people to move, how can they reinforce each other, because right now they’re too parallel?”
Lyft currently offers the Lyft Pink membership program that provides riders with transportation benefits like free priority pickup upgrades and relaxed cancellations, as well as discounts on bikes and scooters. Membership also includes free Grubhub+ for a year and SIXT car rental upgrades, which represent a half-hearted attempt to capture more of the transportation market through partnerships.
Analysts still wary of Lyft’s recovery
Lyft went public in March 2019 for $24 billion. Today, Lyft’s market capitalization is around $3.35 billion. Uber’s market capitalization is $60.44 billion. Investors initially reacted favorably to Risher’s appointment, raising its share price to $10.14 immediately after the announcement. But the positive reaction has been short-lived. Lyft’s share price has fallen 11.4% from Tuesday’s high to close Wednesday at $8.98.
Tom White, a senior research analyst at DA Davidson, told TechCrunch that he remains neutral on the company with a $12.50 price target.
“We’ll admit the news came as a bit of a surprise to us, but perhaps it shouldn’t have given the relative underperformance of shares in LYFT and in Lyft’s core rideshare business in recent quarters,” White said.
Lyft’s first-quarter 2023 revenue outlook was left unchanged by Risher’s appointment, but analysts recall that Lyft’s target ($975 million) was lower than they expected ($1.09 billion). .
Lyft attributed the reduced outlook to colder weather, leading to fewer hail rides, shorter commutes, and a major drop in micromobility usage. Since Lyft is only active in North America, the company lacks the ability to balance low ridership in one wintery part of the world with higher usage in other, warmer places.
Although Lyft’s strategy so far lacks the glitz of shiny new products that could compete directly with Uber, Risher has some pretty good incentives to turn the company around (aside from pride in a job well done).
“As part of your stock compensation, [new CEO John Risher] received 12.25 million performance-based restricted stock units, divided into nine tranches, each awarded separately to LYFT price hurdles of $15.00 to $80.00,” said Ben Silverman, research director at investment research management firm VerityData. “The award schedule is very different from the founders awards Logan received. [Green] and [John] Zimmer in 2021 and 2022, which are only awarded if LYFT meets or exceeds $100.00. Clearly, that aspirational vision has been silenced. Regardless, Risher is tasked with a massive turnaround and, if he succeeds, he stands to win $980 million.”
