
Lyft Raises $530M in Fight with Uber - sethbannon
http://blogs.wsj.com/digits/2015/03/11/lyft-raises-530-million-in-fight-with-uber/
======
habosa
This is great. More competition is great for me, the consumer. Recently Lyft
and Uber have bother offered flat rate rides for $5-7 anywhere in SF. When
people ask me how it can be so cheap, I always joke it's because it's a $15
ride but you're splitting it with a venture capitalist.

I wonder if either company has any serious long-term plan to make sure they
are not competing in a commoditized space. Currently the services are
basically indistinguishable. Sure most people have a preference one way or the
other, but it's not a preference they'd stick to if the other service was a
few bucks cheaper. They seem to be in lock step, doing the same things and
alternating who makes the first move.

If they're not careful they will become like the airline industry. 40 years
ago airlines were a glamorous new way to travel. Now they are reduced to who
can offer the cheapest point-to-point ticket with 17" of leg room, customer
service is an unexpected bonus.

~~~
abalone
The difference is there's a network effect. Uber & Lyft are not actually
transportation companies anymore than Airbnb is a hotel company. They're
networks.

So it's not just about price. It's about the size of the network, which means
availability -- how fast can you hail a ride. The more drivers on the network
the better the availability, so that's where the consumers look first, and so
that's where the new drivers join, and so on in a virtuous cycle. Once one
network reaches a tipping point and becomes dominant it will be harder for
upstarts to enter the market and match the availability of the winner's
gigantic network.

That's the theory at least. All this VC money is about trying to get to that
tipping point where one of them takes the whole transportation network.

~~~
krschultz
This is very much a theory. If the companies are not able to create a network
effect, much of their valuation is not defendable.

I personally believe they do not have a significant network effect. They have
a _brand_. But they do not have a network effect.

When I search for flights, I start with JetBlue. I have the most points there,
I generally have good flights, and they have the most flights out of my local
airport. That's the power of a brand. However I'll go to Hipmunk and start
looking for alternatives if the JetBlue options don't look great. If something
is better, I'll buy that.

On the other hand, I really don't like Facebook. Yet, there is nothing I can
do about dragging my friends to an alternative. That's a network. There is
literally no value for me to be on a Facebook alternative because my friends
are not there.

From my experience taking rides in Uber/Lyft, it seems like many drivers are
using both. Customers are often aware of both. I have used both.

While it is true you need a minimum network size to ensure that rides are
available, I don't think the network is _exclusive_. You need a minimum amount
of capital to buy airplanes and setup of a network of flights, that doesn't
naturally lead to a single airline.

~~~
abalone
There is no Hipmunk for Uber/Lyft. That's one reason the network effect is
stronger. And while many people check both services _now_ , that's because
they are both still floated by tons of VC money.

One we reach the tipping point -- let's say Uber wins -- you will be as likely
to check Lyft as Sidecar. When was the last time you checked Sidecar? Exactly.

~~~
tuna-piano
I think there is a huge difference between being a monopoly and a duopoly. The
fact that Lyfy can exist, and it is (at least currently) easy for both drivers
and passengers to switch, makes it so uber cannot institute monopoly pricing.
The best example of a network that can would probably be Ebay. Uber is
definitely no Ebay, and I doubt it ever will be.

~~~
abalone
It is not going to be a duopoly forever. The current duopoloy is sustained by
massive VC funding. In time the network effects and other advantages of size
will lead to one winner taking all (in theory).

------
alaskamiller
My car's in the shop getting fixed so I've been using Uber and Lyft in the
suburban south bay--a market of long roads, horrible traffic conditions, and
high rate of personal car ownership.

Since the past week I've learned a few things:

\- all the drivers have both apps running and have no loyalty

\- drivers prefer uber customers, however

\- drivers don't like lyft's demo of college kids and local rides, it earns
them no money

\- lyft drivers think uber is evil, uber drivers thinks lyft drivers are
hippies

\- all the international travelers coming into silicon valley have uber and
used to uber service

\- uber dispatches to lyft dispatches are a 5 to 1 ratio

\- drivers always complain lyft keeps them afloat but doesn't get them ahead

\- uber, whether intentionally or not, actually has viable career plan. an
uber black driver i rode with on the lyft service explained how after selling
his real estate company and investing in three lincoln escalades was able to
make his money back on one of the cars after 7 months.

\- all the drivers concur uber is pretty evil, don't like the 1099
relationship, hate how uber corporate doesn't support the drivers over
customers or incidents, yet sadly resign and accept the situation. it's oddly
depressing talking to a uber driver.

Over half a billion dollars at the E round is quite a lot to drop into a
"community" instead of Uber's business.

Hopefully the money is put into innovating locally instead of international
expansion because they're definitely losing the game. And when the automated
cars are here it would have been the tech game's worst investment cycle.

~~~
findjashua
"all the drivers have both apps running"

"lyft drivers think uber is evil, uber drivers thinks lyft drivers are
hippies"

??

~~~
hkmurakami
It's like brand allegiance in consumer brands. You might be a Apple user but
have to use Windows to make a living.

------
downandout
Lyft, with a valuation of around 5% that of Uber, is clearly losing this
battle. However, its mere existence is causing something that is rarely seen:
the transfer of billions of dollars out of the bank accounts of absurdly
wealthy investors, almost directly into the hands of people at the lower end
of the economy. After all, the vast majority of this money is going into
incentivizing drivers to sign up/stay, and subsidizing rides.

As long as this battle goes on and investors are willing to fund it, I'll be a
fan of both companies. Sadly, it won't last forever.

~~~
cubano
> the transfer of billions of dollars out of the bank accounts of absurdly
> wealthy investors, almost directly into the hands of people at the lower end
> of the economy.

Aren't those AKA paychecks?

~~~
downandout
Yes, but no tech startup has ever employed this many non-Stanford/MIT grads at
relatively high wages. Most Lyft/Uber drivers would be laughed at if they
tried to apply for a job at Google or Facebook. Yet some drivers are earning
more than entry-level engineers at these companies.

Normal, everyday people with or without degrees are the recipients of most of
this VC money at the moment. The fight for both drivers and riders is so
fierce that drivers are being overcompensated and riders are being
undercharged at the expense of investors hoping that these businesses will one
day be profitable.

~~~
mbesto
I don't disagree with your premise, but it's a slight exaggeration and isn't
factually correct.

> _Yes, but no tech startup has ever employed this many non-Stanford /MIT
> grads at relatively high wages._

They are contractors.[0] There is a big difference here, as a Stanford/MIT
grad contracting would easily make 2x that of an Uber driver.

> _Yet some drivers are earning more than entry-level engineers at these
> companies._

Proof? My understanding is that the rough maximum you can make driving is
$25/hr. Most junior web developers contracting make $40+/hr in SV.

[0] - [http://www.reuters.com/article/2015/03/12/us-lyft-drivers-
id...](http://www.reuters.com/article/2015/03/12/us-lyft-drivers-
idUSKBN0M72JM20150312)

~~~
downandout
I said that _some_ drivers are making that much. This is anecdotal, but here
is an interview with a Lyft driver (in front of Lyft's CEO) saying that she
was surprised that she was making $300/day ($90K/yr....relatively close to the
$40/hr you claim a junior web developer makes in SV when they have work):

[http://www.bloomberg.com/news/videos/2015-03-06/heard-
lyft-w...](http://www.bloomberg.com/news/videos/2015-03-06/heard-lyft-was-a-
great-way-to-make-money-hockaday)

~~~
zaroth
A) $300/day is not 90k/yr unless you are working 6 days/week and 2 weeks off
the whole year.

B) There are _significant_ direct costs that come out of that $300, it is not
even $300 before taxes, it's $300 at the top of a Schedule C.

I think many of these drivers simply have not done the math.

------
physcab
This makes me happy. After having been an Uber customer, then an Uber driver,
and now a Lyft customer, I'm more than happy to transition my business to
Lyft. Where Uber made me feel douchey, Lyft has made me feel part of a
community. Even though functionally the two services are indistinguishable,
I've always had better experiences with Lyft. Lyft feels more grounded. You
have the opportunity, if you wish, to sit next to your driver and not treat
them as a lower class citizen. I don't hear about Lyft employees being
ruthless or money-grabbing. And generally all Lyft drivers I've met have been
happy Uber driver converts. I totally buy the Southwest Airlines angle they
are trying to achieve.

~~~
JoshTriplett
> I totally buy the Southwest Airlines angle they are trying to achieve.

I wouldn't compare any service I actually _like_ to Southwest Airlines.
Southwest seems to be one of the _least_ appealing airlines in terms of
comfort and quality.

~~~
aetherson
My guess is that you're 30 or under?

Southwest during its rise to prominence in the 90's and maybe early 2000's had
this friendly, relaxed reputation. It was definitely an economical option, but
they tried to be friendly and jokey and get out of your way.

I agree that nowadays that has all gone away and they're just kind of cattle-
cars.

~~~
karmajunkie
Agreed. There was a time i wouldn't fly anything BUT southwest if i could help
it. I don't fly enough these days to care that much, but back when I did fly a
lot, I really preferred their approach.

------
starmole
I might be missing something here because nobody else brought it up: Is this
not just a necessary move to salvage investments in Lyft? Assuming Uber won
already, Lyft investors need to keep it dangerous enough to force a buy out or
write it off completely. Keep Lyft alive until Uber is forced to buy it
pre/post IPO? At some point the Lyft competition is going to cost Uber more
than the price of just buying them out. Please note that I am not a biz guy so
if I am wrong I would be very happy for an explanation on how/why.

~~~
lexap
The industry is big enough for multiple players.

~~~
starmole
It might be, but then it's a commodity! I think the valuation of Uber and Lyft
is based very much on a winner takes all model.

~~~
CamperBob2
To some extent those valuations are based on expectations for the future,
where the companies don't even need to employ human drivers. Whoever owns the
"Johnnycab" concept twenty or thirty years from now is going to be very
profitable.

~~~
maxerickson
Is a strong brand much of a moat? It seems the only way there can be much
pricing power is onerous regulation preventing others from stepping into the
market.

(For example: Why wouldn't an airport charge local cab owners a small fee to
be listed in their registry? Why wouldn't passengers access that registry to
save $10?)

~~~
CamperBob2
_It seems the only way there can be much pricing power is onerous regulation
preventing others from stepping into the market._

That could be another aspect of first-mover advantage: no latecomer will have
the same opportunities for regulatory capture that Uber and/or Lyft will have.

It's not a question of _if_ the taxicab incumbents will lose their grip on the
regulatory process, but _when._ Whoever takes their place will be able to shut
their competitors out, or at least make life hard for them.

------
conanbatt
Im glad investors are backing Lyft even if today its the underdog compared to
Uber. Its no secret that Uber's practices provoke disgust or discomfort, and
that many would wish Lyft to do better just because at least in appearences
they havent been behaving as douchey as Uber.

But I'm happy because no matter how you appreciate Uber as a company in spite
of their practices, there should be no monopolies, and competition is often
the most healthy result to great results to consumers and to CREATE VALUE.

I hope that ALL YC companies remember that the final destination to a profit
driven economy is creating value to people. A large number of companies have
made their cake and made their founders and investors very rich: stop looking
at the bottom line and focus on creating value. Not things you can charge and
make money of. Value.

------
StartupLSatoshi
I'm shocked. </sarcasm>

So, to ask the question that Thiel has asked, is this a market that supports a
monopoly, or is it going to be a consumer-favoring highly competitive scene?

> Thiel is also an investor in Airbnb– yet another darling of the sharing
> economy, valued at a “mere” $10 billion compared to Uber’s $18 billion.
> Unlike Uber and Lyft, Thiel argued, there is no obvious competitor to
> Airbnb. That in and of itself makes it a more valuable company because of
> the distraction and profit erosion that he describes throughout his book.

Thiel seems to think that it doesn't support a monopoly, and I'd tend to
agree.

So, assuming that it's a competitive market, and Uber and Lyft repeatedly copy
the features of one-another, I'm very curious to see what kind of profit
margins and therefore valuations are supported.

For a competitive market, it seems like the gap between Lyft's $2.5bn and
Uber's $41 is bound to be reduced, one way or the other.

------
gkanapathy
I support alternatives to Uber, not because they're bad or anything, but
because I don't want to see a monopoly develop. Competition is the best way to
ensure that we don't wind up with the next Comcast.

I found this analysis to be the most compelling thing supporting alternatives
to Uber that I've ever read:
[http://www.interfluidity.com/v2/5822.html](http://www.interfluidity.com/v2/5822.html)

------
dkrich
I think Lyft is making a major tactical mistake by using surge-pricing, and in
my experience, in many cases at rates that are higher than those of Uber.
While this may ensure that their drivers make a comparable amount to Uber
drivers, its at precisely the times that Uber is surge-pricing at 1.7x+ that
people are most-likely to look at alternate options. Indeed I've witnessed
many instances of friends doing just that- checking Lyft and realizing that
the cost is actually higher than Uber's and just using Uber or (gasp) an
honest-to-God cab. If Lyft truly wants to land-grab from Uber, that is the
most opportune time to do so.

A secondary problem is that Lyft has far too few drivers (at least in DC) to
realistically compete, which probably further compounds the aforementioned
problem of constant surge-pricing. IMO to compete with Uber they should use
this money to get more drivers on the road in major markets and do away with
surge-pricing for some time until they have reached a higher market
saturation.

~~~
dopamean
I've never experienced significant (higher than 1.5x) surge pricing on Lyft
but have frequently with Uber. The last time I was in New York the surge was
6x on Uber. This lasted for hours. The entire weekend I was there it never
dropped below 2.1x. This was not during a holiday or bad weather. It was just
the weekend.

~~~
untog
In my experience both Lyft and Uber use surge pricing in NYC. I've seen Lyft
as high as 2x, Uber much higher. But I usually launch both apps to see what
level they are at.

------
elliotec
Here in Salt Lake City, Lyft already won by a long shot. Its crazy, they got
here like a week or two before Uber, but their arrival seemed to just not
leave any room for a competitor.

Uber can rarely be found here, and if it can its always longer and more
expensive than Lyft. Long live Lyft.

Also, thank god they got rid of the mustache thing and just put the pink
sticker in their back window.

------
FlyingLawnmower
Hopefully Lyft puts some of that money towards supporting more platforms that
could make it competitive with Uber. I would love to have alternative options,
but unfortunately, it seems like Uber is the only service that offers a
Windows Phone application and a Mobile site to order off of. While there
aren't too many non iOS/Android mobile phone users, all of us are collectively
tied to Uber.

~~~
techstrategist
I think this tells us something very interesting about the startup economy:
your choice of car service is dictated by the brand of mobile phone that you
own.

------
chrischen
I think it's extremely premature that people are saying Uber has won. These
companies operate in a bunch of silo'd markets so for Uber to "win," they'd
have to one by one take all the markets.

It's more appropriate to look at individual markets where both are competing
and see how they perform relative to each other. I think Uber's higher
valuation is probably due to the fact that they've aggressively expanded and
are in more markets than Lyft, Sidecar, and others.

------
ChrisAntaki
I'm a little worried. More Lyft drivers on the road might mean it's harder for
me, a simple pizza delivery man, to deliver value across the city of Chicago.
At the same time, I welcome Lyft to challenge Uber's dominant position - and
hope they can gain market share while maintaining a stronger moral stance than
the incumbent.

~~~
logicallee
why do you mention being a simple pizza delivery man in all your comments?

One of your recent comments:

>Well, that's possible with compile-to-JavaScript languages. Also you have the
option of plugins like Unity, if you're going for something graphically
adventurous.

>That being said, JavaScript is a powerful tool, if wielded correctly. It's so
flexible. In a lot of ways, it's like a pizza. One man orders a pizza with
anchovies, another with green peppers. And on and on. Eventually it's like
they've got two completely different dinners.

if you know about compile-to-JavaScript languages, and consider JavaScript a
powerful tool and so flexible, why are you a pizza delivery man? (An unskilled
job requiring no training.) Why don't you get skilled work as a programmer,
even entry-level?

And why would you make an inappopriate pizza analogy in a thread about
javascript, or mention

>When I knock on someone's door, and then hand them a hot box of pizza, they
smile and often hand me money: $5's, $10's, sometimes a $100. I'm just doing
my job, just like this Harlan "Father Time" Stenn. I suppose we take for
granted, that which we can't see.

in a way that is completely unrelated to the story you posted it under? Are
you using this as a 'novelty account'?

~~~
CPLX
I, for one, value the contributions of the pizza engineering sector here on
HN.

------
martinald
I think this industry is going to end up exactly like the airline industry.
IE: no margins to speak of really.

I just can't see how one company can ever have a long term competitive
advantage. I think any current perceived advantage is down to the amount of VC
cash flowing in and also how abysmal the old school taxi competition is.

------
jerguismi
When does Lyft expand internationally? The value of this kind of ride-sharing
apps to me is primarily when I'm traveling. Getting reliable rides in a
foreign country is such a gigantic hassle. Uber seems to be only international
ride-sharing app nowadays.

------
itschaffey
More competition is surely better for the consumer. As I'm based in London,
I'm very much an Uber customer but I hope to see the pink moustaches driving
around Buckingham Palace soon! Will be interesting to see how they plan to
expand to the UK...

------
salimmadjd
For once I get to disagree with A16Z, " _Scott Weiss, general partner at Lyft
investor Andreessen Horowitz, sees the company beating Uber by emphasizing
better customer service...he compares Lyft’s opportunity to Southwest Airlines
and Virgin America_ "

I don't believe the comparison is correct. Catching an Uber is a quick
decision process. I don't believe the change will be big enough to convert
Uber users to install Lyft's app. They would have spend all that money raised
and give it a way to get Lyft customer to refer friends with a free-ride
coupon codes.

------
cndl-mkr-lvl-9
I'm curious where these companies and driverless cars intersect. I guess Uber
transitions to driverless cars and cuts costs. It's crazy to think about. It's
more or less cheap driverless taxis.

------
xacaxulu
I still prefer Uber because it's _nicer_ than Lyft. Not uberx of course, but
even then uberx is basically on par with all Lyft drivers. If I'm paying for a
car service, I don't derive much value from a fist bump. I want a bottle of
water in the back seat, tinted windows and the door opened for me - and the
few extra dollars is more than worth it. Yes competition is good, but which
supporting demographic do you think will keep a company afloat? I'm betting on
the people that fly business class. There are good reasons Uber attracts the
big money investors.

~~~
closetnerd
I'm inclined to believe you simply based on evidence. Uber is till, by far,
the choice for most. Moreover Travis Kalanick seems to have the passion for
efficient transportation as Steve Jobs did for Apple products.

And I suspect there is some biased on Hacker News in favor of Lyft. Thiel is
now even a partner of Y Combinator. And if I was Lyft, I'd rely on the passion
of techies and engineers to push Lyft's "benevolent underdog" fight against
the "evils of the goliath" Uber.

------
nicholasdrake
if self-driving cars become ubiquitous how does that change lyft and uber's
business model? not unreasonable in a 10-20 year time frame right?

