
Lyft vs. Uber: A Tale of Two S-1’s - andrewfong
https://benjamintseng.com/2019/04/lyft-vs-uber-a-tale-of-two-s-1s/
======
raiyu
Looks like Uber is better on every metric, total volume, growth, revenue, the
only area they are behind is margin where they are taking less from their
drivers than Lyft is.

While Uber looks healthier especially given it's size, Lyft's reception after
the IPO was quite negative, with the stock falling 30% immediately in the days
that followed.

Even with better economics and larger scale the larger question looms, which
is how do these businesses turn profitable.

Are they subsidizing a market and creating it by charging less, or will they
reach a certain scale and be able to cut back on certain expenses which will
give them profitability.

I don't think Amazon is a fair comparison here, because they were investing in
infrastructure, building out global logistics, which is different from Uber
and Lyft. They should be much more profitable because they don't have to
invest in that. They don't know warehouses and logistics, and everything else
that e-commerce required.

Also in the case of Amazon the supposed profits would be reinvested in the
business with large CapEx spend, here it seems that the negative margins are
being spent on sales and marketing, which isn't the same as what Amazon was
doing when it was treading in the negative for a decade.

~~~
shubhamjain
According to Aswath Damodaran [1], Professor at NYU and an expert at valuing
companies, if he had to invest between Uber and Lyft, he will choose the
latter.

Who are we kidding? Uber, already a gigantic loss machine, continues to invest
in loss-making ventures like Food Delivery and E-Scooters. Uber has spread
itself to so many areas and markets that I can't see how it'll ever be
profitable without making huge cutbacks. The volume and growth are of little
significance when they are failing miserably to contain their losses.

Compounding it is the fact that there's nothing sticky about any of their
business ventures. Customers will choose the cheapest option, so they can
never go beyond a certain range of prices. Even if Uber does become
profitable, I highly doubt it ever will join the leagues of Apple, Google or
Facebook.

[1]:
[https://www.youtube.com/watch?v=K0wky8yyjuM](https://www.youtube.com/watch?v=K0wky8yyjuM)

~~~
bmmayer1
Yes, a so-called 'expert in valuing companies' who doesn't do any actual
investing himself.

~~~
danjac
I don't know anything about the man or his success record, but as an academic
he may not wish to be accused of conflict of interest by promoting companies
where he has a personal financial stake.

~~~
argonaut
Academics (pure academics) don't have a good track record predicting
valuations/prices, period.

The people who _actually_ have the ability or to predict valuations/prices
(better than the market) are busy making millions, if not billions, of
dollars, and they most certainly aren't going to tell _you_ about their
predictions/models. If they do, it's after they've already invested or shorted
the asset.

~~~
chumali
This isn't quite true and you've pretty much identified the reason why.
Academics are not investors and their objective isn't to profit but to publish
their research.

Academics identify a pattern that generates superior risk-adjusted returns and
then publish their findings - this then leads to the anomaly disappearing as
investors trade away the alpha. [0] The track record of an academic can
therefore only be meaningfully discussed in terms of how well their model
performs in back-testing. Saying they don't have a good track record misses
this point.

Perhaps there are successful academic investors who achieve alpha and don't
publish their research, however they wouldn't show up in any meta analysis.

[0]
[https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3054718](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3054718)

~~~
lotsofpulp
Why would someone publish money making information rather than make the money
for themselves?

~~~
sah2ed
> _Why would someone publish money making information rather than make the
> money for themselves?_

Perhaps because they _enjoy_ academia far more than money making?

Some people like Grigori Perelman [0] are just not interested in money or
fame, or both.

0:
[https://en.wikipedia.org/wiki/Grigori_Perelman](https://en.wikipedia.org/wiki/Grigori_Perelman)

~~~
lotsofpulp
I’m not aware of Perelman publishing a “a pattern that generates superior
risk-adjusted returns".

That type of information is worth millions, and there are many investment
firms offering very lucrative positions to those that can identify a pattern
that generates superior risk-adjusted returns.

Outside of very rare outliers, it doesn’t seem reasonable to assume that
information that will generate outsized returns will be publicly available.

------
kaycebasques
My buddy works for a law firm and was telling me that they often represent
technology companies when they IPO. It turns out there’s an intense amount of
research that goes into the S-1 process. The law firm makes a huge
spreadsheet, with each row representing a sentence from the S-1, along with
evidence supporting the truth of that sentence. They do this because, if the
price goes down after the IPO, there’s inevitably a lawsuit, and the company
needs to justify everything it said in the IPO.

~~~
toomuchtodo
Could be a fun startup idea: NLP for securities legal action against IPOs for
investors.

~~~
jjeaff
Good luck getting VCs to fund something that fights against their primary
source of return.

~~~
rongenre
It'll have to be a lifestyle business /s

------
ohadron
This comparison is very flawed as it fails to recognise a major difference:
the two companies work in very different markets.

Lyft is only active in the US while Uber is spread in many different
countries. Unit economics look totally different in NYC, Cairo, and Rio.

~~~
jpatokal
I'm not so sure about that. Yes, the baseline numbers will be very different,
but the _economics_ of ride share are pretty much the same anywhere: there's
an existing market price for taxis, which is more or less inflated everywhere
due to regulation and inefficiency, and Uber/Lyft/whoever can provide a
similar or better service at a profit... except that there's competition
fueled by a bonfire of VC money pushing the margin deep into the red.

~~~
ohadron
Think about factors such as: cost of vehicle ownership, cost of fuel, minimum
wage, social policies, unemployment, public transport infrastructure,
population density, specific ride sharing regulation, traffic congestion.

All of these directly effect the unit economics of ride sharing.

~~~
jpatokal
You're missing my point. All those factors are real, but they set the unit
economics of _taxi service_ , which in turn sets the baseline for Uber/Lyft
pricing.

So if the market price for taxi service in a city is X, already accounting for
all those factors, Uber/Lyft should be able to deliver the same or better
service for (say) 0.9X, again accounting for the factors but adding in
efficiency gains from bypassing parasitical taxi medallion owners, not needing
dedicated vehicles, having much easier ordering, etc. There will be some
variance in how big that factor is (eg. NYC's $1 million medallions gave Uber
a really juicy margin to exploit), but overall, if a city can sustain taxi
service, it should be able to sustain Uber/Lyft too.

~~~
stcredzero
_overall, if a city can sustain taxi service, it should be able to sustain
Uber /Lyft too_

So if a city wants to kill Uber/Lyft, all they need to do is to attack the
rideshare margins directly. (Not that they really should. Uber/Lyft is
probably a civic good.)

------
tedsanders
These 'per driver' stats are not worth comparing when one company operates
globally and the other operates in US+Canada. Nothing can really be concluded
from them.

~~~
cavisne
The non US markets would be expected to mostly drag down Uber's numbers
though, for the most part they are significantly better. Its surprising that
Uber didnt at least break out US vs non-US markets, maybe the story isnt
really that good.

------
clairity
the buried lede is lyft's opex spike right before their ipo. typically you'd
try to subdue expenses to make the profitability numbers look better, unless
you have other problems to fix that you can spend your way out of.

(taking these graphs as truth) lyft's gross margins were flagging, so it seems
they goosed gross margins with opex, like marketing (likely promos) and better
customer service (e.g., refunds). they spent their way to higher gross margins
so they could look better than uber for ipo.

but as the rest of the analysis points out, lyft is seriously behind uber in
the race to overall profitability despite higher per ride take rates. they're
still a risky investment in comparison.

------
gumby
I can see some of these stats in action. Where I live (Bay Area) Lyft is
always more expensive (I typically check them both), sometimes by a _lot_.
While in Manhattan I find Lyft cheaper about a third of the time. So no
surprise I take more uber rides.

I have more incentive to stick with Uber now I’ve read this as the drivers
make more (and typically the same driver does both anyway)

~~~
linkregister
Drivers use Lyft for a reason; they may have a greater bonus payment that
balances out the higher commission to Lyft. As a rider, you should use
whichever platform will get you to your destination the soonest and for the
least amount of money.

~~~
alehul
> Drivers use Lyft for a reason; they may have a greater bonus payment that
> balances out the higher commission to Lyft

Drivers use Lyft because riders use Lyft, and it's better to drive for either
at a given time than neither. It doesn't mean Lyft pays equally or higher.

------
thisisit
It is entirely possible for two companies to be the same but also different in
how they see their market and revenues. So, without having a deeper
understanding of reading financials, comparisons drawn solely based on numbers
are flawed.

For example,

Uber says:

> We derive our revenue principally from service fees paid by our Driver and
> restaurant partners for the use of our platform in connection with our
> Ridesharing products and Uber Eats offering provided by our partners to end-
> users. Our sole performance obligation in the transaction is to connect
> partners with end-users to facilitate the completion of a successful
> Ridesharing trip or Uber Eats meal delivery. _Because end-users access our
> platform for free and we have no performance obligation to end-users, end-
> users are not our customers._

By making this distinction, Uber might be on a path of trying to maximize it's
driver/restaurant unit economics and not on the per user metric.

While Lyft also thinks of drivers as their end customer but doesn't clarify
the position of end-users like Uber:

> We provide a service to drivers to complete a successful transportation
> service for riders. This service includes on-demand lead generation that
> assists drivers to find, receive and fulfill on-demand requests from riders
> seeking transportation services and related collection activities using our
> Lyft platform. _As a result, our single performance obligation in the
> transaction is to connect drivers with riders to facilitate the completion
> of a successful transportation service for riders._

~~~
username223
> Because end-users access our platform for free and we have no performance
> obligation to end-users, end-users are not our customers.

That's some bracing cynicism there. So their business plan is to keep paying
their taxi drivers less (with VC money), or providing worse service, until
they figure out self-driving cars or run out of money?

~~~
creddit
It's actually the opposite. You're misunderstanding "end-users" and projecting
your inherent bias against Uber. Once I explain what it _actually_ means,
you'll probably project it again but here you're just doing so incorrectly :)

"End-users" as defined here are actually the riders/"eaters" of Uber. Uber is
saying these people are not their customers because they are just providing
access to drivers/restaurants+delivery people with their platform. What Uber
is saying is that driver/restaurants/devliery people are independently selling
their products/services on Uber as a platform and that end-users
(riders/eaters/consumers) are simply given free access.

------
lettergram
Calling it now, Uber has several large loans coming due in 2021 and 2022. I
suspect we will see the bankruptcy proceedings around that time.

They may survive, not strapped with the debt, perhaps they’ll be profitable.
Aka they will just have debt restructuring. Regardless, that’s when I suspect
the bankruptcy will occur.

~~~
baby
this is wishful thinking, Uber is everywhere and too big to fail. It might be
hard to see if you don't travel much outside the US.

On the other hand, I don't know anyone outside the US who knows Lyft.

~~~
willhslade
How is Uber, a company that has never made money, and has competitors in every
market in taxi cabs, too big to fail? TBTF refers to banks, not side
investments from SoftBank and Saudi Arabia.

------
rsuelzer
From the drivers I know, they much prefer to drive for Lyft. Almost entirely
because they say Lyft riders leave much larger tips and Uber drivers tip much
less if at all.

------
sandstrom
Interesting!

This heading sounds off "Despite Pocketing More, Lyft Loses More per User".
Shouldn't that be "Uber loses more…"?

~~~
zone411
The profit per monthly active user and the profit per ride graphs both show
Lyft losing more.

------
nabla9
When the business matures, the margins in the TNC business will be razor thin.

There will be local competitors in every city. There will be pure software
companies that build TNC apps and sell operating services. Maybe Vuitton,
Apple, Waymo, Herz, Hilton, Star Alliance, Oneworld etc. also have their own
mobility service provider networks.

Say 4 billion people, 1% of them do ride-hailing of some kind, every one of
them has five ride sharing apps and they pay $0.20 per day for each. That's
$15B in revenue total for all those involved.

------
judge2020
They both got the stock ticker that matches the company name, but could that
be a bad thing? eg. If you google "lyft" it brings up the company and an Ad to
drive for lyft, so to see the stock price (in G) you have to type
"nasdaq:lyft".

~~~
booleandilemma
I’d say overall it’s a good thing, because you can say the ticker and people
will know what company you’re talking about.

Try that with Boeing, Intel, or Starbucks.

Who cares what Google shows.

