Lyft could ditch shared rides, stay focused on basics under new CEO

Lyft could once again drop its ride-sharing offering, one of several changes the company’s newly appointed CEO could make in a bid to focus on its core ride-sharing business and become profitable.

David Risher, who takes over as Lyft’s CEO in mid-April, told TechCrunch in a wide-ranging interview that other features may also be cut. For example, the Wait & See feature, which allows passengers in certain areas to pay a lower fare if they wait for the best-located driver, could end, he said.

“It’s possible we don’t need both anymore and can focus all of our resources on fewer things,” Risher, the former Amazon executive, told TechCrunch. “Maybe it’s time for us to say shared rides have been great for a while, but it’s time to let it go.”

Lyft, co-founded by Logan Green and John Zimmer, launched shared rides in 2014 on a small scale before expanding the service. Uber launched Uber Pool the same year. Both companies discontinued their ride-sharing services during the pandemic before reinstating new versions later. For Uber and Lyft, ridesharing has always been a money pit, a loss-making ploy to entice passengers with cheap fares.

While nothing is decided yet, the potential move is an example of how Lyft’s new management hopes to stem its losses and eventually claw back some market share from its main competitor and oft-described big brother, Uber. Instead of adding new products like delivery or even selling the business (which Risher says won’t happen), Lyft is going back to basics.

“The first thing to do here is to focus on the basics of carpooling,” Risher said. “The reason I say that is because in this type of market where you have competitors, you can’t lose one share to the other if you want to be there for the long haul. And I think this duopoly is a good thing. In so many other markets, you really want choice as a customer, and I think as a driver you want choice. It keeps us honest and allows us to play against each other a bit.

Uber, already a big company, has taken more market share in the United States from Lyft in recent years, thanks to a global approach that includes food delivery and even public transport services. Today, Uber’s market share has fallen from 62% in early 2020 to around 74% today, compared to Lyft’s 26%, according to YipitData.

Another study by Similarweb shows that Uber leads in the number of monthly active users (MAUs) and that lead has grown over time. In February 2023 alone, Uber had 9.4 million MAUs, a 62% lead over Lyft’s MAU of 5.8 million. At this time last year, Uber only had a 48% advantage over Lyft. Similarweb data also shows that Uber outranks Lyft over Apple’s and Google’s app stores, and over the past 12 months its Android downloads were 22% higher than Lyft’s.

Uber has taken a different approach to profit-seeking than Lyft. While Lyft has stuck with ridesharing, Uber has expanded into delivery through its UberEats platform and added a slew of new products in an effort to attract users but also create a closed business loop in which each product refers customers to other Ubers. canals.

“We’re actively selling food delivery consumers to groceries, grocery consumers to alcohol, and in fact now back to mobility,” Uber CEO Dara Khosrowshahi said during the talk. company’s third quarter 2022 earnings call, which was held on November 1. that we have on the platform continues to grow, attracting new customers and building loyalty as well. »

Risher said Lyft wouldn’t try to compete with Uber by introducing a delivery product into the app, in part because it doesn’t view delivery as a customer or driver decision.

“From the driver’s perspective, he’s now torn between picking up a person and picking up a pizza,” Risher said. “And when I get a pizza, I have to park at a restaurant with seven other people, then I get a ticket once every two weeks, then I have to get back in my car and drive, then get out and ring the doorbell. It’s a very different cycle than “I take people and I just transport them”.

He also said passengers might not want to be in a car that just dropped off some pizza.

The first order of the day

“I think for a lot of people Lyft has gone from head to toe to the side, 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 comparable to Uber’s, according to other research from YipitData.

Risher did not say whether Lyft would reduce its workforce in an effort to contain costs. However, Chief Financial Officer Elaine Paul hinted at taking such action during the company’s fourth quarter 2022 earnings call. Paul also suggested that Lyft hire workers outside the United States who are less likely to expect fairness in compensation.

Risher seems more focused on creating greater demand for services, while making operations more efficient. These efforts extend to increasing demand for Lyft’s micromobility business through a cross-pollination method between the two verticals, according to Risher.

“I don’t think we’ve given enough good reasons for cyclists or motorcyclists to come and try us on carpools, for example,” he said, noting that he is an avid cyclist. “If we have these two ways for people to get around, how can they reinforce each other, because right now they’re a little too parallel.”

Lyft currently offers the Lyft Pink Membership Program which provides riders with perks like free priority pickup upgrades and relaxed cancellations, as well as discounts on bikes and scooters. Membership also includes Grubhub+ free for one year and SIXT car rental upgrades, which represent a half-hearted attempt to further capture the transportation market through partnerships.

Analysts still wary of Lyft takeover

Lyft went public in March 2019 with a valuation of $24 billion. Today, Lyft’s market cap is around $3.35 billion. Uber’s market capitalization is $60.44 billion. Investors initially reacted favorably to Risher’s appointment, pushing his stock price to $10.14 immediately after the announcement. But the positive reaction was short-lived. Lyft’s stock price fell 11.4% from Tuesday’s high to close Wednesday at $8.98.

Tom White, senior research analyst at DA Davidson, told TechCrunch that he remains neutral on the company with a price target of $12.50.

“We’ll admit the news came as a bit of a surprise to us, but perhaps that shouldn’t have given the relative underperformance of LYFT stock and Lyft’s core ridesharing business over the past few quarters,” said White.

Lyft’s Q1 2023 revenue outlook was unchanged by Risher’s appointment, but analysts say Lyft’s target ($975 million) was lower than they had expected ($1.09 billion). of dollars).

Lyft attributed the reduced outlook to colder weather, which is leading to fewer car trips, shorter commutes and a significant drop in micromobility use. Since Lyft is only active in North America, the company doesn’t have the ability to balance low footfall in a wintery part of the world with increased usage in other warmer places.

While Lyft’s strategy so far lacks the sparkle of shiny new products that could directly compete with Uber, Risher has some pretty good incentives to turn the company around (that is, outside of pride of a job well done).

“As part of his stock-based compensation, [new CEO John Risher] received 12.25 million performance-based restricted stock units, divided into nine tranches, each of which vest separately at LYFT price thresholds of $15.00 to $80.00,” said Ben Silverman, director of research at investment research management firm VerityData. “The vesting schedule is very different from the Founders Awards received by Logan [Green] And [John] Zimmer in 2021 and 2022 which only vest if LYFT reaches or exceeds $100.00. Clearly, this ambitious vision has been muted. Either way, Risher is tasked with a massive turnaround and if he fully pulls it off, he can earn $980 million.