Uber vs Lyft: Comparing the Titans of Ride-Sharing

The battle between Uber and Lyft is one of the fiercest and most intense business rivalries we have today. It’s riveting to watch and assimilate what these two companies are doing to rub each other off. There’s been a lot of talk about Uber and Lyft these past few years and we know that they’ve thrown a major blow to traditional cab companies changing the business of transportation forever.

If you’re following the stock market, you would know that there’s been a lot going on with both of them racing to get listed as public companies. Private companies don’t have to release their figures to the public, but public companies do. Basically, if you can’t see the figures, how can you decide where to invest? This means that for the first time ever, both Lyft and Uber will finally reveal how they’re financially achieving their goals.

Uber and Lyft are each required to file a prospectus that has a ton of information on it and now that it’s publicly available, it would be a great time to see how they compare to each other. It makes sense to take a quick look at how they both started.

Uber started way back in 2009 while Lyft got into the market late in 2012. It may seem relatively fresh although they have had roots that reach five years before this. The inception of Uber was headed by Travis Kalanick and Garrett Camp. Camp was the co-founder of a company called StumbleUpon that was sold for $75M in 2007. Kalanick was the co-founder of a company called Red Swoosh that was sold for $15M in 2007. In 2008, the two were attending a tech conference in Paris. They had trouble getting a cab and came up with a concept for a business that would eventually be called Uber.

They dropped the idea for a while, but then in early 2009, Garrett Camp went right back to it. An app was developed. He convinced Kalanick to come to be a part of it. They ran trials and by May of 2010 Uber cabs were available to the public in San Francisco.  Initially, it cost about 50% more than a traditional taxi but it was more convenient and with higher-quality cars. So they didn’t have much trouble finding people willing to pay the premium. That year, the city of San Francisco ordered them to stop conducting business but they worked it out partially by dropping the ‘cab’ part from their name. Simply going by Uber they quickly expanded into other cities around the country.

The big ones included New York, Chicago, and Boston. Of course, they’ve since expanded all around the country and internationally. Over the years they’ve raised money for all of this, mostly through different rounds of funding or exchanging cash for a piece of ownership. In 2011 their valuation was around $50M. By 2013 they were into the billions and in 2019 for their IPO they’re setting their valuation around $100B. Obviously, they’ve come a long way in the past eight years.

With the inception of Lyft, there are two guys to talk about here. John Zimmer and Logan Greene. The way this company started is a little hard to believe. It was initially called Zimride and you would assume it was named after John Zimmer but in actuality, Logan Greene came up with the name before he even met Zimmer. As it turns out, the ‘Zim’ part of the name came from Zimbabwe.

Green had recently been there and took notice of how everyone over there shares rides. This strange naming coincidence is actually part of what brought them together. The two had a mutual friend on Facebook. Green posted something about Zimride on that friend’s page. Zimmer came across it and was immediately interested and confused because it was similar to his idea and contained part of his name. The two of them connected through that mutual friend and soon started working together on Zimride. The idea behind Zimride is carpooling. They focused their efforts around college campuses and provided a way for people to connect who wanted to carpool long distances. All pretty solid ideas and Zimride was pretty successful in functioning like this over the next five years. In 2012 they saw greater potential.

They observed the success that Uber was having and figured that they can start something using their own approach and get in on their share of the pie. At that time Uber was serving more wealthy people. They only had their black car service which was pricier and involves higher-end cars. The guys at Zimride envisioned something similar that can serve everybody. Within weeks of the idea, they launched the Lyft app which was essentially every average man’s version of Uber. Then very soon after Uber started offering Uber X, which was essentially every average man’s version of Uber Black, it became their most popular option.

The battle between Uber and Lyft began in the middle of 2013. The metric I’m interested in studying is of their market share. According to SecondMeasure, Uber is much bigger and they always have been. That’s no surprise, but Lyft is gaining on them pretty fast. Four years ago they were hanging around a 10% share and today that’s crept to 30%. This pie also shows just how much these two dominate the US ride-hailing market.

There are other services out there too. There are Via and Juno. Both of which I’ve actually never heard much of unless you’re from a major city where they operate. Uber and Lyft together form 98% of the industry and everything else combines for the remaining 2%. I also want to mention that I’ve seen some conflicting data here. Lyft states that they have a 39% market share which was irrational to me until I learned that the company that provided that figure may have a bit of a conflict of interest. I’m not accusing anyone of anything but I’m more inclined to believe third-party figures. But either way, they’re gaining.

Let me theorize the reasons behind it. Lyft has been pretty aggressive in their marketing. Specifically, in 2016, they spent more money on sales and marketing and than any other department. Their marketing expenses were higher than their sales by a considerable amount. They also tended to have lower rates for travelers and greater incentives for drivers.

However, I would guess, a bigger reason they’ve been catching up is because of Uber. Uber has been controversial these past few yers and it’s caused people to switch over. I’m talking about sexual harassment claims, self-driving cars being released in California without a permit and then running red lights. Additionally, #DeleteUber was a whole political thing that caused about 500,000 people to delete their Uber account. Misleading drivers about how much they can earn was a $20M lawsuit and then there was that case of underpaying New York City drivers. All of this led to their CEO, another controversial figure, stepping down in 2017. On the other hand, Lyft has maintained a pretty clean image over the years.

Uber saw over $11B in 2018 which is about five times higher than Lyft who brought in about $2.2B. It’s worth noting that those numbers are definitely growing. This market is evolving fast and they’re basically the only two taking advantage of it. However, reports show that Lyft is growing at a much faster rate.

The reason Uber’s revenue is so much higher can be explained by their greater share in the US ride-hailing market. This is also because they have a much greater presence internationally. Uber provides services all around the globe whereas Lyft only operates in the US and Canada. That’s 63 countries compared to 2, and it’s a pretty major contributive difference. Uber also makes a lot more money because they’re involved in a lot of businesses beyond ride-hailing. Ride-hailing accounted for only $9.2B. Of that, $1.5B came from Uber Eats. According to Uber, it’s the largest meal delivery platform in the world outside of China. Based on gross bookings, they have a network of more than 220,000 restaurants in over 500 cities globally. It’s a good option for drivers to make these food deliveries when there’s not much else going on. Since the last couple of years, there’s also been Uber Freight, their service that connects shippers and carriers of goods. Lyft is much more niche-focused whereas Uber has expanded into other related businesses.

However, for both companies, and this is the point of focus that everyone’s been talking about, they’re losing money. Uber had about a $3B operating loss for 2018 and for Lyft it was just under $1B. This makes everyone question, is it even a good business model? They are bringing in money, but once they’re done paying for their insurance and marketing and everything else, there’s nothing left. It’s difficult to see how they will be able to figure it all out and eventually start turning a profit. None of them has much of a plan on how to do it either. The business model may have flaws but from my perspective, they seem to be more concerned with edging each other out. They are both strengthening themselves and they have to since it’s a two-person fight and neither one of them can afford to let their guard down.

When questioned about their business model, this is what Uber had to say. “We have incurred significant losses since inception including in the United States and other major markets. We expect our operating expenses to increase significantly in the foreseeable future and we may not achieve profitability. We will need to generate and sustain increased revenue levels and decrease proportionate expenses in future periods to achieve profitability in many of our largest markets including the United States. And even if we do, we may not be able to maintain or increase profitability.”

Understandably investors ought to be apprehensive and it does seem strange to be valuing a company around a $100B when they’re not making any money. This means that the price they’re paying is really based on the company’s potential and if they can get all this together down the line. This post is being written at a very specific period between their initial public offerings. Lyft had theirs on March 29th, 2019 and Ubers is happening soon. The Lyft IPO valued the company at around $24B whereas Uber’s will likely be around four times higher. We can continue comparing these numbers but I think we get the picture that Lyft is laser-focused on that US ride-hailing market, and for a variety of reasons they’ve been doing well in it. Uber, on the other hand, is much bigger by any measure and they have much more of a broad focus in other countries and other services. Yet, neither one of them is making any money. Eventually, they’re going to have to find a way to start generating a profit. It seems that they already had a decade to figure it out and they’re not even close.

Siddharth Pereira
Digital marketing specialist and exchange investor that is passionate about the internet, technology and everything in between. I work on conceptualizing and implementing online web development projects that provide branding and visibility results to businesses set up in multiple niches.