By Jamie Barrie O nly in the new age of start-ups can you lose $600 million and still have a good year. That is the case for Lyft Inc., the second-largest ride- hailing startup in the U.S. behind Uber Technologies Inc. which lost about $600 million last year while increasing its revenue 250 percent to $700 million. Lyft Inc. appears to be keeping true to a promise that it made to investors last year to limit monthly losses to $50 million as the company looks to become profitable by 2018. How does this compare to their industry rival Uber. Well industry experts had estimated that Uber would lose $3 billion globally last year based on its performance from the first three quarters; this was up over a third from what the ride-hailing giant lost globally in 2015, at $2 billion. Lyft and Uber have been fierce competitors in a winner takes all market, where the gains of one detract from the other’s ability to turn a profit.
portion of the companies’ losses. Lyft has said it enabled 160 million rides in 2016, which implies a loss of $3.75 a ride. That’s a significant improvement over 2015, when Lyft effectively lost $7.77 a ride. Lyft’s growing U.S. presence has frustrated Uber. In the first quarter of 2016, Uber said it turned a profit in the U.S. and Canada for the first time. Lyft saw an opening and, with the help of aggressive subsidies, took away some market share. Uber increased its spending at home during the remainder of the year, losing more than $100 million in the U.S. for each of the following quarters which allowed Uber to recoup some of its market share losses to Lyft in the U.S. Lyft, which was last valued at $5.5 billion by investors, considered selling itself last year and was in some preliminary discussions with potential buyers, one of which was Uber. However, Lyft President, John Zimmer recently told the Wall Street Journal that the company plans to eventually go public to generate the additional cash to keep itself in the market.
Both companies spend heavily on discounts for riders and bonuses for drivers. These subsidies account for a large
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FEBRUARY 2017 • SPOTLIGHT ON BUSINESS MAGAZINE
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