The world of ridesharing — one that has expanded into such areas as food delivery and last-mile transportation needs via scooters — is about to get really interesting. Not only that, but more clarity will soon emerge about the real and perceived health of the overall industry, clarity that could lead to more development and changes, and probably more pressure on the low-performing parts of the ecosystem to shape up or face their demise.
The big events for 2019, of course, are the expected initial public offerings (IPO) for both Uber and Lyft. The company that crosses that line first will stand as the first publicly listed ride-hailing company. No matter who wins that race, those IPOs will bring more light to the financials of those two companies, more information about what really works for ridesharing and what doesn’t.
There are already solid reasons for skepticism about how lucrative ridesharing really is and will be in the years to come, at least in general. Uber is one of those companies that, in a very short time, has become a firm part of the mainstream in daily consumer life and transportation. It has become one of those companies with names like Google, transformed into a verb that is used countless times a day. (After all, even when people are using Lyft or another rival service, they will often say something along the lines of “let’s Uber it.”)
However, Uber’s revenue increased only 2 percent between Q3 and Q4, reaching $3 billion, a 24 percent increase over the previous year — leading some investors to question the ridesharing firm’s future prospects for profitability. Losses came in at $1.8 billion, an improvement over the $2.2 billion in losses reported at the same time in 2017.
For the full year, Uber bookings totaled to about $50 billion.
Uber gross bookings increased 11 percent year over year in Q4 2018, reaching $14.2 billion. That double-digit increase was particularly important to watchers, as growth in gross bookings had stalled in the single digits for all of 2018 prior to Q4. Uber Eats also stood as a star performer in the eyes of Uber executives, with the food delivery service accounting for more than $2.5 billion in quarterly bookings.
Though Lyft doesn’t share its financials, the company is estimated to be worth between $20 billion and $30 billion. Uber, by contrast, is reportedly worth about $120 billion. Yet, those Uber losses are hard to ignore, according to some analysts over the last couple of months.
“Uber has now had over 10 years to demonstrate that its business model works — and has failed miserably,” said one such observation from The Rideshare Guy. “They’ve only had one profitable quarter in that span, and that came on the strength of an asset sale and some accounting gymnastics.”
According to the same outlet, Lyft is “charging [toward] profitability at a faster pace than its rival.” When it comes to Lyft revenue for “2014 to 2017, Lyft has seen a compounded annual growth rate [CAGR] of an astounding 223 percent, compared to Uber’s 146 percent clip over the same time period.”
Reasons for that growth, according to some observers, included scandals that forced Uber to oust its CEO, though it has worked hard — and put money into advertising — to try to move past those scandals.
Uber Eats’ Strength
That said, many of the consumers put off by the Uber sexual harassment scandal still regularly use Uber Eats, even as alternative delivery services enter the New Orleans market. This demonstrates the larger trend that has Uber Eats facing off against the likes of Grubhub and others in an industry that is still probably three or more years away from significant consolidation, according to PYMNTS sources over the past few months.
As Uber Eats seeks to extend its powerful position in that particular part of the eCommerce world, it keeps signing new deals with dominating food and beverage providers. As Karen Webster put it in a column, “Today, many call Uber Eats the company’s secret weapon.”
Payments, too, seems likely to emerge as another battleground for supremacy in the overall ride-hailing industry, which continues to train more consumers to expect seamless payment experiences via mobile devices and stored payment data. Uber also seems to have a head start there via its recently launched Uber Cash. Not only is it a closed-loop payments network that lets consumers easily add funds to its stored value account, but it’s another attempt by Uber to keep consumers from leaving its ecosystem.
Lyft has nothing to compare with the fledgling Uber Cash program (at least, nothing that’s been publicly announced), but it is competing with its larger rival for market share via another form of transportation. The task of fulfilling consumers’ so-called “last mile” transportation needs has, over the last few years, featured putting on-demand eScooters on sidewalks, ready to use by commuters and other consumers via mobile apps (often sparking ire among other citizens and lawmakers).
That competition for scooter-sharing dominance continues, involving Uber and Lyft. According to a Crunchbase tracking report about eScooter companies and their funding (Lime, which was founded in 2017, has raised $467 million, for instance), half of those tracked companies were founded in 2018. In mid-2018, Uber invested in Lime — the amount remains undisclosed, but was described by Lime as “sizable.” The report noted that “Uber’s CEO Dara Khosrowshahi said, at the time, that the company would most likely put a much bigger emphasis on last-mile transit in the future.”
Lyft, for its part, operates Lyft Scooters, which is available in at least nine U.S. cities, with more expansion planned for 2019. Among the ways it hopes to make its scooter business stand out? Lyft Scooters offers free helmets in certain cities (reportedly, Los Angeles and Denver, a response to local laws requiring the use of helmets for scooters), which riders can pick up at Lyft Hub locations.
However, free helmets are unlikely to help any scooter provider win in that last-mile transportation competition. According to one analysis of the major scooter-sharing programs, polices and prices, “Lyft, Bird and Lime all offer a nearly identical service. The cost is the same, the scooters are similar and the apps all function in essentially the same way. So why might you use one service over the other? For most users, the choice will come down to availability. The winner will be the scooter that is closest.”
Though all eyes are, understandably, on Uber and Lyft as they head toward their anticipated IPOs, other operators are trying to win their own places in the wider industry. Any solid success those companies find could also influence the future of ridesharing, and how it develops over the next few years.
As one example, take on-demand startup Alto.
The company provides consumers who pay a monthly membership fee with a differentiated travel offering to take them from, say, uptown to the airport. “Our mission is to really redefine the passenger and driver experience,” Alto CEO and Co-founder Will Coleman told PYMNTS in an interview.
Among the ways the company wants to stand out in a crowded field is via its dedicated fleet of cars that it supplies to its drivers. That gives the company confidence that its vehicles are safe, clean and well-maintained. Instead of having contractors, its drivers are W-2 employees. “We can select them and vet them, and train them, and performance-manage them,” Coleman said.
The rideshare space is an exciting, high-energy one, a place where mobile payments and commerce — and offshoot services — combine to provide relatively seamless experiences for consumers. So much more is yet to come (failures and successes alike), and those two big IPOs expected later this year will surely provide more clarity about the mechanics of this 21st-century business.