Home Technology Lyft could drop rideshares, stay focused on the grassroots under the new CEO

Lyft could drop rideshares, stay focused on the grassroots under the new CEO

by Ana Lopez
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Lyft could once again drop its ride-hailing offering, just one of many changes the company’s newly appointed CEO could make in an effort to focus on its core ride-hailing business and become profitable .

David Risher, who will take over as CEO of Lyft in mid-April, told businessroundups.org in an extensive interview that other positions may also be cut. For example, the Wait & Save feature, which allows passengers in certain regions to pay a lower fare if they wait for the best-located driver, may end, he said.

“It’s possible that we don’t need either of those anymore and we can focus all of our resources on doing a smaller number of things better,” Risher, the former Amazon executive, told businessroundups.org. “Maybe it’s time we said rideshares were great for a while, but it’s time to let that go.”

Lyft, co-founded by Logan Green and John Zimmer, launched shared rides on a small scale in 2014 before expanding service. Uber launched Uber Pool in the same year. Both companies halted their carpool services during the pandemic before reinstating new versions later. For Uber and Lyft, carpooling has traditionally been a money pit, a loss-generating ploy to attract passengers with cheap fares.

While nothing has been decided yet, the possible move is an example of how Lyft’s new management hopes to cut its losses and eventually regain some market share from its main competitor and oft-described big brother Uber. Instead of adding new products, such as delivery or even selling the company (both of which Risher says won’t happen), Lyft is going back to basics.

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

Uber, already a larger company, has taken more market share in the U.S. from Lyft in recent years through an all-encompassing approach that includes food delivery and even transit services. According to YipitData, Uber’s market share has grown today from 62% at the start of 2020 to about 74% today, versus Lyft’s 26%.

Another study of Similarweb shows that Uber leads in monthly active users (MAUs) and its 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. Around this time last year, Uber only had a 48% advantage over Lyft. Compareweb’s data also shows that Uber outperformed Lyft on both Apple’s and Google’s app stores, and Android downloads were 22% higher than Lyft’s over the past 12 months.

Uber has taken a different approach to Lyft in pursuit of profit. While Lyft sticks to ride-hailing, Uber has expanded into delivery through its UberEats platform, adding a slew of new products to attract users, but also create a closed business loop where each product takes customers back to other Uber channels.

“We are actively cross-selling consumers from food delivery to groceries, consumers from grocery to alcohol, and now basically back to mobility,” Uber CEO Dara Khosrowshahi said during the company’s Q3 2022 earnings call on Nov. 1. that we have across the platform continues to grow, attracting new customers and also driving retention.

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

“From a driver’s perspective, they now mentally commute between picking up a person and picking up a pizza,” Risher said. “And if I get a pizza, I have to double park at the restaurant with seven other people, then I get a ticket once every few 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 pick people up and I just transport them.’”

He also said drivers may not want to be in a car that just dropped off a few pizzas.

The first order of business

“I think Lyft has gone from top-of-mind to a little on the side for a lot of people, so our job is to remind people that we exist and give them a really great experience,” said Risher .

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, following the post-COVID driver shortage, Lyft’s average price per mile is similar to Uber’s, according to more research from YipitData.

Risher did not say whether Lyft will cut its workforce to contain costs. However, CFO Elaine Paul hinted at taking such measures during the company’s earnings call for Q4 2022. Paul also suggested that Lyft move to hiring employees outside the US who are less likely to expect equity capital as part of compensation .

Risher seems most focused on creating more demand for the services while making operations more efficient. Those efforts extend to increasing demand for Lyft’s micromobility business through some method of cross-fertilization between the two industries, Risher said.

“I don’t think we’ve given riders or motorcyclists enough good reason to try us out on ride-share, for example,” he said, noting that he’s an avid cyclist. “If we have both ways for people to move around, how can they reinforce each other, because right now they’re a little too parallel.”

Lyft currently offers the Lyft Pink membership program that gives riders ride-hailing benefits, such as free priority pickup upgrades and relaxed cancellations, as well as bike and scooter discounts. Membership also includes free Grubhub+ for a year and SIXT car rental upgrades, which is a half-hearted attempt to capture more of the transportation market through partnerships.

Analysts are still wary of Lyft’s recovery

Lyft went public in March 2019 for a value of $24 billion. Today, Lyft’s market cap is around $3.35 billion. Uber’s market capitalization is $60.44 billion. Investors initially reacted positively to Risher’s appointment, pushing the stock price to $10.14 immediately after the announcement. But the positive response is short-lived. Lyft’s share price is down 11.4% from Tuesday’s high, closing at $8.98 on Wednesday.

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

“We admit the news came as a bit of a surprise to us, but perhaps it should not have pointed to the relative underperformance of LYFT stock and in Lyft’s core ride-sharing business in recent quarters,” White said.

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

Lyft attributed the diminished outlook to colder weather, leading to fewer ride-hail rides, shorter trips, and a major drop in micromobility use. Since Lyft only operates in North America, the company is unable to balance poor driving in one wintery part of the world with increased usage in other, warmer places.

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

“As part of his stock compensation, [new CEO John Risher] received 12.25 million performance-based restricted shares divided into nine tranches, each of which vests separately against LYFT price hurdles of $15.00 to $80.00,” said Ben Silverman, director of research at investment research management firm VerityData. differs greatly from the founder awards that Logan received [Green] And [John] Zimmer in 2021 and 2022 that only vest if LYFT reaches or exceeds $100.00. Clearly, that ambitious outlook has been muted. Either way, Risher is tasked with a huge turnaround and if he is fully successful, he could make $980 million.

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