Why Uber is Going to Start Losing to Lyft
The future looks differently for everyone. And it’s especially difficult to predict the state of technological field given its rapidly evolving nature. Competition comes up with new products, services, and processes that alter the view of everyone’s future. This is why along with strategic goals, it’s imperative to follow tactical ones as well. However, even though we can never tell how the future is going to look like, some notions are more or less obvious to a large part of a population. One of those, I think, is that the taxi services model as the previous generation knew it, is not going to be around for much longer. As I have already mentioned in the previous post, “verbal interactions between people have shortened, as devices became a more prevalent method of communication with the world”. This has opened a way for apps like Uber and Lyft to take advantage of this and start offering taxi services without having a depreciating fleet of cars. The idea seemed weird at first, then interesting, then it started looking ingenious, but now the current state of ride-hailing is hitting the potholes (no pun intended).
Not Uber, nor Lyft are public companies, so the lack of information pushed me to mostly look for news developments, and less at fundamentals. The valuations of the two companies are $70bn and $7.5bn, respectively. Ten times difference is no joke, but again, Yahoo! was once valued at over $100bn, and now is in talks of selling itself to Verizon for mere $4.5bn. Just shows that the dominance in the technological space is fragile if the customers’ data is not stored and used to the advantage. Even now, I think, the ten times difference between Uber and Lyft is on the verge of shortening.
My main concern about Uber is the company’s culture. When I look for investments, the quality of the top management is high up on the checklist. Of course, I need to mention that disrupting a market comes with casualties (look at the performance of Tesla’s factory last year), but you can only defend this notion for so long. Company’s culture is the foundation of success. Sometimes, it transcends through the workplace and becomes a part of the brand, a part of marketing, like it happened with Apple. You might not be a once-in-a-generation CEO with a charismatic personality, but it’s your responsibility to build a top management structure of a company as professional and as aligned with company’s vision as possible. This is one of the reasons I have never seen Twitter a good investment. Uber has been involved in so much bad press lately, that I’ve lost count. But here’s a few:
That Video, where Uber CEO, Travis Kalanick argues with an Uber driver over falling fares
Oh, and when it comes to a top management, it looks like Uber has revolving doors at their headquarters:
Uber’s VP of product and growth Ed Baker has resigned
Uber’s SVP of engineering is out
Uber’s head of finance is leaving
A top Uber executive, who obtained the medical records of a customer who was a rape victim, has been fired (fired just now, but not right after he presented the medical papers)
One of Uber’s top self-driving engineers, Raffi Krikorian, is stepping down
Uber Fires Former Google Engineer at Heart of Self-Driving Dispute
On the road of domination in the ride-hailing space, the contractors are also a concern. Uber drivers are reportedly less happy and earn less than their Lyft counterparts. However, some of the drivers have to switch to Uber as the demand is so much higher.
Uber has lost $700 million in Q1 2017 but it’s less than $991 million loss they had in the previous quarter. At the same time, the revenues are up 18% from the previous quarter, resulting in $3.4 billion. It’s inevitable to experience losses at this development stage of a company, I get it. But it’s still not clear if the model will actually generate profit the way it is set up right now. For the time being, I think Uber is overvalued. The prospects of utilizing self-driving in future, accounted for a large part of the recent valuation. However, with the departure of Anthony Levandowski, a lot of technology they thought they had is now in question, as Waymo has filed a lawsuit against Uber in February over Anthony Levandowski possesing Waymo’s trade secrets. On the other hand, Lyft has just created a partnership with Waymo to help develop self-driving vehicles.
As I said at the beginning, the long-term future is very difficult to predict but I’m confident in the near future Uber will lose some of its market share to Lyft. And then the game for the best self-driving strategy will begin. But let’s leave it for a different blog post.
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