Future engineers beware, below is the article from The Information that talks about Lyft buying share to make their IPO look good, and deal with the ramifications later: Lyft Kicks Off Price War with Uber Ahead of IPOs By Amir Efrati Feb 25, 2019 4:56 PM PST Photo by Bloomberg As Uber and Lyft prepare to go public, both companies are reviving an old and costly tactic to boost market share: discounts. Lyft, which is likely to be first to hit the public market, sharply ramped up discounts for riders in recent weeks, according to people close to both companies. The discounts covered as many as a third of its trips, according to an estimate gathered by Uber. The plan worked: Lyft’s share of the U.S. market, measured by revenue, has risen to around 34% from about 30%, according to Uber’s internal estimates. Uber has the rest of the market. THE TAKEAWAY • Lyft may tell investors its U.S. market share by rides is near 40% • Investors may question Lyft’s rider discounts to gain market share • Rider discounts expected to subside after Lyft and Uber go public. Uber plans to respond with its own discounts, aimed at defending its turf, in the coming weeks, said a person close to Uber. Both Lyft and Uber have used discounts at different points in their history—sometimes very aggressively—to attract customers. That’s often been to the chagrin of investors who have wondered when they would stop subsidizing rides and focus on making a profit. The new round of discounts suggests that won’t happen anytime soon. Lyft, which is initiating the latest price war, may face intense questions from investors about how it can hold onto its market share gains without burning through money. Lyft lost $668 million in the first nine months of last year, before interest and taxes, The Information has reported. Uber has disclosed that it lost about $1.8 billion last year, before interest, taxes and other charges. Spokesmen for Uber and Lyft had no comment for this article. Lyft is reported to be kicking off its IPO marketing in the next couple of weeks, suggesting it could go public by April. Lyft hopes to raise between $2 billion and $3 billion in an offering valuing the company at between $20 billion and $25 billion, said one person briefed about the process. Uber, for its part, expects to go public between April and May, raising as much as $10 billion, people briefed on the matter say. Its valuation could surpass $100 billion. The new round of discounting will worsen the financial performance of both ride-hailing businesses, which had been improving over the past year. But for purposes of IPO marketing, that may be less of a problem, at least for Lyft. When it meets with investors in coming weeks, it will be able to talk up the market share gains. The impact of the discounting, on the other hand, will take months to show up in publicly reported financial statements. And by the time it does, Lyft likely will have gone public. Uber, in contrast, has to try and regain the market share it has lost by the time of its presentations. Market share for the two companies in the U.S. has been fairly stable since the first half of 2017, when Lyft gained share during a cascade of controversy engulfing Uber. Since then Uber’s share of the market, as measured by trips, has hovered at around 65% and, as measured by revenue, at around 70%. That difference reflects the fact that Uber has more corporate and wealthy American customers who pay more, while Lyft appears to have more cost-conscious customers. Now, Lyft has been preparing to tell prospective IPO investors its share of the market, by rides, is close to 40%, said a person briefed on the situation. For its IPO roadshow with investors, Lyft is expected to focus on its market share gains. Historically, it has publicly discussed market share on a rides basis as opposed to revenue. In December Uber CEO Dara Khosrowshahi told employees that Uber would likely let Lyft spend money for what Uber viewed as small, short-term gains. But Lyft has gotten more aggressive since then. Uber estimates that Lyft’s promotions for riders are at an all time high. Uber and Lyft, using a combination of third party tools, have long tracked each other’s promotions for riders. Lyft could offset the financial impact of the discounts by raising prices for certain types of rides or reducing the percentage of fares that certain drivers keep. Last fall, Lyft cut the percentage of fares kept by some Lyft drivers who use rented vehicles. Both companies are expected to issue conservative estimates of when they plan to be profitable so they can handily beat those estimates. Of course, profitability in the U.S. could be a game of chicken, with Uber waiting for Lyft to back down on rider discounts or driver subsidies before it does the same. The companies already have been working on rider and driver loyalty programs that may lessen the need for typical discounts and subsidies in the future. Being publicly traded likely will pressure the companies to focus on profitability.
Well duh, they are a business.
"Pump and dump, pump and dump, bless my stock price forever." - sung to the tune of Adelweiss
This business is a race to the bottom. Margins will shrink. Can someone tell me what differentiates Uber and Lyft services? They both take me from point A to B.
Comments like these always shock me that they come from people working at such reputable companies. You should be smart enough to see the differences. There is a reason their market share has not been static over the last few years... What’s the difference between Yahoo and Google? They both return search results when I search for something!
I guess you're not smart enough to understand my question. That's ok, let me simplify it for you only. I call Lyft to take me from point A to B one day. Next day I call Uber to take me from same point A to B. Now, how do the services differ other than a few cents in price? This is the race to the bottom. Also the difference between Yahoo and Google searches are the results. I'm not shock you don't know that at this point. I mean, they've only been around 20+ years.
Huh, i have recently seen 50% off for rides in previous month. Makes sense now. Wall street and corporate greed I will be skeptical of buying lyft stock aftr it goes ipo
did you read this before attacking Lyft? > Uber plans to respond with its own discounts, aimed at defending its turf, in the coming weeks, said a person close to Uber.
This article just misses the point on why companies even go public... it is another funding round! Thinking from a perspective of an investor, I would be excited if a company showed that cash infusion to subsidize rides would lead to relatively large market share grab. I would be even more excited if reining back the incentives did not lead to market share loss. You want my hundreds of millions? Show me what you can do with it! You think anyone is investing in these companies for the dividends?
Why Uber folks like to attack Lyft? The world is big and Uber should be able to coexist with Lyft.
Not sure why but amir efrati usually tweets and posts articles bashing lyft at timely situations. I have a hunch he somehow has vested interests in uber.
Makes sense why I keep getting lyft promo push notifications on my phone
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this article sounds like they only talked to someone who works at uber
That’s fair but I still felt prudent to post it here because The Information is a pretty reputable tech site. There is some quantitative data to back this up, including losses from three quarters close to 700 million which is much higher relative to Uber
Just keep on giving everyone 50% off rides. I'm loving it 😂