Lyft vs. Uber: An Overview
Sometimes it’s safer or more convenient to leave the driving and traffic headaches to someone else. This is the thought that eventually grew into Uber Technologies Inc. (UBER) and Lyft Inc. (LYFT), the two quintessential transportation service companies.
In a race to the finish line, Uber released its long-awaited initial public offering (IPO) prospectus about two weeks after rival Lyft debuted on the public markets. These app-based services may seem interchangeable, but there are differences between the two largest taxi alternative networks services in the United States.
Lyft operates in the United States and Canada. They set specific requirements on the vehicles used by drivers and have several different categories or levels of service. The Lyft app for smartphones notifies passengers of the driver’s arrival and gives them an estimated cost in advance.
Uber serves not only in the United States and Canada but also provides service in many cities worldwide, including those in the European Union, Central and South America, Africa, Asia, Australia, and New Zealand. Uber also sets vehicle requirements and lists several different categories of service. The Uber app helps passengers and drivers find one another and estimates the cost of the ride in advance.
- Uber and Lyft both offer innovative alternatives to taxis and long-established private transportation services.
- Both give passengers a convenient and innovative way to request and pay for rides through their smartphones.
- The companies have considerable differences in their service areas, offerings, and culture.
- Because each company’s drivers are independent contractors with varying vehicle types and personalities, even if you consistently use the same service in the same city, each trip will be different.
Funding: Uber VS Lyft
Lyft Inc. (LYFT) was launched as a service in 2012. It was spawned from Zimride, a company founded by Logan Green and John Zimmer. Zimride, a peer-to-peer rideshare matchmaker for people looking to carpool long distances securely, was sold so that the duo could focus on Lyft. Green is currently chief executive, and Zimmer is the company’s president.
Going Public and Market Share
On Dec. 6, 2018, Lyft announced that the company had officially filed paperwork with the U.S. Securities and Exchange Commission (SEC) to go public in March 2019. It now trades on the Nasdaq.
Uber’s smaller rival said in a filing that it expected to raise $2 billion in its IPO and would offer 30.77 million shares of common stock, at an expected $62 to $68 per share. The company ended up pricing its shares at $72, and they traded up before falling back and closing at just over $78.
The company was valued at $15 billion in 2018 when it raised $600 million in a financing round led by Fidelity Management & Research Company.
As reported by CNBC, in May 2018, Lyft revealed market share figures for the first time, suggesting that it had 35% of the U.S. ridesharing market and that it has a majority of the share in multiple markets across the country.
Reuters reported that Lyft was estimating the market share figure to be closer to 40%, as of February 2019. Lyft might have gained market share from Uber as a result of several controversies, many of which took place in the months leading up to the IPO announcement. However, its share fell back towards around one-third of the market in subsequent years.
Lyft’s share of the ridesharing market, as of July 2021, according to Bloomberg Second Measure
Operation and Services
Lyft’s website shows the cities where the ride service operates in Canada and the United States, where it serves all 50 states and the District of Columbia. The company has a set minimum vehicle requirement, and the drivers must pass two background checks before approval with the company.
Automobiles must have four doors with a minimum of five seatbelts. The age and condition of the vehicle, among other requirements, vary by state.
Lyft offers several service classes, which vary by city.
- Original Lyft provides rides in regular vehicles for up to four passengers.
- Lyft XL provides rides in regular vehicles for up to six passengers.
- Lyft Lux provides premium black car service in luxury vehicles.
- Lyft Black is a premium black car service including luxury vehicles.
- Lyft Black XL provides rides in a premium black SUV for up to four people.
The Cost of Lyft Services
According to a 2015 study from smartphone app SherpaShare, the average cost of a Lyft ride came in at $12.53. In 2021, though, prices seemed to jump dramatically, due to a pandemic-easing combination of pent-up demand and a shortage of drivers. In July 2021, Lyft’s average transaction value was $27, a 45% jump year-over-year.
The fee for service varies by city and the class or category of vehicle service chosen; for example, Lyft lists New York City ride costs as $1.48 per mile or $0.67 per minute for the basic Lyft service. Fees have a base charge for each ride and additional calculations for total miles traveled and the minutes of travel time. Also, prime-time service will increase the base price.
Any passenger changes to a ride, once it is underway, will affect the total price. Customers pay through the company’s smartphone app.
Lyft App and Amp
Lyft originally identified its vehicles with furry pink mustaches on the front—called “carstashes”—but it now uses a more subtle system called the Amp. The Amp is a small module that sits on the driver’s dashboard and lights up in a particular color. Waiting passengers get notification of the Amp color in the Lyft app, which is especially helpful when getting a ride after dark or when leaving a venue where everyone is using a rideshare app to get home.
All Lyft vehicles have stickers displaying the Lyft logo in the front and rear windshields. Retiring its mustaches may have been a move toward adopting a more professional look in order to compete with Uber.
The Lyft app gives the passenger an estimated total cost for a ride at booking. In some cities, the app can show the exact price of the door-to-door service.
Lyft and Food Delivery
Lyft has gotten into the food delivery game; its major fast-food partner is Taco Bell. In July 2017, the company tested a new feature called Taco Mode, which allowed a user, currently in Lyft transit, to press a button on their app and direct the driver to the nearest Taco Bell. Interestingly, the service was only available between 9 p.m. and 2 a.m. Taco Mode was expected to be rolled out to all devices in 2018, but many drivers and customers expressed disapproval, both because of issues like messiness in vehicles, as well as a general concern about the company’s focus on driver satisfaction.
Lyft Driver Environment
Lyft riders can tip their drivers through the app at the time of destination payment or up to 72 hours after the ride is completed. Drivers keep 100% of their tips. Also, Lyft passengers can split the cost of a ride with fellow passengers through the app, as long as they do so during the ride and not after.
Lyft has so far managed to avoid many of the controversies faced by fellow ride service Uber. Perhaps this is partially due to the company’s smaller size and limited operation sphere. However, in 2017, a New York labor group accused Lyft of wage theft. A story in The Washington Post reported that drivers claimed the service was cheating them on their fare by deducting money for driver’s trips on interstate highways.
Uber was founded in 2009 by Travis Kalanick and Garrett Camp as UberCab. After Kalanick’s resignation as CEO in 2017, Dara Khosrowshahi took his place. Ronald Sugar was named chair in August 2018.
Uber is a much larger company than Lyft and has received negative press for everything from sexual harassment lawsuits to its use of software to track Lyft drivers. As reported by National Public Radio, Uber settled a class-action suit brought forward by former and current employees of color and female workers. The claim cited events of discrimination and harassment. The $10 million settlement came after the firm fired 20 employees for harassment in 2017.
Also in 2017, the FBI opened a probe into Uber’s use of software to track Lyft’s drivers. An article in The Wall Street Journal stated that investigators were looking into the use of software by Uber to get information on drivers who work for both companies and discover information about Lyft’s charges for service.
Going Public and Market Share
Uber filed paperwork for its documents for IPO on Dec. 6, 2018. After delays, the company filed final documents to be listed on the New York Stock Exchange (NYSE) using the ticker symbol UBER. The offering was expected to be one of the largest of 2019. The multinational ride-hailing company was valued at $120 billion by Wall Street banks and reported $11.27 billion in 2018 revenue.
Unfortunately, the actual opening was anticlimactic: Uber’s IPO price was $45. Unfortunately, when the opening bell rang, Uber shares opened at $42. And they closed at $41.57.
The company and its stock have had a bumpy path ever since. Uber may have also lost market share in the early months of the leadership of CEO Dara Khosrowshahi, who assumed the top spot at the company following the departure of co-founder and former CEO Travis Kalanick in June 2017.
A 2019 survey completed by BusinessOfApps.com found Uber’s market share to be around 68%. It’s maintained that share as of July 2021. The company’s S-1 IPO filing shows the service provided 1.5 billion trips in the fourth quarter of 2018 alone.
Operations and Services
Uber serves hundreds of cities in dozens of countries, including the U.S. and Canada, as well as other cities around the globe in Central and South America, Africa, Asia, Australia, New Zealand, and the E.U. Depending on your location, Uber may be your only taxi alternative option. In the U.S. the service lists over 300 cities, from Las Vegas, Chicago, and New York to Fargo, Pensacola, and Kalamazoo.
Like its counterpart Lyft, Uber offers several classes of service whose availability varies by city.
- UberX is the basic sedan service for everyday rides for up to four people.
- UberComfort provides newer cars with additional legroom.
- UberXL provides affordable SUV service for groups of up to six people.
- UberSUV provides luxury SUV service for groups of up to six people.
- UberPool allows customers with different starting and ending points who are traveling in the same direction to share rides in sedans and share the cost.
- UberBlack provides rides with professional drivers in black town cars for up to four people.
- UberBlack SUV provides luxury rides by professional drivers for up to five passengers
- UberWAV provides rides in wheelchair- and scooter-accessible vehicles by drivers trained in assisting passengers.
- UberSelect provides stylish, high-end cars with top-rated drivers for up to four people for special occasions.
- UberTaxi lets you hail a yellow cab from the Uber app.
- UberPet provides affordable rides for you and your pet.
Even if you choose UberX, the lowest-cost option, you will not get picked up in a clunker. Uber has minimum vehicle requirements for drivers in each city. For example, in Los Angeles, vehicles must be no more than 15 years old and have four doors. The automobile must be in good condition with no cosmetic damage and it must have working air conditioning. Further, the car cannot be commercially branded and must have passed a vehicle inspection in the location of operation.
The Cost of Uber Services
Uber’s fares consist of a base fare plus a time and distance rate, and fares vary by vehicle type and by the city of service. Surge pricing during times of peak demand will increase the fare.
Each vehicle class has a minimum fare so that it is worth a driver’s time to pick customers up, even for very short rides. In some cities, Uber does not provide up-front fare estimates but rather calculates the total charge after the ride. The UberSUV option is the most expensive of the offerings; UberX charges the least expensive fares.
The SherpaShare study found that in May 2015, the average Uber trip was $13.36. In July 2021, it was $20, a 20% increase from one year ago. But in many cities, it seemed much more; even Uber CEO Dara Khosrowshahi acknowledged that fares leaped 30%.
Uber App and Beacon
Uber uses a light-up Beacon, similar to Lyft’s Amp, to help passengers identify their ride. Mounted in the front, passenger side windshield, the Beacon allows passengers to spot their ride from a distance easily. Drivers also display placards with the Uber logo in their front and back windshields. The apps themselves help drivers and riders identify each other as well, providing license plate numbers and descriptions of the cars.
After requesting a ride, the Uber app shows all nearby drivers, their photos, automobile specifications, and the license number of the car. The app also allows customers to estimate their fares in advance and determine driver arrival and location.
Uber and Food Delivery
Uber launched Uber Eats in 2014 to compete with other services, like GrubHub and Postmates. Uber gained a major partnership when McDonald’s announced in December 2016 that it would venture into delivery with Uber Eats. In December 2017, the company announced the service was profitable in 40 out of 165 cities in which it operated. Currently, Uber Eats is available in more than 6,000 cities worldwide.
Uber Driver Environment
According to Uber, as of December 2018, they had 3.9 million registered and approved drivers globally. Uber drivers are a combination of professional drivers and non-professionals who have passed driving record checks and background checks. They submit photos for a badge ID and the notification app.
Uber did not solicit tips earlier, but as of 2017, it lets customers add tips to their fares and allows drivers to accept cash tips. Uber allows riders to split fares with friends through the app.
Workers have claimed low wages and poor workplace culture, but Uber is working toward improving conditions. In the U.S., it instituted a program of driver rewards based on a certain rating status.
Both Lyft and Uber have become prime examples of the gig economy at work. Their workers are not guaranteed a minimum wage, supply and maintain their own vehicles, and have few if any benefits.
That is becoming controversial in some cities where the companies operate. In 2018, New York City mandated a $17.22 minimum wage for drivers. In 2019, California legislators passed California Assembly Bill 5 (AB5), a law classifying ride-sharing drivers as employees, not independent contractors, but the state’s voters later reversed that by voting in Uber-sponsored Proposition 22 in November 2020.
On Aug. 20, 2021, Alameda County Superior Court Judge Frank Roesch ruled that two sections of Proposition 22 were unconstitutional and that the measure as a whole was unenforceable. Uber and Lyft announced they would appeal, and Prop 22 remains in effect as the matter winds its way through the courts.