The valuation difference between Uber & Lyft is staggering. Based only on brand recognition and valuation Lyft seems like the better investment today. Lyft's biggest risk is probably Uber's ability to withstand losses that would kill almost any other company but Lyft has refused to die. They might be the surprise leader out of those two companies 10 years from now. Unless Uber has made great gains in their profitability they seem likely to be messy on the public markets which will lead to all kinds of problems.

You can't forget the difference in scale. Lyft is only in USA, while Uber is a global company. For them to enter Europe/Asia now, would mean tremendous investment.

Tremendous investment towards very uncertain results. Asia in particular -- what exactly is the point of investing in Asia? Uber got kicked out of China, and besides Japan, what other market is really worth investing in there for a company that constantly struggles with unit margins?

I think I agree that Lyft is the better opportunity right now to Uber based on valuations -- while Lyft is clearly the less valuable company, it's hard for me to believe that it's 10x less valuable. 5x? Sure. But that makes Lyft twice as good an opportunity as Uber.

Unfortunately, I think that both companies are most likely doomed. Uber almost certainly, Lyft maybe a little less certainly. There really isn't much sign that there's a $7B business in ride sharing, much less a $70B business.

I did some quick math on GDP numbers by country, just making the very rough (and I'm sure incorrect) assumption that Uber will take a similar percent of each countries total spending.

I originally wanted to argue against you, by saying that Asia has some very large and fast growing non-China/Japan countries... but I'm not sure the data shows that. US+EU is $35T total GDP. The largest non-China/Japan Asian economies, India+Indonesia+South Korea+Taiwan+Thailand+Hong Kong+Phillipines+Malaysia is ~$7T[1]. Is it worth all the risk and effort to add only 20% of your potential business?

Maybe, and those countries do have higher GDP growth rates[2]. But given the small market sizes, difference in laws, and substantial local competitors (especially Grab), it doesn't seem like being in Asia should increase Uber's worth by a large multiple, relative to Lyft. That said, if being in Asia is responsible for 20% of Uber's valuation, that is still a gigantic $14B, larger than many fortune 500 companies.

[1]-https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomi...

[2] https://en.wikipedia.org/wiki/List_of_countries_by_real_GDP_...

There are probably a few large markets in Asia: China, India, and Indonesia. The rest don't have as many human beings as these 3 countries.

Both Go-Jek (Indonesia) and Grab have raised huge capital in the last 5 years or so.

Go-Jek seems to be the leader in Indonesia as they've also expanded their capability to food delivery, document delivery, payment gateway, etc (they're becoming more like WeChat minus the chatting/social network aspect)

I have my doubt that Uber in Indonesian will provide significant return to HQ. Uber currently is in 3rd place after Go-Jek and Grab.

Just going by GDP is misleading. Asia has far higher population densities and lower rates of personal car ownership. As those countries grow, there's a real chance for a substantial part of the new middle class to only have ever experienced ride sharing coupled with public transit as opposed to buying their own vehicle.

I beg to differ here. Once you get the scale like Uber, and you don't have to spend billions on marketing, this is a very high margin business.

Minimal costs to maintain infrastructure and 20% cut on millions of ride's a day.

The only reason Uber was struggling is because it wanted total global domination. It was a land grab, and they played it quite well. Failed in China, but succeeded in quite large portion of the globe.

This is a very 2015-era comment. We've seen a lot of evidence over the last year-and-a-half that it's just not true that Uber's only expenditures are on expansion.

I think that this is the reality:

1. There are lots of reasons why customers may not take an Uber. They could take a Lyft, they could take their own car, they could take public transportation, they could take a taxi, and they could in many cases just not go out or substitute a closer destination.

2. Uber achieves high ride volumes in the face of #1 by heavily subsidizing both drivers and passengers, even in the case of relatively mature markets. This drives their profit margins down to extremely thin levels, or in fact negative.

3. Their proposed technological solutions to their margin problem have either not been broadly popular (Uber Pool) or have major roadblocks to even existing (self-driving cars).

4. Their proposed business model solution to their margin problem (being a logistics company) have the problem that nobody wants to be their customer.

5. All of the above are true even in the developed world, where a ride might average $15 and Uber's cut before subsidies might average $3. All of their expansion opportunities now (and in the last few couple of years) are in areas where a ride might average $5 and Uber's cut before subsidies might average $1 (or worse), making it harder and harder to recover the relatively fixed costs of expansion.

6. There is obviously a profitable business in being a taxi company. It's just not a $70B business, and indeed I'm not sure it's a $7B business.

My only Uber pool experience was when in San Francisco the whole group I was with would all request an uber pool for two people and the people who didn't get the same driver would quit. We accordingly were using it to get cheaper rides that was the exact same experience as a normal uber

Lyft could at least expand into Canada, but it looks like even there Uber is running into regulatory issues. They've been wise to let Kalanick's crew run headlong and act as the guinea pigs for the differences in local laws and market conditions around the world.

It's wise for a company in an industry with strong network effects to purposely give up first mover advantage?

That's interesting - these are companies that I would consider to have minimal network effect. There isn't much of a barrier to both drivers and users installing and using both services. It seems like a pretty workable idea to let Uner take the first-mover regulatory risk then follow them into the market and clean up.

> these are companies that I would consider to have minimal network effect

Gett raised $100 million [1], designed a decent app and put up a bunch of billboards all over Manhattan. I tried to use it for over a month. The drivers were friendly, the cars were wonderful and the rates were great. But the waits were like 20 minutes. Haven't used it since.

[1] https://www.bloomberg.com/news/articles/2016-11-30/uber-riva...

Sounds like a bad launch (lots of marketing - leading to lots of users - when you don't have the drivers to handle it) and pretty easy problem to solve.

Ride-sharing no more has strong network effects than Doritos do.

Which is to say: Is it an advantage for Doritos that they have tons of brand recognition and a large customer base? Sure! They get economies of scale, and it is easy for them to convince retailers to carry their product. In turn, their customers know that they can get Doritos anywhere, and that's an advantage for their customers.

But no reasonable person would regard Doritos as a network-effect business.

Passengers for Uber do not make the service better for other passengers. In fact, they make it worse, by driving surge multipliers. If another business provides a rival service to Uber, passengers experience no negatives for switching, the way they do to a brand new social network, where their friends aren't.

The existence of Uber's brand, and the demand that Uber experiences, is of course an advantage for Uber. Obviously, it is a good thing for Uber that they have passengers, and can sell their services. But that's not a network effect -- it's just a regular old "advantage of being big and having a brand."

I'm going to have to disagree.

1. Drivers want to have passengers close by for pickup. Passengers want to have drivers close by for pickup. The more drivers, the quicker passengers will get picked up, the more passengers will use the service, and the more drivers will use the service.

2. In addition, UberPool/Lift Line have obvious and strong network effects. Sharing a ride is only possible with a large number of users. The more rides that can be shared, the cheaper the rides can be.

In both these ways, additional passengers do add value to other passengers.

These services are really just curated marketplaces of drivers and passengers. Uber has its driver/passenger marketplace, Lyft has its marketplace. It's tough to replicate the power of these marketplaces, just as its tough to replicate the marketplace power of Craigslist or eBay.

You need a substantial amount of both buyers and sellers for the service to be worth anything. If Doritos was not yet in Canada, they could provide value immediately by selling Doritos in one 7/11 shop, no problem. For Uber to expand to Canada, they would need a minimum number of drivers and passengers in a given geographic area.

I think you're confusing economies of scale with network effects.

For example, a hotel chain is more valuable if it has a global presence because it can leverage that to create customer loyalty. That is not a network effect. To the consumer, it does not matter how many people use those hotels. They could be completely empty for all they care, they just want a room for a competitive rate.

More efficiency through higher utilization (more passengers lowers the cost of pooled rides) is a classic example of economy of scale.

There are counter-examples to your "Uber expand to Canada" argument. For instance, a mobile provider is not going to be very successful in a market until they have coverage across the area of that market. Nobody would say that a mobile provider has a network effect because they have invested in build-out.

Rideshare providers experience both network effects and economies of scale in their mature markets.

1) Economies of scale: You hire an ops team of 10 people, they manage a city of 10k riders, to get to 50k drivers (5x), you only need to add 5 ops people to manage the city (1.5x).

2) Network Effects: A city starts with 10k drivers. Wait times on average are 10 minutes for a rider, and during rush wait times grow to 25 minutes (less supply elasticity), and the average time from hail to pickup is 12 minutes (IE, app blings the driver, and they are 2 miles away from rider, takes them 12 minutes to drive to rider), and the total pickup loop is hail -> 12 minutes to pickup (unpaid) -> 2 minutes waiting for ride (unpaid) -> 12 minutes on ride, so ~50% of a driver's time on a trip is unpaid. The city grows 5x (50k drivers). Now, average wait time is 3 minutes, and during rush, the average rider wait time is 5 minutes (more supply elasticity), and the average time from hail to pickup goes from 12 minutes to 4 minutes, while the wait time and trip time stay the same, so now the driver is unpaid for only ~20% of a trip. As the percent of time that a "driver is being paid" goes up, the ridesharing fares can go down, to attract more riders, until a sort of equilibrium is reached. The benefit to the consumer of more drivers is lower wait times and lower fares (because you're paying for less driver 'non productive time').

1. Chip-sellers want to have chip-eaters to purchase from them. Chip-eaters want to have chips of known characteristics readily available to purchase. The more chip-sellers of Doritos, the easier it is for chip-eaters to reliably get Doritos, and the more chip-eaters will become Doritos customers, which in turn incents more chip-sellers to carry Doritos.

And, I mean, that's true. It really is an advantage. But it is again, obviously absurd to describe Doritos as having a network effect. A network effect means a scale advantage over-and-above the effect that is enjoyed by everyone with a big brand and built in demand.

2. Uber Pool and Lyft Line have a genuine network effect, that's true. But as far as I can tell, they're just not compelling products.

Many drivers bypass the network effect risk by running both Uber and Lyft apps simultaneously. If a driver prefers Lyft but doesn't get frequent riders with Lyft, he or she can still get some riders.

A rider can do the same by attempting to get a ride with their preferred app, then the dominant one. It's annoying, but surely possible.

How many Duck Duck Go users say "I search with the default search, don't find what I want. Then I do !g and I find what I'm looking for."

They're still making the most of the non-dominant platform.

As long as "network" is defined as "single-city network" - sure. But being the best ride sharing network in SF does not guarantee you Beijing or Moscow or Barcelona.

Depends if the local network is even feasible for a Silicon Valley company to enter.

Would be interesting to know if revenues and profits match that valuation at the same 10x coefficient.

Uber seems to be in 581 cities [1] while Lyft in 200 [2]. So this is 3x difference.

However, Uber is more global, therefore has much more large cities around the globe. It wouldn't be unreasonable to assume that on average cities are 2-3x larger.

This alone could justify valuation gap. I would also assume that because of global presence, Uber has higher usage due to travellers.

[1] http://uberestimator.com/cities [2] http://www.theverge.com/2017/1/25/14383370/lyft-expansion-ne...

Agreed, but from financial perspective the distinction between "profitable cities" and "subsidized cities" is important. As UberChina experience shows, the expansion (to 100 cities, no less https://www.cnet.com/news/uber-pledges-to-expand-to-100-more... ) is costly and sometimes turns out to be never sustainable.

Yes but Uber already lost in China.

Lyfts biggest problem is the media's tendency to refer to the industry as Uber. Kind of like search is to Google, and wiping noses is to Kleenex.

related: http://english.stackexchange.com/questions/7235/what-is-a-wo...

glad to know that there are so many terms for the phenomenon.

They are both private, so its academic, you cannot invest. If the future of ride sharing is electric self driving, buy Tesla or Google (or Apple, their car cannot be too far off).

GM has a large stake in lyft. So in theory you could invest in GM...

A good time for lyft to take advantage of all of ubers bad press. It seems pretty clear that ride-sharing is here to stay but uber may not be.

Uber vs Lyft sort of reminds me of the old Digg vs Reddit rivalry.

Digg had all of the attention (and marketshare), got courted with a few acquisition offers and ends up flaming out...

And in the background is Reddit, just plugging away, doing what it does best and long term, ends up being more influential.

Uber hasn't had any scandals that really impact the rider experience, though. They certainly always could ruin their product with useless features, but so far they haven't.

It's so easy to switch apps, and most drivers have both, so some people (at least me) will switch just because of the bad press, on principle.

I already did that. Wait time is same and Lyft sometimes comes out to be cheaper. Uber doesn't have any competitive advantage in my view. Also their recent sexual discrimination, Waymo vs Uber case and not applying licence in California speaks volumes that playing dirty is in the DNA.

Uber still seems to have lower prices than Lyft (I'm in NYC), and unlike Lyft will give me the exact price rather than a price range on shared rides. That's why I still use Uber.

Is it just me or sometimes showing that you're not trying so hard to shove down unqualified, opinionated product is better than such marketing?

If Uber goes away, it'd be the next TiVo

How pronounced do y'all think the capital vacuum effect is? Do these constant and large raises by Uber/Lyft have a meaningful effect on other ventures getting funded?

I'd think of it from the inverse perspective. If they weren't continuing to be funded, with the preponderance of opinion pieces on their questionable unit economics, then we'd certainly have a negative effect on overall fundraising sentiment.

There's a recent NPR podcast interviewing John Zimmer, one of the Lyft founders: http://www.npr.org/series/490248027/how-i-built-this

Sounded like he's a pretty straight person. I liked it.

Uber has raised $2B and is valued at $7.5B. I guess that is ok. At such a low multiple, does that imply employees are getting diluted more than normal?

You mean Lyft.

What does this make the runway for Lyft?

Thanks. We changed the URL from https://www.ft.com/content/c5a5eb26-ab85-39c7-9dcf-2bf825c2f....

To mods: it would be great if paywalled content was marked as such as part of the title, similar to [video] etc. It would have saved users a bunch clicks.

I've edited the title to reflect that. Thanks for your feedback!

Click on the "Web" link next to the story. Will take you to Google and from there is free

No it still didn't work for me. I think I burst out their free article quota for the month.

Try the google cache version. It usually works for me on ft.

https://webcache.googleusercontent.com/search?q=cache:XCaMdJ...

Open in incognito mode...

If you only read content that's given to you for free, you'll only learn things that someone else has paid to show you.

I'm already subscribed to paid sources, Economist for example.

Uber has made some tremendous progress towards offering self-driving cars, which completely changes the economics of ride sharing.

Lyft might be quietly making moves in this direction too, but I'd worry about their ability to stay competitive without an aggressive self-driving initiative.

A ton of companies are working on self-driving cars, including many companies that are:

a. Bigger than Uber.

b. Have actual profitable businesses that they can use to fund their research.

I have never seen any kind of evidence that Uber will either be the first to market with true self-driving cars, or that their self-driving cars will be superior in kind to their competitors. The closest thing to evidence that I've ever seen anyone provide that Uber self-driving cars are going to have any advantages to their many rivals is "this is an existential issue to Uber."

Companies fail all the time. This is pretty strong evidence that "existential problems" are not guaranteed to be solvable ones.

Evidence: Uber is already deploying self driving cars in multiple cities as part of the car sharing network.

And Tesla is already deploying self driving cars in far larger numbers of cities as part of the "own a goddamn Tesla" network.

We have ample evidence that Uber's self-driving cars require human intervention orders of magnitude more frequently than Waymo's. The fact that they're using human-driven cars with self-driving assist in a vaguely commercial manner is a marketing tactic, not a statement of technological proficiency.

Could you link me to that ample evidence you speak of?

On-demand car sharing is the future, making Tesla's consumer car ownership model outdated. Uber is 5-7 years ahead of Tesla on the operations side of managing and deploying a fleet.

It's way easier for Tesla to start an self driving fleet with an App than Uber to get into car manufacturing.

Lyft partners with GM that acquired Cruise and their tech is solid. They are making cars will all the sensors built in, not add-ons like Uber.

Also Uber is losing a shit ton of money. Tesla is not profitable but doesn't bleed that much money.

Depending on how Waymo vs Uber goes, Uber may have to shut down their self driving car program temporarily. Stealing 40,000 files is ridiculous.

Add that to fact that they didn't get a proper licence so they don't have to report crashes and their self driving car crashed pretty bad.

Uber is a risky bet.

Those are interesting points! Regarding autonomous car technology, since there's so many people working on it, it seems like it may get commoditized soon. If that's the case, being an OEM that supplies the car sharing networks seems like a low margin business, owning the customer relationship is likely to be more profitable. the operational chops to run an efficient fleet might be in shorter supply...

right, uber might have to shutdown its autonomous car program, or it may just settle with google and move on with life...

Uber has a proper license to run in sf again

Uber is absolutely a risky bet. But if they succeed, they may eclipse the car ownership market and get 10x bigger

Tesla can as easily sell to people who manage fleets as individual owners.

They can, but unclear how good the margins are, if manufacturing becomes commoditized since so many players are investing in it. Lions share of profit will likely go to whomever owns the customer relationship w consumers

The first company to provide a total and credible alternative to a human driver will probably capture most of the market. There is little reason to believe this will happen precisely simultaneously. Even a relatively short lead could be a massive advantage.

Also arguably the company providing the contact with the customer is more of a commodity. Certainly its the easiest aspect to replace. 100 companies could handle that tomorrow with existing tech for example. I can imagine people using a service that shops a bunch of car services and lets you connect with any of them.

Also, tsla is neither bigger than uber nor profitable... so it doesn't fall into the categories you brought up earlier

GM, owners of cruise.ai, are investors in Lyft. It seems likely that relationship will be used to help both companies move towards an autonomous car future.

All that self driving progress Uber made is going to be wiped out by Google's lawsuit.

They'll probably settle and move on with life

I'm not sure that Waymo's lawsuit is the existential threat to Uber's self-driving program that other people think it is.

But if we grant for a moment the premise that the lawsuit could substantially set back Uber's program if it is won, and that it has a decent chance of winning, then what is the incentive for Google to settle? Uber doesn't just get to decide to settle unilaterally.

If we don't grant that premise, what is our basis for believing that the premise is untrue? Personally, I don't claim to really understand the ins and outs of these kinds of lawsuits, and am comfortably agnostic.

One reason for settlement would be a partnership.

Yeah, but Google doesn't need Uber. Google has the self driving tech (clearly), has the reach (Google Maps on Android and iOS). Uber? Ain't nobody need Uber.

That's a really interesting point! Other complexity in this business is the operational nightmare of efficiently managing a fleet, but if there's one company that has the tech chops to make this happen fast, it's Google.

Not a bad point, but Uber has market share. If you brow beat them into a partnership on favorable terms it would be quite useful.

Ehh, just strike a deal with Apple to share revenue if they ban Uber from the app store. Where's Uber going if they're not on the Play or App store?

That would be amazing if Google just added in Uber's entire business as a feature into Maps.

Since Uber is already in there [1], Google just needs to push out an app update that swaps the copy to "Waymo". Boom. A string change, and Uber's business model goes poof.

Was mighty kind of Uber and its investors to prove out the business model for Google.

[1] https://newsroom.uber.com/googlemaps/