throwaway434232

> they will both sooner or later have to reach break-even; neither will run at a loss forever.

This. Subsidies don't scale. When you're company does relatively few rides, you can afford to subsidize rides on the order of dollars. The more rides you do however means can only subsidize rides less and less until it has a negligible effect on a rider's decision to switch providers. At that scale, all companies will start to move away from subsidies.

Subsidies can't buy the same amount of market share at scale without losses growing linearly, which is unacceptable to investors. Subsidies will decline and should eventually disappear in mature markets even with fierce competition. Heavy subsidies really only make sense in immature markets where there is a land grab.

They are growing revenue faster than their losses and they are profitable in mature markets. That sounds like a fundamentally sound business to me. The cognitive dissonance you're suffering from is the inability to believe that investors will take on losses on the order of a billions of dollars to build a profitable business. Millions of dollars are okay, but changing millions to billions and people are like "that money has to run out eventually". That's not how investors operate. If the opportunity is on the order of billions of dollars as well (maybe trillions), investments of billions of dollars isn't that big in the grand scheme of things. What matters is that the size of the opportunity is large and that revenue grows faster than losses. So long as those two things are true, there will be no lack of investors willing to pony up the money to be on that gravy train.

Uber is apparently already profitable in the US. Does anyone know if Lyft is? If it is not, then that would suggest that Lyft is more guilty than Uber of subsidizing rides in order to win market share.

    2016 numbers:

    Lyft Revenue: $700 million
    Lyft Losses: $600 million
    Uber Revenue: $6 billion
    Uber Losses: $2.8 billion

The ratio of revenue to losses suggest that Uber is almost twice as efficient as Lyft, and Uber's losses are probably further compounded as it includes many more future investments such as international markets that aren't yet as mature as the US market, and products/services that for which Lyft has no comparable offering like UberRush and UberEats. Lyft also doesn't have any investment in self-driving cars that I'm aware of.