How Deep is Your Love
We sail into the weekend with another ride hailing initial public offering on the horizon. Uber is preparing to blow Wall Street away with an offer intended to dwarf, if not humiliate, Lyft.
Lyft, meanwhile, has been forced to watch helplessly as its stock price has foundered in Facebook fashion with no promise of a Facebook-like recovery. Uber and Lyft are swimming in the same red ocean. There is nothing but red ink as far as the eye can see.
Uber is NMM (not making money) in 63 markets. Lyft is NMM in two. On the positive side, Uber is "dominant" in 36 of its 63 markets. Lyft is dominant in 0.
Market dominance in ride hailing translates to losing less money. Uber has not shown it can turn a profit. This is exceptionally bad news for Lyft, which isn't dominant in any of its markets and is vulnerable to predatory pricing from Uber.
The growth prospects for either of these companies or their competitors might be different if there were significant swathes of the globe that were not already served by ride hailing competitors. In reality, the list of blue ocean opportunities - markets not yet served by ride hailing service providers - is tiny indeed and includes:
- Luxembourg
- Iceland
- Trinidad & Tobago
- French Guinea
- Suriname
- Cuba
- Yemen
- Mongolia
- Nepal
- Almost all of Southern Africa aside from Tanzania, Kenya, Uganda, Nigeria & Ivory Coast
Uber's acquisition of Careem is the last big growth play for Uber. Uber has a path to expansion via sub-contracting with taxi operators in markets where ride hailing is banned or limited. Lyft, too, might explore this avenue.
The bigger question is whether cities get fed up with the inundation of already crowded urban streets resulting from the addition of ride hailing service providers. New York has opted for limitations on ride hailing licenses and has added congestion charging - to kick in in a few years. To the extent to which ride hailing comes to be recognized for the fact that it is pulling passengers away from public transportation - regulators will be motivated to intervene elsewhere in a similar fashion.
Ride hailing driver compensation - already trending downward - will require greater attention to driver churn by operators and their investors. The bottom line of the ride hailing model is that it is based on a game-the-system model with both drivers and passengers seeking to work the angles to make or save a buck. Seasoned drivers for Uber and Lyft avoid airport runs - undermining the ubiquity necessary to market dominance and share growth.
The game-the-system mentality, though, is toxic to the model. The perfect manifestation of this was Lyft's accusing IPO underwriter Morgan Stanley of selling a "short" offering in advance of the initial offering. In other words, even the underwriters were working the angles.
Lyft and Uber will have you believe they are building platforms with intrinsic value beyond their itinerant drivers and app-based demand generation. The reality is that neither Uber nor Lyft is able to build enduring value on the backs of a service delivered by drivers they don't employ and vehicles they don't own.
The two IPOs highlight the underlying value proposition inherent in creating a networked transportation service. That kind of valuation has been realized by companies like Nauto and Lytx and even Cambridge Mobile Telematics. Uber's and Lyft's inability to collect, aggregate and manage the data potentially collected by the vehicles on their networks renders both stocks nearly worthless. Better to invest in a fleet or taxi operator... actually.
Great review, Roger.? I think the very basic model is flawed. No real value is added. All we needed was taxi-services to have an App. Instead we have thousands of drivers driving around looking for passengers and creating pollution and congestion.?
Confidential
5 年If Lyft can IPO at $24 Billion Dollars. Then Uber can IPO at $120 Billion Dollars. " Big Money in the Big Washing Machine "
Confidential
5 年Uber, Lyft, Didi Chuxing, Ola, Grab, Gett, Yandex, etc, should all get into the Fried Chicken business ... they might actually make a Profit. Lyft warns it may Never make any Money. https://qz.com/1563655/lyft-ipo-filing-shows-a-history-of-losses-and-no-clear-path-to-profitability/ " There's a Sucker born every minute " - PT Barnum
Confidential
5 年Silly Con Valley PlayBook: The Unicorn "Pump & Dump" Aka "Rope a Dope" Investors entering and exiting the seed, series A, B, C, etc, Funding merry-go-round, are making a Killing ... at the expense of lawful Legitimate Competition, and Poor Workers in the Gig Economy serving as Slave Labour. So-called Unicorns, are Not conventional legitimate Profit or Loss making Business Models ... they are in actual fact, MLM Investor Pyramid Ponzi Schemes, annually Burning Billions of Dollars in Investors Money subsidizing COSTS of Products & Services by up to 60%, in order to bankrupt legitimate competition and create an elaborate illusion of a defacto Monopoly, by substituting SCALE as an indicator of GROWTH, rather than real actual PROFITABILITY. It's nothing but a Complex Scam. Ending in Dumping what is essentially an Unprofitable Loss Making Business, by Exiting the Gamble via an IPO on to the Stock Market. I'm surprised people haven't woken up to it yet. Beware of Usury Aficionados. Taking Money Out of the Pockets of hapless Investors and poor Workers, is NOT Value Creation, it is merely the Reallocation of Wealth, from many naive Pockets, into the greedy Pockets of a ruthless few. " A fool and his money, are easily parted " Caveat Emptor