Even though Lyft entered the market before Uber, today it is lagging far behind. While Uber is worth more than $50 billion and has presence in more than 300 cities, Lyft is worth less than $3 billion and has presence in less than 70 cities. One would assume that network effects should reward the first entrant, but Uber won with its aggressive fund raising strategy, as well as an initial value proposition \u2013\u201ceveryone\u2019s private driver\u201d – that was easier to adopt than your \u201cfriend with a car\u201d with a slightly awkward fist bump.<\/p>\n
Car-sharing is a marketplace oriented business with really strong network effects: the more drivers a platform has, the more users it attracts and vice versa. The questions are: \u00a0if \u00a0Uber is clearly winning the race, can there be a profitable business opportunity for a second player? Can Lyft break the monopoly of network effects in tech that we see in companies like Amazon, Facebook or even Google? Is the market big enough to allow two players to be successful like Apple and Samsung in the smartphone world, or even AVIS and Hertz in the car rental industry?<\/p>\n
Although Uber and Lyft have tried to differentiate from each other, the job to be done is the same, the cost of riding is extremely similar and the benefits for drivers are also quite comparable. But as Uber grows in more than 58 countries, and Lyft remains focused in the US maybe there is an opportunity for the small player to gain market share in strategic cities.<\/p>\n
Lyft is spending $150 million during 2015 to gain new customers, and $50 million to acquire new drivers through both subsidizing rides, and offering bonuses to drivers. In Manhattan for example, Lyft offered carpooling services (Lyft-line) below 97th<\/sup> Street for $ 5 over the summer compared to $ 10 charged by Uber (Uberpool). This strategy was probably proven successful since they are now bringing it to other cities like Boston where rides are $7.<\/p>\n As I talked to several drivers in New York over the summer, a large amount of them work for both platforms, but lately more drivers are willing to use or try Lyft due to the increased amount of customers that the subsidies bring, the bonuses they receive and tips. On the rider side, I took trips that were worth more than $25 and paid only $5, and I now find myself using more Lyft than Uber. The question is, for how long can Lyft do this? And if big pocket Uber will allow this to continue if it starts losing market share in key markets.<\/p>\n I do not believe that Lyft will be able to defeat Uber, but I do think that there is a space for a profitable second player in this market. If Lyft wants to be that player it has no choice but to keep raising venture capital money and keep burning cash to acquire new customers and drivers. Finally, as customers we have the incentive to preserve both companies alive, because as this battle continues, competition will improve service and keep prices down.<\/p>\n","protected":false},"excerpt":{"rendered":" Even though Lyft entered the market before Uber, today it is lagging far behind. While Uber is worth more than $50 billion and has presence in more than 300 cities, Lyft is worth less than $3 billion and has presence […]<\/p>\n","protected":false},"author":152,"featured_media":0,"comment_status":"open","ping_status":"closed","template":"","categories":[],"class_list":["post-1012","hck-submission","type-hck-submission","status-publish","hentry"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-digit\/assignment\/competing-with-network-effects\/","yoast_head":"\n