In 2018, Lyft co-founders Logan Green and John Zimmer convened a staff meeting in the cafeteria at the company’s headquarters in San Francisco. There, they explained that they would pay $250 million for Motivate, the owner of New York’s CitiBike bike-sharing program.
But employees have been wanting more. For years, Lyft has been competing with Uber, its much larger ride-sharing rival, which has expanded into food delivery and announced its presence in dozens of countries around the world. Lyft’s employees are clamoring for an ambitious move. Some had hoped executives would announce Lyft’s own global expansion plans, said two former senior employees who spoke on condition of anonymity.
It didn’t happen. The bike-sharing deal is an example of what analysts and three current and former employees say is an overly cautious business strategy that has dogged Lyft since its early days. The company’s decision not to serve food or offer rides outside of North America has proved costly as it recovers from the pandemic, giving Uber a solid advantage and sparking interest in Lyft’s business future doubts.
Last week, in its financial results for the final three months of 2022, Lyft warned that it would be hampered by economic challenges, spooking Wall Street and sending its stock plunging nearly 40% to a low of $10 a share, before A slight rebound week in the year. It is now worth $4.2 billion, compared with $22 billion at its peak.
Lyft did report record revenue of $1.2 billion in its most recent quarter, and a loss of $588 million. But it has yet to prove it can become a profitable business, and its recent financial woes have fueled speculation about whether it could be a takeover target.
“I just looked up ‘crash’ in the dictionary and there was a Lyft sticker there,” said Dan Ives, senior equity analyst at Wedbush Securities. Ives said Lyft’s failure to invest in food delivery was a ” Huge strategic mistake” because it’s still a local brand. As the pandemic eases in 2021, Lyft’s financial incentives to lure drivers back to its platform are “far less aggressive” than Uber’s, he added.
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Lyft said its acquisition of Motivate was part of a so-called micromobility strategy, with more than 2 million people using the app to ride a bike or scooter since 2018. In a statement, the company said it remained confident in its overall business. “With driver supply and ride-sharing demand at the highest level in nearly three years, there is clearly an opportunity to capitalize on the market,” said Lyft spokesman Eric Smith.
Uber, valued at $71 billion, said it expects to be profitable on operating income sometime this year, signaling to investors its business is strengthening. The company said more drivers worldwide used its ride-hailing platform in the most recent quarter than ever before. Uber declined to comment on Lyft’s performance.
Uber made some shrewd — or lucky — bets. It started delivering meals in 2014, but there were doubts that the service would be a success. Then, when pandemic restrictions forced people to stay home, the ride-hailing businesses of both companies shut down almost overnight. Lyft has little choice, but Uber drivers are finding that they can continue to make some money through the app’s delivery service as food orders surge.
When people start traveling again in 2021, demand for rides has skyrocketed, but drivers are less inclined to return to ride-hailing apps. Initially, both companies struggled to meet passenger demand. But Uber recovered faster, both because of its delivery business and because it quickly threw in $250 million in incentives to lure drivers back. Lyft spends less on rewards and delivers rewards later than Uber. Its supply issues linger.
Lyft said Monday that it considered offering food delivery early in the pandemic, but it determined there was less overlap than expected between drivers delivering passengers and drivers wanting to deliver. The company did launch a pilot program called Lyft Delivery in April 2020, which allowed drivers to pick up essentials and products for businesses, in April 2020, but canceled it last month, according to an email reviewed by The New York Times. the item.
Drivers are finally returning to Lyft in large numbers. The company said Tuesday that the increase in the number of drivers on its platform from December to January exceeded any other monthly increase since 2019.
Still, over the past six months, Lyft has paid drivers an average of 19% less hourly base wages than Uber, and Lyft drivers drive about 6 hours less per month than Uber drivers, according to Gridwise, one of the sources. An app to help drivers track them. income.
Uber is also aggressively expanding overseas, entering more than 70 countries. It has clashed with foreign transit services and made mistakes, but its greater size has cushioned the economic blow from the pandemic. Lyft, which only flies passengers in the U.S. and Canada, said it was affected by a slow recovery in travel in West Coast cities.
Before the pandemic, Lyft spent years studying whether to move into other countries, sending executives to Australia, Europe and elsewhere, but ultimately decided the cost was too high, according to two former employees. Even its entry into Canada has stalled, though Lyft says it is planning more expansion there.
Lyft said it was being cautious because the pandemic halted travel shortly after the company could have entered international markets.
Lyft CEO Mr. Green and company president Mr. Zimmer agreed on how Lyft could be an alternative to inefficient public transportation and reduce the need to own a car. Both have continued to emphasize the vision in internal meetings, according to four current and former employees. But some have questioned whether their single-mindedness has hindered Lyft’s ability to expand into other businesses or markets.
Lyft executives also hesitated to make important decisions, three of the employees said. For example, when the challenge of making a living as a gig driver became a hot topic in 2018, Lyft rallied dozens of employees to study the issue.
Options and talking points for improving the driver experience were presented to Mr. Green and Mr. Zimmer to counter the exaggerated claims. But two former senior employees said they dragged their feet in responding to recommendations or implementing changes.
In last week’s financial results, Lyft’s forecast for its next quarter fell well short of investors’ expectations. The company said it expects to post revenue of $975 million and adjusted earnings of $5 million to $15 million, a figure that excludes costs such as taxes and interest. Investors had expected Lyft to post revenue of $1.09 billion and adjusted earnings of $82 million.
“That’s clearly not the level of growth or profitability that we’re targeting or capable of,” Mr. Green said on the earnings call.
Lyft said the lower figure was partly due to price cuts, which it did to stay competitive. High prices drive riders to Uber or other modes of transportation, and the company says lower prices will benefit it in the future.
Employees have been concerned about Lyft’s poor stock performance for months, and some were more shocked by the recent plunge, two current employees said.
Some analysts say Lyft should either merge with another gig company, such as DoorDash, or be acquired by private equity. But broader economic challenges, combined with the volatility and the fact that Lyft stock is unprofitable, will make a deal difficult.
Some investors are waiting for Lyft to make changes this year before hitting the panic button. Executives said on an earnings call that they were considering more cost-cutting measures after laying off 13% of the company’s workforce in the fall.
“We’re neutral right now – they have work to do,” said John Blackledge, an analyst at investment bank Cowen.
Lauren Hirsch Contribution report.
