In 2016, Lyft founder John Zimmer famously exalted his vision for the future. He claimed that in just five years, most of Lyft’s rides would be autonomous. Furthermore, he envisions that in 10 years, they will all be. It’s 2019 and life as a Lyft driver has been exciting — and challenging.
John Zimmer depicted utopian scenarios of car ownership as a thing of the past and that everyone will succumb to new technology. This will result, he added, in less pollution, less traffic and less parking spaces. He concluded that, in another five years after, there would be car ‘hotels’ transporting the masses around —some even with bars. A lofty vision indeed- and one that has eliminated Lyft’s biggest hurdle to profitability —the drivers.
“We envision a world where cities feel small again. Where transportation and tech bring people together. Instead of apart. We see the future as – community-driven and it starts with you.” —Lyft.
Three years on, let’s look at where the company is now. How much closer are they to those dreams of everyone relying on ride-hailing companies.
Established in 2012, Lyft has always been the smaller and lesser-known of the two major ridesharing companies in the US. Unlike Uber, its rival who operates in 84 countries with a foothold in most major cities, Lyft only operates in Canada and the US.
In recent years, Lyft has been showing healthy gains in U.S. markets where Uber has stagnated or seen a decline in users. They claim to have had a 22% market share in 2006 and an impressive 39% in 2018. It seems that it will continue to increase further in 2019.
Lyft, in readiness of their IPO, released its financial details for the first time in March. They reported an impressive $2.2 billion in revenue last year. That’s more than double its $1.1 billion in revenue in 2017. Like Uber, however, they have yet to make a profit. To keep its price point competitive, the company is subsidizing most rides. The influx of cash comes from investors who are not in it for the short-term. Many share their 10-year ambitions of having autonomous cars.
So, how is 2019 Unfolding?
Changes in Pay
The biggest concern for Lyft drivers since their IPO is the change in classic Prime Time. Previously, drivers could receive as much as 5x multiplier in an area. They capped this to — a still acceptable— only 3X in 2016. Also, there is a fixed dollar amount ranging from $1 to $4. There does seem to be more of it, and on short rides, you may be ahead by a few cents.
Those 45-minute++ journeys, on the other hand, could hurt your pocketbook. Not so long ago, those rides could give you anything between $30 and $50 —even more. Of course, this was also the time when many passengers think Lyft (and Uber) are robbing them of their money. Remember how high surges could go during New Year’s Eve, a bad storm, or a major sporting event? Now, they’re getting a significantly lower flat rate.
With the declining pay rate and our ever-increasing costs, what we make as Lyft drivers isn’t always enough to make ends meet.
Flat rate surges or pricing isn’t unique to Lyft. Uber has also moved from a multiplier surge to a flat rate surge.
In the rideshare game, we have a term known as a unicorn ride. This means getting a long ride —maybe 60+ miles— at a 3X or even 4X rate. Because it doesn’t happen all the time, it’s such a great feeling for a driver to get one. Unless Lyft finds another way to reward drivers or change their pay rate, longer hauls will continue to be a cause of complaints.
The good news is, you could easily get a ride with a surge by merely being within the New Surge location. It’s way better compared with the old system where you need to receive a request from the area where the Old Surge is. The bad news, however, is that it seems the fixed payout is significantly lower. Furthermore, you won’t make nearly as much on longer trips.
For instance, the area you’re in has a +$2 surge, and you received a 1-hour ride on a 2x surge. How much extra earning do you think you’re going to get? Only $2 plus $2 if the trip goes for just a quarter of a mile.
Rumor has it that Lyft will be fixing the long haul surge rate. But in my opinion, there isn’t much to look forward to. We drivers could be getting less, and Lyft could be getting more with the way things are right now.
In a memo, Lyft communicated their intent on operating mostly autonomous vehicles by 2029. This is definitely less ambitious than the goals they had back in 2016.
The massive $23.4 billion valuation it garnered is because of its strong foothold in the market and an excellent brand reputation. Add to that the belief that self-driving cars are on the verge of becoming mainstream and the company’s future isn’t looking bleak.
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Just how big and how impacting autonomous vehicles will be in 10 years is speculative at best. But current technological advances show they may be close to perfecting the technologies required. A partnership with Waymo and investment from General Motors would help the company produce and supply the vehicles they need to make their autonomous cars a reality.
Unlike Uber, Lyft has done exceedingly well— avoiding scandals that have marred its big competitor. This has given the impression to many drivers and passengers that they are the better choice of the two.
Lyft is generally seen as the ‘nicer’ and “more caring’ company. They have certainly helped bolster that image. The company donates to various causes, resulting in positive publicity for them.
As a driver for both platforms, I often ask my passengers to which platform they like. Many always say that Lyft is a more ethical company. Perception, in this case, is as good as reality. I had the same impression too as I was a Lyft driver for two years before I added Uber to my rideshare business.
Building a Brand
Taking advantage of Uber’s screw-ups might be useful in the short-term. But for long-term growth, they need to boost brand recognition.
Melissa Waters, their chief marketing officer, is responsible for the company’s brand image. She is aware that in many scenarios, price isn’t the only consideration for Lyft drivers and riders. Feeling good and positive about that choice is always a factor in play. She wants to make sure the company follows a set of core values they believe their passengers have.
Lyft knows many of its regular users are travelers. Aligning themselves with a major airline makes logical sense. Every mile a passenger takes with Lyft earns them Delta SkyMiles.
Keeping Lyft Drivers Happy
In 2017, a popular ridesharing blog asked drivers of both platforms which company they prefer. Lyft won by a landslide. Still, some believe there are no real advantages over one or the other. Of course, this is far from a scientific result. It does, however, validate everyone’s perception that Lyft is indeed the better company.
Until drivers are not needed —keeping them driving and happy are keys to the company’s growth. Personally, I feel the love more as a Lyft driver than as an Uber driver. The passengers I get seem to concur with this. And as you know, happier drivers mean happier riders.
Lyft has Greater Cost transparency
Where Lyft has always had the advantage is in the transparency of all costs incurred to the passenger. Their receipts clearly show the duration of the trip and the distance traveled. As a result, riders understand their charges. Lyft also allows companies to set up business accounts, abolishing the need for reimbursements. Riders simply use the said account and justify it —if questioned— later on.
2019 and Beyond
Since Lyft’s IPO, there is a growing concern that they might cut its highest expense — Lyft drivers.
The amount per mile a driver gets is in a steady decline. The fact that drivers have no say —or even knowledge— in any changes in payment makes them wary. Bringing a driver on to the platform is the most expensive aspect, as they need to advertise and entice new drivers to sign up. The company also needs to pay for background checks. It seems it would behoove the company to cut even more meat from the bone for drivers — rideshare drivers have other options.
The Employee Debate
In California, a bill that would transform the gig economy landscape is underway. The proposal would end the debate on whether gig economy workers are employees and not contractors — as what most companies treat them.
The ABC test helps define the relationship between employer and worker. It states:
1. The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.*
2. The person performs work that is outside the usual course of the hiring entity’s business.*
3. The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.*
Many professional jobs from accountant to carpenters to hairdressers are already exempt. Lyft and other companies that take on drivers as contract workers are lobbying against it as much as possible. We should know the result by August or September of this year. If drivers are classed as employees, many changes might happen.
If passed, it could change gig worker status from contractor to employee. This would mean a guaranteed minimum rate. But, what is fair pay for rideshare drivers? Additionally, taxes, social security, and other fees will be taken out of that pay. Furthermore, time off and sick pay will be offered. All these will substantially increase the cost burden of having thousands of drivers on the platform.
Right now, many questions remain unanswered should this bill pass. Do we —drivers— have schedules? Will the company only allow so many drivers on at a time? Must drivers take every ride they get under the new terms of the agreement?
As 90% of drivers are only part-time, how will that work? Also, will they only allow a certain amount of drivers to work for them? NY recently passed a less demanding bill assuring drivers a minimum of $17.22 per hour. This is minimum wage plus an estimation of average cost (fuel, depreciation, etc.).
As the saying goes, the only thing that is inevitable is change. How quickly becoming a Lyft driver has changed in just a short time. If the bill does pass in Califonia, it is a reasonable assessment that other states will follow suit. How do you think Lyft will react?
It certainly appears that autonomous vehicles will become the norm. In fact, Uber has started testing the idea of driverless services. It seems that they’ve been looking at delivering Uber Eats orders via drones.
While these rideshare companies are putting all efforts into autonomous vehicles, I am not sure we’re ready for it. Not everyone is ready to give up driving — or at least have their own driverless car.
Watch this space for any updates!