Have you ever seen HBO’s tech startup based American comedy television series named “Silicon Valley“? The series’ opening credits of the show have made a profound impression on its viewers and tech enthusiasts.
If you will see it, you will know how wittily and strategically they have created different tech giant companies’ logos and animations regarding important events that happened across the silicon valley. But it was those 2 seconds in the opening credits that caught my attention and from that, I came to know about “Lyft”.
The creators have displayed two hot air balloons named Uber and Lyft colliding with each other to convey how eventually new ridesharing company Lyft takes over Uber and establishes itself as a tough competitor of Uber with its similar but strategically diverse business model.
The genesis of this new car-sharing company in silicon valley have generated many curious eyes who want to know about the “Lyft Business Model”.
Since its advent in the ridesharing economy, Lyft has managed to raise $4.9 billion in the 20 funding rounds. Also, Lyft announced Its IPO in March 2019 and hit the stock market.
In this article, we are going to know the ins and outs of Lyft business structure and how Lyft’s community-based platform competes with Uber’s more professional approach.
How Does Lyft Work? A Quick Look
Lyft is a Carpooling marketplace that aggregates riders with drivers. Users can search for a nearby taxi through their app and book the ride for commuting through Point A to B. On the other side, the Lyft driver gets a notification when a user books a cab. According to convenience and availability, the nearby community drivers can accept or decline the ride.
Lyft riders can select from the pool of different modes like Lyft, Lyft Lux, Shared Saver, Shared and book a trusted and highly rated driver. This aggregator model allows the rider to track, rate and pay the driver through the app so there won’t be any hassle of change.
Lyft Business Model Canvas
Here is the Lyft business model analysis from which you can learn about Lyft’s goal, its value proposition, intent, revenue streams and other aspects of its business plan.
Lyft: Value Proposition(For Drivers & Customers)
Every business can thrive in the competitive market by addressing the problems of its stakeholders. Like other ride sharing business models, Lyft’s stakeholders are riders and Lyft drivers.
Lyft’s business model emphasis on solving the commuting problem occurs in the daily life of people. It does that in a way that it benefits not only cab users but the drivers as well. Let’s check out the target market of Lyft.
How Does Lyft Provide value To Customers?
- As Lyft’s tagline says “ Find a New Friend Everyday” / “Your Friend with a Car”, the rider feels more comfortable and safe with the Lyft drivers.
- Comparatively lower fares than traditional cab rides.
- Ride options for customers’ every need:
- Lyft standard, Shared, Shared saver for economical rides
- Lux and Lux black for comfortable and luxurious rides
- Lux XL and Lux Black XL for accommodating more riders
Apart from that, Lyft also facilitates parents who want to commute with their children with their car seat options. However, this option is currently available only in New york city. People with accessibility needs can book a ride with a wheelchair too.
- Under passenger perks and rewards programs, users can earn free rides or some credits. It is beneficial for both referred rider and referring rider.
- In-app payments make it easy for customers to pay the fare from the app so there is no need for worrying about cash payment or changing problems.
How Does Lyft Provide Value to Drivers?
Drivers are an inseparable part of any ridesharing company. They are the heart of the rideshare business. So, to have an ideal business model that enforces driver’s trust is necessary. With the handsome rewards and perks, drivers would love to drive for the company that allows flexibility and freedom. Lyft has also come up with some new benefits and Lyft rewards for drivers. Here’s how Lyft adds value to the driver’s life.
- Those who love to drive could make new friends on their rides.
- Flexible working model lets drivers work at their convenience.
- The faster payment system attracts more drivers to work with Lyft.
- Apart from the trip driver takes, they could also earn from tips and bonuses for going the extra mile.
- Lyft helps its drivers to earn more by suggesting areas where they could get more customers.
- The company proffer insurance policy for drivers which covers liability, injuries, and other damages to the vehicle.
Lyft Business Revenue Model
So how does Lyft make money you might ask. Well, the primary source of Lyft’s revenue generation is their riders.
On every ride completion, Lyft gets the payments from the riders which are called Booking. By cutting its 20% of commission on every payment Lyft gives the remaining share to the drivers. From that 20% fare, the city takes a sales tax of 8.875 % and the Black Car Fund takes a fee of 2.5 %.
Sometimes Lyft implements surge pricing when the demand is high in a particular area. Lyft encourages drivers by providing heat maps of most demand areas and time. So that Lyft could encash more rides and therefore more revenue.
In addition to this, Lyft has started the Express Drive program. It connects drivers who need access to a car with third-party rental car companies. Lyft aids car rental transactions between these companies and drivers.
Revenue model of Lyft also includes a newly started self-driving platform that provides bikes and scooters services for the last-mile commute. To maximize its revenue, the company has partnered with other companies Like Aptive and Waymo to provide autonomous driving experience to the riders.
Here we have curated a list of updated year wise revenue generation of the Lyft. Despite its progressive revenue generation over the years, Lyft hasn’t managed to generate a net profit and like its arch-rival Uber, the company is losing a big chunk of money.
How Lyft Business Model Differs From the Uber Business Model?
Those who want to invest in the Ride sharing business must know the difference between the Uber business model and the Lyft business model.
While at its core, Uber and Lyft operate on the same model of matching riders with the nearby drivers, both ride hailing companies differ in their operations.
From their branding to strategic implementation and business models differ with each other. If we talk about branding perspective Uber has a more professional feel. The company had started with Black car services. On the flip side, Lyft jumped into a consumer market with the Carpooling concept which gives it a more casual and friendly feel.
- Uber Operates in more than 70 countries and dominates at the Global level.
- It has an extensive range of services that includes food delivery service and other services.
- The company has joined hands with many companies to provide autonomous rides. Also, They have ambitious future plans that include Flying taxis called “Uber Elevate”
- Uber values include expanding access, delivering reliability, providing choice Aligning needs, and being upfront
- Lyft operates in the USA and Canada and targets the domestic market.
- The company has only focussed on-demand taxi and carpooling services. The company has also initiated its self-driving services for last-mile travel.
- The ride-hailing giant has collaborated with autonomous vehicle providers.
- Lyft values things like culture and values, multimodal transportation, and brand authenticity
Is Lyft’s Business Model Sustainable?
The problem with the ride-sharing market is its low entry barrier. It can be problematic for Uber, Lyft and other big ride-hailing companies if any other local ride sharing startup comes up. The reason is, for a new business seeker, it is easy to start Lyft like an app in their city. All they have to do is copy the business model of Lyft, build an app, proffer handsome commission to the drivers and set the low fare for the ride users.
Lyft could face similar competition as Uber faced when Lyft kick-started its ride-sharing business and took a competitive advantage of Uber’s downfall in 2017. It’s up to Lyft’s future strategy of how the company attracts new riders and drivers. Amazon marketplace has been successful in retaining customers and small businesses over the years by implementing a customer-first approach. Despite multiple competitors, Amazon has been able to compete with its competitors due to its sustainable business model.
As of 2019, Lyft has seen a fair growth in its riders and average revenue per driver. It remains to be seen whether the pace it has generated would be maintained through its business model or not.
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