Lyft might once again drop its shared rides offering, just one of several changes the company’s newly appointed CEO could make in a bid to focus on its core ride-hailing business and become profitable.

David Risher, who is taking over as Lyft’s CEO in mid-April, told TechCrunch in a wide ranging interview that other features may also be axed. For instance, the Wait & See feature, which allows riders in certain regions to pay a lower fare if they wait for the best-located driver, may end, he said.

“It’s possible that maybe we don’t need both of those anymore and that we can focus all our resources on doing a fewer number of things better,” Risher, the former Amazon executive, told TechCrunch. “Maybe it’s time for us to say the shared rides were great for a time, but it’s time to let that go.”

Lyft, co-founded by Logan Green and John Zimmer, launched shared rides in 2014 on a small scale before expanding the service. Uber launched Uber Pool the same year. Both companies dropped their carpooling services during the pandemic before reinstating new versions later. For Uber and Lyft, carpooling has historically been a money pit, a loss-generating ploy to attract riders with cheap fares.

While nothing is yet decided, the potential move is an example of how Lyft’s new management hopes to stem its losses and, eventually, pry some market share back from its main competitor and oft-described big brother Uber. Instead of adding new products like delivery or even selling the company (both of which Risher says aren’t going to happen), Lyft is going back to basics.

“The first order of business here is to focus on the basics of rideshare,” Risher said. “The reason I say that is because in this type of marketplace where you have competitors, you can’t be losing share to the other guy if you want to be around long term. And I think this duopoly is a good thing. In so many other markets, you really want, as a customer, some choice, and I think as a driver, you want choice. It keeps us honest and allows us to play off one another a bit.”

Uber, already a larger company, has taken more U.S. market share from Lyft in recent years, through an all-of-the-above approach that includes food delivery and even transit services. Today Uber’s market share has grown from 62% at the start of 2020 to about 74% today, versus Lyft’s 26%, according to YipitData.

Another study from Similarweb shows that Uber leads in monthly active users (MAUs), and that lead has grown over time. In February 2023 alone, Uber had 9.4 million MAUs, a 62% lead over Lyft’s MAU of 5.8 million. This time last year, Uber only had a 48% advantage over Lyft. Similarweb’s data also shows that Uber outranks Lyft on both Apple’s and Google’s app stores, and that over the past 12 months, its Android downloads were 22% higher than Lyft’s.

Uber has taken a different approach to Lyft in pursuit of profits. While Lyft has stuck with ride-hailing, Uber has expanded into delivery through its UberEats platform and added a a slew of new products as it aims to own to attract users, but also create a closed business loop wherein each product feeds customers back into other Uber channels.

“We are actively cross-selling food delivery consumers into grocery, grocery consumers into alcohol, and actually back now to mobility,” said Uber CEO Dara Khosrowshahi during the company’s third quarter 2022 earnings call held November 1. “All of the cross-sell that we have across the platform continues to increase, drive new customers and drive retention, as well.”

Risher said Lyft won’t try to compete with Uber by introducing a delivery product to the app, in part because he doesn’t consider delivery to be either a customer or driver-driven decision.

“From a driver’s perspective, they’re now shuttling in their mind between picking up a person versus picking up a pizza,” said Risher. “And when I pick up a pizza, I have to double park at the restaurant with seven other people, then I get a ticket once every couple of weeks, then I gotta get in my car again and drive, then get out and ring the doorbell. It’s a very different cycle than, ‘I’m picking people up and I’m just transporting them.’”

He also said riders might not want to be in a car that just dropped off a couple of pizzas.

The first order of business

“I think for a lot of people, Lyft has gone from top of mind to a little bit on the side, so it’s our job to remind people we exist and really give them a great experience,” said Risher.

That might mean ensuring Lyft doesn’t charge more than the competition and that its drivers pick up and drop off customers on time. In the past, Lyft was an attractive option because it offered cheaper rides than Uber. Now, after the post-COVID driver shortage, Lyft’s average price per mile is on par with Uber’s, according to more research from YipitData.

Risher didn’t say if Lyft will cut its workforce in an effort to rein in costs. However, CFO Elaine Paul hinted at taking such measures during the company’s fourth quarter 2022 earnings call. Paul also suggested Lyft shift to hiring workers outside the U.S. who are less likely to expect equity as part of compensation.

“I don’t think we’ve given riders or bikers enough of a good reason to come and try us out on ride-share, as an example,” he said, noting that he is an avid cyclist. “If we have both of these ways for people to get around, how can they reinforce each other, because right now they’re a little too parallel.”

Lyft currently offers the Lyft Pink membership program that provide riders with ride-hail perks like free priority pickup upgrades and relaxed cancellations, as well as bike and scooter discounts. The membership also includes free Grubhub+ for a year and SIXT car rental upgrades, which represent a half-hearted attempt to capture more of the transportation market through partnerships.

Analysts are still wary on Lyft’s recovery

Lyft went public in March 2019 at a value of $24 billion. Today, Lyft’s market capitalization is around $3.35 billion. Uber’s market cap is $60.44 billion. Investors initially reacted favorably to Risher’s appointment, pushing its share price to $10.14 immediately following the announcement. But the positive reaction has been short-lived.  Lyft’s share price has fallen 11.4% from Tuesday’s high to close Wednesday at $8.98.

Tom White, senior research analyst at D.A. Davidson, told TechCrunch he remains neutral on the company with a $12.50 price target.

“We’ll admit the news came as somewhat of a surprise to us, but perhaps it shouldn’t have given the relative underperformance of LYFT shares and in Lyft’s core ridesharing business in recent quarters,” said White.

Lyft’s Q1 2023 revenue outlook remained unchanged by Risher’s appointment, but analysts recall that Lyft’s target ($975 million) was lower than what they had expected ($1.09 billion).

Lyft attributed the reduced outlook to colder weather, which leads to fewer ride-hail rides, shorter trips and a major dip in micromobility usage. Since Lyft is only active in North America, the company lacks the ability to balance poor ridership in one wintry part of the world with increase usage in other, warmer places.

Although Lyft’s strategy so far lacks the dazzle of shiny new products that might directly compete with Uber, Risher has some pretty good incentives to turn the company around (that is, aside from the pride of a job well done).

“As part of his equity compensation, [new CEO John Risher] received 12.25M performance-based restricted stock units, broken into nine tranches, each vesting separately at LYFT price hurdles from $15.00 to $80.00,” said Ben Silverman, director of research at investment research management firm VerityData. “The vesting schedule is vastly different from the founders’ awards received by Logan [Green] and [John] Zimmer in 2021 and 2022 which only vest if LYFT hits or exceeds $100.00. Clearly, that aspirational view has been muted. Regardless, Risher is tasked with a massive turnaround and if fully successful, can earn $980M.”

Lyft might drop shared rides, stay focused on basics under new CEO by Rebecca Bellan originally published on TechCrunch

https://techcrunch.com/2023/03/29/lyft-might-drop-shared-rides-stay-focused-on-basics-under-new-ceo/