What's your business model?

46460

How does Lyft make money?

While similar to Uber, Lyft is a totally different animal

Innovation series by Faith Merino
May 16, 2014 | Comments
Short URL: http://vator.tv/n/3700

The Lyft/Uber competition is heating up. Just one month after Lyft raised a $250 million round of funding that puts its total just above Uber’s, Uber is now reportedly raising a round of funding at a $10 billion valuation. That’s after Uber urged Lyft drivers to “shave the ‘stache” and come drive for Uber. And earlier this month, Uber offered $500 to any driver of a rival car-sharing service to come try out UberX.

Lyft is much smaller than Uber, but it’s reportedly growing at a much faster rate. But how does it make money?

Lyft has a pretty interesting business model. In most of the markets in which it operates, it runs on “donations.” As in, payment optional. Nevertheless, Lyft drivers are guaranteed $15 an hour (in Los Angeles, at least), and can make as much as $35 or $40 an hour. Lyft takes a 20% cut of each transaction, leaving the other 80% to the driver.

From its humble days as Zimride (one of the very first companies I covered for VatorNews! Aw!), Lyft now operates in 60 U.S. cities—24 of which were added in a single day last month. All told, it now operates in 100 cities worldwide.

While the company hasn’t released hard numbers in terms of revenue, it did reveal last December that it’s growing at a rate of 6% per week. That adds up to 20x growth over the course of a year. By comparison, Uber—which was generating $20 million a week in revenue as of December 2013—was growing at a rate of 2.5% per week during the same time period.

And the company is expanding its product line. Last week, Lyft revealed its new premium service, Lyft Plus. The company partnered with West Coast Customers to design specialty Ford Explorers that come with custom interior leather, an illuminated entrance with custom under-car LED lights, Spotify Premium, ports to recharge your devices, and even a custom grille featuring a brushed steel mustache.

The new line will definitely help Lyft compete more effectively with Uber, which has cornered the high-end market but has been taking aggressive measures to crush smaller competitors in the low-end market.

The next market Lyft will need to jump on is families. Last week, Uber launched its premium family service for customers traveling with young children. It costs an additional $10 on top of the regular fare, but comes with a pre-installed child car seat. 

 


Related companies, investors and entrepreneurs

14337
Lyft
Startup/Business
Description: Lyft is a peer-to-peer transportation platform that connects passengers who need rides with drivers willing to provide rides using the...

Related news


blog comments powered by Disqus

Featured Stories

Other episodes of this series

How does Glooko make money?

17106

What's your business model?

by Steven Loeb
The company charges for access to its population management service, its kiosks and its mobile app

How does Fitbit make money?

17019

What's your business model?

by Steven Loeb
Fitbit sold over 13 million devices in the first nine months of 2015 alone

How does TubeMogul make money?

16927

What's your business model?

by Steven Loeb
TubeMogul makes money from the two different ways that ads are bought and sold

How does Wikipedia make money?

16745

What's your business model?

by Steven Loeb
Wikipedia gets most of its money through donations, but also sells goods on the Wikipedia store

How does SurveyMonkey make money?

16642

What's your business model?

by Steven Loeb
SurveyMonkey uses a freemium model that it says helps to creates organic viral loop for the product