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 Snap make money?

18673

What's your business model?

by Steven Loeb
It makes all of its revenue from advertising, and hasn't yet seen significant money from Spectacles

How does Omada Health make money?

18649

What's your business model?

by Steven Loeb
The company's model is outcome-based: the more weight the patient loses the more money it makes

How does Blue Apron make money?

18644

What's your business model?

by Ronny Kerr
Like HelloFresh and other competitors, Blue Apron sells weekly meal subscriptions

How does Tesla make money?

18637

What's your business model?

by Steven Loeb
Tesla makes most of its money from new electric cars, but also sells batteries and solar panels

How does LINE make money?

18629

What's your business model?

by Ronny Kerr
One of the most popular messaging apps, Tokyo-based LINE makes money through advertising and content