Will ride-sharing be a cheap and attractive alternative to car ownership when these organizations have to turn a profit?
Ridesharing giant Lyft, which filed the prospectus for its initial public offering on Friday, has for the first time lifted the veil on the remarkable business model that it shares with bigger rival Uber.
In early 2016, it was just 3.5 million. At the end of last year, that rose to 18.6 million. The company revenues per user doubled during that time, to $12 a month. Lyft is the smaller of the two ride-sharing companies, but appears eager to go to market before its bigger rival. Lyft is the smaller of the two ride-sharing companies, but appears eager to go to market before its bigger rival. Uber, after a torrid two years in which it ousted CEO and founder Travis Kalanick, has yet to file to go public. Lyft has yet to put any valuation figures on the IPO.
According to the U.S. Labor Department, the average household spends $8,500 a year on cars. That’s $23 per day, and that doesn’t include parking. Nor does it include the non-monetary cost of the time spent finding a parking spot, cleaning your car, digging it out of the snow, or taking it to and from the mechanic.
That begs the question: Will ride-sharing still be a cheap, and attractive, alternative to owning your own car when these organizations have to turn a profit? Furthermore, early stage companies typically lose money as they ramp up operations. The question is the company’s direction. Last year, Lyft’s revenues rose 34% faster than costs. Gross profits — meaning profits before all the central costs — more than doubled to $913 million.
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