Just two months after the popular car-sharing service Lyft closed $250 million round of funding, its counterpart and rival Uber Inc. got its own $1.2 billion round, which quadrupled its valuation to $17 billion.
The funding round, which comes from three mutual-fund managers, Fidelity Investments with $425 million, Wellington Management with $209 million, and BlackRock Inc. with $175 million funding, makes Uber among the highest valuations for venture-backed startups. In recent years, only Facebook Inc. (FB) raised more funding from private investors.
Uber Going for the Kill
Uber is a San Francisco-based startup that connects private car owners and passengers seeking a ride through a smartphone app. Users may request a ride simply by opening the app and selecting car type. Then a car sent from Uber is expected to pick you up within 10-15 minutes.
The fact that Uber trying hard to put squeeze on Lyft is not a secret. Taking the recent round funding as example, Uber's CEO Travis Kalanick declared their intention at the Code Conference on May 28:
"We do 10 times more trips than them and on a booking basis we’re 20 times bigger,” Kalanick claimed. “If they have the same amount of funding we spend faster, so you have to make sure you have a cash advantage," he admitted.
Uber has good reasons to declare itself as a "winner", to some extent. Last December, Uber's dashboard leaked a series of numbers showing raw revenue, signups, active clients and ride requests between mid-October and mid-November of 2013, which positively confirmed its popularity.
The leaked numbers indicated a 11 percent revenue growth in just five minutes and around 80,000 new signups, 1 million requests and 800,000 completions each week. According to calculations based on information laid out, the company expect to book over $ 1 billion gross and $213 million revenue.
Uber Not Without Criticism
Uber is certainly winning right now. Their bookings are about 10 times more than Lyft. Also, Uber has more options to choose as well, including UberX (mid-range cars), UberBlack (High-end sedan or SUV) and UberSUV (SUV with seats up to six people). It also has wider international market, covering 66 cities in 24 countries, compared to Lyft's smaller, strictly U.S-based markets.
So it's a long competition between Lyft and Uber, for sure. Uber slashed its prices of the UnberX service in January, which makes itself the most "aggressive price cut" in its history. Committing to slash fares by 20 percent or lower certainly not only leads to lower income of taxi drivers, but also put pressure its rival Lyft.
But it does not necessarily mean that Uber is cheaper. In fact, Uber is notorious for its surge price strategy. Uber's prices fluctuate based on the supply and demand, saying that the prices are different depend on the number of drivers on the road and customers hailing drivers at that time. When the demand is larger than supply, Uber uses "surge pricing" to attract more drivers to the roads with the cost of a single ride several times the regular price. For example, last December Uber made itself front pages news by charging comedian Jerry Seinfeld's wife $415 to get her kid attend social obligations in the night's harsh weather.
Even if the price cut for UberX in January makes itself more price-friendly for normal prices, the "surge pricing" time is still a pain in the ass for many users. On the other hand, its rival, Lyft, isn't that better, though. Similar to "surge pricing", Lyft has "prime time" to charge more, but one can not ask more when it at least has "happy hour" on light demand. Two of a kind, from the perspective of price, typical car-sharing app users run both apps to weigh their costs in different times and selection.
Could Uber and Lyft Co-Exist?
For customer experience, some users may enjoy the feeling of being treated with respect. Uber seems more into dressing professionally and opening doors, and passengers always sit at the back. Some may like Lyft’s camaraderie vibe better with its hallmark moustache and “fistbump.” In comparison, Lyft’s customers usually sit beside the driver can enjoy chatty atmosphere.
The differentiation between the two is not simply Lyft's cute pint mustaches on the headstock versus Uber's blue "U" logo inside the windshield, for sure. They differ in prices, markets, and even vibes, but back to the basics, these two services have the same intrinsic concept – ride sharing.
Their existence indeed not meant to fight against each other, like many other startups in this growing transportation industry, both Lyft and Uber face the pressure from authorities for legalization in many cities, and competition from traditional taxis.
If you have to say it’s a competition, then Uber wins for this battle. Whereas based on the round funding that Lyft has raised in these years, one cannot say it doesn’t have a chance to raise more. Uber does not desperately try to pressure Lyft out of nowhere. At least for now, they are chasing each other.