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Lyft vs Uber: A Tale of Two S-1’s

You can learn a great deal from reading and comparing the financial filings of two close competitors. Tech-finance nerd that I am, you can imagine how excited I was to see Lyft’s and Uber’s respective S-1’s become public within mere weeks of each other.

While the general financial press has covered a lot of the top-level figures on profitability (or lack thereof) and revenue growth, I was more interested in understanding the unit economics — what is the individual “unit” (i.e. a user, a sale, a machine, etc.) of the business and what does the history of associated costs and revenues say about how the business will (or will not) create durable value over time.

For two-sided regional marketplaces like Lyft and Uber, an investor should understand the full economic picture for (1) the users/riders, (2) the drivers, and (3) the regional markets. Sadly, their S-1’s don’t make it easy to get much on (2) or (3) — probably because the companies consider the pertinent data to be highly sensitive information. They did, however, provide a fair amount of information on users/riders and rides and, after doing some simple calculations, a couple of interesting things emerged

Uber’s Users Spend More, Despite Cheaper Rides

As someone who first knew of Uber as the UberCab “black-car” service, and who first heard of Lyft as the Zimride ridesharing platform, I was surprised to discover that Lyft’s average ride price is significantly more expensive than Uber’s and the gap is growing! In Q1 2017, Lyft’s average bookings per ride was $11.74 and Uber’s was $8.41, a difference of $3.33. But, in Q4 2018, Lyft’s average bookings per ride had gone up to $13.09 while Uber’s had declined to $7.69, increasing the gap to $5.40.

Average Bookings $/Ride
Sources: Lyft S-1; Uber S-1

Note: the numbers presented above for Uber are for Uber ridesharing bookings divided by total Uber rides, which includes rides for Uber Eats — this was done because we don’t have great data on rides for Uber Eats and because I suspected that Uber Eats trips represent a small minority of trips — something borne out by the fact that the trend / numbers I arrived at roughly matches the Ridesharing Gross Bookings per Trip chart in the Uber S-1

This is especially striking considering the different definitions that Lyft and Uber have for “bookings” — Lyft excludes “pass-through amounts paid to drivers and regulatory agencies, including sales tax and other fees such as airport and city fees, as well as tips, tolls, cancellation, and additional fees” whereas Uber’s includes “applicable taxes, tolls, and fees“. This gap is likely also due to Uber’s heavier international presence (where they now generate 52% of their bookings). It would be interesting to see this data on a country-by-country basis (or, more importantly, a market-by-market one as well).

Interestingly, an average Uber rider appears to also take ~2.3 more rides per month than an average Lyft rider, a gap which has persisted fairly stably over the past 3 years even as both platforms have boosted the number of rides an average rider takes. While its hard to say for sure, this suggests Uber is either having more luck in markets that favor frequent use (like dense cities), with its lower priced Pool product vs Lyft’s Line product (where multiple users can share a ride), or its general pricing is encouraging greater use.

Monthly Rides / Monthly Active Rider

Sources: Lyft S-1; Uber S-1

Note: the “~monthly” that you’ll see used throughout the charts in this post are because the aggregate data — rides, bookings, revenue, etc — given in the regulatory filings is quarterly, but the rider/user count provided is monthly. As a result, the figures here are approximations based on available data, i.e. by dividing quarterly data by 3

What does that translate to in terms of how much an average rider is spending on each platform? Perhaps not surprisingly, Lyft’s average rider spend has been growing and has almost caught up to Uber’s which is slightly down.

Monthly Bookings $ / Monthly Active User

Sources: Lyft S-1; Uber S-1

However, Uber’s new businesses like UberEats are meaningfully growing its share of wallet with users (and nearly perfectly dollar for dollar re-opens the gap on spend per user that Lyft narrowed over the past few years). In 2018 Q4, the gap between the yellow line (total bookings per user, including new businesses) and the red line (total bookings per user just for rides) is almost $10 / user / month! Its no wonder that in its filings, Lyft calls its users “riders”, but Uber calls them “Active Platform Consumers”.

Despite Pocketing More per Ride, Lyft Loses More per User

Long-term unit profitability is more than just how much an average user is spending, its also how much of that spend hits a company’s bottom line. Perhaps not surprisingly, because they have more expensive rides, a larger percent of Lyft bookings ends up as gross profit (revenue less direct costs to serve it, like insurance costs) — ~13% in Q4 2018 compared with ~9% for Uber. While Uber’s has bounced up and down, Lyft’s has steadily increased (up nearly 2x from Q1 2017). I would hazard a guess that Uber’s has also increased in its more established markets but that their expansion efforts into new markets (here and abroad) and new service categories (UberEats, etc) has kept the overall level lower.

Gross Margin as % of Bookings
Sources: Lyft S-1; Uber S-1

Note: the gross margin I’m using for Uber adds back a depreciation and amortization line which were separated to keep the Lyft and Uber numbers more directly comparable. There may be other variations in definitions at work here, including the fact that Uber includes taxes, tolls, and fees in bookings that Lyft does not. In its filings, Lyft also calls out an analogous “Contribution Margin” which is useful but I chose to use this gross margin definition to try to make the numbers more directly comparable.

The main driver of this seems to be higher take rate (% of bookings that a company keeps as revenue) — nearly 30% in the case of Lyft in Q4 2018 but only 20% for Uber (and under 10% for UberEats)

Revenue as % of Bookings
Sources: Lyft S-1; Uber S-1

Note: Uber uses a different definition of take rate in their filings based on a separate cut of “Core Platform Revenue” which excludes certain items around referral fees and driver incentives. I’ve chosen to use the full revenue to be more directly comparable

The higher take rate and higher bookings per user has translated into an impressive increase in gross profit per user. Whereas Lyft once lagged Uber by almost 50% on gross profit per user at the beginning of 2017, Lyft has now surpassed Uber even after adding UberEats and other new business revenue to the mix.

Monthly Gross Profit $ per Monthly Active User
Sources: Lyft S-1; Uber S-1

All of this data begs the question, given Lyft’s growth and lead on gross profit per user, can it grow its way into greater profitability than Uber? Or, to put it more precisely, are Lyft’s other costs per user declining as it grows? Sadly, the data does not seem to pan out that way

Monthly OPEX $ per Monthly Active User
Sources: Lyft S-1; Uber S-1

While Uber had significantly higher OPEX (expenditures on sales & marketing, engineering, overhead, and operations) per user at the start of 2017, the two companies have since reversed positions, with Uber making significant changes in 2018 which lowered its OPEX per user spend to under $9 whereas Lyft’s has been above $10 for the past two quarters. The result is Uber has lost less money per user than Lyft since the end of 2017

Monthly Profit $ per Monthly Active User
Sources: Lyft S-1; Uber S-1

The story is similar for profit per ride. Uber has consistently been more profitable since 2017, and they’ve only increased that lead since. This is despite the fact that I’ve included the costs of Uber’s other businesses in their cost per ride.

Profit $ per Ride
Sources: Lyft S-1; Uber S-1

Does Lyft’s Growth Justify Its Higher Spend?

One possible interpretation of Lyft’s higher OPEX spend per user is that Lyft is simply investing in operations and sales and engineering to open up new markets and create new products for growth. To see if this strategy has paid off, I took a look at the Lyft and Uber’s respective user growth during this period of time.

Sources: Lyft S-1; Uber S-1

The data shows that Lyft’s compounded quarterly growth rate (CQGR) from Q1 2016 to Q4 2018 of 16.4% is only barely higher than Uber’s at 15.3% which makes it hard to justify spending nearly $2 more per user on OPEX in the last two quarters.

Interestingly, despite all the press and commentary about #deleteUber, it doesn’st seem to have really made a difference in their overall user growth (its actually pretty hard to tell from the chart above that the whole thing happened around mid-Q1 2017).

How are Drivers Doing?

While there is much less data available on driver economics in the filings, this is a vital piece of the unit economics story for a two-sided marketplace. Luckily, Uber and Lyft both provide some information in their S-1’s on the number of drivers on each platform in Q4 2018 which are illuminating.

Q4 2018LyftUberComparison
Drivers1.1 million 3.9 million
Rides / Driver162.18382.82Uber is higher by 136%
Rides Bookings
$ / Driver
$2,123$2,943Uber higher by 39%
because Uber bookings
per ride lower by 41%
Total Bookings
$ / Driver
$2,123$3,63319% of Uber bookings
are non-ride
Take Home
$ / Driver
$1,514$2,982 (total)
$2,350 (rides)
Uber higher by 97%
because drivers take
home 15% more per $
If only rides, Uber
higher by 55%

Sources: Lyft S-1; Uber S-1

The average Uber driver on the platform in Q4 2018 took home nearly double what the average Lyft driver did! They were also more likely to be “utilized” given that they handled 136% more rides than the average Lyft driver and, despite Uber’s lower price per ride, saw more total bookings.

It should be said that this is only a point in time comparison (and its hard to know if Q4 2018 was an odd quarter or if there is odd seasonality here) and it papers over many other important factors (what taxes / fees / tolls are reflected, none of these numbers reflect tips, are some drivers doing shorter shifts, what does this look like specifically in US/Canada vs elsewhere, are all Uber drivers benefiting from doing both UberEats and Uber rideshare, etc). But the comparison is striking and should be alarming for Lyft.

Closing Thoughts

I’d encourage investors thinking about investing in either to do their own deeper research (especially as the competitive dynamic is not over one large market but over many regional ones that each have their own attributes). That being said, there are some interesting takeaways from this initial analysis

  • Lyft has made impressive progress at increasing the value of rides on its platform and increasing the share of transactions it gets. One would guess that, Uber, within established markets in the US has probably made similar progress.
  • Despite the fact that Uber is rapidly expanding overseas into markets that face more price constraints than in the US, it continues to generate significantly better user economics and driver economics (if Q4 2018 is any indication) than Lyft.
  • Something happened at Uber at the end of 2017/start of 2018 (which looks like it coincides nicely with Dara Khosrowshahi’s assumption of CEO role) which led to better spending discipline and, as a result, better unit economics despite falling gross profits per user
  • Uber’s new businesses (in particular UberEats) have had a significant impact on Uber’s share of wallet.
  • Lyft will need to find more cost-effective ways of growing its business and servicing its existing users & drivers if it wishes to achieve long-term sustainability as its current spend is hard to justify relative to its user growth.

Special thanks to Eric Suh for reading and editing an earlier version!

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12 Comments

  1. Andrew Garvin Andrew Garvin

    Nice analysis, thank you.

    //One possible interpretation of Lyft’s higher OPEX spend per user is that Lyft is simply investing… to open up new markets and create new products for growth… The data shows that Lyft’s… [CQGR] from Q1 2016 to Q4 2018 of 16.4% is only barely higher than Uber’s at 15.3% which makes it hard to justify spending nearly $2 more per user on OPEX in the last two quarters.//

    The counter is that Lyft is only focused on acquiring US users, which have a higher LTV than the >50% international customers Uber is acquiring. As you mentioned, we need Uber’s regional/US breakout to assess this.

    Forward-looking, the worry for Lyft is that they may have already raised their prices & take rate as much as they can relative to Uber. It’s a bad sign to me that they have pulled those levers and remain less profitable per ride/user than Uber.

    • 100% agree — its very alarming that despite higher take rates and per ride value that they are still less profitable per ride and per user. We don’t (or at least I don’t) have the information to precisely calculate their LTV to CAC / payback period, and while I assume its positive, it seems clear to me that Lyft will eventually have to make big changes to what they’re doing going forward if they want to keep up with Uber’s economic engine because they’re paying an extra ~$2/user in OPEX to get only ~$1/user extra in gross profit versus Uber.

    • Forward-looking, the worry for Lyft is that they may have already raised their prices & take rate as much as they can relative to Uber. It’s a bad sign to me that they have pulled those levers and remain less profitable per ride/user than Uber.

      It’s actually the other way around. Put simply, as rates converge to zero, market share converges to 100%. Lowering rates pushes you closer to the gross margin boundary since you can’t lower prices anymore. Being able to raise rates YoY is a strong signal that Lyft’s expansion hasn’t come at the expense of subsidies. That’s sustainable growth vs subsidies which are unsustainable.

      Furthermore, Uber has better economies of scale so line items like their cloud bill will be much lower per rider. The marginal costs will improve much more slowly for Uber now because economies of scale are asymptotic as we all know. So Lyft has more room here to reduce their cloud bill and improve similar economies of scale, thereby improving margins at a better pace.

      • I agree that being able to maintain growth even while boosting take rates shows that Lyft has real market power. But, just because you’re growing unit gross profit doesn’t mean that you actually have a sustainable model if you’re also growing the sales & marketing, operations, overhead, and engineering costs to achieve that. While I don’t have data to break down allocation of those spend items, on an aggregate level its pretty clear that Lyft is spending a lot more per user on those things and they have yet to see any real economies of scale, whereas by the same earlier logic, Uber can eventually start increasing its take-rate on its other services (like Uber Eats) to boost its profitability (although its wise for them to wait until they get more share of wallet there) — so I think this makes a stronger case for Uber’s economic model than vice versa (although not necessarily any given valuation).

        Also, it’s not clear to me that either Lyft or Uber will become profitable anytime soon: the profit per user and profit per ride in 2018 has more or less flatlined which suggests that Uber’s improvement appears to be caused by a step-change in OPEX spend per user that happened in late 2017/early 2018 that they haven’t been able to repeat again, and Lyft’s has been at all time high for the past two quarters which more less ate up all the gains in gross profit per unit they achieved.

    • Andrew Garvin Andrew Garvin

      //Being able to raise rates YoY is a strong signal that Lyft’s expansion hasn’t come at the expense of subsidies. That’s sustainable growth vs subsidies which are unsustainable.//

      Lyft’s growth is not yet sustainable. Lyft is far from being unit profitable and needs to continue to raise prices. The question is: Can they raise prices to a sustainable level given Uber’s low prices? Just because Lyft can keep users at a 15% higher price doesn’t mean they can keep users at a 30% higher price.

      These companies still need to figure out the unit economics before gains from scale are meaningful. Uber’s other business lines – say, just UberEats – are much more important (since they maximize driver utilization) than Lyft’s potential for scale gains. Lyft/Uber’s cloud bill is trivial on a per ride basis relative to customer and driver acquisition.

  2. Frank Frank

    Uber drivers are less paid, which makes Uber very vulnerable loosing lots of drivers.

    • I wish I had market-by-market breakdowns of the data / distribution of driver data as that is probably true in certain markets / for some drivers, but based on the aggregate data, it does look like an average Uber driver, at least in q4 2018, is getting paid dramatically better than an average Lyft driver.

  3. ipocandyman ipocandyman

    Nice writeup! I’m going to share a link to this today in our Weekly IPO CandyGram! I think our readers will be interested.

  4. Lisa K Davis Lisa K Davis

    Odd how the coverage of these two companies, always seem to downplay the most important roles of the drivers that make their company run, to the magnitude of their empire and the price they pay for it! We the drivers have paid the price for their empires success! We take the cost of our automobile wear and tear, abuse from passengers, cost of fuel, extreme planning to make a profit, cost to maintain a higher level of service, lack of company support when media attacks us as a whole when an individual incident happens, reduced income for reduced ride cost but higher company residuals, poor employee support and communication, proper affordable and informative insurance and tax coverages are among the long list of issues!

  5. The long term survivabilty and viability of both companies is probably going to hinge on which one purchases the other.

  6. joe joe

    Nice comparison

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