What Lyft's Funding, and Uber's Struggles, Mean for the Sharing Economy - eMarketer

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What Lyft's Funding, and Uber's Struggles, Mean for the Sharing Economy

Fasten your seat belts

March 3, 2017

Ride-hailing service Lyft is seeking $500 million in funding, which would value the company between $6 billion and $7 billion, Reuters reports. By comparison, its biggest competitor Uber is valued at about $70 billion.

Although Lyft may not catch up to Uber anytime soon, the funding can help fuel Lyft’s growth and strategy while Uber is preoccupied with other concerns.

Last week, Lyft announced that it is expanding to 54 additional cities, including Fort Myers, Florida, and Pittsfield and Amherst, Massachusetts. Uber is available in over 560 cities around the globe.

From a business standpoint, Uber remains unquestionably the dominant player. It has 40 million monthly users worldwide, compared to Lyft’s 3 million. But with near-daily press accounts bruising its brand image, Uber faces real challenges.

Lyft, meanwhile, can focus on its growth and building a solid reputation.

“Uber has had a barrage of bad press over the past couple of months, which has intensified in recent days over allegations of sexism in the workplace, poor treatment of drivers and the behavior of its founder, Travis Kalanick,” said eMarketer analyst Yory Wurmser.

“Its longtime competitor Lyft has sought to capitalize on these problems with donations to the ACLU and its biggest launch to date, expanding to additional cities in the US,” he said.

Uber’s branding issues are real and reflect a corporate culture that needs fixing, but none of the issues it currently faces threaten the company near-term, Wurmser believes.

“They’re likely to continue rapid international expansion,” he said. “But if Kalanick fails to address these problems, other companies should be able to fill the void.”

The sharing economy continues to grow in the US, with more and more people participating in it. And on-demand jobs—like with Uber and Lyft—are a necessity for many. In fact, August 2016 data from Pew Research Center found that many of the people who labor in the sharing economy are doing it not to take part in some hip new prospect, but because they need the job to pay their bills.

In addition to its growth in the US, the sharing economy is also expanding globally.

In China, for example, it is seeing rapid growth. A September 2016 report by iiMedia Research indicated that revenues in this sector were projected to rise 76% last year, with more growth set to come.

There’s also strong growth in Europe, although Uber is facing other issues there.

This week, The Guardian reported that Uber’s lawyers are fighting against Transport for London’s plan for mandatory testing of minicab drivers’ written English skills, arguing that such a test would result in 28% of the city’s minicab drivers—a staggering 33,000—losing their jobs in the next three years.

And, in Denmark, a proposed taxi law could complicate Uber’s business. If passed, the new law will require all taxis and cars for hire in Denmark to have seat sensors, video surveillance and taxi meters.

—Rimma Kats

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