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Lyft is getting a big boost from Uber's struggles

LyftLyft

Uber’s recent struggles — including the resignation on Tuesday night of CEO Travis Kalanick — appear to have given a big boost to its archrival, Lyft.

Even as Uber’s market share shrinks, more people are taking more rides with Lyft. And the smaller ride-hailing company, known for its pink mustache symbol, is seeing more people openly identify as Lyft customers. 

Among them: Lisa Jackson, Apple’s vice president of environment, policy and social initiatives. When asked at a tech conference Wednesday which ride service she uses, Jackson 
said, “Lyft all day.” 

Uber’s US market share fell from 84% at the beginning of this year to 77% at the end of May,
according to research firm Second Measure. Meanwhile, Lyft’s bookings were up 135% year-over-year in April, according to PYMNTS.com.

“When it comes to their market share, the damage has been done,” said Michael Ramsey, a research director at Gartner.

“On the other side of Uber making these mistakes, Lyft has been the foil to them in that the impression they leave is that they’re a better run company with better values,” he added. “You have to give them credit.”

Uber’s business has been rocked by a series of scandals and controversies since since the beginning of the year when the company broke a taxi strike in New York, and in response, critics launched a #deleteuber campaign. Things only got worse after February 19, when former Uber engineer Susan Fowler posted about her experiences at the company, alleging pervasive sexism and that she was sexually harassed by a manager. 

In the wake of the scandals, numerous executives have left Uber, the company fired more than 20 employees, and its board agreed to adopt some 47 new policies and changes to its workplace that were recommended by an outside law firm. And most recently, Kalanick stepped down.

Lyft saw a more than 60% increase in passenger activations in the seven days following #deleteuber, a company representative said. In all, Lyft tallied 70.4 million rides in the first quarter. That was up 142% from the same period a year earlier. It was also up 36% just from the fourth quarter of last year, before all the drama started at Uber. 

When Uber announced Tuesday that it would allow some drivers to accept tips in its app, Lyft took to Twitter to take a shot at its archrival. Painting itself as the more driver-friendly company, Lyft noted that riders have been able to tip drivers through its app for nearly five years. 

Lyft’s strategy of painting itself as the friendly alternative to Uber has been effective, because it’s so easy for customers to change which ride hailing service they use, Ramsey said.

“There’s almost no switching cost between Uber and Lyft,” Ramsey said. “If you have enough memory on your phone, you have both apps. You get on the app and see if there are cars near by.”

“It’s a comparable service,” Ramsey added. “All it takes is you saying ‘I’ll choose Lyft because I’ve heard bad things about Uber,'” Ramsey said.  

Of course, Uber’s main advantage is its size. While Lyft’s service is now available in 350 cities, it only operates in the US. Uber, by contrast, operates in 614 cities worldwide.

Smaller start-ups like New York’s Juno — which markets itself as a socially-responsible, pro-driver company — might succeed in smaller areas, but will likely struggle to make a dent nationally, Ramsey said.

Uber’s turmoil could end up benefitting the whole industry, not just Lyft, said Evan Rawley, an associate professor of business at Columbia University. Kalanick’s departure will likely give Uber’s new leadership the freedom to raise prices, which would allow smaller competitors to follow suit, Rawley said.

“Profits are going to surge,” Rawley said.

Outside of the US, where Uber has often struggled to contend with entrenched competitors and local regulations, Kalanick’s departure and Uber’s broader struggles likely won’t have much of an impact.

Uber is more or less off the radar in China since it merged its business there with Didi last August in a $US35 billion deal that ended Uber’s standalone presence in the country.

While people in China are fascinated with all the Uber news, it likely won’t affect the ride-hailing business in that country, said Hans Tung, a managing partner at GGV Capital, which owns a stake in Didi.

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