Lyft President and co-founder John Zimmer has been making the podcast rounds in the wake of the recent victory of California Prop 22. That’s the ballot initiative that now secures Uber and Lyft drivers’ status as independent contractors, at least in California. Zimmer faced some tough questions on the podcasts about gig economy ethics. And even tougher questions on Lyft’s competitive position and way forward.
On Prop 22, Zimmer’s basic argument is that drivers need to be paid better and get some help with the cost of health care. But the ride-hailing business model falls apart if it devolves into shift work, he argues. And he noted, accurately, that ride-hailing drivers overwhelmingly prefer to be independent contractors.
“This was a win-win for drivers, riders, the California economy and for Lyft,” Zimmer said of the Prop 22 victory. There may be some debate on these points. But, for now at least, Uber and Lyft have won the battle. We’re more interested in what Lyft’s place is in the ever-evolving last-mile ecosystem, a space we’ve covered pretty closely this year on Localogy Insider.
This week Zimmer appeared on a personal favorite, the Pivot podcast featuring journalist Kara Swisher and NYU business professor Scott Galloway. More on this conversation in a minute.
Planet? Or Lunar Object?
Over the summer, when the food delivery space was abuzz with deal activity, Lyft was nowhere to be found. This despite its chief rival Uber being among the top food delivery players with its Eats operation. Uber acquired its Eats rival Postmates in July for $2.6 billion. This came after Uber failed in its bid to acquire Grubhub.
At the time, we wrote the following. We cited Pivot, which at the time singed out Lyft as a potential odd-company-out in the delivery wars.
Uber’s ride-sharing rival Lyft must be feeling very small right now. As Galloway put it on Pivot, Lyft should be calling its bankers and demanding ideas. Otherwise, in the war of the worlds, “they will be downgraded from a planet to a lunar object.”
Climbing Back Slowly
In fairness, Lyft has cut into Uber’s ride-hailing business over the years. According to Statista, Uber’s share of the U.S. ride-hailing market has declined from 74% in September 2017 to 69% in September 2020. Most of the loss was to Lyft’s benefit. However, the ride-hailing business itself has taken a massive beating during the pandemic. In May, Lyft reported ride-hailing volume was down 70% due to the pandemic. Volumes have been gradually returning to normal. Lyft reported recently that active riders grew 44% in Q3.
Nonetheless, the pressure remains on Lyft to further diversify. In fairness, Lyft does have a scooter and e-bike business, as well as a fleet business. Still, it must find a way to break out of its image as Uber’s ankle-biter competitor.
People or Things?
This week, Swisher and Galloway got to ask Zimmer directly what Lyft’s plan is for world domination. Or at least for survival. Zimmer was ready for it. He wanted to make it clear that Lyft isn’t standing pat.
“We are 100% focused on being the best consumer transportation platform,” Zimmer said. “We are not trying to do everything, like our competitor [is].”
OK. So what does it mean to be the best “consumer transportation platform”? Zimmer says Lyft has stayed focused on moving people. On bikes and scooters, via ride-hailing, and through consumer car rental and its driver fleet service. Uber, he argues, has divested out of much of the consumer transportation stack. Instead, Zimmer noted Uber is showing more interest these days in moving things than people.
What’s a ‘Transportation Subscription’?
“As we create a subscription service in transportation, which is where this is heading,” Zimmer said. “If you want access to all the ways of getting around, you will only be able to get that through Lyft.”
Dropping the “S” word got Galloway’s attention. He’s the “rundles” guy after all. Please tell us more, John.
“In the same way that you have an AT&T, Verizon, or T-Mobile plan, the future of transportation is, instead of getting minutes, you get miles,” Zimmer said.
So how does that really work? Zimmer explains it further.
He notes the average U.S. household spends $9,000 per year to own and operate a car they spend 4% of their time in. He said this stat was a “lightbulb” that made him think there must be a more efficient way to meet a household’s transit needs.
“For less than $9,000 we can give you a monthly subscription plan to take care of all of your transportation,” Zimmer explains. “You will never have to worry about insurance or maintenance. But if you don’t have all of the modes of transportation. Which Lyft has and Uber does not, then you will not have the best consumer experience. That’s how we win.”
So What About Delivery?
Zimmer didn’t rule out entering the delivery space. This despite saying moments earlier that Lyft is 100% focused on consumer transportation. He said if the experience helps drivers make more money without gouging local businesses with a 30% vig on each delivery, then Lyft is interested. Subtle burn on his chief rival. We inferred that Lyft is planning to enter delivery in a manner along these lines.
“I am not interested in being just another consumer delivery platform,” Zimmer said.
Despite just having helped vanquish the movement to give gig workers labor rights, Zimmer does credibly present Lyft as a warmer, fuzzier alternative to Uber. But we all know warm and fuzzy doesn’t pay the bills. The idea of a transportation subscription might have legs, particularly among the younger, urban knowledge workers who are eschewing car ownership. Much will depend on how much human mobility returns post-COVID. If the new normal of work from home, end-of-the-office persists, it may be better to bet on moving things over moving people.