How Lyft’s Ride-Sharing Business Works (And Doesn’t)

Thanks to its IPO, Lyft — which lost $978 million in 2018 — is now worth a very large sum of money. Here’s why.

Lyft became a public company today, valued at around $24 billion, which is a lot for a company that’s never made money, may never make money, and in fact lost nearly a billion dollars last year. As the company itself noted in its SEC filing, “We have incurred net losses each year since our inception and we may not be able to achieve or maintain profitability in the future.”

So, why are investors, big and small, pouring money into Lyft? Here’s how the business looks on paper.

First, there are really only two ride-sharing players in the United States — Uber, the clear leader, and Lyft, the clear number two. In addition, Lyft has been growing quickly and taking market share from Uber. The company claims it had 39 percent of the market in December 2018, up from 22 percent two years before.

Second, Lyft may be losing huge amounts of money, but it’s still growing revenue faster than it is growing costs. In particular, three numbers are going up: the total number of riders, the number of rides per rider, and the revenue per rider. To an optimist, it looks like more people are using Lyft’s services, and when they do, over time, they use them for more and longer rides.

Read the full article on Atlantic.com

JB