Lyft’s Driver ‘Referrals’ Show Limits Of Model, As Uber Expands

Business models show their resilience when they are stress tested — and limitations are spotlighted, too.

So it is with verticals such as ride-hailing and the online firms that serve them, promising disruption to getting people to and from where they need to go.

In particular, the coronavirus pandemic has shown Lyft faces challenges that Uber does not when it comes time to pivot gig economy workers to new revenue streams that can help keep them afloat in times of crisis.

News came at the end of the week that Lyft is referring drivers to work for Amazon to get extra work “as a way to earn additional income right now,” in roles such as warehouse workers or delivery people. In addition, Lyft also has noted to drivers, as relayed by Bloomberg, that drivers could receive compensation through the recently approved stimulus bill.

Amazon, for its part, has said it will look to hire an additional 100,000 people nationwide to help meet a surging eCommerce demand.

The ride-hailing business, of course, has suffered no matter where you look. Yahoo Finance reported earlier this week that ride-hailing business for Uber and Lyft was down double-digit percentages. The two companies have suspended their shared ride options.

But recent announcements from these two marquee names — Lyft’s aforementioned pact with Amazon, and Uber’s own take on its opportunities amid the pandemic — show just how two different business models can react in times of crisis.

Uber’s Take

As noted in this space, earlier in March, Uber Technologies said that it has billions of dollars in cash on hand — a tally that should reach as much $6 billion at the end of the year. Management said on a conference call with analysts that the cash, along with a $2 billion revolver, comes amid the continued impact of COVID-19.

CEO Dara Khosrowshahi said Uber Eats “is an important resource right now. Even in Seattle, our Eats business is still growing.”

And here is an important differentiator. Uber is able to shift and has been shifting drivers to its restaurant delivery business, which means that at least some of the impact — for the drivers, and for Uber — of the coronavirus is blunted. That also means that drivers need not scramble to find new sources of income off the platform, which in effect is what is happening as Lyft starts referring drivers to another company.

We noted in this space, too, that Lyft’s cash and short-term investments position at the end of last year stood at about $2.8 billion. That seems a decent buffer in what can charitably called a volatile time.

Lyft’s Pivot

Lyft has said it has expanded its services to offer medical supply delivery and food delivery to vulnerable populations, linking with healthcare providers and governments, as the Hill reported. The food delivery offering is targeting meal delivery to children (for reduced fee lunches offered through schools) and the elderly.  That program will begin in the Bay area of California and is slated to expand elsewhere in the states.  We wonder if that pivot may gain traction even as Lyft is seeking to funnel drivers to Amazon, and where at least some drivers would conceivably leave Lyft.

By way of contrast, Uber already has cross-pollination in place, having built a platform that has ride-hailing at its core, but entrenched ancillary offerings that are intuitive for both sides of the platform (the drivers and the consumers) to embrace through the app. Uber Freight is a business that would be well-positioned for what seems to be dawning as a new wave of eCommerce.

As Karen Webster wrote about a year ago, “both Uber and Lyft are in the ridesharing business, but that’s where the similarities begin and end. Lyft is a self-described peer-to-peer marketplace focused on ‘revolutionizing transportation,’ and reducing traffic congestion in cities. For Uber, transportation is a platform feature that is central to its business, but is not its end game.”

The difference in those business models may be reflected in the declines seen in the firms’ respective stock prices in the wake of the coronavirus pandemic: Lyft is off about 52 percent from its peak, Uber about 35 percent, which may reflect a relatively sanguine view Uber’s diversified platform model.