Lyft's rough ride

Lyft is sure it's different from Uber. It's just not sure how.

Five months into 2023, Lyft already has corporate crisis bingo.

Mass layoffs ✓. Stock down ✓, market cap crumbled ✓. Founders out ✓, new CEO in ✓. Business products shuttered ✓. Remaining staff told to get back to the office ✓.

Lyft has always lived in Uber’s shadow, but the pandemic was an inflection point. Uber, buoyed by its food delivery business, weathered global lockdowns and arguably emerged from covid-19 stronger. Lyft, without a ride-hail alternative to fall back on, suffered a year of meager revenues and substantial losses, and three years on still has fewer monthly riders than it did before the pandemic. News outlets have openly speculated about Lyft’s “demise.” Even Uber seems to feel bad.

“As far as what we are seeing domestically with Lyft, obviously they’re going through a lot of changes,” Uber CEO Dara Khosrowshahi told analysts this week, fresh off an incredibly strong quarter at his own firm. “It’s a very, very strong brand,” he continued, sounding less like a rival CEO than the apologetic coach of a little league team that just annihilated the opposing squad. “It’s not going anywhere.”

The new CEO of the losing team is David Risher, a Lyft board member who spent time at Microsoft and Amazon before founding a childhood literacy nonprofit in 2009. Risher took over in April from Lyft co-founder Logan Green. The other co-founder, John Zimmer, is expected to transition out of his role as company president this summer. Green and Zimmer will both keep their seats on the board.

Risher’s mandate is to turn the struggling business around, and he’s wasted no time in setting an agenda. He announced major layoffs on his fourth day as CEO. He preaches the gospel of customer obsession. He believes that that “great companies have purpose” and Lyft has two of them: to get riders places, and to give drivers a flexible earning opportunity.

Most importantly, Risher is sure that Lyft is different from Uber. He just isn’t sure how.

Uber and Lyft spent years playing tug-of-war, using a rope spun from billions of VC dollars.

Differentiation is a serious problem in ride-hail. The products and services tend to feel the same. The cars and drivers often actually are. In the heyday of 2010s-VC subsidies, Uber, Lyft, and other sporadic ride-hail challengers competed primarily on price. For riders, this took the form of cheap fares and discount codes. For drivers, it came in lucrative sign-up bonuses, earnings guarantees, and performance-based incentive pay. Uber and Lyft spent years playing tug-of-war in the U.S., using a rope spun from billions of VC dollars.

With relatively little to differentiate their actual products, Lyft and Uber spent the better part of a decade differentiating on reputation. Uber, under co-founder and former CEO Travis Kalanick, was proudly aggressive and confrontational. Lyft, leaning into the opening Kalanick created, branded itself as Uber’s foil. Where Uber had black cars, Lyft had fist bumps and fuzzy pink moustaches. Where Uber used and screwed drivers, Lyft paid and treated them better. Where Uber price-gouged riders, Lyft dreamt of making the world cleaner and greener by getting more people into fewer cars. Where Uber was the face of unabashed capitalism, Lyft was a force for social good that unfortunately also happened to be a company.

If you nodded in agreement at any of that, Lyft’s marketing worked. If not, congrats on your bullshit detector.

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Lyft’s single biggest success was establishing and perpetuating this narrative of it as the better and more ethical Uber, when in reality the companies were the same on most measures that matter. As I said before, the products are all but identical, the prices hew closely together (unless you are being targeted by a discount from a particular company), and the cars and drivers can be literally the same. But where Uber paraded its scandals, Lyft honed its good-guy rep. It’s why Uber is associated with surge pricing and Lyft with shared rides, even though each had both. It’s why if you ask a random person which company treats drivers better, they’ll probably say Lyft, even though no systematic data has ever shown that to be the case, and one of the best studies of driver earnings—the 2018 Parrott-Reich review in New York City—actually showed Lyft paying the worst driver rates of any ride-hail company.

Because reputation was most of what Lyft had going for it, it was also fiercely protective of and not-so-nice about it. By the time I was working at Quartz in the mid-2010s, Uber was used to being called an asshole in the press. Lyft, on the other hand, was not. The company was not happy when I started writing pieces arguing, as I have here, that Lyft was like Uber with better reputation management. Lyft was so mad that I failed to fall in line with the nice guy messaging that for roughly a year it kicked me off all its press lists and sent its releases to other Quartz reporters instead (who, invariably, forwarded them to me. Imo, this is not an effective PR strategy, unless your goal is to annoy the entire newsroom).

I mention all this not to dunk on Lyft’s 2010s comms team, but because Lyft’s reputation is once again in the spotlight. Risher is looking to rehab Lyft’s reputation as much as its financial performance, and that means reminding North American users on both sides of the market what makes Lyft different. “We need to drive awareness that Lyft is a great choice so that more people open our app and see our improved pricing and service levels,” Risher told analysts after Lyft reported Q1 results yesterday. “We’ve been too quiet for too long. So, you'll see us use low-cost, high-visibility ways to remind folks of who we are, and point out real differences between us and Uber.”

The problem is that Risher doesn’t yet seem to know what those real differences are, at least in any way that he’s been able to articulate. Asked by analysts to talk about how Lyft could differentiate itself from Uber, Risher had only generalities to offer. “We do have different models,” he said. And: “we’ve got a lot of ideas on how we can create products and services that our riders and drivers both like that are really differentiated against where Uber is.” He pointed to a TikTok campaign that Lyft launched this week with social media influencer Delaney Rowe, the debut spot of which makes fun of Uber drivers who also deliver on Eats for having smelly cars that make their passengers late and smelly too! Like blue cheese! “Should’ve taken a Lyft,” says a martini-sipping Rowe.

@delaneysayshelloShoulda Taken A Lyft #lyftpartner

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Generalizations are easy; it’s the specifics that are hard. The details are where Lyft has always lost to Uber. It’s the details that made Uber’s algorithm superior; its worker pool bigger and more liquid; its funding war chest greater; its rides faster and more reliable. The details also showed when Uber paid drivers better, despite all of Lyft’s general claims otherwise. I’m not going to get into that TikTok ad here—how it’s neither funny nor clever, but tone deaf and insensitive to preach the gospel of flexibility while also mocking your gig drivers for taking on a different kind of work to cobble together a living. That can be for another post. The point is that Lyft has lost its way, and it’s unclear whether Risher can find it.