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Lyft’s Business Model: Exploiting an Existing Competitor’s Weakness

Putting Out Your Digital Thumb; Lyft Aims to Bring New Meaning to ‘Catching A Ride’

A few weeks ago, we profiled new cab provider UberCab, which is quickly gaining a dedicated following in cities around America and Europe with its alternative, intuitive cab services.  With an integrated mobile approach, geared toward removing the guesswork usually involved in catching a cab in a major city, UberCab has latched on to the need in this struggling economy for cheap rides and convenient pickups, especially for suburban commuters looking for an alternative to unreliable or cost-prohibitive public transportation.


Learning from Uber Mistakes

However, Uber is just one small fish in a pond that seems to grow larger with each new interested user.  One of the more exciting and innovative options jumping into the crowdsourcing ridesharing game (unwieldy term, I know) is Lyft, another startup focusing on getting people rides cheaply and easily, in urban areas specifically.  However, Lyft has avoided the headaches and hangups that have been delaying Uber, specifically because Lyft has removed one major element from the Uber business model – the cabs and limousines themselves. 

Instead, Lyft chooses to connect users who have cars or carseats to share, with other users who are looking for a cheaper, more convenient, and easy-to-access-through-mobile platform for finding their own rides to work.  Lyft has expanded from an initial unveiling in San Francisco (we know, another exciting start-up from the San Francisco/Silicon Valley cradle of digital civilization, borrrrrring) to Seattle, Los Angeles, and more recently, my hometown of Chicago.


The model remains essentially the same as Uber, allowing users to summon cars to their current location and pay via their smartphone, but the main difference is the cars themselves.  They are piloted by users operating their personal vehicles, and the cost per ride is determined by the rider and the driver (although Lyft will send a suggested donation recommendation determined by the distance of the ride).

Certainly, while the benefits of this type of business model allow Lyft to position itself as a very real and very enticing alternative to cab-reliant services like Uber, it’s time for us to examine Lyft using our patented SWOT analysis and find out what it is about Lyft that we can take back to our ventures and businesses:


The S.W.O.T. Analysis


  • Removal of union and city contract issues that have plagued Uber. Drivers using personal cars allow Lyft to circumvent this constant inhibitor to business growth
  • Intuitive and innovative marketing approach, including mustachioed cars (yes, Lyft cars have giant mustaches on the front) and social rollout similar to the process utilized by Spotify, Google Plus, and others in the past.
  • Benefits not only for those who need rides, but also for those who can make extra money by fulfilling the need for rides. (The essential component of service networking)


  • Liability issues.  Background checks/oversight of drivers still won’t answer concerns about rider injuries, payment issues, safety issues, and reliability issues.
  • Legal issues remain.  The network essentially turns drivers into gypsy cabs, which have been maligned and pursued in major cities for years as illegal and threatening to unionized cabs and services.
  • Market cap.  Since money being paid for fares is going largely to drivers, Lyft’s profit on each ride is currently limited.


  • Subscription services, or scheduled rides.  By engaging users in subscribing to the service, or committing to consistent rides over an extended period of time (daily, weekly, monthly), the company can generate the type of consistent revenue that can allow the model to explode.
  • Plenty of places to expand.  As Uber, Lyft’s major rival, has only expanded through the U.S. and London, Lyft still has the opportunity to introduce its business model and services in advance of competitors/alternatives.
  • Party buses, pickup trucks, etc.  If Lyft can begin to differentiate the types of “rides” available, consumer interest will grow as customers explore new options for Lyft.


  • Competition from Uber, as well as other new ridesharing startups.  Lyft must establish itself as reliable and profitable in as large a market as possible before competitors encroach.
  • The liability issues, along with potentially destructive press from the wide array of situations that can arise in the model, leave danger signs for Lyft’s future growth.


Lift Up Your Own Business Using the Lyft Model

Sure, the innovative approach Lyft has to identifying an existing demand in current markets and responding to it is perhaps the most essential component of Lyft’s future growth and success.  However, for we entrepreneurs and innovators always looking for best practices and methods in entrepreneurship, Lyft provides several clear takeaways for us to apply to our own business.

We have written about this before here, and it may seem intuitive to many of us, but one of the most important strategies Lyft put into practice while attempting to break into an emerging market was to identify an existing competitor’s weakness, and exploit it fully.  By removing the cab/limo element of the Uber business model, Lyft is able to circumvent from the outset the very problems that have dogged Uber’s expansion throughout the rival company’s young history.

While certainly a whole new slew of potential problems arises from this approach, notably the necessity for Lyft to experience its own problems and liability issues, Lyft also manages to present itself as a viable and innovative alternative to its largest competitor no matter where it launches.

Aside from this, another key takeaway for us from Lyft has been the effectiveness of intuitive social media marketing and contests as a means for rocket-launching our businesses to the forefront of the industries we are attempting to break into and dominate.  Slick marketing, puns, eye-catching visual ads, clever slogans, slightly inappropriate branding; all of these are elements that have helped Lyft gain traction and notice in the four cities it currently resides.  No matter how established a proven competitor, an effective and engaging viral media campaign can make up for millions of dollars in advertising by generating organic interest and a dedicated following, even before the launch of a product or service.

Go cash in on today,




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