Chart of the Week: What Does the Uber/Didi Merger Mean for Lyft?
This week, Uber announced that it’s effectively throwing in the towel in China and merging with Didi Chuxing, its biggest rival in China’s ride-hailing market. The deal reportedly boosts Didi’s valuation to $35 billion and allows Uber to make a somewhat graceful exit from a thorny and highly competitive market – one that’s it’s spent upwards of $2 billion trying to penetrate.
Is Lyft About to Lose Out?
While it’s a great win for Uber, Didi, and their investors, it spells big trouble for Lyft, Uber’s biggest competitor in the U.S., as well as many other international ride-hailing companies that are fighting for a foothold in developing markets across the world.
In April, Lyft announced a ride exchange partnership with Didi that allows Chinese Didi users to call Lyft cars while in the U.S. “We always believed Didi had a big advantage in China because of the regulatory environment,”notes a Lyft spokesperson, adding that Lyft is now re-evaluating the partnership and what impact the Uber/Didi deal will have upon further business. And as many analysts have already noted, now that Uber is no longer fighting a costly battle for riders in China, it can set its sights (and resources) on dominating the U.S. ride-hailing landscape, among many others.
The Fight for Market Share
According to recent Verto data, Uber continues to dominate the U.S. ride-hailing market in terms of monthly unique users and net reach – in May 2016, Uber claimed seven times as many monthly users as Lyft (among U.S. adults, 18 and older). Uber has rolled out a desktop app, potentially making it friendlier to enterprise clients and others who may opt for their higher-priced services.
However, Lyft has a much higher stickiness rating than Uber – Verto’s metric for quantifying the most engaged users by comparing daily users to monthly users. The average Lyft customer launches the app more often per month than the average Uber user, but spends less time overall using the app. Lyft may have a smaller user base than Uber, but it appears that they request more rides – a sign that Lyft’s pricing structure makes it more appealing to riders. Since our data shows that only 6% of Uber users also use Lyft, it seems safe to assume that each brand has their own loyal user base.
Can Loyalty Save Lyft?
So what does this mean for Lyft in the U.S. – and beyond? They’re certainly fighting an uphill battle for market share, but their stickiness – aka, their user engagement stats – could be crucial as they fight to develop a winning user acquisition and retention strategy. Regardless, Lyft needs to identify how it can leverage this stickiness – and fast.