In July 2017, I wrote why Uber and Lyft will merge. I had put the date as 2022. On LinkedIn, the call was challenged: many believed that antitrust/competition regulators would not allow that. Of course, I gave a reason: these pairs battled until they went to parties – Elance/Odesk (now UpWork), Groupon / LivingSocial, Sirius / XM, Rover / DogVacay, and DraftKings/FanDuel. I did not see any core strategic advantage in Uber and Lyft that would keep them profitably sustainable, as they battled each other, destroying value in the process.
In this piece, I explain why Uber and Lyft will merge. The trajectories both are following show that they will have challenges with Lyft gaining on Uber, but the overall industry cooling. As soon as that happens, their margins, if they have any, will collapse. Once that happens, they will begin to talk of merger, with each other. Government will see their struggles, and will dismiss any anti-trust concern gone. The result: it will bless their union. Uber is today’s Category-King, but its past behaviors have slowed it down, offering a window for Lyft to catch-up. As they become peer-competitors and rivalries, they will destroy the sector. Similar rivalries have ended together: Elance/Odesk (now UpWork), Groupon / LivingSocial, Sirius / XM and Rover / DogVacay. Please add DraftKings and FanDuel in the list; I predict they will merge also despite any FCC ruling, at the moment. They will struggle, owing to wounds they inflict on each other, in coming years, and will be saved via merger.
But while I was waiting for 2022, Covid-19 will bring that merger forward. Uber is about firing 20% of its staff (about 5,400) after Lyft cut 17% (about 1,000 jobs). Unfortunately, the job cuts do nothing to the core problem: the construct of sharing economy was built on saving money, and improving flexibility, but owning assets now is a safety & security matter.
Imagine not having a car to take a family member to a clinic when the police are busy, and no Uber is available. That day, you will look stupid because in life, you do not just buy only things you need, you also build redundancies for safety, just as they do in electronics design.
Ladies and gentlemen, Uber and Lyft will merge before 2021 ends.
The coronavirus pandemic has brought many an industry to its knees, one of them being the “sharing economy.” The likes of Uber and Lyft have taken a massive hit as Americans hunker down without a need for ride-hailing services. Lyft, per CNBC, is cutting roughly 1,000 jobs, or 17% of its total workforce, while Uber is considering similar action. In addition, Airbnb hosts lost $1.5 billion in bookings in mid-March, per recent market data, and Axios argues the pandemic will require the big players in the shared economy to “recalibrate” how they envision the future.