Unveiling the Facts: How does Lyft Work?

By NCrypted Editorial TeamUpdated Sep 11, 20267 min read

One of the biggest ride-sharing services, Lyft tends to get the improved rap - it was the first app to support tipping, and the company seems to recurrently experiment with new safety features and options for both its riders and drivers. Lyft launched in 2012, with the original concept of ride-share. So what is rideshare? The concept behind Lyft and other rideshare organisation is to offer a more technically highly developed, cheaper option to taxi services, as well as make the ride more personal by enabling you to know who it is you will trust to drive you from one point to another point. Have you ever wondered what those funny pink mustaches mean that are attached to the frontage of many cars you see driving around a city? The pink mustache or grill-stache was the original branding for Lyft cars so that riders can recognize the car when it comes to picking them up. The grill-stache has since been replaced by a minor, glow in the dark, pink dash-stache. Lyft is founded by John Zimmer, Matt Vat Horn, Logan Green, and Marcus Cohn. Lyft was founded as Zimride in 2007 and then came with the name Lyft in the year 2012. Company’s headquarter is located in San Francisco, California, USA. Lyft had completed 7 million rides till October 2015 and the number of registered driver till March 2015 was 1,00,000. It has been valued at $15.1 billion in its most recent funding round. The company generally generates 20% in net revenue per ride while the most of the revenues go to the driver.

How does Lyft Work?

Unlike Uber, Lyft works on a model where user almost always sits in the front seat along with the driver. This is because of Lyft’s tagline - Your friend with a car. As Lyft is a ride-sharing app, it works differently for the riders and the drivers. Let’s see How does Lyft Work for them.

How does Lyft Work for Riders?

The first step of the Lyft Business Model is about requesting a ride. Any rider with having a smartphone and installed an app in that phone can request a ride instantly with the help of a few steps. There are 3 options to be chosen by the users- Lyft, Lyft Plus, Lyft Line. Map based interface allows the client to track the car while it comes and also gives the ETA. Customers can give feedback to the driver once the ride gets over. The feedback system is a significant part of Lyft Business Model. A user can split the cost of the ride with the fellow passenger, once the ride has been picked up, both the passengers can decide to split the cost of the ride. For that, the user just needs to open the Lyft app and head down to the card with the ride information on it. A User can tap the Split button, scroll through the contacts and select the person from the list. In addition to the ride cost, the user will also split the cost of any tip he/she decides to leave. A User can select up to 5 other passengers to split the tip with.

How does Lyft Work for Drivers?

When the request is made by the passenger, a nearby driver in that area will get the notification and he/she will have the option to accept or decline the ride. Drivers can track the location of the passenger, from where the request was made. If the driver accepts the ride then he/she can reach the location of the rider through this location tracker and can do the job this way. Drivers can rate the rider. A Rating system is there for drivers also. Lyft adds additional income source to the driver’s profile. It allows a driver to work in flexible schedule time. The Drivers are able to work anytime and as long as he/she wishes. It can help in pursuing the hobby for those who love to drive and can do other things in rest of the time. Although Lyft Business model and Revenue model is like the business model of Uber. Though, from many perspectives, it has constantly differed itself and took after a technique where it can upset Uber in any way possible. Here are the couple of remarkable features of Lyft.

Lyft matches clients who wish to have a ride, with nearest available drivers.
All Lyft cars have a huge pink coloured moustache on the front.
A Customer gets to know the driver details and ETA when he requests a ride.
Live tracking tells the driver the exact location of the customer from where ride has been requested.
They use the tagline - Find a new friend every day.
Lyft business model has a feedback system in place for drivers as well as clients where they can give feedback to each other.
Payment procedure is handled by Lyft itself within the app.
Lyft takes fees of 20% from each ride and the rest 80% goes to the driver.
Lyft also has other pricing model called as heat maps.
Unlike Uber, Lyft just has 3 car options - Lyft, Lyft Plus, and Lyft Line.

Lyft Business Model

Lyft is a ride-sharing and acts as a branded marketplace for co-passengers and drivers. To understand Lyft business model, we must understand that carpooling market is not regulated everywhere and it’s not a stand-alone market. Lyft business model is simple and effective as it gets. One might predict that Lyft might be getting richer day by day owing to millions of rides and their 4 different ways to mint money on its platform however, that is not true. Owing to the competition from Uber and various overheads, Lyft posted a net loss of $127 million in the first half of the year 2015 as per Bloomberg Lyft is growing at a very fast pace. The company is expecting to break even and in the early 2016 and would post a profit as quoted by leaked figures suggest that it might achieve $400 million profit in the year 2016

How does Lyft Make Money?

Lyft is basically a cab application that matches customer who wants a ride with drivers who have a car. Each transaction happening on Lyft is divided between the driver and the company. Lyft takes a 20% commission from the total amount paid by a passenger to the driver and the rest 80% amount goes to the driver. The main revenue model of Lyft includes:

Lyft Car Ride

Lyft charges a 20% commission from every transaction that happens on the platform of the application. There are 5-seater cars, which come under the normal “Lyft” car division. Drivers get the remaining 80% of the amount that is being paid by the passenger.

Heat maps (Surge Pricing)

The heat maps are there which are location and time specific. Just like Uber’s surge pricing, Lyft also has heat maps that define an area where the requirement is getting increased. In case of high demand in a particular area, more price is charged by Lyft. This is the addition to the revenue model of Lyft.

Lyft Plus (More Seater Vehicles)

To give its clients another option apart from the normal 5-seater cabs, there is the feature called “Lyft Plus”. Lyft Plus is basically a 7-seater vehicle. Again, Lyft earns a commission of 205 from each ride but the charges for Lyft Plus are higher as compared to normal Lyft.

Discounted Rides under Lyft Line

Lyft which was born out of a ride-sharing platform named Zimride. It was a service that offered to people who did not want to hire an independent cab to go out on their destination. As the name suggests Lyft Line, it was offering a ride on a predefined route just like any other transport service like metro or city-run buses but was serviced by Lyft. Share Your Thoughts with Us Got a million dollar idea to build an app like Lyft? Get in touch with us to know how we can help you to build your MVP. Share your views here in the comment box about Business Model of Lyft and about How does Lyft Work. How does Lyft scaled is an inspiration for those who want to get entered into cab service providing industry and we would love to work with and share with the passionate people like you.

How to Launch Your Own Business Similar to Lyft?

If you’re willing to start your own ride-sharing business - you should go with Lyft Clone which has customized features to let you roll with your own carpooling solution. Here are some other informative articles articulated by NCrypted Websites:

NCrypted Editorial TeamProduct & research, NCrypted Technologies

We build and write about the business models behind the platforms our clients clone and launch - marketplaces, on-demand, travel, fintech and more.

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