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Sharing Economy

How are Uber and Lyft not profitable?

Arity · March 29, 2019 · 5 min read
As Uber and Lyft release their quarterly earnings, Arity shares their view on how rideshare has changed our lives and how data can benefit these companies.

Ten years ago, Uber launched and quickly popularized a new perspective—that it may be more convenient, and more efficient if vehicle commuting was a shared experience. At that time the idea of hopping in the personal vehicle of a complete stranger seemed a cause for concern or socially unacceptable. Flash forward to today, Uber serves more than 100 million monthly active users per month, and Lyft with over 20.5 million. Both have created a new cultural norm, a new business model, and a new lane for transportation as we know it to evolve.

The transition happened at a dizzying pace, but getting people from one place to another is just the beginning as consumers have become increasingly aware of and reliant on rideshare services. Just like any other industry, services like Uber, Lyft, and other sharing economy providers will continue to evolve and that comes without its own set of challenges.

Of course, here at Arity, we look to the data to provide insights on the challenges and solutions to an evolving industry, but specifically transportation. So, what are the hurdles that leading rideshare providers will face in the coming years and how will the data help them solve those challenges?

Near-Term Challenge: Keeping and Finding Drivers who Drive Safely
Today, one of the major growth challenges for both Uber and Lyft is the company’s capability to maintain and grow their large pools of drivers. But what is equally important, and a telltale test for the ubiquity of ride-sharing services is not just getting more drivers but keeping and attracting the drivers who consistently exhibit safe behavior on the road.

We believe the ability to assess risk in a smarter, data-driven way will empower sharing economy companies to make more profitable decisions around acquiring and attaining safe drivers while operating efficiently, and decreasing liabilities such as car abandonment and inaccurate period assessment which will help them to mitigate high insurance costs.

Leveraging robust data analytic models like Arity’s PreQual offering will provide sharing economy companies with deeper insights into driver behavior and enable them to create more personalized shared experiences based on actual consumer behavioral trends. It’s very simple: having fleets of trusted, safe drivers will enhance the consumer experience and solidify ridesharing’s place as a ubiquitous mode of transportation.

Long-Term Challenge: Understanding the Needs and Wants of Users
Over the last decade, we have seen the development of the sharing economy across major industries such as transportation, healthcare, education, among many others. Emergent sharing marketplaces like Postmates, Handy, and Airbnb have demonstrated how services centered on consumer wants, needs, and experiences are at the core of this new facet of the global economy. As these companies continue to build technology that enables the growth of this shared business model, there will be an even greater need to understand consumer behavior through the intelligence and insights garnered from that data, allowing providers to continuously iterate models based on what the data is telling us.

As we become an increasingly connected society, here at Arity we are working with our customers and partners to use telematics data to assess the industry-wide implications of this massive shift and how we can use this influx of data available to maximize both efficiency and profitability. Specifically, these data-driven insights enable Arity to empower sharing economy companies to evolve their business models through deriving a real understanding of their users, improving existing offerings, and creating new services for all.

The Opportunity: Safer, Smarter, More Useful Services for All
With the ubiquitous adoption of ‘rideshare’ and other transportation-focused sharing economy services, consumers will no longer identify themselves with vehicle ownership. Instead, consumers will prioritize the quality and availability of new, curated services that automatically adapt to their needs and wants. Ridesharing is just the tip of the iceberg when it comes to transportation and mobility that focus on the needs of consumers. Looking ten years into the future, we predict that the norm will be platforms providing a variety of on-demand services that adjust in real-time depending on the dynamic needs and wants of consumers. Getting to a place where a platform can provide on-demand rides, cars, parking spots, and package delivery – while being profitable – is going to take diligent and collaborative data analysis while consumer preferences continue to evolve.

Over the next decade and beyond, we are fully committed to doing our part—which includes providing the data as well as the insights to help drive the growth of sharing economy as a major force in our evolving transportation system.

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