Sharing Economy

How are Uber and Lyft not profitable?

Arity · March 29, 2019 · 4 min read
As Uber and Lyft release quarterly earnings, Arity unpacks how rideshare is changing transportation — and how data can benefit sharing economy services.

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 Uber and Lyft is their ability to maintain and grow a large pool of drivers. But an equally pressing sharing economy challenge is attracting and retaining safe drivers.

We believe the ability to access data-driven risk empowers sharing economy services. With mobility data, they can acquire and attain safe drivers while operating efficiently and decreasing liabilities. By leveraging this data, companies like Uber and Lyft can mitigate high insurance costs and make more profitable decisions.

Leveraging robust data analytic models like Arity’s PreQual offering provides sharing economy companies with deeper insights into driver behavior. These data-informed insights can drive sharing economy growth with personalized shared experiences based on behavioral data.

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, we are using telematics to work with our customers and partners to assess these rapid changes. This influx of data enables efficiency and profitability that drives sharing economy growth. And with a better understanding of their users, sharing economy services can evolve business models, improve existing offerings, and create new services.

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 that focuses on customers. Looking ten years into the future, we believe there are sharing economy opportunities in services that adjust in real time depending on the dynamic needs of consumers.

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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