NextBurgh, PA          @VannevarB      About      Pittsburgh Murals
February 11, 2014

Lyft says they're not a taxi company. I believe them.

I would like to deviate from my previous comments about Lyft, which were pretty much fact- and evidence-based, and move into absolute speculation. So: Beware. Fair Warning.

When Lyft says that they are not a taxi company, and that they are not a transport company, I believe them. Let me tell you why.

It's puzzling to me that such high-power venture capitalists would invest in shuttle services. Sure, they can break the monopoly of Yellow Cab or medallion cabs, but VC's are sharks going after max rates of return - why are they pursuing this activity? It doesn't make sense.

A web-bud kept asking, How is Lyft different from a Jitney? He's a smart guy so I pondered it. My first pass was: Jitneys are black-operated in black neighborhoods. My second pass was: although jitney drivers know their customers, it's a cash operation; no receipts, no records, no footprint. Lyft is all digital; there's records everywhere. Don't want to use Lyft to get to your assignation or dealer (although inevitably people will).

So I thought about the loss of privacy with Lyft. Even Yellow Cabs are anonymous if you hail a cab in the street. Sure, there's video cameras but that requires extraction and that's exceptional; the norm is anonymity.

When you see smart people (VC's) doing something that doesn't make sense, either they're foolish or (more likely) you don't hear the music they're dancing to. Then I realized; the loss of privacy with Lyft isn't a bug, it's a feature. It fact, information gathering is Lyft's core profitability.

  • In a digital transaction, the information gleaned can be more valuable than the goods and currency exchanged, particularly when leveraged over the lifetime value of the customer.
  • You've probably heard this before: Google isn't a search-engine company; Google is an advertising company that happens to have a search engine, among other things.
  • Lyft isn't a taxi company. Lyft is a marketing company using drivers and their cars. (This is my speculation)

Let me explain myself. Facebook has billions of users, and Facebook is an advertising company. The better they can understand and quantify who their users are, the better they can sell their advertising. So Facebook knows that SteelerBoi1992 has certain demographics, likes certain bands, has certain friends, goes to certain other websites - they've got a pretty good portfolio on SteelerBoi1992. They watch him move around on his mobile phone, that helps a lot. Facebook has a pretty good handle on the Zip code where he sleeps, and where he spends his time during daylight hours on weekdays.

So Facebook can sell SteelerBoi1992's profile for a lot of money, and they can sell ads to SteelerBoi1992 at a higher rate because they can target him very specifically. Some people don't use Facebook on their smartphones, can you believe it? Facebook doesn't make as much money off their profiles.

The point is, the more enriched the Facebook profile, the more valuable the individual profile and the more valuable the overall portfolio is.

The Holy Grail is to break through the avatars and UserNames and get past the charade of SteelerBoi1992 and find out that this individual is really Walter Johnson, 22 years old, of 1313 Elmhurst Street, and what his credit card number is. Boy, when you can attach the online profile to the IRL (in real life) profile you've just multiplied the value of this file in a big way. That's a play that's worth the VC's time and money.

That's what Lyft does. Lyft connects online identities with real-life identities and then enriches the profile with location and demographic data from the driver. That's what's brilliant about Lyft targeting young, moneyed Millenials.

When the Customer wants a Lyft, they sign in through Facebook as SteelerBoi1992 to get a car. The App knows that they're also Walter Johnson. Walter identifies where he is and where he's going. Those are all datapoints that are stored. Lyft gets the Facebook username, the photo, and the real name. After the ride, the driver enters a few items into the Customer Profile. I'm going to be very disappointed if there aren't some demographics and econometrics in there. Then the Customer pays through the App with their Credit Card, which gives Lyft entree into Walter's financial data. This is a marketing wet dream.

When Lyft goes into a City, they're using shuttle services to enrich Facebook marketing data on young professionals who can afford car services. Imagine the tremendous value for Facebook in enriching the database for a population like San Francisco. This is why they're moving into every city.

This is how Lyft is undercutting Yellow Cabs on price. They don't have to make their money on the rides. They're making it elsewhere. They can probably lose a few cents on every ride and still be quite profitable.

In the old days, when they said "it's not about the money", it was about the money.
In the Nu 2.0, when they say "we're not a cab company", they're not. It's about the data.



BrianTH said...

Of course this concern isn't limited to Lyft. Pretty much any good or service you purchase or use through a smartphone or computer is likely to generate data which could be valuable for marketing purposes, particularly when combined with other data you generate.

Bram Reichbaum said...

You admit this is speculation, and I don't criticize that. But the speculation is fashioned to explain the participation of venture capitalists.

To speculate myself, I think this gets highlights a large part the root Lyft's opposition: that being, for some people this #Lyft business involves too many of the kinds of people they just don't like very much: venture capitalists, hipsters, affluent whites, people who go to cocktail marketing parties, and coy subversives.

But for the most part they're not harming anybody, at least not any more than an ordinary pizza delivery operation. (Which if it's corporate, is probably also selling your data.) Is there any room for a person to say they think Lyft is dumb, and they don't like a lot of the characters that seem to be involved in it, but that's STILL NO REASON to prevent those people from having options in Pittsburgh to do what they seem to enjoy? Live and let live? No one's forcing anybody into the passenger seat or behind the wheel.

Bram Reichbaum said...

In regards to my earlier submitted comment, I should add hastily that those aren't the only valid speculations upon the motivations of Lyft's grassroots opposition in Pittsburgh. I should think a good bit of it is something a great deal more romantic. Always perilous to assume motive, and yet we must speculate. Unsettling waters, policy and politics.

Vannevar said...

Bram, to restate: I don't have any problem with Lyft, with the exception that they're providing an illegal taxi service, and they're misrepresenting their insurance situation. The data sniffing IMO is just brilliant. And I believe that when the crash happens, people will be injured.

Note that the insurance only covers above and beyond the drivers policy. What happens when the driver's policy declines coverage? Also, notice that the secondary policy only covers when a passenger is in the car. What happens when the driver is enroute to a pickup, or cruising the "hot spot" in order to be closest when the App gets a request - because then they're travelling for Lyft, but the Lyft secondary policy won't cover them. Cheers V

Vannevar said...

Sorry, should have added; When the crash happens, people will be injured - and they may be pedestrians or occupants or other vehicles, who did not make informed decision to participate in Lyft insurance-roulette.

BrianTH said...

So they are working on closing any holes in the insurance coverage:

By the way, just as you have to look at this on a net basis with respect to the underlying risk question (i.e., a world in which there are cheaper, more available, more informative, and more competitive carhire services may be on net safer than a world in which more people who are poor or impaired drivers are forced to drive themselves, there is less information available about individual drivers, the existing carhire services are monopolies or in cartels, and so on), you also need to to look at this on a net basis with respect to the insurance question. For example, it is also not going to be automatically the case that everyone currently driving themselves for lack of better options is adequately insured for all possible contingencies, and so it could well be that even if there are still some possible holes, these services would immediately improve the net insurance situation.

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