It all started when Lyft announced a plan to add on-demand carpooling to its cool ride app, and when rival Uber found out, it preempted Lyft‘s story with news in a blog that it had a “private beta” version of its own app called Uberpool.
Fighting ensued between the rivals, with Lyft alleging that its larger competitor was ordering phony rides and cancelling them at the last minute in an effort to frustrate Lyft drivers and cost the company money. This might not surprise critics of Uber, who may recall tales of “surge pricing” practiced by the company in times of high demand. During a San Francisco music festival, it wasn’t unusual for Uber drivers to charge $290 to $470 to go from Golden Gate Park to other places. Equally infamous was the driver who demanded $100 during the New York blizzard to drive a customer down the block.
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Uber is the larger of the two companies, with exposure to more cities and a billion in funding to Lyft’s much smaller reach and backing. However, the viciousness of the fight may not be to see who is going to win, but who is going to survive, as pointed out in Wired. While both Uber and Lyft are popular with customers, their business models may not be sustainable. The price war necessary to stay afloat involves, in some cases, rides costing more than drivers are paid, which means operating at a loss. In addition, nothing is stopping drivers switching services along with customers.
These two start-ups are fighting as if they are involved in a zero-sum game where only one company will be left standing. However, a more stark reality is that the price and PR war might cause both companies to run out of gas.