What is the Business Model of Lyft? A Deep Analysis into Core Working

Business Model of Lyft

Uber’s business model is to capture the global on-demand taxi market for urban areas by operating autonomous tilt-rotor electric aircraft and self-driving ground vehicles at a lower cost than owner-operated cars. Indeed, Uber has changed the way we travel and its sudden success has given birth to another startup called Lyft. Two-sided marketplaces, with both riders and drivers, enable Lyft to take second place, leaving little room for other competitors.

With a valuation of $23 billion, on-demand transport services are booming. Every person in the world is absolutely dependent on such services, while the industry’s competitors try their best to gain our patronage. 

Growth is largely attributed to the companies recovering from the COVID-19 impact and resuming their operations while adapting to the new normal. Earlier, restrictive containment measures involved social distancing, remote working, and the closure of commercial activities, which was problematic from a business standpoint. As a result, it is predicted that the market will reach $41.22 billion in 2025 at a CAGR of 9.5%.

Uber, Lyft, and Didi are examples of these companies. They make use of online platforms and mobile apps to offer their services to customers. Lyft, which has disrupted the industry since 2012, is one such company among the ridesharing companies.

If you’ve ever wondered how Lyft works, and particularly how it makes money without you tipping extra, or how its prices are typically lower than taxis, read on to learn how it works.

Lyft – Best Ride Sharing Company in the USA 

Its mobile-phone app was developed to enable passengers to connect with drivers who are willing to rent their cars by its masterminds Logan Green and John Zimmer in June 2012, marking its debut presence. 

In addition to covering 200 U.S. cities, the transport service company operates in New York City, San Francisco, and Los Angeles. The on-demand transportation service provides reliable and affordable rides through an app. You might get shocked to know that Lyft has snared 40% of its market share in US cities, including California and Austin. 

The taxi dispatch app was launched on May 22, 2012, and has raised $4.9B in 23 funding rounds, the most recent of which was on March 1, 2019. As of FY2020, Lyft reported $2.36B in revenue, staggering numbers that have shocked many business owners and motivated many to build an app similar to lyft as it helps them stand tall in the large online ride-booking market and also ensures attractive yield on investment. 

Now, without any ado, let’s see how Lyft works and what steps passengers need to follow for a quick ride. 

How Does Lyft Work?

No doubt, the increasing penetration of smartphones has made people also smart, but when it comes to online taxi booking services, some people are still reluctant about their usage. So, see how does it work? 

  • Install the app
  • Register or login with the options given in the app
  • Choose the type of vehicle you want 
  • Enter the live location along with pick-up and drop location details
  • Get linked with all nearby drivers
  • Here, customers can also see the fair price.
  • After booking, a user can track the location of the driver and also get the cab details along with the driver’s photo
  • Get into the car, make payment and reach your destination without any hurdle

Isn’t it easy to book a cab? Yes, it is and this is the reason why apps like Lyft are getting huge momentum in the market. Now, let’s dig into its business and revenue model. 

What is Lyft’s Business Model?

Lyft introduced the concept of the aggregator business model to the world and its unique business model that includes building partnerships and letting the drivers work under their brand name. It means, Lyft does not own any cars or vehicles, it aggregates or collects cab drivers, who drive their own cabs but lack digital presence. 

Lyft ensures that the service standards are met despite the fact that the actual service is delivered by partners – the cabs arrive on time, are clean, take the correct route, and ensure that the customer is safe. So, here’s the business model that will give you a quick glimpse of how Lyft earns money and how does it operate? 

Lyft’s Customer Segment

The user segments of Lyft are:

  • People who prefer online ride-booking services
  • People who don’t own cars
  • People who don’t want to drive themselves
  • People who are looking for a cost-effective travelling option

The driver segments of Lyft are:

  • People who own a car but looking for some extra income
  • People who love to drive
  • People looking for a flexible work schedule 

Therefore, Lyft has the advantage of offering a wide variety of transport services to its passengers, unlike other on-demand businesses.

Lyft Revenue Model

Along with growth, every business owner wants to earn maximum revenue. Lyft’s cost structure has already been discussed, but what about its revenue? There are many revenue-generating streams in Lyft’s business model.

  • Riders’ booking costs are the main revenue stream. A rider pays Lyft 20% of the price for their trip, and the other 80% goes to the driver. 20% of these revenues must be paid in local taxes, if applicable, and the rest is the company’s revenue.
  • Another revenue stream comes from surge charges charged by taxi dispatchers when there is high demand. 
  • The new self-driving platform also adds a new leaf to the Lyft revenue tree. For last-mile commutes, users can rent bikes and scooters through the platform.


The online cab booking business will keep growing in the years to come as more people now prefer private modes of transportation due to safety purposes. Indeed, Lyft is famous across the USA, if you are also interested in building your own app like Lyft within less time at a reasonable cost, choose the right technology partner and propel your business.