Another ridesharing service is biting the dust.
Gett, a ride-hailing company that serves mostly corporate clients, said that it was shutting down Juno, its ridesharing app in New York City. The company cited "the enactment of misguided regulations in New York City earlier this year," a reference to the cap on ridesharing vehicles in the city and rules about minimum pay. Gett also said that it was shutting down Juno in order to focus on the corporate ridesharing sector.
Separately, Israel-based Gett, which was last valued at $1.5 billion and counts Volkswagen as a backer, said that it was forming a strategic alliance with Lyft (NASDAQ:LYFT) to enable its corporate clients to get rides in the U.S. Gett riders will be able to use the Gett app to get rides from Lyft drivers in the U.S. Additionally, Juno riders are being invited to join Lyft and receive a credit to start using the service.
Image source: Lyft.
Gett's announcement looks like a win for Lyft on multiple fronts. It represents the elimination of a competitor, though small, leaving just Uber (NYSE:UBER), Lyft, and Via as established ride-hailing operators in the U.S, and gives Lyft an ally as it seeks to grow its own customer base and take market share away from Uber.
Juno provided 14 million rides in 2018. The business has struggled this year amid changes in driver-pay rules in New York, and Gett had put it up for sale in March at a nominal price, meaning that number could have declined this year. By comparison, Lyft in 2018 provided more than 600 million rides so Juno only represents a fraction of its business, so Lyft has relatively little to gain even if it took all of Juno's customer base. Gaining Juno riders and drivers could help it scale up in New York, the biggest ridesharing market in the country, however.
The bigger deal here may be Gett's alliance with Lyft, an event that continues a pattern of Lyft being a preferred partner over Uber for various reasons including Lyft's No. 2 status in the industry. That gives Lyft an advantage in a way as suppliers and customers would like to prevent Uber from gaining a domestic ridesharing monopoly. Lyft's reputation may also be an asset over Uber in its bid for partners as Lyft hasn't run afoul of regulators the way Uber has on several occasions.
Gett serves 15,000 companies, including a third of the Fortune 500, and the arrangement should make Lyft the preferred network for Gett users when they come to the U.S. Additionally, the partnership could pave the way for Lyft to expand in Europe or give it a stake in a company with a strong presence there should the two companies extend their partnership.
Lyft today only operates in North America, and has not announced any plans to expand internationally, though the company made reference to a potential international expansion in its IPO prospectus. Given the changing market conditions and the company's renewed emphasis on profitability, with a goal of getting out of the red on an adjusted EBITDA basis by the end of 2021, an expansion across the pond seems like it would wait until Lyft hits that profitability milestone. Gett could also be a useful partner because of Volkswagen's efforts in autonomous vehicles. VW has invested more than $300 million in Gett.
The bottom line
Juno's demise and the Lyft's new partnership are unlikely to move the needle on Lyft's bottom line in the near future. Lyft did not have a formal comment on the news, but CFO Brian Roberts said he was "super excited about this partnership," signaling there may be more to this deal down the road. Investors should expect some clarity at some point from the company as it's unclear if the partnership goes beyond the details that Gett specified in the press release. Lyft's next public presentation will be at an RBC Capital Markets conference on Wednesday.
For now, the alliance with Gett is unlikely to change Lyft's trajectory, but it's a reminder that the company is much better positioned to gain from such partnerships than Uber. It also shows why Lyft should continue to gain market share on its chief rival and should help bring it closer to delivering on its profitability promise.