Here's why one insider predicts that Amazon will acquire Lyft in the next 18 months - and how Uber's value would plummet as a result
- Author Parth Detroja predicts that Amazon will acquire Lyft in the next 18 months.
- The deal would benefit both companies, says Detroja: Amazon could use Lyft's network of drivers to corner last-mile delivery, and Lyft could tap into Amazon's vast subscriber base to open new markets.
- A deal between the two companies would also have a direct hit on Uber's valuation, Detroja suggests.
Author and Facebook product manager Parth Detroja has made a bold prediction: in the next 18 months, Amazon will buy Lyft, the ride-share company that's reportedly planning to go public in 2019. According to Detroja, who co-authored a book on key business strategies in tech called Swipe to Unlock, a better move for Lyft's business would be an acquisition by Amazon.
The deal would benefit both companies by solving their key pain points, says Detroja: Amazon's signature subscriber offering of two-day shipping is costly and difficult to execute, and Lyft has yet to make significant progress entering international markets.
If Amazon acquired Lyft, the company could utilize drivers' trunks to make deliveries when they aren't picking up riders. In turn, Lyft could compete on a global stage against Uber by tapping into Amazon's rapidly growing international Prime-subscriber base.
How Amazon's last-mile delivery pains could be relieved
"If you look at ridesharing, the fundamental problem is that it's incredibly difficult to open a new market because you need a steady base of both drivers and passengers for the service to work," said Detroja. "The costs to do that are insane."
With a Lyft acquisition by Amazon, Detroja suggests that the shopping giant could offer Prime subscribers discounted rides - which could possibly open new markets for the ride-share company over night. In turn, Lyft could acquire new drivers by offering better pay than its biggest rival, Uber, by utilizing the empty space in drivers' trunks to courier Amazon packages to Prime subscribers.
Amazon has already looked into acquiring a driver base that would corner last-mile food delivery, Detroja points out. In September, the Telegraph reported that Amazon engaged in early-stage acquisition talks with European courier service Deliveroo twice in recent months.
"The logistics of Amazon's last-mile food delivery are so expensive," said Detroja. "There's also gaps with ridesharing. What if Lyft drivers had food or items in their trunk that they could deliver along passenger pick-up routes?"
Detroja admits that there are a few obvious snafus with this theory that would still need to be sorted out: a trunk full of packages would pose as a problem to passengers traveling with luggage, and a deluge of riders might cause issues ensuring timely package delivery.
"Of course there's intricacies here that would need to be sorted out," he said.
He continued: "As Amazon grows in established markets, what they're trying to do is outspend and out-offer their competitors. For instance, free two-day shipping wasn't even a thing until Amazon pioneered it - they're forcing everyone's hands."
Uber's valuation might suffer as a result
Detroja also points out that if Lyft and Amazon teamed up together, they'd be formidable contenders against Uber.
"Uber and Lyft have tried to engage in a price war, but their prices will always be in within 5% of each other," he said. "If they tried to compete for better prices forever, it would be a race to zero. But if Amazon owned Lyft, they could pass on savings to the consumer. It's the same strategy Amazon used to offer people video and music services."
Additionally, with a Lyft acquisition, Amazon would acquire yet another interesting asset, Detroja notes: Lyft's self-driving technology, which highlights an area that Amazon has expressed growing interest in over the past year.
If Amazon acquired Lyft, Detroja predicts that it would have a direct effect on Uber's multi-billion dollar valuation. "I think Uber's valuation would be cut substantially," said Detroja. And, if the acquisition took place before Uber's IPO - which, like Lyft, is reportedly expected to take place in 2019 - Detrojas said that the company might have to scramble to come up with a new valuation prior to going public as a result of competing directly with Amazon. "Uber would take a huge hit in market share over night," said Detroja.