Travis Kalanick is out. The ride-sharing market that Uber currently dominates is now completely in play. Hot off the heels of Amazon's move to buy Whole Foods, the speculation must be abounding:

Why not buy Uber if you're Amazon?

That was my first inclination yesterday when I saw the news of Kalanick's resignation. At first blush, it makes sense. Uber is the king of ride-sharing, has no way of going public any time soon, and their $60 billion valuation is likely ripe for a discounted deal with the right buyer that could promise the institutional shareholders a real path to growth and future liquidity.

The Automated Trucking Group (ATG) at Uber would bring amazing intellectual property asset to Amazon's aggressive strategy to expand their logistics business and become independent of UPS, FEDEX and the like forever. The Uber driver force is in the millions, and the company's brand has grown into a very--my five-year-old calls every car we don't own our Uber driver.

Amazon could make a run at Uber and certainly has the cash and the accretive stock. Owning the king of ride-sharing and on-demand delivery would further its lead against Walmart, Target, and the rest of the retail industry.

So here's why I think Amazon should buy Lyft instead.

I haven't owned a car for four and a half years, and I take Ubers or Lyfts everywhere I go. I talk with every driver and, anecdotally, more than 90 percent of full-time drivers seem to have two smartphones in their car: one for Lyft and one for Uber.

In several thousand rides, I haven't met a single person who likes Uber more than Lyft. Drivers only seem to drive Uber because, at present, they get a larger volume of rides through Uber than Lyft.

Here's what a world where Amazon buys Lyft would look like, broken down into nine pieces:

  1. Amazon can pay as little as $15 billion for Lyft (double their last posted valuation), which is roughly eight times less than what they would need to buy Uber.
  2. With the Prime customer now as a lead source, I'd predict a mass exodus in most major markets of the Uber force into Lyft full-time. This would decimate revenues and customer experience for Uber riders. The headless executive suite at Uber (and its rotten culture) wouldn't have time to recover before Lyft became the default choice.
  3. Amazon has the resources to infringe on the Uber ATG's intellectual property. Uber has so many legal drains already that if it ever sued Amazon, it would likely be forced to settle at some point. And if Uber didn't want to settle, Amazon could just drag the fight out indefinitely.
  4. Walmart, Google, or someone similar would partner or make a bid to buy Uber--and they'd pay much more to get it than they would if they'd bought Lyft (which, in this hypothetical, is no longer available). Either way, success would be unlikely: An alliance would lead to serious integration difficulties and any solo bid would have to anticipate a big lawsuit from Amazon.
  5. At some point in this scenario, Uber would probably have to file for Chapter 11 bankruptcy. Amazon would be able to bid aggressively to acquire Uber's intellectual property at auction for a discount.
  6. The independent drivers would win in the short run, as long as Amazon realized that Lyft's culture and DNA of treating their drivers as key assets is a strategic advantage not to mess with.
  7. Amazon Prime memberships would explode even further with special discounts on Lyft only available to Prime members.
  8. AmazonLyft has a nice ring to it. Whole Foods groceries would be deliverable. One-hour Prime shipping could happen through a ride-sharing force that's happy to deliver full-time during the day, rather than driving around drunk people at night to make ends meet.
  9. Doordash and Ubereats would become extinct or second fiddle.

I think the window is closing on this deal, but I wouldn't be surprised if this is the next "shot heard around the business world."

Would you?

Published on: Jun 23, 2017