Lyft’s Melnick: ‘No Magic Bullet’ for Building a Multi-sided Marketplace

Share this:

LyftBuilding up a community of drivers and passengers for a ride-hailing service from scratch is no easy feat. There are big, fiercely competitive rivals in the ride-sharing space and new serivces popping up all the time — but that has not deterred Lyft. The company lauds the quality of its platform and service, positioning it for a different type of appeal among its peers.

Seth Melnick, senior operations manager for Lyft, will join us as a speaker at Street Fight Summit on October 25th in New York.  We caught up with him recently to chat about what the company is doing to extend its reach in the local market and differentiate its services from its competitors.

How challenging is growing and building a multi-sided marketplace?
With any type of multi-sided marketplace, it really is a constant balancing act. You’re constantly having to monitor and work with two different groups. In many businesses, you work with a client and make sure you keep them happy. Of course, we have to make sure that we’re keeping our drivers happy and keeping our passengers happy. So that drivers are seeing enough of a rise in requests and passengers are seeing an affordable ride and an ETA that doesn’t make them want to go to someone else.

For us, it’s a lot of making sure that we are growing in tandem. For drivers, we do things like driver-to-driver referrals. We think the best people should be able to decide who else should be driving for the app, like the great drivers we already have. We incentivize drivers to bring their friends along. We also do passenger promotions, to encourage different times we may see imbalances in the market. Maybe we need more passengers there or more drivers there.

Is there a trick to figuring out how to maintain a ready supply of drivers growing at the same proportional rate as the number of users?
I wish there was some really great trick for figuring it out. There’s no magic bullet; just hard work, building a team that’s ready to dig in. With the data we have, we’ve been in New York over two years now, so we have a much better idea of exactly what’s going to happen on a given date then we would have a year ago. Understanding what a September 7th in any year is going to look like, and then making good decisions and planning ahead. In a lot of situations, we’re just trying to make sure we’re keeping all the plates spinning in the air.

What are the biggest challenges of your job managing the New York market?
There are so many variables. There are other verticals that have more product that are in the market. There’s also the strongest public transportation system in possibly the world; there’s the yellow taxi system, which as of 2011 was ranked the third largest public transportation in terms of sheer volume. Also, New York has a very interesting climate. Things change a lot here. Rain, snow, sleet — all that can very quickly create big challenges for what we do on a day-to-day basis. We see this from a 10,000-foot view, but then there is the micro-issue of “Hey, I’m on 45th Street and Third Avenue, it’s snowing like crazy and I need a ride.” How do I get a vehicle out to that person and make sure the entire market continues to turn?

One of the great challenges of any transforming industry, not only is it growing, but it’s changing. The driver population is changing, the passenger population is growing, and the industry that started here is changing. We’re all trying to solve this interesting issue, but it does mean that it’s constantly moving. One of the hardest things about managing this market is constantly having to change our viewpoint, our attitude, and the way we look at things. You’re never going to see one day that’s exactly the same and you have to be ready for that.

Seth Melnick
Lyft’s Seth Melnick

As you said, New York has extensive transportation options. What’s the trick to making Lyft the go-to choice?
We’re very interested in creating reliability because that’s what people care about. They need to get to where they’re going on schedule and they don’t want to pay a lot of money for it, reasonably so. One thing we’re very focused on is creating this amazing in-car experience. Ask anyone and they will always say, driver or passenger, Lyft is a friendly experience. It makes them comfortable and feel they are in a place where they can be themselves. We used to say “Your friend with a car,” and your friends allows you to be who you are.

Are there particular parts of the city where Lyft is more popular?
In terms of where we excel, I think we’re great throughout the city but we have a really great amount of success in the outer boroughs. Almost half our trips take place in the outer boroughs. We really see New Yorkers rely on Lyft to close the public transportation gaps — that first- and last-mile solution. It’s really important to us to fill those gaps and make those gaps more efficient. If you live too far from the train station, we want to make it cheap and easy to get you there.

The fact that the data is playing out that we’re actually the outer borough solution, really makes me excited for what that means for Lyft as a company.

There are a lot of drivers who use multiple ride-hailing services; does that create any issues with the competing platforms?
The driver as to make the best decisions for themselves. They are kind of consumers in this market and they have to decide what’s best for them. My goal is for Lyft to be the best and we’re really focused on making sure Lyft is the best option for drivers in terms of how they live within the ecosystem. Drivers today prefer Lyft and they can make more money through a number of different ways. We’re the only app that has tipping within the app. Passengers can add tips, and we encourage them to do that. Drivers can also make more money with the Power Driver Bonus by earning back a portion of their commission by giving a certain number of rides per week.

Lyft was founded on the ideal of bringing people together and improving everyone’s lives through transportation. We’re finding ways to show drivers we’re really focused on making sure they earn enough but are also part of this entire process.

What do you do to ensure there are enough cars available on the street when people need them, given that many drivers come and go at irregular hours?
There are a number of ways we can do dynamic pricing. We’ve done things like send drivers to particular venues, if there is a great concert there. We send out an e-mail that has a number of different locations that we believe will be hotspots for activity for that night. It shows a heat map of what rides look like in the area. We’ve sent text messages out when there is a lot of activity at a corner. You try to direct it to the individual driver.

Is turnover an issue among drivers?
There is some turnover for sure, but my goal is to make sure there doesn’t have to be. I want to enable the driver to have the best experience that allows them to earn the highest. If this person wants to drive, they can stay here and be hired as much as possible. That is why we push things like the Power Driver Bonus, and different incentivizes. We love to communicate with drivers we haven’t seen for a while and ask what we can improve on to get them back.

What steps is Lyft taking to make sure it has a sustainable long-term position in New York?
We really want to make the best ride possible for passengers and the best platform for drivers that gives them information that allows them to see how they can earn better and also what’s going on in the city. We’re really focused on making sure we’re growing like crazy, but doing it in a sensitive way. We want to really build this great ride, and we’re hyper-focused on that.

headshot Joao-Pierre RuthJoão-Pierre Ruth is a freelance writer, editor, photographer, and the New York editor with Xconomy.

Hear more from Lyft’s Seth Melnick at Street Fight Summit on October 25th in New York. Click here for tickets and more info!