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Cloud is a world of much promise, but one where cost overruns are common and increases in productivity sometimes fleeting. The truth of how to effectively and affordably leverage AWS and other public cloud services is frequently different than the narrative being driven by tech media, and even by the cloud providers themselves.

Rhythmic has been navigating companies through the rapidly changing cloud environment since AWS was founded. Our monthly newsletter, Take Note, is where Rhythmic’s cloud experts share valuable insights and unique perspectives that will help you understand how to effectively and efficiently leverage the cloud for your business.  Subscribe today!

Latest Issue

Issue #11 - Uber v Lyft: A Story About Making Money in the Cloud

Written on March 12, 2019.

February was a quiet month in the cloud, but March started off with a bang when Lyft filed for its much-anticipated IPO. On page 37 of an otherwise dry S-1 filing, Lyft casually mentioned that it is contractually required to spend $300 million with AWS over the next three years. It turns out someone reads these 270-plus page documents, as Twitter caught on almost immediately. There’s been a ton of discussion in the ensuing week. Is this too much to spend? Is it wise to lock in for so long, presumably in the name of a modest discount? As always, we think the question is more important than the answer, and in this case, the better question is: What did Lyft get out of their considerable investment in AWS? In this issue, we dig in and take a look at the cloud’s role in Lyft’s journey.

-Cris


Uber v Lyft: A story about making money in the cloud

Lyft raised eyebrows everywhere when it filed its S-1 in preparation for its IPO. It turns out Lyft is spending close to $100 million per year with AWS. In fact, it is a contractual obligation. The media gobbled up this story, and the widespread reaction was that Lyft’s cloud spend was way out of whack compared to non-cloud alternatives. Journalists and know-it-all tech pundits on social media painted visions of hipster bean counters treating the infrastructure budget as though it was made of Monopoly money. Lyft’s engineering team was clearly a bunch of kids in need of adult supervision. While that’s a possibility, perhaps there’s more to this story.

To get to the bottom of this, let’s start at the beginning. Uber invented the ride share market, which is always nice if you can do it. The company methodically established a network of drivers and built a phenomenal infrastructure that could track them and pair them with riders worldwide within seconds. With a three-year head start, deep pockets, and an insurmountable brand with drivers and riders alike, Uber became the “verb” for ride sharing before Lyft was an idea. Uber had a strong moat around its business, deep and wide as any.

By starting slow and iterating toward their ultimate business model, Uber was able to gradually work toward an infrastructure that could support a city, a few cities, regions and then countries. This head start enabled their market domination, with no credible competition. When Lyft started, it had no drivers, no riders and no platform. The company did not have the luxury of starting slow. It had to have comparable infrastructure on Day 1 to have any hope of attracting drivers and riders.

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