Los Angeles is inching closer to its happy saturation point for rideshare drivers on the road—at least by corporate standards. This week Lyft and Uber both reduced the cash bonuses offered by their driver referral programs aimed at expanding (and replenishing) their already legionary fleets. While the bonuses remain generous, the gradual reductions reflect a simmering down in the SoCal market compared to the promotional chaos that marked the first three months of 2015.
On Monday Lyft quietly reduced its driver sign-up bonus from $250 to $100 for new recruits who complete 50 rides within their first 30 days of driving. The same amount is awarded to the drivers who referred them. Uber, for its part, announced in an E-mail blast to its “partners” on Tuesday the end of its own summer promotion, which gave drivers an alternative to the standard $200 bonus for every driver referred. They could instead choose to earn three percent of their referrals’ first 30 days of work. While the standard $200 referral bonus will remain in effect, option two will be discontinued on August 31st.
Marketing tactics like these, which rely heavily on social media and word of mouth, are similar across all shared economy services, from Airbnb to Postmates. The system is simple: When you sign up, you get your own personal code, which you can use to invite friends, families, co-workers, or just strangers off Craigslist to sign up for the service. Once someone signs up with your code, both of you will receive a small financial prize, usually in the form of credits for that service, but sometimes cash. These bonuses are referred to as “double-sided” because both parties get the same reward. The airport car rental service Flightcar, for example, offers $20 to both the referrer and the new customer. All of the rideshare companies offer credits in a similar dollar range.
It is in the driving sector, however, where the real money is at. In large markets like Los Angeles, the fierce competition between Uber and Lyft has inflated these referral bonuses among drivers to levels of surreal absurdity. In addition to its normal $200 referral incentive, Uber has for over a year now been offering $500 to Lyft and Sidecar drivers to cross over its ranks. They are of course still allowed to drive for the competing services at the same time (as long as they are legally classified as independent contractors, at least).
In late February, Lyft hastily announced a too-good-to-be-true $1,000 double-sided bonus for new referrals (that is, $1,000 each). However, it discontinued the promotion just 25 hours later upon receiving too many applications (in the thousands) for their staff to process. Two weeks later, a class-action lawsuit was filed against the company by applicants and drivers who claimed to have been cheated by a bait-and-switch.
Despite such hiccups, Lyft has continued to offer generous driver referral bonuses in cities across the country. The pay-outs vary from city to city and range from $50 to $1,000. Strategically, the markets with the highest need for drivers offer the most money. With this in mind, Lyft’s deficit of drivers is apparent in Boston, where it has recently begun offering $1,000 for new drivers who complete 100 rides in their first month. It currently offers $750 in six cities, and $500 in another handful of seemingly steadier markets. Meanwhile, Uber, which has a much more established presence in all cities across the U.S., has lowered its driver referral bonuses to no more than $200 anywhere.
As such, the referral bonus amounts may serve as a barometer for the market presence of either company in a given city. Whereas last month Lyft was offering only $350 for new referrals in Seattle, it recently increased the bonus to $750. Likewise, New York City, one of the most volatile battlegrounds between Uber and taxi companies, was recently lowered from $750 to $500– and drivers must give 100 rides to get it.
In Los Angeles, the rideshare economy is in constant flux. It remains to be seen how the transition from summer into the school year will impact the number of active drivers, or how the city council’s recent approval of airport pick-ups will motivate “retired” drivers to get back on the road. In any case, no one can doubt that ridesharing is more popular than ever. It is now hard to take a walk downtown without spotting a Prius with a pink mustache in its dashboard roll by. Whether ridesharing’s ubiquity as both a service and as a side job makes it more or less lucrative for drivers is currently up for debate, but one thing is clear: Convincing people to try it is no longer the hurdle it once was.