Google steers Uber and Lyft from the back seat

By Gina Chon

(The author is a Reuters Breakingviews columnist.)

SAN FRANCISCO, April 15 (Reuters Breakingviews) - Google is steering Uber and Lyft from the back seat. The search giant's parent Alphabet has made money on the two ride-hailing apps in a number of ways, according to details disclosed in their initial public offering documents. It will keep doing so even as its own technologies threaten their existence.

Google itself benefits too. Uber forked out $58 million from 2016 to 2018 for Google Maps, in addition to $702 million for advertising and other services. Lyft spent $208 million over the same time for similar things. The fight for riders means Uber and Lyft's chief executives, Dara Khosrowshahi and Logan Green, will continue to fill Google's tank with ad spending.

The plot thickens with Waymo, Alphabet's self-driving car division. That's a threat to both Uber and Lyft, who count drivers as one of their biggest costs. Waymo plans to test a commercial self-driving car service in the Phoenix area and has a permit to try out autonomous vehicles on public roads in California. Yet Waymo also owns around 0.3 percent of Uber in convertible shares, which it took to settle a dispute over intellectual property. As a result of that case, Uber is still being reviewed by an independent expert who could call for changes to Uber's product or suggest it pay licensing fees to Waymo.

Alphabet no longer has a board seat at Uber because of competition with Waymo - though it did until 2016. And Lyft's board still includes David Lawee, a partner at Alphabet's CapitalG investment arm. The upshot: The $848 billion company is at once a supplier, an investor and a rival to the two ride-hailing apps. Whichever wins the fight for investors' favor, Alphabet is the one that holds the keys.

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- Entities affiliated with Alphabet, the parent company of Google, hold a 5.2 percent stake in Uber Technologies or nearly 71.1 million shares, according to the ride-hailing app's draft initial public offering prospectus filed on April 11.

- Alphabet subsidiary Waymo, which works on self-driving technology, has another 5.1 million convertible preference shares as the result of a lawsuit settlement in 2018. Ongoing disputes over Waymo's intellectual property could result in licensing fees or required design changes for Uber, the company said in the filing.

- Uber also paid $58 million from 2016 to 2018 for services related to Google Maps, in addition to $702 million in that same period for advertising and other services.

- Separately, Alphabet-related entities own 5.3 percent stake of Lyft, the rival car-hailing app that listed its shares on March 29. Lyft also relies on Google Maps and paid the search firm $208 million from 2016 to 2018 for ad and other services.

Uber S-1 filing

Lyft S-1 filing

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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