Lyft Ups Its Game With Gift Cards

Lyft has decided to pull out the big guns and do something that no other U.S. ride-hailing company has done before – sell gift cards.

According to CNBC, the company will begin selling $20 gift cards at participating Starbucks coffee shops this week as a part of its "Give the gift of Lyft" promotion.

"The partnership, we think, can help us not only reach new people, which is a huge goal of ours, but also get more people to take Lyft more frequently," Lyft's Vice President of Partnerships Oliver Hsiang told CNBC.

The company hopes the gift card promotion will increase its growth and potentially gain market share from its faster-growing competitor, Uber. According to a report obtained by Recode, Lyft told investors that July was a record month, accumulating a total of 13.9 million rides – 1.5 million more rides (a 12 percent increase) than the company performed in June.

The company also hit more than $2 billion in what it calls "net ride value" for the first time in history, on a run-rate basis, Recode reports. Net ride value, which different from Lyft's revenue, is the amount passengers pay without accounting for tolls or tips. Lyft takes 20 to 25 percent of the fare, meaning that the company's run-rate revenue for the year is between $400 million and $500 million.

The report also showed a 14 percent increase month-over-month in trips that were not subsidized or otherwise paid for using credits or coupons. In July, 11.4 million (81 percent) of the 14 million rides the company performed in total were not subsidized.

In addition, Lyft hit yet another milestone: the company saw more than three million monthly active passengers, up from two million in February 2016. In that same month, Lyft added 825,000 new passengers and 50,000 new drivers to the platform.

"Lyft attracted the largest number of new passengers and drivers in a single month, as well as the highest number of active passengers and drivers since inception," the document reads.

Last year, Lyft partnered with Starbucks to provide ride services for baristas in addition to offering perks to Lyft drivers and Starbucks reward program members.

In order to appeal to coffee regulars and Lyft riders alike, Starbucks customers will receive a $5 Starbucks gift card for each Lyft gift card purchased. Customers who sign up for Lyft and link their Starbucks account via the Lyft app will receive 125 stars, which is the equivalent of one free coffee.

This limited-time promotion will last until November 9.

As an added bonus, riders will also earn five stars toward free food and drinks,if they catch a ride between 5 a.m. and 10 a.m. Monday through Friday.

Hsiang told CNBC that their goal is to "cross-pollinate" Lyft riders and Starbucks coffee drinkers to bolster both companies' foot traffic.

"There are lots and lots of Starbucks stores in the cities that Lyft operates, and we know that people are taking Lyft rides to and from these locations," Hsiang said. "In fact, Starbucks was the number one most-visited coffee shop for us last year."

So, why is a digital ride-hailing service reverting back to the traditional gift card? According to Hsiang, it's all a part of Lyft's strategy.

"The gift cards allow us to get in front of a lot of people who may not be familiar with Lyft, or they can get in front of people who want to gift Lyft to other people," Hsiang told CNBC. "What we have learned is that there are lots of people who still prefer to transact through the physical card."

For consumers who prefer the digital realm, Lyft is offering referral codes to friends and family, inviting them to download the app and receive a free ride.

[Photo by Mike Coppola/Getty Images]