For anyone pondering Uber's future, it's useful to look at the markets available to the ride-hailing titan. Using estimates from Aswath Damodaran, a finance professor at NYU’s Stern School of Business who has written extensively on this subject, here’s the size of some markets that Uber is already in or might enter.
Uber’s most obvious market is taxi and limousine services, which the company already has been entering and in some cases disrupting. Damodaran sizes that entire market at $125 billion in annual global revenue and believes it’s possible for Uber to take a 40 percent share of it -- or $50 billion.
Investors -- and major car companies for that matter -- think Uber can expand beyond livery services. If riders use Uber as an alternative to rental cars, mass transit, local delivery, moving and car sharing, its "total available market," or TAM, expands significantly.
Add all of those separate sectors to taxi and limo services, and you get a market that rings up about $310 billion in annual sales.
It's hard to say what Uber’s realistic potential is in this large and complementary series of non-livery markets. Damodaran thinks Uber may snare 10 percent of it. (Damodaran has no affiliation with Uber, or stock in it or other ride-sharing companies.)
Bill Gurley is a venture capitalist at Benchmark -- which is an Uber investor -- and he has a much more robust outlook for Uber (perhaps because he's an investor!).
Gurley believes that drivers opting to swap car ownership for Uber services could eclipse all of Uber’s other markets. To calculate the size of that market's annual sales he multiplies the annual cost of owning a car ($6,000, he estimates) by the number of cars in the world. He then assumes Uber could replace perhaps 2.5 percent to 12.5 percent of that market, yielding a range of $150 billion to $750 billion (yes, billion) in annual sales for Uber. Gurley also thinks that Uber could possibly corral multiples of that range based on San Francisco’s expanding car-for-hire market.
For its part, Morgan Stanley Research said in September that the world's car owners spend roughly $10 trillion on such things as car payments, gas, maintenance, and insurance (10 trillion miles traveled annually, at an estimated cost of $1 per mile). If just 2.5 percent of those folks chose to forego spending that money on their cars and used Uber services instead, Morgan Stanley argues, the company could corral another $250 billion annually.
When pondering all of these very large numbers and projections, it's also worth remembering that Morgan Stanley has its eyes on underwriting a potential Uber IPO (and is already selling shares of Uber’s unlisted stock to top clients).
Still, Uber has wonderful prospects. All it has to do is achieve them.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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