Several people have attempted a reasonable analysis of Uber’s target addressable market (TAM). Analysis by FiveThirtyEight blog gave Uber a generous TAM of $100 billion growing to $184 by 2024. I gave a conservative estimate of $22 billion growing to $28 by 2018.
Seeing analyses like these based on current market and growth assumptions, most point out, that for disruptive services like Uber the approach ignores market expanding beyond known sources because a new easy to use product is now available. That is, ease of use, affordability and convenience of Uber will accelerate the market growth 2X, 3X or 5X and not the programmed in 5% growth for Taxicab market. As supporting evidence we hear the disconnect between Taxicab market in San Francisco, $100 million vs. Uber revenue of $300 million from San Francisco.
Let us reset. Let us go the other direction. Let us not size based on Taxicab market but as a share of passenger miles travelled worldwide. What we are saying is Uber will take a share of total passenger miles travelled – which means displacing cars, buses etc. Let us make it huge and make a case for even higher valuations.
Here is total Car+Bus passenger miles travelled in four major geographies in 2014. Note that this is in Km and only for 4 Geos.
This is 9210 billion miles and if we give 150% multiplier for the rest of the world we get 14000 billion miles. This is all car and bus passenger miles.
Let us say 50% of this is simply not possible to reach for Uber due to long distance travel, roads, etc. That leaves 7000 billion miles a year.
Cars ownership is not going away 100% but Uber is going to eat into it. Let us take a number favoring Uber and say owned car miles will be just 50%. That leaves 3500 billion miles for Uber.
Uber makes $0.2 per mile on average, let us use that as basis. That is a $700 billion a year market.
That is a measly .28% market share for Uber.
Uber is growing 300% year over year. That is hard to keep up for next five years. So let us say it merely doubles every year for the next five years. It will reach $64 billion by 2020 and its market share will still be less than 10% of the $700 billion passenger miles market.
That is even after 5 years Uber will have lot more room to grow.
So here you go. Bring on the $1000 billion valuation next?