Professor Damodaran's analysis centers on two significant assumptions: Size of Potential Market, and Uber's Market Share. Professor Damodaran estimates the size of the global taxi market at $100 billion, growing at 6% per year for the next 10 years to a total global market of $183 billion in 2024. Next, he estimates Uber's future market share of this market at 10%, and notes that while Uber's market share is minuscule today, "the market share it can aspire to gain will depend on at least three factors: drivers' and passengers' openness to a different way of doing business, the competition and regulation.
Now, Bill Gurley, General Partner at venture capital firm Benchmark, and a board member and investor in Uber, has provided his thoughts on how Professor Damodaran may have underestimated Uber's total addressable market and market share. Bill Gurley is no slouch when it comes to valuation. He was a Wall Street equity research analyst covering personal computer hardware and software, and has invested in a number of highly successful companies. He is also a CFA Charterholder (as am I).
In his article "How to MIss By a Mile: An Alternative Look at Uber's Potential Market Size" he outlines his thoughts on why the total addressable market may be significantly larger than Prof. Damodaran's assumption, and market share may also be higher. Respecting the total addressable market, Gurley points out that "[w]hen you materially improve an offering, and create new features, functions, experiences, price points, and even enable new use cases, you can materially expand the market in the process." He then analyzes each of these improvements, and argues that Uber's total addressable market may range from $450 billion to $1.35 trillion. Gurley then looks at market share and points out several reasons why Uber's market shares may be much higher than 10%. All in all, a very interesting post and a recommended read.
So who's right? These are two very intelligent, accomplished and respected professionals that have different views on the addressable market opportunity. So I don't know who is right, but I will continue to watch Uber closely to see how it is valued in its initial public offering and by the market thereafter.
Link to Prof. Damodaran's article:
Link to Bill Gurley's article: