In my Uber narrative, I viewed Uber as a car service company that would disrupt the existing taxi market (which I estimated to be $100 billion), expanding its growth (by attracting new users) and gaining a significant market share (10%). The Gurley Uber narrative was a more expansive one, where he saw Uber's potential market as much larger (drawing in new users) and much stronger networking effects for Uber, leading to a higher market share. In many ways, this is exactly the discussion I was hoping to have when I first posted on Uber, since it allows me to see how these narratives play out in the numbers. In table 10.3, I contrast the narratives and the resulting values: Table 10.3: Uber Narratives Damodaran versus Gurley – Uber (Gurley) Uber (Damodaran) Narrative Uber will expand the car service Uber will expand the car service market substantially, bringing in market moderately, primarily in mass transit users & non-users from urban environments, and use its the suburbs into the market, and use competitive advantages to get a its networking advantage to gain a significant but not dominant market dominant market share, while cutting share and maintain its revenue slice prices and margins (to 10%). at 20%. Total $300 billion, growing at 3% a year $100 billion, growing at 6% a year Market Market 40% 10% Share Uber’s 10% 20% revenue slice for $28.7 billion + Option of $5.9 billion + Option value of Uber entering car ownership market ($6 entering car ownership market billion+) billion)
In my Uber narrative, I viewed Uber as a car service company that would disrupt the existing taxi market (which I estimated to be $100 billion), expanding its growth (by attracting new users) and gaining a significant market share (10%). The Gurley Uber narrative was a more expansive one, where he saw Uber's potential market as much larger (drawing in new users) and much stronger networking effects for Uber, leading to a higher market share. In many ways, this is exactly the discussion I was hoping to have when I first posted on Uber, since it allows me to see how these narratives play out in the numbers. In table 10.3, I contrast the narratives and the resulting values: Table 10.3: Uber Narratives – Damodaran versus Gurley Uber (Gurley) Uber (Damodaran) Narrative Uber will expand the car service market substantially, bringing in mass transit users & non-users from the suburbs into the market, and use its networking advantage to gain a dominant market share, while cutting prices and margins (to 10%). Uber will expand the car service market moderately, primarily in urban environments, and use its competitive advantages to get a significant but not dominant market share and maintain its revenue slice at 20%. Total Market $300 billion, growing at 3% a year $100 billion, growing at 6% a year Market Share 40% 10% Uber’s revenue slice 10% 20% for Uber $28.7 billion + Option of entering car ownership market ($6 billion+) $5.9 billion + Option value of entering car ownership market billion)
NarrativeMay2016.docx