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Part of this is just Finance 101. Valuation is an art as much as it is a science. Arguing assumptions is exactly what valuation is about-- this does not seem to

Part of this is just Finance 101. Valuation is an art as much as it is a science. Arguing assumptions is exactly what valuation is about-- this does not seem to reveal anything great. Gurley is obviously a buyer of Uber while Damodaran is not. The lower TAM or penetration numbers could even be written off as conservatism, after all humans are generally more optimistic about future prospects. Gurley makes a good point on the elasticity of Uber but frankly if I am in a suburb (as most of my close friends and family), you do not use Uber as much given you own a car you paid $30K+ for. In areas like NYC where Uber is used more, there could be higher demand but then you meet a limit- the number of cars on the road... too many causes congestion and people opt for mass transit. I do agree with the napkin sketch but I think there are multiple forces working against Uber away from large metropolitan areas (which is stated as a growth opportunity) including 1) car ownership; 2) infrequent trips -- you generally do a bunch of errands in one shot due to distance; 3) physical space-- how many ubers can there honestly be in a 20-40 mile radius in a lower volume area? Why not go to a nearby city, instead? Uber is a great service and I use it a lot but I find it hard to see as a car alternative. It is an alternative to existing cabs and mass transit in most areas. It will be interesting to see how it grows and like previously stated, what kind of margins it's drivers are earning... at a certain point you can only drive so much in price drops till they leave for the alternative. "Appendix" I even spoke to a yellow cab driver in NYC the other day and he stated that he is rounding up support from the commissioner for help on two things: 1) Green cabs (limited to where they can physically pick up but often times break rules) and 2) Uber.

aetherson 12y ago
The other thing about non-large-metro areas is that they're expensive to expand into. You need to promote Uber locally, recruit drivers, use promotions to drive demand while building supply, and all of that for a not very large market. There are a lot of these not-very-large markets, and, in aggregate, they're definitely a big opportunity. But they're inherently more expensive to acquire and slow to move into. Great for a mature company -- but hard to drive rapid growth with such a strategy.
- pbreit 12y ago
  Uber is close to or has already proven that it can effectively move in to less dense areas. Another huge advantage for it. With more courage and resources on pricing, it can go into new markets much more efficiently.
pbreit 12y ago
It sounds like you skimmed or didn't read the entire article. The author addresses many of your concerns. The situations you describe are already happening and we are barely in the first inning. My own experience with Uber is that it works even better in the suburbs where all alternative transportation (taxis, towncars, shuttles, Zipcar, bus, rail, relayrides, etc) is substantially worse.
- santoshsankar 12y ago
  I have used it in suburbs and I have had totally mixed experiences. Off course Ubwe is better than the status quo cab and mass transit you mentioned. But unless you do not own a car (for whatever reason), odds are that Uber really can't expand into that niche (as largely as was proposed). The only time my friends in the suburbs use Uber is to get between points if they have had a drink (cited in the article). To your point and the article's point, perhaps Uber can displace the older and smaller transportation infrastructures but you still face the issue of physical space. I can move more people per hour, per mile of track on a train than by car. Roads can only be built so wide and long in a given area -- NYC for example. I have been stuck in Uber plenty of times racking a $100+ charge cause of gridlock -- nothing can be done but add roads but we can't pave water. Other modes like trains can go above, on and below ground and coexist with other systems and you can run them more often and with more cars. After thinking more about the point of auto ownership, I think the $9k/annum cost of having a car is pretty steep. My dad who is religious about logging mileage and tracking his car's health from engine to windshield wipers likely would agree too. Car makers can and are reducing the cost curve and price points of their offerings. Furthermore, I am sure they're focused on the on-going safety and integrity of their product given the Toyota and GM recalls. If this is $9k, that for sure will be coming down. If it's truly that cumbersome to maintain a car, what about Uber's cars? Are drivers going to be spending large sums to maintain their vehicles (that likely see more wear and tear given they are cabs)? Who eats those costs... Uber? If not, do they need to pay higher wages or concede some ground to these livery companies to help maintain their fleet? Just something for us to all noodle about-- nothing like good discussion
  - pbreit 12y ago

aetherson 12y ago

The other thing about non-large-metro areas is that they're expensive to expand into. You need to promote Uber locally, recruit drivers, use promotions to drive demand while building supply, and all of that for a not very large market. There are a lot of these not-very-large markets, and, in aggregate, they're definitely a big opportunity. But they're inherently more expensive to acquire and slow to move into. Great for a mature company -- but hard to drive rapid growth with such a strategy.

pbreit 12y ago
Uber is close to or has already proven that it can effectively move in to less dense areas. Another huge advantage for it. With more courage and resources on pricing, it can go into new markets much more efficiently.

pbreit 12y ago

It sounds like you skimmed or didn't read the entire article. The author addresses many of your concerns. The situations you describe are already happening and we are barely in the first inning. My own experience with Uber is that it works even better in the suburbs where all alternative transportation (taxis, towncars, shuttles, Zipcar, bus, rail, relayrides, etc) is substantially worse.

santoshsankar 12y ago
I have used it in suburbs and I have had totally mixed experiences. Off course Ubwe is better than the status quo cab and mass transit you mentioned. But unless you do not own a car (for whatever reason), odds are that Uber really can't expand into that niche (as largely as was proposed). The only time my friends in the suburbs use Uber is to get between points if they have had a drink (cited in the article). To your point and the article's point, perhaps Uber can displace the older and smaller transportation infrastructures but you still face the issue of physical space. I can move more people per hour, per mile of track on a train than by car. Roads can only be built so wide and long in a given area -- NYC for example. I have been stuck in Uber plenty of times racking a $100+ charge cause of gridlock -- nothing can be done but add roads but we can't pave water. Other modes like trains can go above, on and below ground and coexist with other systems and you can run them more often and with more cars. After thinking more about the point of auto ownership, I think the $9k/annum cost of having a car is pretty steep. My dad who is religious about logging mileage and tracking his car's health from engine to windshield wipers likely would agree too. Car makers can and are reducing the cost curve and price points of their offerings. Furthermore, I am sure they're focused on the on-going safety and integrity of their product given the Toyota and GM recalls. If this is $9k, that for sure will be coming down. If it's truly that cumbersome to maintain a car, what about Uber's cars? Are drivers going to be spending large sums to maintain their vehicles (that likely see more wear and tear given they are cabs)? Who eats those costs... Uber? If not, do they need to pay higher wages or concede some ground to these livery companies to help maintain their fleet? Just something for us to all noodle about-- nothing like good discussion
- pbreit 12y ago