Narrative and Numbers: The Value of Stories in Business (Columbia Business School Publishing)

by Aswath Damodaran

As an urban car service company, the market that it is pursuing is the taxicab and car service market in cities. Aggregating the taxicab and car service revenues of cities, I obtain a value of $100 billion for the urban car service market. 2. The local networking benefits will allow Uber to emerge as the dominant player in a subset of cities, while facing competitors (both domestic and foreign) in others. The market share that I assign in steady state for the company is 10 percent. While this is far higher than the highest market share of any of the existing players in this splintered business, it is capped at 10 percent rather than 30 or 40 percent because my story does not presume global networking benefits. 3. Uber’s first-mover status, its strong capital position, and its technological edge will allow the company to maintain the revenue-sharing agreement that it has with drivers (80 percent to the driver, 20 percent to Uber) and sustain strong operating margins (40 percent in steady state). 4. Continuing on its prevailing path of not owning cars or investing in infrastructure, the company will be able to generate $5 in revenues for every dollar in capital invested. To provide some perspective, the median value for this statistic across all U.S. companies is about 1.5 ($1.50 in sales for every dollar invested in capital) and a sales-to-capital ratio of 5.0 would be around the 90th percentile of all companies. Figure 8.4 summarizes thes...