Something I’m pondering this Sunday morning is Uber’s new round of financing and $18 billion valuation.
Fifteen years ago the most valuable thing Delta owned was shares in Priceline — the company liquidating unsold airline inventory was worth more than the carrier that actually had that inventory.
It was 2001 before Delta had sold more than a billion dollars worth of tickets online — and only half that amount was through its own website. (Southwest Airlines was actually one of the first 5 websites to cross a billion dollars in sales in a year.)
In a blast from the past, two years ago Priceline had a market capitalization greater than all US airlines combined. That’s no longer the case, with Delta, American, United, and Southwest alone combining for about 50% more market value than Priceline today. But that means Priceline is worth nearly twice as much as any single U.S. airline.
In this context it’s worth pondering that with Uber’s new $1.2 billion round of financing they have a valuation over $18 billion which is greater than Avis and Hertz, which each have cars. Indeed, Uber’s valuation is now about the same (give or take a few hundred million) as Avis and Hertz combined. (Of course Hertz likey was in worse shape than previously reported.)
I’ve been a big fan of Uber, first penning here Why Taxis Suck and What You Can Do About It. I think the business model of taking underutlized resources (downtime of cars, cabs) and connecting up those with consumers looking to pay for them is a brilliant one. It makes the economy more efficient, delivers value without substantial additional capital.
This idea can be extended, of course, to other industries. And embedded in an $18 billion valuation is that Uber will be able to expand beyond connecting passengers to cars.
Priceline is worth a ton, but was supposed to be able to revolutionize other industries too. The Priceline liquidation model, taking excess capacity and finding consumers through an opaque bidding model that wouldn’t cannibalize existing sales, was supposed to extend to everything from gas for your car to home mortgages. The vision didn’t extend as far as it was supposed to.
I love Uber but I’m skeptical that they’ll revolutionize several industries. Many investors much smarter than I am clearly disagree.