Here’s a statement you might laugh at: Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) has a whole bunch of billion dollar ideas in the works, and one of the most promising of those ideas is scooter sharing.
Yes, scooter sharing. That may sound funny, but if you’ve been in Los Angeles, San Francisco, or San Diego recently, that statement probably seems less funny and actually quite realistic.
The streets in those cities are littered with for-rent electric scooters. Companies like Bird and Lime have brought the principles of the ride-sharing economy to the last mile electric scooter rental market.
And its working. Like clockwork. Demand for these electric scooters, which are on-demand and cheap, is robust. Consumers are riding these scooters everywhere from the boardwalks of Santa Monica and Pacific Beach to downtown San Diego.
Why? Because they’re a ton of fun. And they get you from point A to point B at a low cost and without much hassle.
Where does Google come into all of this?
Big money is starting to make a move into this hyper-growth scooter sharing market. Namely, Google’s venture arm is leading a $250 million investment into e-scooter company Lime at a pre-money valuation of around $750 million.
That valuation may ultimately prove to be a steal. The growth potential of scooter sharing through multi-city and multi-country expansion is quite robust. And Google’s investment into Bird could one day yield a multi-billion dollar payout.
Here’s a deeper look.
Scooter Sharing Is the Future
In the same way that Uber revolutionized the car-based transportation industry by utilizing sharing principles to optimally pair supply with demand, companies like Bird and Lime are doing that in the last mile e-scooter industry.
The concept of these companies is quite simple. They get a bunch of money. Buy a bunch of e-scooters. Put those e-scooters in areas where demand for last mile scooter sharing is robust. Allow everyone and anyone who downloads the app to ride the scooters, and charge next to nothing for rides (around $0.15-per-minute is the present market rate).
Demand for these e-scooters has been huge for two reasons. Firstly, they are a ton of fun to ride. A 15 minute joyride on a Bird or Lime scooter down the boardwalk is an enjoyable and cheap activity. Secondly, they are convenient. You can pick one up wherever the last person left it, and you can quickly travel in dense traffic areas at little cost and without any hassle.
Because scooter sharing dominates in the two areas that matter most for consumer-facing products (price and convenience), this market is bound to have robust demand for the foreseeable future in every urban market it launches in.
Lime Has Huge Growth Potential
How big could the payout be for Google as a result of its investment into Lime? Very big.
By my numbers, scooter sharing is a multi-billion dollar opportunity for Google. Here’s the math:
- Lime reported 55,000 trips in the company’s first three weeks of operation in San Diego, conservatively rounding out to around 70,000 per month.
- Uber and Lyft have seen rides-per-month soar in their most developed markets over the past several years. A similar dynamic will likely play out with ride-sharing scooters considering the striking similarities.
- Therefore, at scale, Lime could do about 315,000 rides per month in San Diego (4 to 5-times as much as the first month rate of 70,000).
- That equates to 3.78 million rides per year in a city with 1.4 million people, so about 2.7 rides per person, per year.
- Other cities will not have as high of a ride frequency because scooter-sharing is inherently an outdoor activity. San Diego weather allows for this activity to happen in high frequency year around. Other cities do not have such favorable weather conditions.
- Weather, on average across major urban areas, should accommodate high scooter usage for about half of the year. Therefore, urban average Lime rides per year, per person should total 1.35 at scale (half of 2.7)
- The total urban population in the U.S. is around 250 million, meaning that Lime, if implemented in every city, could do about 337.5 million rides per year in the U.S.
- Average duration of each trip should be about 15 minutes, with the average cost being $0.15/per minute, so each trip generates $2.25 in revenue, on average
- (337.5 million rides per year) x ($2.25 revenue per ride) = ~$760 million domestic revenue opportunity.
If you globalize the above numbers (4 billion total urban population), then you are looking at a global revenue opportunity in excess of $12 billion.
That is just the ride sharing service part of these companies. Throw in tangential revenue opportunities through last mile goods delivery, data licensing and advertising, and these companies could stand to generate revenue in excess of $20 billion-plus on a global basis.
Bottom Line on Scooter Sharing
Scooter sharing might sound funny, and look even sillier. But the core value proposition of scooter sharing is quite robust. Consequently, consumer demand for the services these e-scooter companies offer is huge.
If early successes in LA, SF, and SD can be replicated at scale, then Google and other early investors could be rewarded with multi-billion dollar payouts.
As of this writing, Luke Lango was long GOOG.