Estimate the market size for Google Fi.

My approach to this Google estimation interview question is as follows:

Google Fi is US only. 

Majority of revenue is by providing Mobile plans to users using a combination of other telcos avialable to switch between them to provide the best connectivity. 

Some users may purchase devices directly but that's more recent. 

Only some devices are compatible with Fi (assume some iPhones are also compatible). 

Total smartphones in US:  320 x 85% penetration = 270mil smartphones. 

Of these, assume 80% are on a plan and 20% are prepaid or not locked in. 

Mobile plan users: 215m x 80% = 110mil, 

Unlocked users: 55mil

How many of these would be in market for Google Fi. 

With unlocked users - say 50% will at any given time (annually) look to compare and switch to another network or plan. They're using prepaid and are either more price conscious so they'd make these decisions based on price, or they have phones outright and want the flexibility so a higher propensity to choose Google Fi. 

22.5mil market size for unlocked users. 

For locked in users - let's break up between premium and non-premium. Also plans are appoximately 2 years so . 

Premium vs nonpremium is 50:50. 

annual # of users looking to change contract or renew: 110/2 = 55 mil . 

Premium phones: 22.5mil 

Say 80% of these phones are eligible for Google Fi. 17.5mil. 

non-premium phones: 22.5mil

Say only 50% of these phones are eligible for Google Fi: 12.25mil

Total: 22.5+ 12.25 = 35mil

Total users = 35mil + 55 mil annually = 90mil

Avg phone plan rate is $25 dollars

 90mil x $25 

= $2.25 Bil

Sense check: seems a bit high. When we look back maybe we can think about how many users on plans will probably not switch their current providers. And maybe unlocked users estimation is a bit high if they're price conscious and don't want to spend $25 per month. 

Assumption made : 

Market size : how much potential business is really out there. Market size is generally looking at the number of potential customers, or number of transactions each year.

Facts:

• Google Fi is a wireless service carrier(MVNO- Mobile virtual network operator) A mobile virtual network operator (MVNO) is a wireless communications services provider that does not own the wireless network infrastructure over which it provides services to its customers.

• Google fi uses T Mobile, US cellular, Sprint network + wifi network to route

• Google fi is best for international travel

• Google fi provides additional offers like Google One service 

• Google Fi uses Esim method to get iPhones working on their network 

• Current Google Fi user world wide are around 500K

I would break my market sizing by covering TAM, SAM and SOM approach 

Total Addressable market (TAM) : Total market available for Product 

Total = ~5 Billion devices as of 2022 

so anywhere between 5 -6 Billion is total addressable market

Serviceable available  market (SAM) : Portion of market we can acquire based on business model 

• Below factors have been considered 

• Due to service coverage (no good coverage in rural areas and in emerging markets)

• device support (iphone devices are covered through Esim only)

• Price point in emerging markets - Samsung, Xiaomi have better rates in APAC regions 

• Google Fi needs other strong cellular service providers in each country to ride on (Reduce stronger network and Wifi coverage in emerging markets) 

Total Serviceable Available Market  = 3 to 4 Billion 

Total Serviceable Obtainable  market : Percentage of SAM  you can  realistically capture 

Factors being considered

• Comparing competition : Verizon, AT&T, Sprint in US and other carriers which are established and have brand recognition 

• Pricing structured offered 

• Perks offered which entice people

  • Ex: Verizon customers get services like Apple music, Disney+, Hulu at a discounted rate

  • AT&T offers HBO Max at discounted rate 

• Other carriers willing to let Google ride their network (especially in emerging markets. 

Total Serviceable Obtainable Market   of 1.5 to 2 Billion is market size 

Google Fi needs to plan a right Go to Market strategy to scale to move from current 500 K to Obtainable of 1.5 B in next 2-5 years. 

If we want to go into Market Value = total users * revenue per customer(based on the plan) or Market Share = Total revenue of google fi / Total revenue of all carries. 

Clarify

Here I am estimating Google Fi Market size in 2020.

Market Size means Total revenue generated from user in $$.

Company Background

Google Fi is a mobile virtual network operator (MVNO) service operated by Alphabet that uses networks operated by T-Mobile, Sprint, and U.S. Cellular and over 2 million Wi-Fi hotspots. Google Fi switches between these networks to enable best connectivity services to its end users. While initially started on Nexus phones, Google Fi has extended to Android phones manufactured by popular OEMs and iPhone.

Equation

Google Fi generate revenue through two sources:

1.       Revenue generated from providing Network and Data Services

2.       Revenue from selling Google Fi enabled Mobile devices

Revenue generated from providing Network and Data Services = No. of Active Google Fi User * Services Plan taken by user

Revenue from selling Google Fi enabled Mobile devices = No. of Google Fi user who purchased Google Fi enabled Mobile devices* price of Mobile devices  

Assumption

According to Firece Wireless

Approximate No. of Google Fi users = 500000

Math Calculation

Revenue from Service Plan

Here I am taking Assumption about % of user with respect to Plan.

Total Revenue from Plan = 6.75M+6M+2.5M = $ 15.25M

Yearly Revenue from Plan = 15.25 *12 = $183M

Revenue from Buying Google Fi enabled Phone

Suppose 50% of people buy phone from Google Fi and Phone ‘s approximate price is $ 500.

Total Revenue from Buying Phone from Google Fi = 250000*500 = 125000000 = $125M

Total Revenue = 183+125= $308M

So, Total Market size of Google Fi in 2020 is $308M.