tech:

taffy

Total addressable market (TAM)

TAM stands for Total Addressable Market, also known as Total Available Market. TAM represents the total potential revenue that could be generated if a company captured 100% of the market for a particular product or service. It is an estimate of the maximum possible sales opportunity available to all businesses in the industry.

TAM is useful for understanding the overall potential of a market, but does not account for the realistic constraints or competitive dynamics that may limit a specific company’s ability to capture the entire market.

How to calculate TAM

There are several ways to calculate TAM:

Top-down approach: This method involves analyzing market research reports, industry data, or analyst estimates to identify the total revenue generated by similar products or services in the target market. This data is then used to estimate the TAM for the specific product or service being offered.

Bottom-up approach: The bottom-up method starts with an assessment of the target customer base, including the number of potential customers and the average revenue generated per customer. By multiplying these two factors, the TAM can be calculated. This approach typically requires more detailed research, but it can provide a more accurate and tailored estimate of the market opportunity.

Value Theory approach: This method focuses on the value a product or service provides to customers, rather than the actual revenue generated. By estimating the total value created by solving a particular problem or addressing a specific need, businesses can calculate the TAM based on the potential value capture.

TAM represents the maximum potential revenue a company can achieve if it were to capture 100% of the market share, which is rarely attainable. Which brings us to two additional concepts: Serviceable Addressable Market (SAM) and Serviceable Obtainable Market (SOM).


Related:

Just in

Apple sued in a landmark iPhone monopoly lawsuit — CNN

The US Justice Department and more than a dozen states filed a blockbuster antitrust lawsuit against Apple on Thursday, accusing the giant company of illegally monopolizing the smartphone market, writes Brian Fung, Hannah Rabinowitz and Evan Perez.

Google is bringing satellite messaging to Android 15 — The Verge

Google’s second developer preview for Android 15 has arrived, bringing long-awaited support for satellite connectivity alongside several improvements to contactless payments, multi-language recognition, volume consistency, and interaction with PDFs via apps, writes Jess Weatherbed. 

Reddit CEO Steve Huffman is paid more than the heads of Meta, Pinterest, and Snap — combined — QZ

Reddit co-founder and CEO Steve Huffman has been blasted by Redditors and in media reports over his recently-revealed, super-sized pay package of $193 million in 2023, writes Laura Bratton. 

British AI pioneer Mustafa Suleyman joins Microsoft — BBC

Microsoft has announced British Artificial Intelligence pioneer Mustafa Suleyman will lead its newly-formed division, Microsoft AI, according to the BBC report. 

UnitedHealth Group has paid more than $2 billion to providers following cyberattack — CNBC

UnitedHealth Group said Monday that it’s paid out more than $2 billion to help health-care providers who have been affected by the cyberattack on subsidiary Change Healthcare, writes Ashley Capoot.