Leading car sharing provider Zipcar saw its share price soar almost 30 percent today as the company handily beat analysts’ earnings estimates. CEO Scott Griffith took the opportunity to assure investors that 2012 would indeed be the first year in which Zipcar achieved profitability. Revenue was up 15 percent year over year and total membership grew 18 percent to 767,000. Equally important, the company continues to see fairly good revenue growth—15 percent—in its four established North American markets, Boston, New York, San Francisco and Washington D.C.
This is good news for the company after a bumpy second quarter in which a failed broadcast radio ad campaign cost the company money and increased its new customer acquisition costs. I still think it’s going to have to deal with the hefty capital costs of expanding into new markets and waiting for those markets to become profitable. It added Miami recently as its 20th market. By the company’s account the Zipvan service is doing well and it launched it in five markets during the quarter. I think there’s a lot of value in the service for consumers and really fits a niche need not terribly well met by its competition (U-haul).
The remaining question is just what happens with its membership model, which charges users $60 a year. New referral and trial programs helped drive subscriber growth 18 percent to 767,000, which is excellent. But if it gets hard to maintain that $60 price tag, then we’ll have to readjust the Zipcar business model, which Zipcar may well have to do anyways.