pg is surprisingly prescient in his predictions about the potential size of the opportunity. This might just be survivorship bias though, but still, one takeaway I got from the email exchanges is that pg really evaluated founders on both the idea/market opportunity and the qualities of the founders themselves:
I'd recommend having the debate after meeting them instead of before. We had big doubts about this idea, but they vanished on meeting the guys.
To be fair, pg probably has more signal on the founders as individuals and VCs may not get as much signal based on a pitch meeting, but you could also argue that one of YC's edge was their focus on identifying stronger founders moreso than great ideas, whereas VCs, given their general strategy of investing more in large priced post-seed rounds care more about traction and market opportunity and less on the "intangible" traits of the founders.
It's interesting that pg also believed in the eventuality of AirBnB competing with and taking a lot of market share away from hotels. Fred and the "older" guys at their firm didn't believe this.
It's interesting that they both missed the real killer edge here. Fred said it was Etsy, Paul said it would move up into hotels. Neither are really what happened.
Turns out in most places it's profitable to arbitrage long term property cost and AirBnB income. So you have a bunch of small time operators buying or leasing property and putting them on AirBnB. AFAICT that seems to be the bulk of AirBnB business. Not Etsy (person to person) nor Hotels. But a new kind of "hotel" that consists of one person running a handful to a couple dozen apartments.
>But a new kind of "hotel" that consists of one person running a handful to a couple dozen apartments.
The most important part of Airbnb is creating a hotel "chain" or "brand" without having to deal with things like zoning or licensing or insurance for hotels.
While Hilton/Marriott/IHG/Hyatt/Accor/Choice/Wyndham/etc collect 10% to 20% in exchange for putting their brand on the line, Airbnb also was able to create a business where they can take 18% without putting their brand on the line, and keeping the ability to dump all the liability on the hosts. However, I think this is a weakness for Airbnb long term, but they may be able to take advantage in the short term.
Quality control for real world products, especially volatile ones such as abodes rented night after night, are costly and I'm willing to pay a premium to make sure there are some double or triple checks going on.
I kind of despise Airbnbs for this reason. It's usually some clean on the surface mess that was mostly cleaned up by the previous guests. I got sick of having to wash all the dishes, take off sheets, etc when I check out (usually having to check out at 11 am or earlier, so it can be as easy as possible on the host to rent it out again!). When I vacation I want a hotel room that someone else professionally cleaned, not more chores and what feels like staying in someone's dirty house.
And we stay in some of the nicest Airbnbs, my brother is a doctor.
Those chains don't really deal with zoning or licenses. The actual hotels are almost all franchises.
The real difference, as you allude to, is centralized reputation. If you stay at a crappy Marriott you blame Marriott. If you stay at a crappy Airbnb you blame the host.
It will be interesting what happens in the long run. There's now a proven market for apartment style hotel options. I could see a reputable brand move into the space.
My point was that the above mentioned brands only offer their product in a properly licensed and insured hotel. They couldn't have came onto the scene and enabled small time owners to flaunt local laws like Airbnb did without great reputational risk.
I feel like what a lot of the gig economy experiment has shown is that we have created too high of a entrance floor for new businesses. A lot of the taxes and expensive regulations are certainly well intentioned, but making them mandatory prevents a lot of people with entrepreneurial drive but low resources from getting into the game. It also creates a higher cost for people who would be glad to get a cheaper option with some risk of discomfort. It's so hard to roll back regulations once they've been put in place, though, that the only way you can create these options is to build entirely new models that skirt the entire structure.
If it's Hilton/Hyatt/Marriott/IHG/Choice/Wyndham, you can go to the hotel brand's website, you will get the same room for cheaper if you are part of the free hotel rewards program. You're also more valuable to the hotel since you'll be paying netting the hotel more income than someone coming from HotelTonight (since the hotel doesn't have to pay HotelTonight commission), therefore more eligible for perks or upgrades.
Due to rate parity clauses member rates on OTAs like Expedia basically match the franchise reward rates. They’re often the same rate plans in the software hotels use for managing their rates.
I checked Hilton SF downtown for next week and it’s $91 on HT and $95 on Hilton Honors rewards pricing.
In my hotel tonight app, I searched Hilton San Francisco for a 1 night stay in Hotel Tonight.
It returned Hilton SF Airport Bayfront at $93 for a room with either 1 or 2 beds. In the Hilton app, I get the same hotel for the same night at $87 for a room with 1 king size bed or 2 double size beds.
Then I was able to search for Hilton SF downtown in Hotel Tonight and find the Financial District one, which was available for the night of Fri Nov 27 for one night. Hotel Tonight had a price of $152 for the following room:
“The hotel will assign room at check in and it will fit 2 adults”
The Hilton app showed the financial district hotel available on Tue Nov 24 (which the hotel tonight app showed as not available) for $95, and for Fri nov 27, the Hilton app shows 1 king bed or 2 double size beds at $159.
So it looks like you’re right for some nights for some hotels, except they don’t let you confirm a room type on Hotel Tonight. I wonder how this squares with Hilton’s best price guarantee:
Looks like they’re trying to engage in some price discrimination. I would call the hotel front desk and tell them, I can pay the cheaper hotel tonight price, and you get 85% of that (hotel tonight pays the hotel 85% of the price you pay hotel tonight), or the hotel can sell to you directly for 10% off the hotel tonight price and end up making 5% more and see what they say.
It’s also possible the franchisor is violating their franchise agreement by letting hotel tonight sell for cheaper than Hilton’s website, so you might be able to get an even bigger discount by filing a complaint with Hilton.
The stock options were written to expire after ten years and the ten year expiration date was coming up. Airbnb wanted to IPO to ensure these early employees got properly rewarded for their huge contributions. I’m not sure exactly why they couldn’t just grant replacement options but I believe this would cause issues with the cost basis / additional tax and they probably can’t issue equivalent options to some of those people who no longer work for them due to IRS regulations
They don't need that much cash. The business is incredibly capital efficient and has great working capital dynamics because they collect the entire booking value up front and then pay the host once the booking occurs.
Uber I can still believe due to their complex app (real-time tracking of drivers and riders, matching algorithms, route mapping, pooling, fare calculation, surges). Not to mention other divisions like food delivery, autonomous driving, freight etc.
AirBnb is...a database of static listings and a search engine on top. Their top technology problems were all solved by Expedia like 20 years ago.
Uber is not that difficult. There's work for hundreds of developers between the few products, the localization for tens of countries with different language/currency/culture, and maintaining the main applications in working condition 24/7 at global scale. That's about it.
They have thousands of engineers sitting idle or making pet projects, struggling to justify their existence, as regularly attested by internal employees when an article pops up.
Roadshows must start 15 days after the listing. After that the company will start with their roadshow with institutional investors to gauge interest (~20 more days).
Once demand and supply of the shares is established, they can announce a public price for the share on the date before the IPO.
My initial guess is that we can expect pricing of the IPO on the week of 12/14
No idea what the process for getting this information released is... but it feels unlikely to be a coincidence that on the day a 2nd extremely effective vaccine is announced to the world... Airbnb files their public S1.
A lot of that document talks about COVID-19 and how it's effected their business (no surprise there) but also several mentions of vaccines. Mostly in the following phrase (repeated 3 times in the document, I think):
> The extent and duration of the adverse impact of COVID-19 on the Company over the longer term remain uncertain and dependent on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of COVID-19, the extent and effectiveness of containment actions taken, including mobility restrictions, the timing, availability, and effectiveness of vaccines, and the impact of these and other factors on travel behavior in general and on the Company’s business.
1. It’s been well known for a long time that vaccine results will start showing up this month.
2. Every single company in the world had to list COVID as a potential source of adverse effect to their business. It turned around whole economy and further impact is still unknown. And by every I literally mean every. Even companies like Zoom, that are super hot as a result of COVID - for them getting control of COVID will mean potentially big slides down.
It's not something you can just throw together on news of a vaccine. It's maybe possible they had it ready for this eventuality, but given they need to synchronize this with investment banks, the SEC, etc, I don't see them able to hold that credibly until news breaks.
Don't forget, there was the announcement in April [0], they issued $1 billion of that debt at 10% interest, and it's convertible, which is equivalent to rate of about 12-13% non-convertible debt.
What the S1 says about that loan: Interest on the First Lien Loan is payable monthly or quarterly in arrears, at our option depending on the chosen per annum interest rate equal to (i) in the case of LIBOR borrowings, 7.5% plus LIBOR, subject to a floor of 1% (the “First Lien Eurodollar Rate”), or (ii) in the case of base rate borrowings, 6.5% plus the greatest of (a) the prime rate, (b) the federal funds effective rate plus 0.5%, and (c) LIBOR for a one-month period plus 1%, subject to a floor of 2%.
'While we have not yet received a Revenue Agent’s Report generally issued at the conclusion of an IRS examination, in September 2020, we received a Draft Notice of Proposed Adjustment from the IRS for the 2013 tax year relating to the valuation of our international intellectual property which was sold to a subsidiary in 2013'
Well, you spend money as part of doing business, but then, in theory, you make some money. This is revenue. Revenue is taxed at 21% in the US as of the 2019 tax year. Now, if you screw up, and the IRS catches you, you owe penalties. And you owe interest on the money you didn’t pay. And these can add up, especially, like the S-1 filing says, if you have irregularities dating back 7 years.
I’m sure they will have to make a more detailed explanation of this at some point, and it should make for a good read whenever the release it. And they may take their accounting firm to court, because this is large enough to at least suspect negligence or fraud. But until something else happens, all we have is speculation.
Excited to learn more about the specifics. Really hoping people don't flood this thread with their anecdotal bad Airbnb experiences ("I paid below market rate this one time 6 years ago and got a crappy host, therefore this company is going to fail!"), which seems to happen every-time someone mentions their name.
airbnb sides too much with the host in my experience.
When a host left me and my family in an unsafe environment due to a gas leak, airbnb was impossible to work with. It took months of escalation with airbnb to get things fixed, despite providing all the documentation required the same day that I didn't stay at the property and had to book a last minute hotel at increased cost.
Got punched in the face outside of an Airbnb once and left immediately. Host charged me for damages including blood on the towel because I got punched. Airbnb sided with the host.
This is one of those examples where someone's point of view is so foreign to me that I start wondering if they live on another planet.
You seem to insinuate that because it wasn't within the host's control that I bled on their towel that it somehow falls on me instead. What? Did I choose to bleed, then? I mean, obviously it seems to me that it should fall on Airbnb itself to pay in cases like these. Perhaps the owner of the house should have demanded funds from Airbnb in exceptional cases like these. The outrage here is that the owner of the Airbnb - and you, apparently - seem to think that it's somehow a burden that I myself have to bear, as if I chose to get punched in the face.
Oh and by the way I did pay a standard multi-hundred-dollar cleaning fee. Apparently that wasn't enough, though.
If I got in a car crash in an Uber, because another car backed into me, do you think they would have fined me if my head hit the headrest in front of me and I got a bloody nose? To suggest as much would be outrageous. In fact, I have gotten into a car crash in Uber, and even Uber, one of the scummiest companies out there, knew to do the right thing. They immediately comped the ride and gave me another one for free. (OK, one could argue they could do even more...)
If I went to a hotel that was located in a shady area and walked outside and got punched in the face and bled on the floor when I came back in, do you think their first reaction would have been to charge me to clean it up?
The experiences that people report often indicate systemic issues within the platform/product, especially when they are as pervasive as some on the AirBnB platform are.* I wouldn't be so quick to dismiss them.
* I've had two shit hosts that left me up a creek scrambling to find housing, as has my S/O. As a consumer, I am way less likely to use the platform now because my experience has shown me that AirBnB either doesn't care or doesn't have an effective lever to pull to improve this situation.
You can interpret anecdotal data however you see fit - I'm not going to run a survey to validate the hypothesis either way.
That said, I think you'd be foolish as a potential investor to not consider that AirBnB appears to have some unresolved platform issues that could create opportunity for a competing product to make inroads. And while the voices we hear may well be the loudest ones, they can still be influential in driving change, positive or negative.
If there's one in a million chance for a problem to occur in a particular day with a particular host, given a million of hosts, you should expect the problem to occur approximately every day.
> Most of our guests discover Airbnb organically, with approximately 91% of all traffic to Airbnb coming through direct or unpaid channels during the nine months ended September 30, 2020.
Anyone know what % of traffic to Bookings and Expedia (and others) are paid vs unpaid? 91% unpaid seems really high, and I wonder if it's because Airbnb is so differentiated / people want to "Airbnb" a place (vs. "stay somewhere")
edit:
> Our hosts had 7.4 million available listings of homes and experiences as of September 30, 2020, of which 5.6 million were active listings. We consider a listing of a home or an experience to be an “active listing” if it is viewable on Airbnb and has been previously booked at least once on Airbnb
IMO it's super sneaky to blend homes and experiences together
Bookings and Expedia are way, way, way lower than that. Expedia has been complaining a lot in recent years how Google has been taking away a lot of their search traffic with in-results-page hotel listings.
At one point in the past I heard Booking was the largest spender, worldwide, on Adwords.
That's correct, Booking was the largest Adwords spender. I worked on their adwords integration then. Good fun.
I wouldn't immediately consider the hotel metasearch products a problem for booking. It shifts traffic to different paid channels with different tradeoffs (eg. less fine grained control of spend if it's a revshare model). I ran the product development in marketing for a little while. Some years ago (ie. late in the game, largely due to politics), we started investing in cross channel attribution models to better direct spending.
Disclosure: I no longer work for Booking, though. I do work for Google, but am in NO way involved in Ads or travel and an not trying to comment on the company's business.
Ah, I'd be out of date then. Go back a few years and my info would've been authoritative. I was running product development for booking's marketing department then, including the meta search integration.
Even if they would spend more on ads if Covid hadn't happened, it's still remarkable how great their numbers are with this little ad spend. It really speaks to the brand they have been able to build.
Airbnb also stopped performance marketing during COVID, so it is all unpaid for the past 8 months. But yes, Booking and Expedia rely much more on performance marketing, but Airbnb historically has paid a lot more for traffic. Experiences historically has been a very small # and $ amount so its not material. No need for them to break it out separately.
89% for Expedia, assuming you count search + direct. Airbnb is at 88% for the same breakdown according to Similarweb. However SimilarWeb has direct for Airbnb at 61.47% versus Expedia's 37.72%
AirBnb took the opposite approach of Expedia, Booking, VRBO, etc. Instead of focusing on SEO and paid search like the incumbents, AirBnb focused on brand.
Great article. But I think that saying "AirBNB focused on brand" is almost literally a misinterpretation:
"Brand is an extension of the Airbnb model, not its own strategy. If the product doesn’t deliver on a differentiated experience, brand building usually does not create loyalty."
This post seems to say that AirBNB didn't just focus on brand, but they innovated on /somehow/ making booking UX "10x" (let's leave the ostensible 10 aside for a moment and just say "a lot" instead) better than incumbents. But that requires a durable product advantage, one that consistently creates a differentiated experience. It's more accurate to say that brand is a downstream side effect of the core product than a sole or primary focus.
They reached verb/noun status year ago so 90% isn't surprising. If your mom wants to rent out her guest house does she type "gig economy app that let's me rent out my place" or airbnb?
Does anyone know what happened with the stock options for early airbnb employees which were expiring this month (Nov 2020)? Did they find some legal way to extend the options, or did employees end up having to find the money to exercise them or else lose out on them?
Airbnb in the less urban areas where I live was incredibly popular during the summer / fall. Covid-19 encouraged people in the city I live in to travel in the province instead of go to other countries.
Yep. COVID surprisingly ended up increasing the usage of Airbnb amongst my circles. My entire Insta/Twitter timeline is full of people who wanted to take advantage of the remote work situation and travel, but didn't want to stay in hotels due to a perceived risk of COVID, so they chose Airbnbs.
And then of course they also posted a lot of pics of said Airbnb on their timelines, which basically became advertisements encouraging other people to do the same...
Can anyone estimate what an investors in 2009 in Air BNB will get for an ROI post- IPO? I just looked and S&P 500 returned 426.134% with dividends reinvested through September 2020.
I believe in 2011 the strike price (accounting for both stock splits) would have been around $0.75-0.80 after they raised funds around May 2011. Assuming they are worth at least $30 billion, the shares would be around $50 for around a 6150% total return assuming $0.80 initially.
If someone got shares in 2009 they likely had a substantially higher return.
I think shares on the open market were selling for around $230 a share 2 years ago, I don't know valuation on that number but despite covid and the $1B loan amongst other things the people who joined earlier are making out like bandits(a few of my ex-coworkers went there and a friends wife joined there in 2011).
Strike price in 2011 post series B and after splits is $0.30. At the time I think the nominal price was like $2-4 a share, I'd have to go back and look.
Re: 2009. I recall an early employee saying YC told them not to hire anybody, but they hired him anyways off of his very creative outreach. But let me tell you they all earned every penny of it. It's hard to remember how crazy of an idea Airbnb was ~10 years ago.
As one of the most successful tech growth stories of the 2010s, obviously they 1,000X'd the returns of the S&P over that time.
The real question is though, going forward, what ROI will Airbnb deliver vs. the S&P 500.
Growth stocks seem to be nearing bubble territory at the moment, so if we get a repeat of the 2000s where interest rates start rising again and value stocks become more in favor, it doesn't look great.
Then again, selling fractionalized access to highly restricted real estate supply in all of the world's major cities doesn't sound like a bad bet for the future. If the lack of desire to invest in new construction in cities due to the covid narrative of cities being dead (obviously overblown) leads to further supply deficits, the future for Airbnb looks bright.
So in summation, its impossible to predict, buy index funds instead.
Would be quite hard to tell. AirBnb raised money 22 times since it was founded in 2008, including 6 rounds of VC funding. The early investors could do great or they could be wiped off if that's what the later investors wanted to do.
I wonder about their long term business model. Sure they have opened up the industry, but I'd think its quite easy to copy them. Sure there are a bunch of people that will keep AirBnB their favorite but when I'm looking at places I'll religiously check every site I can. There will be nothing unique about them.
I'd also like to add that Airbnb has become a pretty widely adopted verb. Once a brand becomes a verb, overtaking and unseating that degree of brand recognition becomes a feat that I can't recall has ever been done before.
I disagree strongly on this point. Building up a two-sided marketplace is incredibly difficult. On the consumer side, consider that many younger travelers have zero affinity towards hotel chains, and manage their entire accommodations arrangement through AirBnB, which feeds into an absolute requirement for hosts to list on the platform. This is not simply two markets you can copy: the feedback loops are so powerful already.
When I travel as a business user, I don't check any of the hotels apart from the top most brands. Sometimes, even if there is a 5 star hotel from a brand I don't know of, I wouldn't choose it over a 4 star hotel of a brand I do know of. The vast majority of business travelers behave (or book via their companies) the same way more or less.
When I'm choosing a place for a vacation, again, I'm looking at the top brands I know of, including AirBnB. Since the major hotels all resemble my business hotels, I'm more or less stuck looking at AirBnB rentals, simply because it's a more casual brand that I know of. I assume the vast majority of casual travelers are just like me.
I've had very good experiences using AirBnB in smaller towns, even in otherwise poorer places in Asia and Europe. On the contrary, I've had shitty AirBnB experiences, mostly in large cities in developed markets.
To be fair the loss in 2019 is largely attributed to the drastic increase in marketing spend, but also their increase in product development cost line item. Neither of those increases led to a significant increase in revenue though.
Makes me wonder what the 2020 story would have been without COVID.
Personal bias makes me think Airbnb is here to stay and the marketing spend can definitely be cut back. The timeline to revenue growing back against their costs is probably 2 years with this pandemic though and that hurts anyone who is looking to invest and hold.
I heard a podcast discuss the possibility of AirBnB offering shares or options to superhosts (like me) ahead of the IPO–essentially as a "thank you" to the people who helped build the marketplace.
Anyone have thoughts on if that is possible or plausible?
Airbnb Host Endowment: A fund that is intended to provide support to our host community now and in the future, which we expect will be initially funded with 9.2 million shares of Airbnb stock
Employees that get and exercise stock options are not accredited investors either. Couldn't they take a similar route?
I admit, I ask mostly selfishly (my wife and I are superhosts, we have managed a full-time AirBnB in CA for 2 years). But it's also an interesting thought experiment. It would be quite the contrast to how the rideshare and food delivery companies treat their non-employees.
The S-1 has this section with title "Directed Share Program":
"At our request, the underwriters have reserved up to [blank] shares of Class A common stock, or [blank]% of the shares offered by this prospectus, for sale at the initial public offering price through a directed share program to:
* Eligible U.S. hosts who hosted on our platform in 2019 and 2020 [...]"
I just got an email from AirBnB outlining their plan to offer shares to hosts as a part of the IPO with first dibs to hosts that first came on the platform.
How does one figure whether the business will keep growing without blasting people's faces with ads? If so much spend on ads is required to generate revenue growth then there will either never be profits or the revenue growth will stall (and thus the equity is worth rather little), if ads are not required then why are they spending so much on them, or maybe when will they stop spending.
All the "heroes" of the tech boom (Facebook, Google, Apple, Microsoft) did not suffer from this problem - they were profitable before going public.
It feels like this time we're in an advertising bubble. Nearly every single S-1 submitted to HN has this feature.
I am genuinely puzzled by this, if someone can offer some perspective on how can you model something like this I would be grateful - what assumptions you'd be making here.
Incidentally, half of those companies you've mentioned are in the top 50 spenders for marketing [1]. I'd hazard to say that they are all in the top 100 in global spend.
Well yeah but that's because of how massive they have become (thanks to being profitable and internal compounding). Their marketing spend in terms of % of revenue is not comparable to the late IPO up-starts, they make very very very healthy margins.
I am not saying advertising is bad, or that it doesn't work, or that you shouldn't do it. Nothing of this sort. It's just unclear to me what's the plan for eventually returning anything to the shareholder. All of the eventual value depends on this.
I understood what was meant. Companies don't just start marketing once they have multi billion dollar profitability.
If you're consumer focused, you spend on marketing, if you're business focused, you spend on sales. There are few examples to the contrary (Google, Atlassia, for example).
AirBnB early on was sniping Craigslist vacation listings[1], and now they have the resources, and scale to market directly. If AirBnB isn't doing it right, what constitutes the 'right' time to spend on marketing?
I'm curious as to how some folks would respond to this, and why.
The general idea here is that there will only be one major winner who will capture the market due to network effects.
So scaling as fast as possible is the #1 goal, because if you don't someone else will and you'll go out of business.
Therefore sales and marketing is a huge factor in growth. Then the idea is, once you've grown as much as you can and it's too hard for others to compete because of your entrenched network effects, you can reduce sales and marketing to a a reasonable, highly profitable level.
That's it in a nutshell and it works in any market with strong network effects, which AirBNB strongly fits into, in facts it's a poster child for the concept. Yelp is another good example -- sign up all the restaurants before a competitor does.
There are a lot of different business models out there, which you can study (and MBA programs teach you). This is just one model, and it's a legitimate one. Google, Facebook, Microsoft and Apple all have different models from it (and all drastically different from each other as well).
To evaluate ad spend, you don't look at just short-term return. There's a reason that "lifetime value" is a critical concept for companies. It's fairly normal in large companies that, in a given year, you may spend more on ads than you gain from those ads - but you expect the customers you gain from them to continue spending over many years.
So you may spend $100 to gain a customer who spends $20 in the first year... then $40 in the second... then $80 in the third... now all of a sudden your return on that was positive, three years later.
These are the kind of ads you want to buy, even if in the short term it looks bad. These large marketing expenses should have compounding benefits over many years. The people who care about the short term like that are not the investors you want and not the people you're trying to please.
Okay, so how would you model that? Can you be precise? What's the lifetime revenue generated by $1 of ad spend? This number is critical, because if that number is too low then the equity is, mathematically, worthless. It's not about patience, it's about whether you're compounding a number that's >1 or a number that's <1. I just cannot tell.
Yes, companies have ways to do this with a decent amount of precision and accuracy based on existing user behaviors. They can often even be detailed enough to know that LTV differs depending on the channel that the customer was acquired by (e.g. organic vs. Facebook ads vs. search ads) and tailor their ad spend accordingly.
I don't know what AirBnB's numbers are, companies aren't required to disclose this and they guard it very closely :)
Yeah but as an investor why would you buy this stock, and at which price level if so? My point of view is that of an investor - how would I know if they're compounding up or down. Is it a zero? Is it great? All you're saying is "trust the management".
I am not saying they're doing a bad job, I am merely saying that it looks difficult to tell. Remember, the management has a huge incentive to sell you the stock regardless of the future value of the business, it's your job to figure out if it is a good idea.
I'm not saying "trust the management", I'm telling you how an investor would think about it. High spend on marketing can absolutely be justified. Additionally, there's rarely enough public info to allow any investor to independently verify whether it's justified in a specific scenario or not. But if an investor thought that there was positive ROI on that spend, they're not going to fret too much about how large that amount is - as long as it's bringing in a positive return.
How often is it the case where a house is split into many units though? They're all for rent, but none are for the whole house. Yet the whole house is being rented in pieces.
I think the number is bullshit. They can't tell the difference between a room and a full home.
At least that's my experience when I was trying to search on the site. There was little filtering available and the owners were listing their properties as anything.
My experience is that you have read the listing extremely carefully trying to devise what is it about.
Is it a whole flat, or a room in a property with the landlord living in, or a room in a property fulled rented on airbnb (how many people?), or a bed in a bunk of beds (yes that's a thing). There's listings for everything and quite a few are misleading. It doesn't help that you have no idea what is the normal price range when traveling abroad and may not speak the language very well.
If you're interested by the way. My counter experience renting a flat on airbnb over the summer, is that guests are evaluating everything they could use including beds and couches and ground space. The guest renting a one bedroom could be anything from a person or a couple to a family (maybe with extended family/cousins joining in) to a group of many friends. It's always a surprise whether there will be 1 or 6 people showing up.
Assuming COVID ends up as less of a threat towards the end of next year, this might be good timing in favor of employees. Travel (and market sentiment around travel companies) might pick up right around the time when their lock-in period expires.
For a normal non-tech company, this would be considered beyond over leveraged, in fact no one would have ever lended to them at all. Granted these notes have warrants attached, I’m guessing SVB was involved, but still that’s a lot of debt service for a company with no cash flow.
I switched from hosting with Airbnb over to a property management company when I'm out of town. Airbnb continues to refuse to take security seriously and won't fulfill their host guarantee in the event that a guest causes thousands of dollars in damages. They should be an easy company to beat for long term rentals since they're so poorly run in many ways. I don't think they have any serious competition for very short term housing rentals ( not talking about hotels).
Yes someone tried to book a long term rental with me recently and I said I wouldn't take it on Airbnb since they've screwed me over in the past. I realize people here don't like others being critical of quality of tech companies but it's just the reality many have experienced
To anyone who disagrees with above statement though...I'd love to debate you if you think it's acceptable for them to just back out of their host guarantee.
Has anyone done a comprehensive review of the Airbnb regulatory environment? I know there's a bunch of places where some of it has settled but also many where hosts might still be operating contrary to regulations. Would be interested in knowing how that breaks out around the world.
There's a long list of cities with what they started to do. Search for "Paris" or "London" and should find them in the document.
It's not really a problem from a financial perspective because law is lagging decades behind the real world and there's way too much money on the table for renters to care about the restrictions/bans (and there's almost zero enforcement of restrictions anyway).
Wow, the financials are a little bit surprising (in how bad they seem to be, but in actuality might be okay)
Amazing growth and story up to 2018 (only $20M loss on $3.5B rev), clear investment in the marketing side that leads to the 2019 loss, but now curious if they can rebound when the world opens up.
Investing in Airbnb is definitely a bet on their model righting itself in a reasonable time frame. I wonder if their IPO price will have to reflect current realities instead of just future potential (given it probably won't improve its profitability for 2 years now)
>>the board of directors reduced Mr. Chesky’s base salary from $110,000 to $1, set his target bonus at $0, and granted him a long-term, multi-year equity award comprised of 12,000,000 RSUs (the “Multi-Year Award”).
Its quite surprising that CEO of Airbnb should make just $110k/ annum in base salary before the company goes public. I would expect it to be around $500k.
No, money is the thing you use to allow yourself to spend 200% of your time at work. Private tutors to school your kids so you don't have to. Cleaning services so you don't have to spend time cleaning. First class plane tickets so you can relax, sleep or work on the flight. Private driver or Ubers so you can work while driving places. A personal assistant to book travel, appointments and everything else mentioned so far.
Uber XL or black (need space and comfort to work efficiently) for 1 hour a day probably adds up to $200/day or around $50k/year. Which isn't cheap.
edit: That's a rough estimate and probably a low estimate. You'd be using Uber for commuting, going to work social events, driving kids on weekends, driving out of the city on vacation, etc.
It's much more tax efficient for Chesky to get loans against his equity in lieu of cash compensation -- especially if he believes that the equity will grow dramatically in value due to an IPO.
For public securities, margin or a pledged asset line. If it's private equity (structured lending), you'll need to speak with a banker who can structure a deal specifically for you based on an illiquid PE holding.
I've heard this before, but what advantage does the loan have? Doesn't the CEO still pay just as much tax when he/she sells the stock to pay down the loan? Is it just to allow the stock a chance to appreciate?
That's not how taxes on RSUs work (at least federally in the US). Nothing happens when RSUs are granted because they have no value until they vest. Once the RSUs vest, you are taxed based on the cost basis of $0 (since you pay nothing for RSUs).
It is probably early to congratulate the founders and the team, but as someone who started using Airbnb before they were cool, and having watched the company grow, it is very joyful to see they are finally going public. Hopefully it's just up and to the right even more from here onwards. Good luck!
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[ 181 ms ] story [ 5663 ms ] threadIt's interesting that pg also believed in the eventuality of AirBnB competing with and taking a lot of market share away from hotels. Fred and the "older" guys at their firm didn't believe this.
Turns out in most places it's profitable to arbitrage long term property cost and AirBnB income. So you have a bunch of small time operators buying or leasing property and putting them on AirBnB. AFAICT that seems to be the bulk of AirBnB business. Not Etsy (person to person) nor Hotels. But a new kind of "hotel" that consists of one person running a handful to a couple dozen apartments.
The most important part of Airbnb is creating a hotel "chain" or "brand" without having to deal with things like zoning or licensing or insurance for hotels.
While Hilton/Marriott/IHG/Hyatt/Accor/Choice/Wyndham/etc collect 10% to 20% in exchange for putting their brand on the line, Airbnb also was able to create a business where they can take 18% without putting their brand on the line, and keeping the ability to dump all the liability on the hosts. However, I think this is a weakness for Airbnb long term, but they may be able to take advantage in the short term.
Quality control for real world products, especially volatile ones such as abodes rented night after night, are costly and I'm willing to pay a premium to make sure there are some double or triple checks going on.
And we stay in some of the nicest Airbnbs, my brother is a doctor.
The real difference, as you allude to, is centralized reputation. If you stay at a crappy Marriott you blame Marriott. If you stay at a crappy Airbnb you blame the host.
It will be interesting what happens in the long run. There's now a proven market for apartment style hotel options. I could see a reputable brand move into the space.
Anecdotally, HotelTonight is my go-to for booking any hotel, any time.
I checked Hilton SF downtown for next week and it’s $91 on HT and $95 on Hilton Honors rewards pricing.
It returned Hilton SF Airport Bayfront at $93 for a room with either 1 or 2 beds. In the Hilton app, I get the same hotel for the same night at $87 for a room with 1 king size bed or 2 double size beds.
Then I was able to search for Hilton SF downtown in Hotel Tonight and find the Financial District one, which was available for the night of Fri Nov 27 for one night. Hotel Tonight had a price of $152 for the following room:
“The hotel will assign room at check in and it will fit 2 adults”
The Hilton app showed the financial district hotel available on Tue Nov 24 (which the hotel tonight app showed as not available) for $95, and for Fri nov 27, the Hilton app shows 1 king bed or 2 double size beds at $159.
So it looks like you’re right for some nights for some hotels, except they don’t let you confirm a room type on Hotel Tonight. I wonder how this squares with Hilton’s best price guarantee:
https://hiltonworldwide3.hilton.com/en/price-match-guarantee...
Looks like they’re trying to engage in some price discrimination. I would call the hotel front desk and tell them, I can pay the cheaper hotel tonight price, and you get 85% of that (hotel tonight pays the hotel 85% of the price you pay hotel tonight), or the hotel can sell to you directly for 10% off the hotel tonight price and end up making 5% more and see what they say.
It’s also possible the franchisor is violating their franchise agreement by letting hotel tonight sell for cheaper than Hilton’s website, so you might be able to get an even bigger discount by filing a complaint with Hilton.
Uber/Airbnb don't need near the amount of product/engineering they actually have.
AirBnb is...a database of static listings and a search engine on top. Their top technology problems were all solved by Expedia like 20 years ago.
They have thousands of engineers sitting idle or making pet projects, struggling to justify their existence, as regularly attested by internal employees when an article pops up.
Expedia, hotels.com. booking.com and most airlines are handling more requests than Airbnb in more challenging environments.
Once demand and supply of the shares is established, they can announce a public price for the share on the date before the IPO.
My initial guess is that we can expect pricing of the IPO on the week of 12/14
A lot of that document talks about COVID-19 and how it's effected their business (no surprise there) but also several mentions of vaccines. Mostly in the following phrase (repeated 3 times in the document, I think):
> The extent and duration of the adverse impact of COVID-19 on the Company over the longer term remain uncertain and dependent on future developments that cannot be accurately predicted at this time, such as the severity and transmission rate of COVID-19, the extent and effectiveness of containment actions taken, including mobility restrictions, the timing, availability, and effectiveness of vaccines, and the impact of these and other factors on travel behavior in general and on the Company’s business.
2. Every single company in the world had to list COVID as a potential source of adverse effect to their business. It turned around whole economy and further impact is still unknown. And by every I literally mean every. Even companies like Zoom, that are super hot as a result of COVID - for them getting control of COVID will mean potentially big slides down.
I'm reading this right, correct? I see the cash positions below are a bit different, but that's likely from... the loans?
2018 looked so hopeful. They only lose $20m total! 2019 should have been a profitable year, IMO, but they went with the aggressive strategy.
Don't forget, there was the announcement in April [0], they issued $1 billion of that debt at 10% interest, and it's convertible, which is equivalent to rate of about 12-13% non-convertible debt.
[0] https://www.businessinsider.com/airbnb-paying-10-percent-int...
What the S1 says about that loan: Interest on the First Lien Loan is payable monthly or quarterly in arrears, at our option depending on the chosen per annum interest rate equal to (i) in the case of LIBOR borrowings, 7.5% plus LIBOR, subject to a floor of 1% (the “First Lien Eurodollar Rate”), or (ii) in the case of base rate borrowings, 6.5% plus the greatest of (a) the prime rate, (b) the federal funds effective rate plus 0.5%, and (c) LIBOR for a one-month period plus 1%, subject to a floor of 2%.
'While we have not yet received a Revenue Agent’s Report generally issued at the conclusion of an IRS examination, in September 2020, we received a Draft Notice of Proposed Adjustment from the IRS for the 2013 tax year relating to the valuation of our international intellectual property which was sold to a subsidiary in 2013'
I’m sure they will have to make a more detailed explanation of this at some point, and it should make for a good read whenever the release it. And they may take their accounting firm to court, because this is large enough to at least suspect negligence or fraud. But until something else happens, all we have is speculation.
I hope you're not an accountant.
Revenue was up ~30%, but costs an expenses up ~50%, primarily SG&A and product development... basically they hired a lot of people it looks like.
airbnb sides too much with the host in my experience.
When a host left me and my family in an unsafe environment due to a gas leak, airbnb was impossible to work with. It took months of escalation with airbnb to get things fixed, despite providing all the documentation required the same day that I didn't stay at the property and had to book a last minute hotel at increased cost.
:)
We had drug dealers moving product from one. We told airbnb not to contact the guests. They contact them anyways trying to "resolve" the situation.
Every time guests break rules like smoking that have clearly posted fees, airbnb says they can't help. Even when the guests admit to it.
When we needed to call CPS on morons endangering their one year old, we were not able to get the guests information to give to the police.
Their support will straight up lie to you to resolve cases faster.
It is the host's fault for charging me damages outside of my control. It is also Airbnb's fault for refusing to take a side.
You seem to insinuate that because it wasn't within the host's control that I bled on their towel that it somehow falls on me instead. What? Did I choose to bleed, then? I mean, obviously it seems to me that it should fall on Airbnb itself to pay in cases like these. Perhaps the owner of the house should have demanded funds from Airbnb in exceptional cases like these. The outrage here is that the owner of the Airbnb - and you, apparently - seem to think that it's somehow a burden that I myself have to bear, as if I chose to get punched in the face.
Oh and by the way I did pay a standard multi-hundred-dollar cleaning fee. Apparently that wasn't enough, though.
If I got in a car crash in an Uber, because another car backed into me, do you think they would have fined me if my head hit the headrest in front of me and I got a bloody nose? To suggest as much would be outrageous. In fact, I have gotten into a car crash in Uber, and even Uber, one of the scummiest companies out there, knew to do the right thing. They immediately comped the ride and gave me another one for free. (OK, one could argue they could do even more...)
If I went to a hotel that was located in a shady area and walked outside and got punched in the face and bled on the floor when I came back in, do you think their first reaction would have been to charge me to clean it up?
The person who really ought to pay is the guy who punched you in the face. Unless you deserved it but I’m giving you the benefit of the doubt.
* I've had two shit hosts that left me up a creek scrambling to find housing, as has my S/O. As a consumer, I am way less likely to use the platform now because my experience has shown me that AirBnB either doesn't care or doesn't have an effective lever to pull to improve this situation.
That said, I think you'd be foolish as a potential investor to not consider that AirBnB appears to have some unresolved platform issues that could create opportunity for a competing product to make inroads. And while the voices we hear may well be the loudest ones, they can still be influential in driving change, positive or negative.
> Most of our guests discover Airbnb organically, with approximately 91% of all traffic to Airbnb coming through direct or unpaid channels during the nine months ended September 30, 2020.
Anyone know what % of traffic to Bookings and Expedia (and others) are paid vs unpaid? 91% unpaid seems really high, and I wonder if it's because Airbnb is so differentiated / people want to "Airbnb" a place (vs. "stay somewhere")
edit:
> Our hosts had 7.4 million available listings of homes and experiences as of September 30, 2020, of which 5.6 million were active listings. We consider a listing of a home or an experience to be an “active listing” if it is viewable on Airbnb and has been previously booked at least once on Airbnb
IMO it's super sneaky to blend homes and experiences together
At one point in the past I heard Booking was the largest spender, worldwide, on Adwords.
I wouldn't immediately consider the hotel metasearch products a problem for booking. It shifts traffic to different paid channels with different tradeoffs (eg. less fine grained control of spend if it's a revshare model). I ran the product development in marketing for a little while. Some years ago (ie. late in the game, largely due to politics), we started investing in cross channel attribution models to better direct spending.
Disclosure: I no longer work for Booking, though. I do work for Google, but am in NO way involved in Ads or travel and an not trying to comment on the company's business.
Seems like Booking and Expedia disagree with you:
https://www.marketwatch.com/story/some-of-the-biggest-tech-n...
Time flies!
So they are definitely getting a tremendous amount of organic traffic because "Airbnb" became a verb like Google or Uber.
Especially around the fast growing millennial sector which is very focused around experiences and travel.
Definitely helps that Airbnb has become a verb - can't beat that.
Great breakdown by Casey Winters on the strategies - https://news.greylock.com/four-strategies-to-win-big-with-lo... - showing that there are different strategies, and not one absolute best.
"Brand is an extension of the Airbnb model, not its own strategy. If the product doesn’t deliver on a differentiated experience, brand building usually does not create loyalty."
This post seems to say that AirBNB didn't just focus on brand, but they innovated on /somehow/ making booking UX "10x" (let's leave the ostensible 10 aside for a moment and just say "a lot" instead) better than incumbents. But that requires a durable product advantage, one that consistently creates a differentiated experience. It's more accurate to say that brand is a downstream side effect of the core product than a sole or primary focus.
For context: http://archive.is/xdv1u (NYT Article)
Revenue:
2020* 2.5billions
2019 4.9billions
2018 3.7billions
*until September.
And then of course they also posted a lot of pics of said Airbnb on their timelines, which basically became advertisements encouraging other people to do the same...
Depends on later stage dilution and what the pre-money is, but still a ridiculous markup. No comparison to S&P.
If someone got shares in 2009 they likely had a substantially higher return.
Re: 2009. I recall an early employee saying YC told them not to hire anybody, but they hired him anyways off of his very creative outreach. But let me tell you they all earned every penny of it. It's hard to remember how crazy of an idea Airbnb was ~10 years ago.
The real question is though, going forward, what ROI will Airbnb deliver vs. the S&P 500.
Growth stocks seem to be nearing bubble territory at the moment, so if we get a repeat of the 2000s where interest rates start rising again and value stocks become more in favor, it doesn't look great.
Then again, selling fractionalized access to highly restricted real estate supply in all of the world's major cities doesn't sound like a bad bet for the future. If the lack of desire to invest in new construction in cities due to the covid narrative of cities being dead (obviously overblown) leads to further supply deficits, the future for Airbnb looks bright.
So in summation, its impossible to predict, buy index funds instead.
https://www.crunchbase.com/organization/airbnb/company_finan...
Most people probably don’t want to check a dozen different sites (convenience) or don’t know which sites they can trust.
Maybe that is true right now, but in the future I doubt it. The last place I rented was on both AirBnB and VRBO, VRBO having a slightly lower price.
When I'm choosing a place for a vacation, again, I'm looking at the top brands I know of, including AirBnB. Since the major hotels all resemble my business hotels, I'm more or less stuck looking at AirBnB rentals, simply because it's a more casual brand that I know of. I assume the vast majority of casual travelers are just like me.
I've had very good experiences using AirBnB in smaller towns, even in otherwise poorer places in Asia and Europe. On the contrary, I've had shitty AirBnB experiences, mostly in large cities in developed markets.
I know there were layoffs so I'm sure they were in full cost-cutting mode by the time the pandemic hit full swing
Makes me wonder what the 2020 story would have been without COVID.
Personal bias makes me think Airbnb is here to stay and the marketing spend can definitely be cut back. The timeline to revenue growing back against their costs is probably 2 years with this pandemic though and that hurts anyone who is looking to invest and hold.
Anyone have thoughts on if that is possible or plausible?
https://www.airbnb.com/resources/hosting-homes/a/how-were-gi...
I admit, I ask mostly selfishly (my wife and I are superhosts, we have managed a full-time AirBnB in CA for 2 years). But it's also an interesting thought experiment. It would be quite the contrast to how the rideshare and food delivery companies treat their non-employees.
https://techcrunch.com/2019/04/11/uber-is-dishing-out-apprec...
Disclaimer: I am an Airbnb employee
Disclosure: am employee
"At our request, the underwriters have reserved up to [blank] shares of Class A common stock, or [blank]% of the shares offered by this prospectus, for sale at the initial public offering price through a directed share program to: * Eligible U.S. hosts who hosted on our platform in 2019 and 2020 [...]"
Not sure what this means.
How does one figure whether the business will keep growing without blasting people's faces with ads? If so much spend on ads is required to generate revenue growth then there will either never be profits or the revenue growth will stall (and thus the equity is worth rather little), if ads are not required then why are they spending so much on them, or maybe when will they stop spending.
All the "heroes" of the tech boom (Facebook, Google, Apple, Microsoft) did not suffer from this problem - they were profitable before going public.
It feels like this time we're in an advertising bubble. Nearly every single S-1 submitted to HN has this feature.
I am genuinely puzzled by this, if someone can offer some perspective on how can you model something like this I would be grateful - what assumptions you'd be making here.
[1] https://howmuch.net/articles/worlds-top-50-biggest-advertisi...
I am not saying advertising is bad, or that it doesn't work, or that you shouldn't do it. Nothing of this sort. It's just unclear to me what's the plan for eventually returning anything to the shareholder. All of the eventual value depends on this.
However, I think H8crila meant that they did not spend that much on advertisement around the time they ipoed.
If you're consumer focused, you spend on marketing, if you're business focused, you spend on sales. There are few examples to the contrary (Google, Atlassia, for example).
AirBnB early on was sniping Craigslist vacation listings[1], and now they have the resources, and scale to market directly. If AirBnB isn't doing it right, what constitutes the 'right' time to spend on marketing?
I'm curious as to how some folks would respond to this, and why.
[1] https://growthhackers.com/growth-studies/airbnb
So scaling as fast as possible is the #1 goal, because if you don't someone else will and you'll go out of business.
Therefore sales and marketing is a huge factor in growth. Then the idea is, once you've grown as much as you can and it's too hard for others to compete because of your entrenched network effects, you can reduce sales and marketing to a a reasonable, highly profitable level.
That's it in a nutshell and it works in any market with strong network effects, which AirBNB strongly fits into, in facts it's a poster child for the concept. Yelp is another good example -- sign up all the restaurants before a competitor does.
There are a lot of different business models out there, which you can study (and MBA programs teach you). This is just one model, and it's a legitimate one. Google, Facebook, Microsoft and Apple all have different models from it (and all drastically different from each other as well).
To evaluate ad spend, you don't look at just short-term return. There's a reason that "lifetime value" is a critical concept for companies. It's fairly normal in large companies that, in a given year, you may spend more on ads than you gain from those ads - but you expect the customers you gain from them to continue spending over many years.
So you may spend $100 to gain a customer who spends $20 in the first year... then $40 in the second... then $80 in the third... now all of a sudden your return on that was positive, three years later.
These are the kind of ads you want to buy, even if in the short term it looks bad. These large marketing expenses should have compounding benefits over many years. The people who care about the short term like that are not the investors you want and not the people you're trying to please.
I don't know what AirBnB's numbers are, companies aren't required to disclose this and they guard it very closely :)
I am not saying they're doing a bad job, I am merely saying that it looks difficult to tell. Remember, the management has a huge incentive to sell you the stock regardless of the future value of the business, it's your job to figure out if it is a good idea.
That’s interesting and I guess the big thing that makes this different than vrbo if they can grow the spare room side much more over time
At least that's my experience when I was trying to search on the site. There was little filtering available and the owners were listing their properties as anything.
I’m sure this could vary by price/location though.
Is it a whole flat, or a room in a property with the landlord living in, or a room in a property fulled rented on airbnb (how many people?), or a bed in a bunk of beds (yes that's a thing). There's listings for everything and quite a few are misleading. It doesn't help that you have no idea what is the normal price range when traveling abroad and may not speak the language very well.
If you're interested by the way. My counter experience renting a flat on airbnb over the summer, is that guests are evaluating everything they could use including beds and couches and ground space. The guest renting a one bedroom could be anything from a person or a couple to a family (maybe with extended family/cousins joining in) to a group of many friends. It's always a surprise whether there will be 1 or 6 people showing up.
It's not really a problem from a financial perspective because law is lagging decades behind the real world and there's way too much money on the table for renters to care about the restrictions/bans (and there's almost zero enforcement of restrictions anyway).
Amazing growth and story up to 2018 (only $20M loss on $3.5B rev), clear investment in the marketing side that leads to the 2019 loss, but now curious if they can rebound when the world opens up.
Investing in Airbnb is definitely a bet on their model righting itself in a reasonable time frame. I wonder if their IPO price will have to reflect current realities instead of just future potential (given it probably won't improve its profitability for 2 years now)
Its quite surprising that CEO of Airbnb should make just $110k/ annum in base salary before the company goes public. I would expect it to be around $500k.
The average private driver salary's in NYC is about 60k a year according to Google btw[0]. The average yearly -household- income in the US is 68k.
It's a massive luxury to be able to afford such a thing.
[0]: https://www.quora.com/How-much-does-a-full-time-driver-cost-...
edit: That's a rough estimate and probably a low estimate. You'd be using Uber for commuting, going to work social events, driving kids on weekends, driving out of the city on vacation, etc.
Wow, that's crazy. I pay 28000USD/yr in London, most of my friends pay about the same.
Perhaps the money goes towards cloning costs?
https://arstechnica.com/tech-policy/2020/11/overpaid-executi...
as I understand it the value of the RSUs is on the _grant date_ for such purposes. (and not at vesting)
Options on the other hand are a different beast.
Any airbnb=er here wants to invest in a travel company? lol you never know..