1. "A stable company might have a price/earnings ratio of 5x" You're way off on PE's. The Shiller PE is 26* right now. P/E moves inversely with interest rates

1. "A stable company might have a price/earnings ratio of 5x" You're way off on PE's. The Shiller PE is 26* right now. P/E moves inversely with interest rates. With rates around 1% (i.e. driving up P/E's) only distressed companies trade at 5x P/E ratios. 2. "AirBnB takes a 3% cut on transactions" You overlooked 2/3 of their revenue. "Airbnb generates revenue by taking a 3% cut of each booking along with a 6% to 12% service fee from guests" 3. "for them to have a $25 billion valuation, that's $5 billion in revenue or $167 billion in bookings" The relevant data is in the article. Note they made $340 on $2.2B of bookings (about %15 of bookings). "Airbnb generated $340 million of revenue in the third quarter, on bookings of $2.2 billion". You can just annualize that. Current run rate revenue is ~$1.4B. Current run rate bookings are ~$8.8B. I don't have an opinion on the valuation but I can understand how they could be worth $25B. Airbnb's incremental cost for processing customers is probably close to zero. If they double bookings again, they'd double top line revenue ~$3B. I could easily see $1B of that flowing to the bottom line. Also there are network effects/customer captivity at play that bode well for the long term. What do I mean? It would be hard to create a competitor to Airbnb because no one wants to establish their reputation on more that 1 platform (same under-appreciated advantage Ebay has). *http://www.multpl.com/shiller-pe/ http://www.multpl.com/shiller-pe/