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And yet if you compare SBUX and DNKN, they have nearly identical PE and EPS. SBUX only has a larger market cap because they have more revenue than DNKN. At the

And yet if you compare SBUX and DNKN, they have nearly identical PE and EPS. SBUX only has a larger market cap because they have more revenue than DNKN. At the end of the day, WeWork uses X sqft per desk, has an average occupancy rate, etc. So one way to look at their business is revenue/sqft.. which is very similar to a traditional landlord. The only real difference is that WeWork can improve their revenue/sqft by adding desks without tearing down walls or remodeling the building; and they can increase prices at a faster rate than a traditional landlord who has a longer lease term. But on the downside, they have shorter lease terms, which makes their earnings less stable and more responsive to market conditions (ie: it's easier to stop paying WeWork during a market downturn that it is for a traditional landlord). The question is, are WeWork properties similar to Boston's properties, and does WeWork generate 5x the revenue/sqft as Boston on similar properties.

mbesto 9y ago
> and they can increase prices at a faster rate than a traditional landlord who has a longer lease term. They can also lose clients much quicker than a landlord that has longer lease terms. The only thing realistically driving WeWork's valuation (outside of the "SV pixie dust") is the potential for WeWork to sell direct or become a marketplace for ancillary services (e.g. business software, legal services, etc).
- yourapostasy 9y ago
  > The only thing realistically driving WeWork's valuation (outside of the "SV pixie dust") is the potential for WeWork to sell direct or become a marketplace for ancillary services (e.g. business software, legal services, etc). The way they go about doing that looks like an ad-ish model. "Here's a bunch of vendors that were willing to pay our vigorish to be shoved in front of you." That's tough to build a premium around if you don't scale the ads, or have a compelling story for the advertisers on how much more effectively WeWork converts their co-working renters than, say, Google AdWords. An A-B test WeWork might carry out is put in an AdWords campaign side-by-side with a WeWork-based campaign for as many vendor types they can think of, and measure the results between the two on an ( ad-spend : sales_expenses - revenue ) ratio basis, and tweak their strategy model from there. If I'm one of the vendors WeWork is trying to pitch to their co-working renters, then I'd immediately be thinking, "they reach a smaller audience than my AdWords purchases (or whatever other marketing channel I'm comparing to), but supposedly more targeted, so if I put some spend there does it really perform?" If you are a new startup, then there is a lot of bullshit in the business world that wastes a lot of your time because you simply don't know better on what to spend your limited time upon. Having a SCORES-like concierge/advisor service on tap (for a fee after an initial time of trying it out, perhaps) might be another way for WeWork to build premium value. But not scalable. If the premium on-site staff is highly attuned into their renters' concerns, etc., that might be a way to add value by using that information as a development input. But that's very non-scalable. Their core value proposition seems to run right into competing against Google on an efficiency basis, so I must be missing something the investors didn't.
dsr_ 9y ago
If Boston Properties wanted to add WeWork style services to their current buildings, they could do that. And if it didn't turn out to be profitable, they could stop doing it and still own all their buildings. Or they could contract with some well-known service corporation to provide those services in their buildings. Sodexho? If WeWork wanted to own all their buildings, they would need to convince a lot of landlords to take stock instead of cash. Though I don't know that they could afford to do that.

mbesto 9y ago

> and they can increase prices at a faster rate than a traditional landlord who has a longer lease term. They can also lose clients much quicker than a landlord that has longer lease terms. The only thing realistically driving WeWork's valuation (outside of the "SV pixie dust") is the potential for WeWork to sell direct or become a marketplace for ancillary services (e.g. business software, legal services, etc).

yourapostasy 9y ago
> The only thing realistically driving WeWork's valuation (outside of the "SV pixie dust") is the potential for WeWork to sell direct or become a marketplace for ancillary services (e.g. business software, legal services, etc). The way they go about doing that looks like an ad-ish model. "Here's a bunch of vendors that were willing to pay our vigorish to be shoved in front of you." That's tough to build a premium around if you don't scale the ads, or have a compelling story for the advertisers on how much more effectively WeWork converts their co-working renters than, say, Google AdWords. An A-B test WeWork might carry out is put in an AdWords campaign side-by-side with a WeWork-based campaign for as many vendor types they can think of, and measure the results between the two on an ( ad-spend : sales_expenses - revenue ) ratio basis, and tweak their strategy model from there. If I'm one of the vendors WeWork is trying to pitch to their co-working renters, then I'd immediately be thinking, "they reach a smaller audience than my AdWords purchases (or whatever other marketing channel I'm comparing to), but supposedly more targeted, so if I put some spend there does it really perform?" If you are a new startup, then there is a lot of bullshit in the business world that wastes a lot of your time because you simply don't know better on what to spend your limited time upon. Having a SCORES-like concierge/advisor service on tap (for a fee after an initial time of trying it out, perhaps) might be another way for WeWork to build premium value. But not scalable. If the premium on-site staff is highly attuned into their renters' concerns, etc., that might be a way to add value by using that information as a development input. But that's very non-scalable. Their core value proposition seems to run right into competing against Google on an efficiency basis, so I must be missing something the investors didn't.

dsr_ 9y ago

If Boston Properties wanted to add WeWork style services to their current buildings, they could do that. And if it didn't turn out to be profitable, they could stop doing it and still own all their buildings. Or they could contract with some well-known service corporation to provide those services in their buildings. Sodexho? If WeWork wanted to own all their buildings, they would need to convince a lot of landlords to take stock instead of cash. Though I don't know that they could afford to do that.