7 ms·

Why does AirBnb need a billion dollars? I can't find anything suggesting they're spending more than $100mm on their ongoing litigation, the technology isn't pa

Why does AirBnb need a billion dollars? I can't find anything suggesting they're spending more than $100mm on their ongoing litigation, the technology isn't particularly novel or complex, is the rest just going to compliance or to pay for previous commitments? Just seems like an absurd amount of money. That's like one year of revenue for them.

subsubzero 6y ago
Essentially think of it as a lifeline for a year, they are prepared for things to be rough for a while. Now if the virus persists and things are still as crazy now as late into the summer/fall all these hosts who bought a few houses for airbnb rentals begin to lose the houses to defaults. Millions laid off don't have money to travel for hotels or airbnb rentals and those that do are afraid due to virus concerns. What seemed like a total bulletproof business model is falling apart. But that's if things stay bad for awhile. I truly hope not but the loan keeps them solvent.
- subpixel 6y ago
  Crazy prediction: Airbnb offers financing to leveraged hosts who will decimate the supply side of the marketplace if they lose their property. Like a Stripe loan, but for the house you bought to Airbnb. When the market comes back all the loans are sold off (collateralized or just packaged up) and Airbnb can service their original debt with the spread.
- tonyedgecombe 6y ago
  But that's if things stay bad for awhile. Tourism was the first sector to suffer in this crisis and my guess is it will be the last to recover.
jeromebaek 6y ago
So Airbnb has tried to unsuccessfully pivot to a payments infra company for several years now. Notable acquisitions for this effort include acqui-hiring ChangeTip, a bitcoin micropayments platform, and Tilt, a social payments platform. But Square and CashApp are way ahead of the curve. I suspect there's internal political problems.
ardit33 6y ago
AirBnb is in an existential crisis right now... it might take years before their market recovers... It makes absolutely sense to have enough money to weather this storm.... Even firing people costs money... even just keeping their lights on, and service at bay, (with no new features) costs money.... People that usually comment like the above are either: Young and inexperienced, or just not don't have real life experience on running a business. I used to think like that when I was young, but after some years of experience your view on things changes and becomes more nuanced.
- unlinked_dll 6y ago
  And comments like this usually come from people with a warped concept of money and funding. But it doesn't help to comment on the nature of a poster because you don't know much about them. The comment is not on the necessity of money but the amount. I legitimately can not fathom why AirBnb needs that much money to run a service business on top of a custom app and website when the fundamental complexity of the business (the particular nuances of local markets, their regulatory/compliance needs, etc) has always been a second thought to their management and trawling for articles, it does not seem like they need that much money to continue. Particularly since regulatory bodies and courts have closed worldwide.
  - redwood 6y ago
    Employees and potential assistance for hosts...
  - lancesells 6y ago
    They are a middleman but a very complex one with what I would guess are enormous legal costs. Paypal has the same amount of employees. Uber has twice the amount. Could they exist with fewer employees? I'm sure they can but that means less people employed.
- tootie 6y ago
  I think the question is what are they going to do with $1B though? Like why would they ever need that much money? I have the same question about a bunch of unicorns like Lyft and Uber. Their core offering hasn't changed all that much in years. My only guess is that it's like Hitchhikers Guide to the Galaxy where they have spend 10% of operations and 90% on running their complaint department.
tmh79 6y ago
They are expecting their revenue to basically go to near zero for the next year.
marcinzm 6y ago
When you're large enough it's easy to hire people to gain a 0.01% lift in metrics and still come out ahead. At least on paper/dashboards but that's usually all that promotions and budget allocation is based off of. Downsizing after that is hard and expensive.
henryl 6y ago
Cheap acquisitions
Barrin92 6y ago
This is something I've struggled with as well conceptually. The company has 12000+ employees and is essentially an online marketplace. I mean at what point will people stop valuing a business like that like a tech company and start valuing it like a rental company? Because the defining feature of technology is essentially low marginal cost at scale, and these companies just seem to keep growing in their human labour. This seems generally true for a lot of companies in the "sharing economy" space.
- lojack 6y ago
  I feel like it’s unfair to suggest they stop valuing the company like a tech company while simultaneously calling them nothing more than an online marketplace.
- majormajor 6y ago
  Google suggests Marriot has 176,000 employees, and Hilton 169,000. So AirBnB is massively smaller, still. Underestimating employee counts is a phenomenon similar to underestimating software rewrite costs/time. The happy path seems simple... but then there's thousands of marginal features or requirements that have come up over the years that make the thing more viable that all take more people and more time.
  - tootie 6y ago
    AirBnb doesn't operate any properties. I'd bet 90% of Marriott and Hilton staff are running hotels. Not applying machine learning to the check-in process.
    - majormajor 6y ago
      Well, yes, exactly. That's the theory behind their valuation: that they might be able to capture the revenue with much lower overhead.
    - beering 6y ago
      Your guess of 90% seems in line with AirBnB: 0.1 * 170,000 = 17,000, which is still more than AirBnB's current headcount, right?
cylinder 6y ago
because their revenue is basically $0 right now?

subsubzero 6y ago

Essentially think of it as a lifeline for a year, they are prepared for things to be rough for a while. Now if the virus persists and things are still as crazy now as late into the summer/fall all these hosts who bought a few houses for airbnb rentals begin to lose the houses to defaults. Millions laid off don't have money to travel for hotels or airbnb rentals and those that do are afraid due to virus concerns. What seemed like a total bulletproof business model is falling apart. But that's if things stay bad for awhile. I truly hope not but the loan keeps them solvent.

subpixel 6y ago
Crazy prediction: Airbnb offers financing to leveraged hosts who will decimate the supply side of the marketplace if they lose their property. Like a Stripe loan, but for the house you bought to Airbnb. When the market comes back all the loans are sold off (collateralized or just packaged up) and Airbnb can service their original debt with the spread.
tonyedgecombe 6y ago
But that's if things stay bad for awhile. Tourism was the first sector to suffer in this crisis and my guess is it will be the last to recover.

jeromebaek 6y ago

So Airbnb has tried to unsuccessfully pivot to a payments infra company for several years now. Notable acquisitions for this effort include acqui-hiring ChangeTip, a bitcoin micropayments platform, and Tilt, a social payments platform. But Square and CashApp are way ahead of the curve. I suspect there's internal political problems.

ardit33 6y ago

AirBnb is in an existential crisis right now... it might take years before their market recovers... It makes absolutely sense to have enough money to weather this storm.... Even firing people costs money... even just keeping their lights on, and service at bay, (with no new features) costs money.... People that usually comment like the above are either: Young and inexperienced, or just not don't have real life experience on running a business. I used to think like that when I was young, but after some years of experience your view on things changes and becomes more nuanced.

unlinked_dll 6y ago
And comments like this usually come from people with a warped concept of money and funding. But it doesn't help to comment on the nature of a poster because you don't know much about them. The comment is not on the necessity of money but the amount. I legitimately can not fathom why AirBnb needs that much money to run a service business on top of a custom app and website when the fundamental complexity of the business (the particular nuances of local markets, their regulatory/compliance needs, etc) has always been a second thought to their management and trawling for articles, it does not seem like they need that much money to continue. Particularly since regulatory bodies and courts have closed worldwide.
- redwood 6y ago
  Employees and potential assistance for hosts...
- lancesells 6y ago
  They are a middleman but a very complex one with what I would guess are enormous legal costs. Paypal has the same amount of employees. Uber has twice the amount. Could they exist with fewer employees? I'm sure they can but that means less people employed.
tootie 6y ago
I think the question is what are they going to do with $1B though? Like why would they ever need that much money? I have the same question about a bunch of unicorns like Lyft and Uber. Their core offering hasn't changed all that much in years. My only guess is that it's like Hitchhikers Guide to the Galaxy where they have spend 10% of operations and 90% on running their complaint department.

tmh79 6y ago

They are expecting their revenue to basically go to near zero for the next year.

marcinzm 6y ago

When you're large enough it's easy to hire people to gain a 0.01% lift in metrics and still come out ahead. At least on paper/dashboards but that's usually all that promotions and budget allocation is based off of. Downsizing after that is hard and expensive.

henryl 6y ago

Cheap acquisitions

Barrin92 6y ago

This is something I've struggled with as well conceptually. The company has 12000+ employees and is essentially an online marketplace. I mean at what point will people stop valuing a business like that like a tech company and start valuing it like a rental company? Because the defining feature of technology is essentially low marginal cost at scale, and these companies just seem to keep growing in their human labour. This seems generally true for a lot of companies in the "sharing economy" space.

lojack 6y ago
I feel like it’s unfair to suggest they stop valuing the company like a tech company while simultaneously calling them nothing more than an online marketplace.
majormajor 6y ago
Google suggests Marriot has 176,000 employees, and Hilton 169,000. So AirBnB is massively smaller, still. Underestimating employee counts is a phenomenon similar to underestimating software rewrite costs/time. The happy path seems simple... but then there's thousands of marginal features or requirements that have come up over the years that make the thing more viable that all take more people and more time.
- tootie 6y ago
  AirBnb doesn't operate any properties. I'd bet 90% of Marriott and Hilton staff are running hotels. Not applying machine learning to the check-in process.
  - majormajor 6y ago
    Well, yes, exactly. That's the theory behind their valuation: that they might be able to capture the revenue with much lower overhead.
  - beering 6y ago
    Your guess of 90% seems in line with AirBnB: 0.1 * 170,000 = 17,000, which is still more than AirBnB's current headcount, right?

cylinder 6y ago

because their revenue is basically $0 right now?