6 ms·

Airbnb to earn $183M in 2012 (I think)

22 points by harscoat 14y ago

hoodwink 14y ago
Aside from first mover advantage, what is stopping copycats from moving in and starting a price war with Airbnb? If they are this profitable, that quickly, it should only be a matter of time before competitors crop up. One could argue that user acquisition is the barrier to entry, but just like the Groupon copycats, it'll be worth it for copycats to "buy" users to gain market share. Airbnb has a great brand, great management, amazing infrastructure, et cetera, so I'm not suggesting that copying them will be easy. However, I think a lot of people that use the site are by definition budget conscious, or else they'd just get a hotel, so I could see both Hosts/Guests jumping ship to a less expensive option. Curious what you guys think.
- bretpiatt 14y ago
  They have a competitor in HomeAway already. They are a public company with an IPO last year (NDAQ:AWAY). Airbnb is the new entrant and doing a good job at growing more quickly right now and based on these estimates could pass them in revenue in 2013. AWAY has reported 242M in revenue (TTM ending Q112) with ~35-40% YoY growth.
  - hoodwink 14y ago
    I'm aware of HomeAway. That company has a different business model which is more of an online classifieds site. Pay $300 per year and post your home. Potential renters can browse for free. All transactions are person-to-person, whereas Airbnb takes a more active approach and handles money collection, complaints, etc. Per my research, I think HomeAway does better in the traditional week-long vacation rental market whereas Airbnb is more geared up for the shorter duration stays in urban areas.
    - DanielCole 14y ago
      Correct. I've used HomeAway for two vacations. Their focus has always been the traditional vacation home owner. 99% of their listings are an aggregate of other perfessionally managed 7-day stay rental homes. Completely different business model, technology, culture, market, etc. HomeAway CEO Brian Sharples has remarked multiple times they see little to no overlap in their customers & listings. See his answer about half way down this 2011 WSJ article: http://blogs.wsj.com/venturecapital/2011/10/13/homeaways-ceo-talks-ipos-airbnbs-valuation/ http://blogs.wsj.com/venturecapital/2011/10/13/homeaways-ceo...
- rwhitman 14y ago
  The barrier to entry is that they have the largest marketplace. Anyone entering this space needs to acquire both buyers and sellers, and convince them that their network is more valuable.
  - hoodwink 14y ago
    Yes, I acknowledged this point in the original post and I don't disagree that it is a substantial hurdle. One could have made the same argument for Groupon circa 2009. Look at it now. (see: http://www.nytimes.com/2011/03/10/business/smallbusiness/10sbiz.html http://www.nytimes.com/2011/03/10/business/smallbusiness/10s... or their stock price chart) Here's an example competitor: http://www.onefinestay.com/ http://www.onefinestay.com/
- philwelch 14y ago
  I think the attraction of Airbnb isn't so much saving money vs. a hotel, it's that staying in someone's home, or cabin in the woods, or igloo or whatever is more fun and more interesting.
- kunle 14y ago
  > Aside from first mover advantage, what is stopping copycats from moving in and starting a price war with Airbnb? First mover advantage is only part of the story. The network effect is already pretty powerful and only gets stronger. AirBNB has done all the work to polish the experience, and hosts are making money using the site. That's very sticky. On top of that, as a guest, you now know that there's nowhere you can go to get a bigger selection (which co-incidentally, gets bigger everyday) of reputable hosts. Same is true for hosts, with the added benefit that guests are insured. > just like the Groupon copycats, it'll be worth it for copycats to "buy" users to gain market share. Whatever the copycats can pay, AirBnB can pay more, and even then, the hosts have no incentive to switch from AirBnB to something else. They might list elsewhere, but as long as more guests are coming through AirBnB, they wont cancel their AirBnB accounts. Fundamentally - AirBnB enabled people to monetize something that lay fallow before. The thing that makes people switch wont be a lower transaction cost; it will be a greater chance of booking (and thus revenues).
  - hoodwink 14y ago
    > Whatever the copycats can pay, AirBnB can pay more If AirBnB has to "pay" to defend market share, then this would be an example scenario of competitive pressure reducing margins. Again, I think AirBnB is an amazing company and agree with all your points. Just curious what the competitive landscape will look like in one or two years.
    - DanielCole 14y ago
      Great points. I think Airbnb competition will emerge beyond the international copycats (Wimdu). Their biggest risk is other small startups picking apart niche markets within he greater accommodations vertical. Others have thrived like crashpadder (acquired by airbnb) or Onefinestay. I think in two years you will see more Airbnb's in the accommodations marketplace competing on price and experience. The market has room for Marriott, and super8.
hullo 14y ago
Non-business travel obviously jumps up in the summer - it's a huge mistake to think that a growth curve encompassing summer bookings will continue at that same pace in the fall.
rwhitman 14y ago
I'm not particularly knowledgable in this area, but shouldn't a revenue generating company with a $1B valuation be making more than that? 4X revenue is $732M
- DanielCole 14y ago
  Valuation is based on the total addressable market for travel and other markets, not what they are booking today. If this growth continues their revenues will certainly justify the valuation even before moving into adjacent markets.
rprasad 14y ago
These numbers are so off that I had to log in to flag this post. Airbnb's commission is 3%, not 13% as in the post. That makes a world of difference. The post also assumes an increasing growth rate in the number of rooms booked and a substantial increase in the prices of rooms booked and in the average length of each stay. Basically, this post is just some guy trying to bring people to his blog using Airbnb for free press and made up numbers to make it seem like he has something to say.
- hoodwink 14y ago
  http://www.airbnb.com/help/question/104 http://www.airbnb.com/help/question/104 "We charge guests a 6-12% service fee for every reservation booked, depending on the total of the reservation." "Airbnb also charges hosts a 3% fee for every booking that is completed, which covers the cost of processing guest payments." 9 to 15% range and the author chose 13%
  - rprasad 14y ago
    Payments collected on behalf of other parties (i.e., the payment fee) are not treated as revenue under GAAP. If AirBNB were to do such a thing, its auditor would refuse to sign off on its financial statements. And, as I said, the post is assuming maximum commission on each reservation, with the length of each reservation increasing substantially from the year before. (To put it in comparison, it is like saying that Microsoft's revenue from Windows 8 will be $100 billion this year, assuming the best numbers for everything.)
    - hoodwink 14y ago
      His math is sound and he clearly states his underlying assumptions. Using the recently published infographic, AirBnB revealed it did 5,000,000 nights in a 143 day period. Grossing this up by 365 days equals 12,750,000 nights projected for 2012 (5M / (143/365) = 12.8M). This calculation implicitly assumes that the rate of bookings does not increase for the rest of 2012, which is probably not true looking at their impressive growth rate. The author backs out a 19% month-over-month historical growth rate using other statistics published in the same infographic. Using this rate of growth, he derives a projected 17.6M nights for 2012 versus the 12.75M above. > with the length of each reservation increasing substantially from the year before The 17.6M projected nights makes no explicit assumption about the "length of each reservation." The 5 million nights published by AirBnB could have been 1 user booking a 5 million night stay (it wasn't) or 5 million users booking 1 night stays. It doesn't matter, the length of reservation is embedded in the statistics and not separately dealt with, so the author cannot be growing that assumption. > the post is assuming maximum commission on each reservation He does not use the maximum commission on each reservation, which we established would be 15%. Instead, he uses 13%. > Payments collected on behalf of other parties (i.e., the payment fee) are not treated as revenue under GAAP. I'm not going to argue GAAP accounting, but from a cash perspective, AirBnB is collecting 9 to 15% on each reservation. If a listing is for $100, the Guest pays somewhere between $106 and $112 per night (i.e., 6 to 12% markup) and the Host gets $97 ($100 less $3 or 3%). Therefore, AirBnB is generating revenue of $9 to $15 on every $100 in reservations.

22 points by harscoat 14y ago

Aside from first mover advantage, what is stopping copycats from moving in and starting a price war with Airbnb? If they are this profitable, that quickly, it should only be a matter of time before competitors crop up. One could argue that user acquisition is the barrier to entry, but just like the Groupon copycats, it'll be worth it for copycats to "buy" users to gain market share. Airbnb has a great brand, great management, amazing infrastructure, et cetera, so I'm not suggesting that copying them will be easy. However, I think a lot of people that use the site are by definition budget conscious, or else they'd just get a hotel, so I could see both Hosts/Guests jumping ship to a less expensive option. Curious what you guys think.

bretpiatt 14y ago
They have a competitor in HomeAway already. They are a public company with an IPO last year (NDAQ:AWAY). Airbnb is the new entrant and doing a good job at growing more quickly right now and based on these estimates could pass them in revenue in 2013. AWAY has reported 242M in revenue (TTM ending Q112) with ~35-40% YoY growth.
- hoodwink 14y ago
  I'm aware of HomeAway. That company has a different business model which is more of an online classifieds site. Pay $300 per year and post your home. Potential renters can browse for free. All transactions are person-to-person, whereas Airbnb takes a more active approach and handles money collection, complaints, etc. Per my research, I think HomeAway does better in the traditional week-long vacation rental market whereas Airbnb is more geared up for the shorter duration stays in urban areas.
  - DanielCole 14y ago
    Correct. I've used HomeAway for two vacations. Their focus has always been the traditional vacation home owner. 99% of their listings are an aggregate of other perfessionally managed 7-day stay rental homes. Completely different business model, technology, culture, market, etc. HomeAway CEO Brian Sharples has remarked multiple times they see little to no overlap in their customers & listings. See his answer about half way down this 2011 WSJ article: http://blogs.wsj.com/venturecapital/2011/10/13/homeaways-ceo-talks-ipos-airbnbs-valuation/ http://blogs.wsj.com/venturecapital/2011/10/13/homeaways-ceo...
rwhitman 14y ago
The barrier to entry is that they have the largest marketplace. Anyone entering this space needs to acquire both buyers and sellers, and convince them that their network is more valuable.
- hoodwink 14y ago
  Yes, I acknowledged this point in the original post and I don't disagree that it is a substantial hurdle. One could have made the same argument for Groupon circa 2009. Look at it now. (see: http://www.nytimes.com/2011/03/10/business/smallbusiness/10sbiz.html http://www.nytimes.com/2011/03/10/business/smallbusiness/10s... or their stock price chart) Here's an example competitor: http://www.onefinestay.com/ http://www.onefinestay.com/
philwelch 14y ago
I think the attraction of Airbnb isn't so much saving money vs. a hotel, it's that staying in someone's home, or cabin in the woods, or igloo or whatever is more fun and more interesting.
kunle 14y ago
> Aside from first mover advantage, what is stopping copycats from moving in and starting a price war with Airbnb? First mover advantage is only part of the story. The network effect is already pretty powerful and only gets stronger. AirBNB has done all the work to polish the experience, and hosts are making money using the site. That's very sticky. On top of that, as a guest, you now know that there's nowhere you can go to get a bigger selection (which co-incidentally, gets bigger everyday) of reputable hosts. Same is true for hosts, with the added benefit that guests are insured. > just like the Groupon copycats, it'll be worth it for copycats to "buy" users to gain market share. Whatever the copycats can pay, AirBnB can pay more, and even then, the hosts have no incentive to switch from AirBnB to something else. They might list elsewhere, but as long as more guests are coming through AirBnB, they wont cancel their AirBnB accounts. Fundamentally - AirBnB enabled people to monetize something that lay fallow before. The thing that makes people switch wont be a lower transaction cost; it will be a greater chance of booking (and thus revenues).
- hoodwink 14y ago
  > Whatever the copycats can pay, AirBnB can pay more If AirBnB has to "pay" to defend market share, then this would be an example scenario of competitive pressure reducing margins. Again, I think AirBnB is an amazing company and agree with all your points. Just curious what the competitive landscape will look like in one or two years.
  - DanielCole 14y ago
    Great points. I think Airbnb competition will emerge beyond the international copycats (Wimdu). Their biggest risk is other small startups picking apart niche markets within he greater accommodations vertical. Others have thrived like crashpadder (acquired by airbnb) or Onefinestay. I think in two years you will see more Airbnb's in the accommodations marketplace competing on price and experience. The market has room for Marriott, and super8.

hullo 14y ago

Non-business travel obviously jumps up in the summer - it's a huge mistake to think that a growth curve encompassing summer bookings will continue at that same pace in the fall.

rwhitman 14y ago

I'm not particularly knowledgable in this area, but shouldn't a revenue generating company with a $1B valuation be making more than that? 4X revenue is $732M

DanielCole 14y ago
Valuation is based on the total addressable market for travel and other markets, not what they are booking today. If this growth continues their revenues will certainly justify the valuation even before moving into adjacent markets.

rprasad 14y ago

These numbers are so off that I had to log in to flag this post. Airbnb's commission is 3%, not 13% as in the post. That makes a world of difference. The post also assumes an increasing growth rate in the number of rooms booked and a substantial increase in the prices of rooms booked and in the average length of each stay. Basically, this post is just some guy trying to bring people to his blog using Airbnb for free press and made up numbers to make it seem like he has something to say.

hoodwink 14y ago
http://www.airbnb.com/help/question/104 http://www.airbnb.com/help/question/104 "We charge guests a 6-12% service fee for every reservation booked, depending on the total of the reservation." "Airbnb also charges hosts a 3% fee for every booking that is completed, which covers the cost of processing guest payments." 9 to 15% range and the author chose 13%
- rprasad 14y ago
  Payments collected on behalf of other parties (i.e., the payment fee) are not treated as revenue under GAAP. If AirBNB were to do such a thing, its auditor would refuse to sign off on its financial statements. And, as I said, the post is assuming maximum commission on each reservation, with the length of each reservation increasing substantially from the year before. (To put it in comparison, it is like saying that Microsoft's revenue from Windows 8 will be $100 billion this year, assuming the best numbers for everything.)
  - hoodwink 14y ago
    His math is sound and he clearly states his underlying assumptions. Using the recently published infographic, AirBnB revealed it did 5,000,000 nights in a 143 day period. Grossing this up by 365 days equals 12,750,000 nights projected for 2012 (5M / (143/365) = 12.8M). This calculation implicitly assumes that the rate of bookings does not increase for the rest of 2012, which is probably not true looking at their impressive growth rate. The author backs out a 19% month-over-month historical growth rate using other statistics published in the same infographic. Using this rate of growth, he derives a projected 17.6M nights for 2012 versus the 12.75M above. > with the length of each reservation increasing substantially from the year before The 17.6M projected nights makes no explicit assumption about the "length of each reservation." The 5 million nights published by AirBnB could have been 1 user booking a 5 million night stay (it wasn't) or 5 million users booking 1 night stays. It doesn't matter, the length of reservation is embedded in the statistics and not separately dealt with, so the author cannot be growing that assumption. > the post is assuming maximum commission on each reservation He does not use the maximum commission on each reservation, which we established would be 15%. Instead, he uses 13%. > Payments collected on behalf of other parties (i.e., the payment fee) are not treated as revenue under GAAP. I'm not going to argue GAAP accounting, but from a cash perspective, AirBnB is collecting 9 to 15% on each reservation. If a listing is for $100, the Guest pays somewhere between $106 and $112 per night (i.e., 6 to 12% markup) and the Host gets $97 ($100 less $3 or 3%). Therefore, AirBnB is generating revenue of $9 to $15 on every $100 in reservations.