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For people questioning the valuation, There is already a public company that is very similar to airbnb called Homeaway. They are profitable with a 3 billion do

by utnick 11y ago

For people questioning the valuation, There is already a public company that is very similar to airbnb called Homeaway. They are profitable with a 3 billion dollar market cap. It doesn't seem far fetched to me to say airbnb is an order of magnitude more valuable than homeaway based on number of listings and mindshare I see online.

adventured 11y ago
How about Expedia then: $5.7 billion in sales. $400 million profit. Solid, consistent growth. $15 billion market cap. Airbnb might achieve those metrics - ten years from now. Or, going on the order of magnitude premise, it implies Airbnb is worth half as much as Priceline.com: $8.4 billion in sales. $2.4 billion profit. This is a fantasy valuation for Airbnb, that is pulling forward returns from far into the future. Airbnb seems to have an excellent business, and they may grow into that valuation one day - that day is not nearby.
- lifeisstillgood 11y ago
  Sorry to be picky but pulling into a current valuation all the future profits is the point of a valuation. The value of a company stock today is all of expected returns from stock ownership (ie dividends and capital) for the life of the company. If not then I would but the stock from you and just wait for it to survive longer than the timeline you valued it at. But airbnb has a long way to go to be Expedia / Priceline size. Mostly it needs to stop relying on 75% borderline illegal listings !
  - adventured 11y ago
    No, pulling into the current valuation all the future profits is not the point of a valuation. If you did that, there would be no return to ever be had for the investors. Under that premise, Facebook should have been valued at $200 billion at their IPO (or even earlier). Google should have been worth $300 billion at their IPO in 2004. Apple should be carrying a $20 trillion market cap using that calculation, pulling all of their future profits into their present valuation. Investors do not normally reach a valuation for an investment today, based on profits ten years from now, with the expectation that the price paid today is equal to what the profits in ten years will justify. That's a recipe for not yielding any returns for ten years. The point of a valuation is to invest capital into a company based on speculation of future returns to be yielded based on future profits, not to pay for all of those future profits with your investment today. The value is determined by the near-present estimation of what the business is worth, and with a potential bias elevating the valuation. The investor return comes from all of those future profits not being priced into the current valuation.
    - lifeisstillgood 11y ago
      Hmm, not really. It kind of depends on how effective a marketplace we think the VC world is. We cannot complain it is overheated and bubble like, and then say it is leading to valuations less than its true value. So, from my small knowledge of these things there are three means to value a publicly listed stock - (discounted) free cash flow, (discounted) dividend returns and earnings multiple. All of which assume you have perfect future knowledge of the total returns to holding the given asset and allow you to then price the asset today. So using your example, let's say it is Google's IPO day and they are selling x shares at a total value of 10bn (whatever it was). If you have a copy of the FT from 2015 and it says google has made 300bn dollars in dividend payments to date, and then ceased trading for the Lulz -then you can confidently price the discount on those dividend payments (what you get for buying the asset) and then pay upto that amount in the IPO. Your profit comes from knowing the true value of holding google stock until 2015 as opposed to every other investors knowledge (who probably were a lot more conservative) If everyone had that copy of the FT, then the price of the stock would on IPO exactly match the (discounted) return from the dividend payouts (well there are a lot of caveats here) If another copy falls through time and says "oh, 300bn, we meant 30bn" then your estimate changes again. So, in an ideal marketplace, all the participants know all the future events to come, can then workout current asset price and then pay upto that amount for the asset. The only profit investors can make is if a) the market is unfair (barriers to entry, reduced knowledge etc) or b) by thinking they have more accurate estimates of future then the rest of the market (ie time wormholes near FT newspapers) So - there is simply no way a competitive market will leave a gap between the current price and the "what everyone agrees will happen in the future" price. That's the definition of an unfair market. Either way, airbnb is getting compared to companies like Ezpedia, but using their discounted cash flow and saying it is like airbnb is not taking into account the enormous legal and regulatory hurdles they are facing.
    - airza 11y ago
      The entire idea of valuation is to indeed capture the value of current and future profits- it's just that the value of future profits is reduced in proportion to how far away they are. Investors lose the value of the money invested for the amount of time that it is invested in exchange for future rewards, which are discounted the further out they are. I don't know where those numbers came from.

by utnick 11y ago

adventured 11y ago

How about Expedia then: $5.7 billion in sales. $400 million profit. Solid, consistent growth. $15 billion market cap. Airbnb might achieve those metrics - ten years from now. Or, going on the order of magnitude premise, it implies Airbnb is worth half as much as Priceline.com: $8.4 billion in sales. $2.4 billion profit. This is a fantasy valuation for Airbnb, that is pulling forward returns from far into the future. Airbnb seems to have an excellent business, and they may grow into that valuation one day - that day is not nearby.

lifeisstillgood 11y ago
Sorry to be picky but pulling into a current valuation all the future profits is the point of a valuation. The value of a company stock today is all of expected returns from stock ownership (ie dividends and capital) for the life of the company. If not then I would but the stock from you and just wait for it to survive longer than the timeline you valued it at. But airbnb has a long way to go to be Expedia / Priceline size. Mostly it needs to stop relying on 75% borderline illegal listings !
- adventured 11y ago
  No, pulling into the current valuation all the future profits is not the point of a valuation. If you did that, there would be no return to ever be had for the investors. Under that premise, Facebook should have been valued at $200 billion at their IPO (or even earlier). Google should have been worth $300 billion at their IPO in 2004. Apple should be carrying a $20 trillion market cap using that calculation, pulling all of their future profits into their present valuation. Investors do not normally reach a valuation for an investment today, based on profits ten years from now, with the expectation that the price paid today is equal to what the profits in ten years will justify. That's a recipe for not yielding any returns for ten years. The point of a valuation is to invest capital into a company based on speculation of future returns to be yielded based on future profits, not to pay for all of those future profits with your investment today. The value is determined by the near-present estimation of what the business is worth, and with a potential bias elevating the valuation. The investor return comes from all of those future profits not being priced into the current valuation.
  - lifeisstillgood 11y ago
    Hmm, not really. It kind of depends on how effective a marketplace we think the VC world is. We cannot complain it is overheated and bubble like, and then say it is leading to valuations less than its true value. So, from my small knowledge of these things there are three means to value a publicly listed stock - (discounted) free cash flow, (discounted) dividend returns and earnings multiple. All of which assume you have perfect future knowledge of the total returns to holding the given asset and allow you to then price the asset today. So using your example, let's say it is Google's IPO day and they are selling x shares at a total value of 10bn (whatever it was). If you have a copy of the FT from 2015 and it says google has made 300bn dollars in dividend payments to date, and then ceased trading for the Lulz -then you can confidently price the discount on those dividend payments (what you get for buying the asset) and then pay upto that amount in the IPO. Your profit comes from knowing the true value of holding google stock until 2015 as opposed to every other investors knowledge (who probably were a lot more conservative) If everyone had that copy of the FT, then the price of the stock would on IPO exactly match the (discounted) return from the dividend payouts (well there are a lot of caveats here) If another copy falls through time and says "oh, 300bn, we meant 30bn" then your estimate changes again. So, in an ideal marketplace, all the participants know all the future events to come, can then workout current asset price and then pay upto that amount for the asset. The only profit investors can make is if a) the market is unfair (barriers to entry, reduced knowledge etc) or b) by thinking they have more accurate estimates of future then the rest of the market (ie time wormholes near FT newspapers) So - there is simply no way a competitive market will leave a gap between the current price and the "what everyone agrees will happen in the future" price. That's the definition of an unfair market. Either way, airbnb is getting compared to companies like Ezpedia, but using their discounted cash flow and saying it is like airbnb is not taking into account the enormous legal and regulatory hurdles they are facing.
  - airza 11y ago
    The entire idea of valuation is to indeed capture the value of current and future profits- it's just that the value of future profits is reduced in proportion to how far away they are. Investors lose the value of the money invested for the amount of time that it is invested in exchange for future rewards, which are discounted the further out they are. I don't know where those numbers came from.