
Airbnb to earn $183M in 2012 (I think) - harscoat
http://postbarter.blogspot.de/2012/06/airbnb-to-earn-183m-in-2012-i-think.html
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hullo
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.

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hoodwink
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.

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kunle
> 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).

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hoodwink
> 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
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.

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rwhitman
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

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DanielCole
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.

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rprasad
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.

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hoodwink
<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
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
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.

~~~
DanielCole
Thanks hoodwink, appreciate the feedback. I posted hoping someone else would
give it a sanity check. The numbers I was seeing were 100x what others have
guessed.

> I really didn't have a clue in estimating the average room costs. I did a
> sampling of the various geographic areas with high booking rates to come up
> with $80.

> Also it's impossible to know the seasonal effects on the data. I'm wondering
> for example what effect the Olympics had on the run up to 10M.

