Comment by tyre | Hacker News Reader

Comment by tyre | Hacker News Reader

1) This is a press release from a PR person in the company. There is no "person familiar with the matter" who is willing to risk their reputation and career to leak internal metrics of the company.

2) This is a follow-on to their last round of funding, not a separate capital raise. The valuation did not change. They likely had an interested party that missed the boat, got nervous about being left out, and agree to the same terms. Little distraction for the company + money at known terms + small stake (.4%) + press = #yes.

3) AirBnB takes a 15% cut on bookings. A stable company might have a price/earnings ratio of 5x. So for them to have a $25 billion valuation, that's $5 billion in revenue or $33 billion in bookings. That means they would need to grow ~24.5x their current size (either without raising again or raising at the same valuation) to justify this.

According to an industry association[1], sales in 2013 for all lodging in the US was $163 billion. Yes international, but that's for the largest GDP in the world and there are non-zero costs in marketing/sales/regulation/data security to entering other markets.

[1]: https://www.ahla.com/content.aspx?id=36332

EDIT - I was wrong about the fee, thank you richiezc!

1. "A stable company might have a price/earnings ratio of 5x"

You're way off on PE's.

The Shiller PE is 26* right now. P/E moves inversely with interest rates. With rates around 1% (i.e. driving up P/E's) only distressed companies trade at 5x P/E ratios.

2. "AirBnB takes a 3% cut on transactions"

You overlooked 2/3 of their revenue.

"Airbnb generates revenue by taking a 3% cut of each booking along with a 6% to 12% service fee from guests"

3. "for them to have a $25 billion valuation, that's $5 billion in revenue or $167 billion in bookings"

The relevant data is in the article. Note they made $340 on $2.2B of bookings (about %15 of bookings).

"Airbnb generated $340 million of revenue in the third quarter, on bookings of $2.2 billion". You can just annualize that. Current run rate revenue is ~$1.4B. Current run rate bookings are ~$8.8B.

I don't have an opinion on the valuation but I can understand how they could be worth $25B. Airbnb's incremental cost for processing customers is probably close to zero. If they double bookings again, they'd double top line revenue ~$3B. I could easily see $1B of that flowing to the bottom line.

Also there are network effects/customer captivity at play that bode well for the long term. What do I mean? It would be hard to create a competitor to Airbnb because no one wants to establish their reputation on more that 1 platform (same under-appreciated advantage Ebay has).

*http://www.multpl.com/shiller-pe/

All of that checks out, but:

> It would be hard to create a competitor to Airbnb because no one wants to establish their reputation on more that 1 platform (same under-appreciated advantage Ebay has).

Bookings.com is a pretty strong competitor to AirBNB in some market segments.

2) Agree, this is likely the case

3) From the article: "Airbnb generates revenue by taking a 3% cut of each booking along with a 6% to 12% service fee from guests. Based on the third-quarter numbers, it appears the company is collecting a maximum fee from guests, with revenue running at about 15% of bookings."

I was wrong about the revenue they make on bookings, thanks for pointing that out. That's closer to reality, but the numbers still feel aggressive. Along with the earlier $1 billion, they need to turn that into $24 billion in revenue.

Reply on news.ycombinator.com