[unlinked_dll]

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.

[ardit33]

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.

[appleshore]

In general, it’s a great question: why does it take such extreme overhead to run a digital company that’s like Craigslist with better pictures. I understand it’s more than that but it’s still a valid philosophical question to ask it there’s a way to run it with say 1,200 employees? Or maybe there’s not.

It’s analogous to the size of government and this trend of doing less with more.

Craigslist has 50 employees. I know there’s a ton of counter arguments to minimize my point but surely there’s a third way between 50 and 12,000.

[tootie]

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.

[grandridge]

Makes sense to borrow at 10%?!?! You are witnessing the end here

[unlinked_dll]

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.

[Barrin92]

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.

[tootie]

I think a good counter example is Etsy. They're like an old dog in the startup unicorn space. They took an existing market and commoditized it. Grew too fast behind a sneaky CEO and well-publicized tech culture. Went IPO, got sued, fired the CEO, let go off a bunch of staff working on projects outside their core business. And since then have been kinda cruising for a while earning a lot of revenue and keeping their business stable. They have <1000 employees to do all of this which seems like a reasonable number.

[thebean11]

> Because the defining feature of technology is essentially low marginal cost at scale

Outside of the current crisis I think this holds true doesn't it? I'd be curious to compare how many employees AirBnb has per bedroom compared to a hotel chain (and then factor in that they are still in the process of scaling).

The issue now means they have pretty much zero revenue, but that's kind of beside the point. I'd venture to guess they can manage costs better than a hotel since they don't actually own any buildings, or employ the folks that maintain those buildings. As far as property costs, they take a one time hit on cancellations.

[lojack]

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]

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.

[subsubzero]

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]

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]

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.

[marcinzm]

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.

[jeromebaek]

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.

[tmh79]

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

[henryl]

Cheap acquisitions

[cylinder]

because their revenue is basically $0 right now?