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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 pa

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 6y ago
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.
- tootie 6y ago
  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.
  - derision 6y ago
    They have 13000 employees. That's a lot of money in salary alone
    - fullshark 6y ago
      Well why do they have so many employees?
      - whymauri 6y ago
        The number of countries they operate in and the assumption that the next few years would be growth years. This isn't really rocket-science.
        jonathankoren 6y ago
        It’s not just that. Being flush with cash causes engineering bloat. You start chasing blue sky trendy ideas (AirBnb was reportedly doing chatbot for a while, ala Volara.) or chasing more and marginal gains on existing products. It’s inevitable, when money is cheap.
        xchaotic 6y ago
        So they probably need to let go of those staff and projects rather than raising money at high interest?
      - thelittleone 6y ago
        The vulnerabilities of this business model laid bare. If you're a business like Airbnb you have to be global, otherwise a competitor will be and they'll eat you up. You need solid in country representation otherwise competitors with a deeper regional focus (even smaller companies) will have better offerings and eat your market share. It seems being global and local is possible with 13,000 employees.... except when tourism crashes 90+%.
    - tootie 6y ago
      Sure, but why do they need 13,000 employees is the question.
      - dzhiurgis 6y ago
        No doubt there's big layoffs coming
  - icebraining 6y ago
    "Airbnb Will Give $250 Million to Hosts Who Lost Income to Virus" https://www.bloomberg.com/news/articles/2020-03-30/airbnb-will-give-250-million-to-hosts-who-lost-income-to-virus https://www.bloomberg.com/news/articles/2020-03-30/airbnb-wi...
    - DevKoala 6y ago
      When you write it like that, they sound generous. In reality, they tried to pass the hit for Coronavirus related cancellations to the hosts and then realized they were in for legal trouble if they followed through.
      - deleted 6y ago
        [deleted]
      - hkmurakami 6y ago
        Iirc they passed the costs from the end user to the hosts by enforcing a much more lenient refund policy than what many hosts had put on their listings?
        DevKoala 6y ago
        https://www.airbnb.com/help/article/43/what-happens-if-my-guest-cancels https://www.airbnb.com/help/article/43/what-happens-if-my-gu... > Guests who cancel are automatically refunded according to YOUR cancellation policy—unless the cancellation qualifies as an extenuating circumstance or falls under our Guest Refund Policy. Exactly. And they were not legally allowed to do that. Which is why they are reimbursing hosts. They were flooded with cancellations and did right by the renter, but wanted the host to take the hit, when in reality the broker (AirBnb) is liable.
        slenk 6y ago
        Still screwing people though. We had reservations that fell outside of their "coronavirus window" (the 24th) so they wouldn't give us a refund. When Trump extended his guideline, they only offered half the cash back or all of it in credit. That doesn't even feel legal to me.
  - refurb 6y ago
    With 13,000 employees at an average fully-loaded cost of $150K/yr (just a guess), $1B will let you keep them all employed for about 6 months.
- unlinked_dll 6y ago
  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.
  - redwood 6y ago
    Employees and potential assistance for hosts...
  - lancesells 6y ago
    They are a middleman but a very complex one with what I would guess are enormous legal costs. Paypal has the same amount of employees. Uber has twice the amount. Could they exist with fewer employees? I'm sure they can but that means less people employed.
- appleshore 6y ago
  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.
  - onion2k 6y ago
    Craigslist is only the listing part. Airbnb does listings, but it also does booking management, cancellations, payments and refunds, host support, etc as well. Plus Airbnb has reps all over the world helping hosts. If they had ten staff (photographers, sales, etc) in every city that has more than a million population that'd account for more than 5000 people alone.
    - thelittleone 6y ago
      Not sure how much "helping" of hosts Airbnb does, at least when it's really needed. They quick and thick with platitudes but thin on support when push comes to shove as they almost always side with guests. I'm a superhost with only 5 listings one has over 100 reviews with 4.98 average rating. So far Airbnb has remotely adjudicated 2 guest disputes (on my 4 years of operations) that cost me $5k. Not trivial.
      - onion2k 6y ago
        That's subjective though. The guests who raised the disputes presumably think Airbnb did a great job. Dispute resolution is essentially marketing. When a host tells people they lost a dispute most people don't care because they're not going to be in that position. Most people can't afford to buy property to let on Airbnb. Even it they are in a position to buy and let a property, so long as Airbnb have more supply than demand then they're happy - they're getting every booking they can. Having another host in an area that already has hosts doesn't add much to their business. (If you were the only host in the area then you'd be much more likely to win disputes.) When a guest tells people they lost then everyone can imagine being in that position, and might stop wanting to use Airbnb. That has a measurable impact on Airbnb's revenue. The key thing to remember with any company that runs both sides of a marketplace is that they care about themselves more than either party in a dispute. I have no idea about the numbers, but if Airbnb side with hosts more than 10% of the time I'd be absolutely amazed. In popular areas it's probably less than 5%.
- grandridge 6y ago
  Makes sense to borrow at 10%?!?! You are witnessing the end here
tmh79 6y ago
They are expecting their revenue to basically go to near zero for the next year.
marcinzm 6y ago
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.
henryl 6y ago
Cheap acquisitions
Barrin92 6y ago
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.
- majormajor 6y ago
  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.
  - tootie 6y ago
    AirBnb doesn't operate any properties. I'd bet 90% of Marriott and Hilton staff are running hotels. Not applying machine learning to the check-in process.
    - majormajor 6y ago
      Well, yes, exactly. That's the theory behind their valuation: that they might be able to capture the revenue with much lower overhead.
    - beering 6y ago
      Your guess of 90% seems in line with AirBnB: 0.1 * 170,000 = 17,000, which is still more than AirBnB's current headcount, right?
      - tonyhb 6y ago
        A marginal amount considering you need to have far less operational staff "below the line" when you don't have thousands of properties to manage.
subsubzero 6y ago
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 6y ago
  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 6y ago
  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.
cylinder 6y ago
because their revenue is basically $0 right now?
jeromebaek 6y ago
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.

ardit33 6y ago

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.

tootie 6y ago
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.
- derision 6y ago
  They have 13000 employees. That's a lot of money in salary alone
  - fullshark 6y ago
    Well why do they have so many employees?
    - whymauri 6y ago
      The number of countries they operate in and the assumption that the next few years would be growth years. This isn't really rocket-science.
      - jonathankoren 6y ago
        It’s not just that. Being flush with cash causes engineering bloat. You start chasing blue sky trendy ideas (AirBnb was reportedly doing chatbot for a while, ala Volara.) or chasing more and marginal gains on existing products. It’s inevitable, when money is cheap.
        xchaotic 6y ago
        So they probably need to let go of those staff and projects rather than raising money at high interest?
    - thelittleone 6y ago
      The vulnerabilities of this business model laid bare. If you're a business like Airbnb you have to be global, otherwise a competitor will be and they'll eat you up. You need solid in country representation otherwise competitors with a deeper regional focus (even smaller companies) will have better offerings and eat your market share. It seems being global and local is possible with 13,000 employees.... except when tourism crashes 90+%.
  - tootie 6y ago
    Sure, but why do they need 13,000 employees is the question.
    - dzhiurgis 6y ago
      No doubt there's big layoffs coming
- icebraining 6y ago
  "Airbnb Will Give $250 Million to Hosts Who Lost Income to Virus" https://www.bloomberg.com/news/articles/2020-03-30/airbnb-will-give-250-million-to-hosts-who-lost-income-to-virus https://www.bloomberg.com/news/articles/2020-03-30/airbnb-wi...
  - DevKoala 6y ago
    When you write it like that, they sound generous. In reality, they tried to pass the hit for Coronavirus related cancellations to the hosts and then realized they were in for legal trouble if they followed through.
    - deleted 6y ago
      [deleted]
    - hkmurakami 6y ago
      Iirc they passed the costs from the end user to the hosts by enforcing a much more lenient refund policy than what many hosts had put on their listings?
      - DevKoala 6y ago
        https://www.airbnb.com/help/article/43/what-happens-if-my-guest-cancels https://www.airbnb.com/help/article/43/what-happens-if-my-gu... > Guests who cancel are automatically refunded according to YOUR cancellation policy—unless the cancellation qualifies as an extenuating circumstance or falls under our Guest Refund Policy. Exactly. And they were not legally allowed to do that. Which is why they are reimbursing hosts. They were flooded with cancellations and did right by the renter, but wanted the host to take the hit, when in reality the broker (AirBnb) is liable.
        slenk 6y ago
        Still screwing people though. We had reservations that fell outside of their "coronavirus window" (the 24th) so they wouldn't give us a refund. When Trump extended his guideline, they only offered half the cash back or all of it in credit. That doesn't even feel legal to me.
- refurb 6y ago
  With 13,000 employees at an average fully-loaded cost of $150K/yr (just a guess), $1B will let you keep them all employed for about 6 months.
unlinked_dll 6y ago
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.
- redwood 6y ago
  Employees and potential assistance for hosts...
- lancesells 6y ago
  They are a middleman but a very complex one with what I would guess are enormous legal costs. Paypal has the same amount of employees. Uber has twice the amount. Could they exist with fewer employees? I'm sure they can but that means less people employed.
appleshore 6y ago
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.
- onion2k 6y ago
  Craigslist is only the listing part. Airbnb does listings, but it also does booking management, cancellations, payments and refunds, host support, etc as well. Plus Airbnb has reps all over the world helping hosts. If they had ten staff (photographers, sales, etc) in every city that has more than a million population that'd account for more than 5000 people alone.
  - thelittleone 6y ago
    Not sure how much "helping" of hosts Airbnb does, at least when it's really needed. They quick and thick with platitudes but thin on support when push comes to shove as they almost always side with guests. I'm a superhost with only 5 listings one has over 100 reviews with 4.98 average rating. So far Airbnb has remotely adjudicated 2 guest disputes (on my 4 years of operations) that cost me $5k. Not trivial.
    - onion2k 6y ago
      That's subjective though. The guests who raised the disputes presumably think Airbnb did a great job. Dispute resolution is essentially marketing. When a host tells people they lost a dispute most people don't care because they're not going to be in that position. Most people can't afford to buy property to let on Airbnb. Even it they are in a position to buy and let a property, so long as Airbnb have more supply than demand then they're happy - they're getting every booking they can. Having another host in an area that already has hosts doesn't add much to their business. (If you were the only host in the area then you'd be much more likely to win disputes.) When a guest tells people they lost then everyone can imagine being in that position, and might stop wanting to use Airbnb. That has a measurable impact on Airbnb's revenue. The key thing to remember with any company that runs both sides of a marketplace is that they care about themselves more than either party in a dispute. I have no idea about the numbers, but if Airbnb side with hosts more than 10% of the time I'd be absolutely amazed. In popular areas it's probably less than 5%.
grandridge 6y ago
Makes sense to borrow at 10%?!?! You are witnessing the end here

tmh79 6y ago

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

marcinzm 6y ago

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.

henryl 6y ago

Cheap acquisitions

Barrin92 6y ago

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.

majormajor 6y ago
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.
- tootie 6y ago
  AirBnb doesn't operate any properties. I'd bet 90% of Marriott and Hilton staff are running hotels. Not applying machine learning to the check-in process.
  - majormajor 6y ago
    Well, yes, exactly. That's the theory behind their valuation: that they might be able to capture the revenue with much lower overhead.
  - beering 6y ago
    Your guess of 90% seems in line with AirBnB: 0.1 * 170,000 = 17,000, which is still more than AirBnB's current headcount, right?
    - tonyhb 6y ago
      A marginal amount considering you need to have far less operational staff "below the line" when you don't have thousands of properties to manage.

subsubzero 6y ago

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 6y ago
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 6y ago
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.

cylinder 6y ago

because their revenue is basically $0 right now?

jeromebaek 6y ago

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.