Airbnb, the darling of the software-as-a-service class of start-ups, will begin trading on the Nasdaq in the next few weeks, under the ticker ABNB. The initial public offering (IPO) is expected to raise $3bn.
It will be hoping to duplicate the success of cloud data platform provider Snowflake, which listed in September, selling 28-million shares and bringing in $3.36bn, making it the largest software IPO yet. At the time of writing Snowflake was sitting pretty on a market cap of about $77bn.
Crunchbase, and a bunch of other publications, have declared Airbnb one of the most anticipated IPOs of 2020, but it’s not been smooth sailing to get here. Other digital denizens expected to start public trading before the end of the year include discount goods platform Wish and DoorDash, the world’s largest food delivery company. DoorDash has been living through boom times due to the lockdown, with revenue more than tripling in the first nine months of 2020.
Unlike these peers whose services focus on bringing things to you in the locked-down safety of your home, Airbnb relies on people leaving home behind. That’s why it has been battered by the cruel winds of 2020 as tourism ground to a halt and people cancelled all but essential travel. In March about 80% of its sales were cancelled, almost overnight.
When it filed last week investors got their first real peek under the hood, which shows some of the carnage the pandemic has caused. If that’s your thing, TechCrunch has an in-depth exploration of the financials disclosed in the filing.
Stripping out all the jargon, 93% of Airbnb’s users went straight to it, via the web or app, as opposed to being driven there by the advertising results that pop up when you’re searching.
A year ago when it first shared plans to list, Airbnb boasted a gross booking figure of $38bn, which had grown 29% from $29.4bn in 2018. This year, however, it tumbled to $18bn. In response it had to lay off a quarter of the team (about 1,900 employees) and raise $2bn rescue funding from private equity sources.
However, deep in the details in the initial registration form we see good omens for a fantastic bounce-back, including reporting $219m in net income in Q3 and higher booking numbers than this time last year.
Another positive sign is its direct and unpaid user numbers in Q3, which were back at 2019 levels. This organic user number is 93% of total traffic, as opposed to paid-for advertising driving users to the site. Stripping out all the jargon, 93% of Airbnb’s users went straight to it, via the web or app, as opposed to being driven there by the advertising results that pop up when you’re searching terms such as “accommodation Philadelphia” or wherever. Phocuswire.com has an interesting article on this, contrasting its marketing-spend-to-revenue ratio (9%) with rival digital travel companies Experia (34%) and Booking.com (42%), and arguing that this reflects Airbnb’s immense brand recognition.
The filing document is naturally optimistic, and even goes so far as to cast Airbnb as a hero of wider economic recovery. “Covid-19 has materially adversely affected our recent operating and financial results and is continuing to materially adversely impact our long-term operating and financial results,” it reads. “However, we believe that as the world recovers from this pandemic Airbnb will be a vital source of economic empowerment for millions of people.”
Shifting regulation
And yes, renting out your spare space has become a side hustle for many worldwide. Airbnb generated nearly R10bn for hosts in SA in 2018. This is a sliver of its global figures, but arguably not to the nearly 65,000 SA listings.
It does still face a considerable challenge, a similar beast to that threatening the likes of Facebook and Google: shifting regulation as the world grapples with how to manage these amorphous global and digital behemoths. It admits as much in the registration form, writing that it finds itself “subject to a wide variety of complex, evolving and sometimes inconsistent and ambiguous laws and regulations that may adversely impact our operations and discourage hosts and guests from using our platform”.
This, Airbnb warns, “could cause us to incur significant liabilities including fines and criminal penalties, which could have a material adverse effect on our business, results of operations, and financial condition”.
• Thompson Davy, a freelance journalist, is an impactAFRICA fellow and WanaData member.
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