[riggins]

Every step of the way someone says something like this

"is worth almost as much as say Marriot ... is absurd"

here's an example around the $10B valuation

http://qz.com/190432/airbnb-doesnt-even-own-a-bed-but-its-ba...

I'll just make a meta-point. The parties that are investing in AirBnb at $20B are not some retail pikers chasing a bubble. TPG for example. They're literally among the most sophisticated institutional investors in the world. I'm not going to make an appeal to authority, but I will say that dismissing parties with real expertise in a casual manner is usually poor judgement.

Furthermore, I think its almost certain that the investment research that led the teams at Fidelity and and TPG to value AirBnb at $10B+ is not 'absurd'.

So a more interesting question is 'What exactly is it that the TPG and Fidelity' see?

[DustinCalim]

Right. Like the sophisticated institutional investors of the S&L days? Or the Recession of six years ago, or the Depression...

[fdsafsdfgds]

Yeah. TPG are gods. http://nypost.com/2015/01/01/tpgs-2015-ipo-plans-hit-fundrai...

[riggins]

let me give you the elevator explanation for a $20B valuation.

'Barclay’s report estimates that Airbnb’s current bookings are about 37 million room-nights per year ... predicts that Airbnb’s growth in bookings could triple in size in the next year, '

http://qz.com/329735/airbnb-will-soon-be-booking-more-rooms-...

So AirBbB is already at 37M bookings, expected to triple to ~$120M. Assume the average cost of a room is $200 and you're talking $24B in gross revenue. Of that AirBnb takes 3% ... working out to ~$720M. Now here's the beauty ... to generate that $720M AirBnb doesn't need that many employees. If we go on LinkedIn there are 2,257 employees listing AirBnB as their employer. Let's say average cost is $400K that's $90M. Say there's another $100M in expenses (server hosting costs, office space, etc). We can see how AirBnb could be generating $500M in profit. Slap a 40x multiple on that and we're at $20B.

Furthermore there are some incredibly appealing characteristics. One, expenses won't grow with revenue. If AirBnb goes from 120M to 240M bookings their expenses are relatively fixed. They'll have to add additional server capacity but the for the most part that will just be pure profit.

Two, and more important, they're got a tremendous competitive position. The degree of customer captivity is highly under-appreciated. Once someone makes an account and establishes their credibility on one platform they're going to be reluctant to go through the effort to do that on another platform. Combined with their market leading position it will make difficult for anyone to unseat AirBnb.

So as I said before, I think what's interesting is figuring out what serious investors see that justifies a $20B valuation.