| 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. |