Airbnb posted a loss of $322 million in Q3’ 19, according to the Wall Street Journal. The timing of the announcement is not coming at the best time, considering the company is making plans for public listing.
In the same period in 2018, Airbnb posted profits of $200 million. However, with Wall Street casting increasingly unfavorable looks at profit-shy tech companies, black has seemingly turned to red. Investors are now tasked with the task of deciding the reason for the losses, which could be as a result of one-off fixes to potential long-standing problems, or a more serious issue with the revenue model.
It is worth noting that Airbnb generates revenue by charging a service fee from users that book and host people in their homes. Despite the company’s coverage, Airbnb has been able to maintain very few overheads. However, there has been major spending in some areas pre-IPO, particularly in the area of marketing.
The Information reported last year revealed that the company spent $367 million on sales and marketing in the first quarter of 2019. In the same quarter, the company’s losses doubled compared to the same period a year earlier. The marketing spend represents a 58% increase from the same quarter a year earlier.
The startup has also acquired some institutions as it looks to expand its offering and revenue streams. One of such acquisitions is HotelTonight, a hotel booking site, and Urbandoor, a competitor which targets business customers. The HotelTonight deal was reportedly worth over $400 million in cash and stock. Airbnb has also expanded its experiences product, allowing users to book tours and tickets in the places they are staying through the website and mobile app.
Other expenses from the company include security expenditure, with increasing concerns over the security of those staying in stranger’s housing. Consequently, the company announced plans to spend $150 million on safety initiatives, including verifying each listing for accuracy and quality, creating a safety hotline for users, and manual screening of reservations that are deemed high risk.
The company’s spending seems to have targeted areas that will help it to increase its profitability in the long run, and serve as a sign that the executive team is forward-thinking to survive the scrutiny of public markets. On the other hand, the company’s losses will have a significant impact on the IPO due to the performance of tech IPOs in 2019.
For more business and financial news and the services offered by Ye Long Investment, please visit – https://yelonginvestment.com.
About Ye Long Investment
Ye Long Investment is an innovative professional financial services firm formed in September 2002. Headquartered in Hong Kong, the company specialises in holistic and individually tailored client-centred care for all of an individual’s financial needs, enriching the business ventures and personal lives of all clients by appropriately positioning and protecting what they have today, planning for what they want in their future, and preparing the path by which they will reach their goals.
Company Name: Ye Long Investment
Contact Person: Mr. Paul Wilkins
Email: Send Email
Address:Nexxus Building, 41 Connaught Rd Central