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· Posted on
August 9, 2024

Airbnb gets a 1 star rating from the share market after its third quarterly miss in a row

Airbnb announced that its bookings for the quarter increased 8.7%, which was well below investor expectations.

What's the key learning?

  • In the upcoming quarter, Airbnb now expects its marketing expenses to grow faster than revenue.
  • This can be worrisome for the investors as this may indicate that the brand strength isn't as strong as it claimed, or, the competition is gainer market share from Airbnb.
  • So for now the marketing spend might grow its revenue, but it could also lead to financial strain if not managed carefully.

👉 Background: Since Airbnb's launch in 2008, it's grown to over 150 million worldwide users and more than 1.5 billion stays. We're talking igloos, yurts, caves and even coffins.

👉 What happened: Airbnb announced that its bookings for the quarter increased 8.7%, which was well below investor expectations. As a result,  Airbnb’s share price dropped more than 13%, the largest drop since it listed in 2020.

👉 What else: On top of this, Airbnb warned that its marketing spend will outpace its revenue in the next quarter. Not what you want to hear in a slowing market.

What's the key learning?

💡Marketing spend can’t just be another cost, it needs to be an investment with a strong return.

💡Airbnb has always promoted the fact that the majority of its traffic is direct - we’re talking 90% comes from unpaid channels. In fact, Airbnb spent only 18% of its revenue on marketing in 2023.

💡But increasing marketing spend at a moment when demand is softening can be a major red flag for investors because it may signal that Airbnb is struggling to maintain its revenue and market share.

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