Airbnb’s IPO Filing Proves How Little It Needs to Advertise

Performance marketing is less of a priority after a brand becomes a verb

Airbnb has room to grow, estimating a market worth $1.5 trillion. Kacy Burdette

Confirmed by its IPO filing for prospective investors, Airbnb is more than a brand—it’s a verb.

Despite a year that has decimated the travel industry, a look under Airbnb’s financial hood showed a company that turned a profit in Q3, has enviable brand recognition with little advertising, and could serve a short-term rental market worth more than $1 trillion.

In its IPO prospectus, filed on Monday, Airbnb stated that in 2020, about 91% of its online traffic has come through the brand’s owned or unpaid channels. In 2019, that figure was 77%. That means it doesn’t rely on performance marketing; travelers arrive by their own choice.

The company’s marketing and sales spending dropped from $1.18 billion in the first three quarters of 2019 to $545,510 this year, a move Airbnb characterized as “suspending substantially all discretionary marketing program spend.” (For comparison, competitor spent an estimated $5 billion on marketing in 2019 alone.)

“We rely on marketing to drive guest traffic to our platform,” according to the filing. “We have invested considerable resources into establishing and maintaining our brand. As a result of the Covid-19 pandemic, we realigned our organizational priorities to further increase our focus on individual hosts and brand marketing, while reducing performance marketing.”

The filing is a measure taken before the brand goes public, when it will be traded under the symbol ABNB.

Last year, Airbnb saw revenue reach $4.8 billion, but the company still lost more than $674 million. So far this year, revenue is down 32% to $2.5 billion. In April, bookings on the platform fell 72%, though by September, they were down only 23%. In comparison, the hospitality industry at large is still down nearly 36%. Although Airbnb doesn’t have a loyalty program, 69% of 2019’s revenue came from return guests.

The brand cut costs to stabilize itself amid the pandemic, including slashing its marketing budget and laying off 25% of its workforce. Airbnb expects to keep its marketing budget down through 2021.

“In early 2020, as Covid-19 disrupted travel across the world, Airbnb’s business declined significantly. But within two months, our business model started to rebound even with limited international travel, demonstrating its resilience,” according to the filing. “We believe that the lines between travel and living are blurring, and the global pandemic has accelerated the ability to live anywhere. Our platform has proven adaptable to serve these new ways of traveling.”

Airbnb has room to grow, estimating a market worth $1.5 trillion, with most revenue coming from the brand’s short-term rental platform and $239 billion for experiences. There’s also the 14% of Airbnb guests who opted for a stay of 28 days or longer in 2019, a segment the brand hopes will keep growing after the pandemic. Already in 2020, this figure has grown to 24% and could be worth up to $162 billion.

“Airbnb would like nothing more than to make all hotels obsolete and put them all out of business,” said Chekitan Dev, a hospitality branding professor at Cornell University. “As the lodging business continues to struggle, I expect Airbnb will use its resources, augmented by IPO funds, to move into a hyper-competitive mode. Hotels are going to have to up their game even more if they are to keep the Airbnb wolf away from their front door.”

On the brand marketing front, Airbnb acknowledged that past efforts and brand partnerships have proven expensive and, perhaps, less worthwhile than it once hoped. Last November, the platform inked a deal with the Olympics for the next five Olympic games (though the 2020 Games have since been delayed until next summer due to the pandemic).

@RyanBarwick Ryan is a brand reporter covering travel, mobility and sports marketing.