The digital platform reshapes and builds a series of new value systems and economic models, which are not only the progress of convenient sharing. It is more of another ideological change in public values. This creates value and opportunities for the multi-stakeholders involved in the multi-stakeholder market. The core of the rise of platform business is the process of data cleaning and quantification and accurate data collection. (van Dijck, Poell & de Waal, 2018) Data can be converted into tradable digital products and services. The positioning of the sharing economy is a change in monitoring and seizing possible opportunities in this era. (Flew, 2021) The mode of sharing economy is that human and material resources are shared by buyers and sellers at the same time to develop new businesses. (Raval, 2017) The platformization of traditional enterprises has not only reshaped the enterprise but also reshaped the social life. However, the economic success of platform operation is actually inseparable from private and public investment. (Flew, 2021) This essay will use Airbnb as a case study to analyze the advantages and disadvantages of this type of digital platform, profitability, and make suggestions for improvement at the end.
what are the primary fields of operation of Airbnb?
Airbnb is an online platform founded in 2008 to connect travelers with local hosts. Airbnb’s business logic is to rent and share idle resources, and maximize benefits by improving the utilization of idle resources. Airbnb’s main business area is to connect operators and consumers through a peer-to-peer business model. That is, through Airbnb, a mature market platform, its in-depth review system adds value to potential hosts and travelers in need of accommodation.
The advantages of Airbnb under the wave of sharing economy:
1. Compared with traditional hotels, the price is cheaper.
2. There are more choices of house types and geographical locations.
3. Bring an immersive experience for travelers or foreign workers who have housing needs.
4. The emergence of new platforms provides people with the experience of “sharing” assets with others to gain profits. It provides inspiration for many successful entrepreneurial cases and competitors.
Although some problems such as providing security for guests and illegal hotel operators entering and abusing the platform still need to be improved. The overall external evaluation and platform development are successful.
As of 2021, the platform has 2.9 million landlords and 151 million users. There are 220 countries and regions with active and high turnover Airbnb listings. The number of its global listings is also about to reach 7 million. Compared with traditional hotels, millions of areas need to be invested in the construction and maintenance of properties, while Airbnb does not have excessive costs, and only people are the key resource. This allows it to grow rapidly at zero marginal cost. Since its establishment, a series of advantages have made Airbnb a leader in peer-to-peer online hotel service platforms.
Airbnb has long been a standout among other competitors. In the future, Airbnb plans to expand its business to business travel, house experience, business management, and other registration services, and through these to improve the competitiveness of the platform.
How does Airbnb make money?
In terms of expenditure, Airbnb’s cost structure only involves three main aspects:
1. Salary of regular employees. 2. Technical setup and operating costs. 3. Freelance photographers hired to shoot for the landlord’s apartment. (Steve, 2021)
The reservation service fees paid by guests and landlords are the two main sources of Airbnb’s revenue. Different booking scales and housing types determine the non-refundable service fees that need to be paid for the platform. For guests, Airbnb will charge a service fee of 10%-14% on the basis of the predetermined price. (“How Airbnb Makes Money”, 2021)This fee is determined by the total amount of the order. The higher the total fee, the lower the percentage of the fee. For landlords, Airbnb will charge 3%-5% when renting out apartments. (“How Airbnb Makes Money”, 2021) These amounts increase Airbnb’s revenue. Guests in the European Union and other regions will be affected by the exchange rate. And both the tenant and the landlord need to pay VAT. Most of Airbnb’s revenue comes from booking service fees paid by guests and hosts. However, this single income has led to Airbnb’s extremely weak anti-risk ability when the epidemic broke out in 2020. At the same time, before the company’s IPO, Airbnb was also spending huge sums of money to solve security issues, upgrade technology, and expand its user base.
Airbnb’s biggest concern is that a situation similar to the pandemic in 2020 has led to a downturn in the tourism industry and a decline in rental transactions. This means a reduction in the customer base and low usage of the platform. The second problem is the rejection of platforms such as Airbnb in some countries, that is, legal issues. First, it suppresses the local traditional economy. Secondly, the platform refuses to provide transparent user data and violates local laws and other related issues. The third is that supervision is not in place. Tax evasion of some illegal listings and user safety issues. These are the centers where Airbnb is committed to change.
All in all, the most direct and fastest way to understand a company is checking their finical report According to the finanicial report of Airbnb, the operating revenue at the end year of are 2018, 2019, and 2020 are $3651million, $4805million, and $3378 million. (“Yahoo is now a part of Verizon Media”, 2021)There is a nearly 30% decrease during 2020, because of Covid-19, however, the operating expense in 2020 is the highest than previous years, it is $5940 million. This caused Airbnb to lose $3438 million in its daily operating activities. Investors’ confidence is shown in the capital market, diluted earnings per share are -$16.12 in 2020 continuous negative earnings per share will make a vicious circle after causing investors to lose hope and desire for investment in this company. Financing and investing activities are also significant for a company, according to the balance sheet of it ,Airbnb has made great moves to raise funds in financial activities during 2020, firstly it issued $1928.8million long-term debt it means Airbnb will face a $500 million liability payable each year. Secondly, at February 2020 formula initial public offering to fund $3650million, dividend payable is also a cost resource for Airbnb. Based on the cash flow data, it showed Airbnb’s investing behavior is different from before, in 2019 its net tangible asset was -$1562 million but this figure changed to $2170 million(“Yahoo is now a part of Verizon Media”, 2021), it means Airbnb to prevent the impact of the tourism downturn on it, there is a lot of investment has been made to diversify the risks brought by the business.
Recommondations for the digital platforms:
Digital platforms should strengthen the supervision of commodity providers, such as the safety-qualified attributes of commodities. Digital platforms should require a high margin system for commodity providers to ensure reasonable compensation when the interests of commodity buyers are harmed. At the same time, as an intermediary, it is necessary to adjust the relationship between the purchaser and the provider of the goods to achieve fairness and justice. Add platform grievance mechanism and punishment mechanism to the platform to provide multiple audits. It must have the ability to innovate to ensure that the digital platform is competitive among competitors. Moreover, it must be integrated with urban laws.
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