A DoorDash bag is carried by a bike messenger in New York City on Wednesday, December 9, 2020.
There will be no return to pre-Covid spending for Airbnb, CEO Brian Chesky said on CNBC’s “Mad Money” in April, implying that the home-sharing service will not revert to pre-Covid spending.
Airbnb’s second-quarter earnings report on Thursday revealed that sales and marketing expenses rose 175 percent year over year to $315.3 million, far from bringing the total to zero. Prices have not yet returned to pre-pandemic levels, but they are not too far off the $437 million peak in the fourth quarter.
Instead of focusing on luring guests, Airbnb is now actively courting hosts. In the gig economy, it’s becoming more and more common. According to DoorDash’s earnings report released on Thursday, the food delivery service increased sales and marketing spending by more than 150 percent from a year earlier to attract Dashers, or drivers.
Due to a severe labour scarcity caused by the pandemic, as well as an increasingly saturated market of enterprises that use apps to share everything, the cost of freelancing and contract work is rising. In order to meet consumer demand and keep expanding at a high rate, companies must develop innovative ways to strengthen the supply end of their platforms.
According to CFO Prabir Adarkar, “We in fact acquired more Dashers this quarter than we have in the history of DoorDash.” Adarkar was responding to a question from a financial analyst. “Because of the increased competition for Dashers in our pool from the ride-share business and others, we saw an increase in advertising charges as well. As a result of these two factors, Dashers costs were greater than expected in the most recent quarter.”
According to FactSet, DoorDash reported a loss of 30 cents per share in the quarter, which was much more than the 6 cents experts were expecting. Before the markets opened on Friday, the stock had fallen by more than 4%.
DoorDash is competing with Uber Eats and GrubHub in the meal delivery sector. Amazon’s Flex service for delivering parcels and grocery orders is a major threat to Instacart and Uber and Lyft in the ride-hailing industry.
Long wait times and customer complaints about increasing charges have plagued Uber and Lyft recently. Last week, Uber CEO Dara Khosrowshahi made a statement on the company’s earnings call saying Uber has been investing more to get drivers on the road.
(Khosrowshahi referred to this as the “heaviest driver acquisition and incentive spend” he expected to and did observe.) In order to reduce wait times and surge levels, “we really had to act very rapidly because the market was not in a place that we thought healthy.”
The Situation is a Little Different With Airbnb.
By cutting its marketing budget by 75% between the third quarter of 2019 and the third quarter of 2020, while travel ceased and revenue decreased, the company remained profitable.
Airbnb saw a boost in business this year as vaccines became available and the economy began to recover. Rather of saturating the market with expensive internet and television advertising, the company decided to hunt for customers on the inverse side of the market: the supplier’s side.
On the 20th of June, 2016, Airbnb CEO Brian Chesky attended the Cannes Lions.
When asked about the need for more hosts, Chesky, one of the company’s co-founders, stated in April that as travel booms, the platform will need to add millions more. As part of its “made possible by hosts” advertising campaign, Airbnb used photos of visitors staying in houses throughout the world.
The promotion was expanded to Italy and Spain in the second quarter, according to Airbnb’s financial statement. Sales and marketing costs for the quarter totaled $292 million, the most since the first quarter of 2020, when the company spent over $311 million.
In a conference call with investors, Chesky said, “We continue to be incredibly excited by the results of this campaign, in terms of traffic, first-time bookers, interest in hosting, and brand favorability.
There is a considerable danger that Airbnb’s spending on recruiting hosts could backfire if recent pandemic trends continue.
Covid-19 delta variant, a highly contagious strain of the virus that has been linked to an uptick in hospitalizations in places like Florida and Texas, is expected to have an impact on travel patterns, Airbnb said in a letter to shareholders.
Uber and Lyft face similar risks in their primary businesses. Last year’s pandemic, on the other hand, was a boon to DoorDash because of the shift in customer behaviour toward food delivery services.
For many of DoorDash’s investors, the major concern has been: What happens when the eateries reopen? Between the middle of February to the middle of May, the stock’s value was halved. As a result, it’s recouped more than half of its losses in the delta variant.
Analysts are keeping a careful eye on the economic turbulence. Alexander Potter, an analyst at Piper Sandler, wrote in a note following the results announcement that future demand for DoorDash remains questionable.
According to Potter, who has the equivalent of a “hold” rating on the company, “We still believe there is a danger of normalisation in coming quarters.” It’s possible that Covid’s rebound will at least put off the inevitable.