Airbnb and DoorDash Boost Marketing in Q2 for Recruitment

A bicycle courier carries a DoorDash bag during a delivery in New York City on Wednesday, December 9, 2020.

Michael Nagle | Bloomberg | Getty Images

Airbnb CEO Brian Chesky told CNBC’s “Mad Money” in April that the home-sharing site can “cut marketing to zero and still have 95% of the same traffic as the year before,” indicating that there would be no return to pre-Covid spending.

Far from reducing the number to zero, Airbnb said in its second quarter earnings report Thursday that spending on sales and marketing jumped 175% from the previous year to $ 315.3 million. Costs haven’t quite returned to pre-pandemic levels, but they’re not too far off the high of $ 437 million in the fourth quarter of 2019.

The difference now is that Airbnb is spending to attract hosts rather than travelers. This is becoming a common theme in the concert economy. Food delivery service DoorDash said in its earnings announcement, also Thursday, that it had increased sales and marketing costs by more than 150% over the previous year to attract Dashers, or whatever. the company calls its drivers.

The combination of a massive labor shortage in the United States in the wake of the pandemic and an increasingly crowded marketplace of app-based sharing companies are pushing up the prices of freelance work and contractual. Businesses need to find new ways to strengthen the offerings of their platforms to meet consumer demand and continue to grow at a rapid pace.

“In fact, we acquired more Dasher this quarter than we have in the history of DoorDash,” said Prabir Adarkar, the company’s chief financial officer, during Thursday’s earnings call in response to a question from an analyst on the increase in spending. “And we also experienced higher ad rates, probably because the rideshare industry and others were competing for Dashers in our pool. So those two things resulted in higher Dashers costs this quarter than what we had planned. “

DoorDash posted a loss of 30 cents per share in the quarter, larger than the 6 cents expected by analysts, even as revenue of $ 1.24 billion exceeded previous estimates, according to FactSet. The stock fell more than 4% before the markets opened on Friday.

In the food delivery market, DoorDash must push back Uber Eats and GrubHub. More broadly, there’s competition from Instacart, which needs drivers for grocery delivery, Uber and Lyft for ridesharing, and Amazon’s Flex service for delivering packages and orders. grocery store.

Uber and Lyft are grappling with long wait times and consumer complaints about higher prices. Uber CEO Dara Khosrowshahi said during his company’s earnings call last week that Uber was spending more to get drivers on the road.

“The heaviest driver acquisition spending and incentive spending that we think we are seeing and that we have seen was in the second quarter,” Khosrowshahi said. “We really had to act really quickly because the market was not in a place that we considered healthy and we wanted to look to reduce wait times, to reduce peak levels.”

For Airbnb, the story is a little different.

During the pandemic, as travel halted and revenues plummeted, the company reduced its marketing costs by about 75% between the third quarter of 2019 and the same period in 2020.

Airbnb’s business has rebounded with the rollout of vaccines this year and the reopening of the economy. Rather than spending a lot on digital and TV marketing to find consumers, the company turned to the other side of its market.

Airbnb CEO Brian Chesky attends the Cannes Lions on June 20, 2016, in Cannes, France.

Richard Bord | Getty Images

Chesky, who co-founded Airbnb in 2008, said in April that the platform needs to add millions of new hosts as travel resumes. Airbnb launched an ad campaign titled “Made possible by Hosts” using photographs of guests staying in homes around the world.

Airbnb said in its income statement that it had extended the campaign in the second quarter to Italy and Spain. Excluding stock-based compensation, the company recorded selling and marketing costs for the quarter of $ 292 million, the highest since the first quarter of 2020, when it spent approximately $ 311 million.

“We continue to be really encouraged by the results of this campaign in terms of traffic, first-time bookings, interest in accommodation and brand preference,” Chesky said during the call with analysts.

The big risk is that the spending Airbnb commits to recruiting hosts could backfire if recent pandemic trends continue.

Airbnb warned in its letter to shareholders that the delta variant, a highly contagious strain of Covid-19 that causes increased hospitalizations in Florida, Texas and elsewhere, is likely to affect travel behavior, “including frequency and when customers book and cancel. “

Uber’s core business and Lyft face similar risks. DoorDash, on the other hand, was among the biggest beneficiaries of the pandemic last year as restaurants closed and consumers turned to delivery.

The big investor question for DoorDash has been: what happens when restaurants reopen? The stock lost half of its value between mid-February and mid-May. However, he recouped more than half of his losses as news about the delta variant worsened.

Analysts pay close attention to fluctuations in the economy. Piper Sandler’s Alexander Potter said in a note following the earnings report that there is lingering uncertainty about future demand for DoorDash.

“We still believe there is a risk of normalization in the next few quarters,” wrote Potter, who has the equivalent of a hold rating on the stock. “But a resurgence of Covid could delay this problem.”

– CNBC’s Salvador Rodriguez contributed to this report

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