Modeling Marketplaces Revenues
a Rose is a Rose is a Rose
Today I dig into the key revenue drivers for four marketplaces businesses: Uber, Lyft, Booking, and Airbnb. What are the insights from their 2022 annual reports?
Let me start with the great news for all the FP&A professionals out there:
you can move jobs between the Marketplaces businesses,
reuse your forecasting models,
and reapply your knowledge immediately, with a very short learning curve.
You can see in the pictures below that the four businesses only vary in the naming conventions and the degree of detail in their disclosures when describing their revenue drivers in the annual reports.
What are the insights for the IR community? Those come from game theory:
when you omit the information that your competitor is reporting, the signal you might be sending is the “hidden bad news.”
For example, Uber, who have had an exceptionally good year, is providing significantly more metrics transparency than Lyft who struggles by comparison.
What are the key business insights?
All four businesses show strong double-digit growth in their transaction volumes, partially due to the post-pandemic recovery.
Uber increased its effective take rate by 43ppt, resulting in 83% revenue growth – can this be repeated?
Lyft does not split the frequency/price/take rate effect – making it hard to judge its fundamentals and the growth potential.
Booking and Airbnb take rates are converging (13.4% and 13.3%, respectively), with the Booking take rate decreasing while the Airbnb one increasing.
None of the companies include the sell-side offering into their business model drivers (the number of drivers, hotels, hosts). It is purely buy-side driven, a big difference from the early marketplaces days when acquiring sell-side offering is key.
What’s next?
I will be comparing the reported revenue drivers for online transactional marketplaces: #Zalando, #eBay, #Allegro and some more. Will the rose still be a rose? Read about it next week.
Please subscribe to the #PathtoProfitability Newsletter to stay tuned for the insights on the growth, take rates, and revenue forecasting.
Please add your suggestions in the comment section on the interesting companies to analyze, and tips on getting deeper insights on the non-public companies – for example, #fashion #marketplaces which are super interesting to review.
Below are the in-depth insights and revenue model per company.
For #Uber, all user metrics have been on green in 2022:
Active Consumers (riders) have grown 11% YoY,
Trips increased by 20% (driven by 8ppt higher frequency),
Gross Bookings grew 28% (explained by 6ppt average trip price increase)
The pièce de résistance is the take rate, which jumped 43ppt, resulting in the impressive 83% YoY revenue growth.
Great results? Absolutely. Can this be repeated next year? Let’s see.
#Lyft is in essence a very similar business to Uber. They are also a public company, filing the annual report with the SEC.
The difference is that Lyft takes a shortcut, reporting Revenue per Active Rider and combining the other three business health metrics into one. We can see that both the rider numbers and the revenue per rider have grown, however, it is not transparent whether this growth came from higher frequency of usage, higher price, or a hike in the take rate. The answer does matter for understanding the longer-term growth outlook.
Continuing to the marketplaces that focus on travel, #Booking and #AirBnB both focus on the same metrics and their results can be almost directly compared.
Most of the usage and revenues come from the room stays for both companies, so the noise coming from the car rentals, airline tickets, experiences, and advertising revenues is not likely to change the big picture.
What is the big picture? For #Booking, it shows strong volume growth of 52% YoY, a modest increase in the average price per nightly stay, and a slight decrease in the take rate. This is very interesting from the perspective of business maturity and competitive pressure – since the take rate increase has consistently been one of the key growth drivers for the marketplaces businesses.
Another observation is that neither Booking nor AirBnB report the number of unique customers who purchased room stays – it would be very interesting to see the split between different customer segments and understand how much growth is coming from expanding the user base vs. increasing the frequency of usage.
#Airbnb growth is lower than that of Booking but is nicely consistent across different levers: the number of nights booked grew 31%, and both the average price and the take rate show a modest increase of 3-4ppt, definitely less confronting for the customers than the Uber jump of 43ppt.
Next, I will be looking in detail at the transactional marketplaces like Zalando, eBay, Allegro, and the like: their reported revenue models, implied take rates, and growth drivers.
Stay tuned, drop your questions or comments below, and subscribe to the #PathtoProfitability Newsletter.