Can Uber and Airbnb last the distance?

Uber led the way, by going public in May. And it’s had a pretty rough time of it since.

Uber’s share price has been on a rollercoaster ride in its short five-month lifespan. The US$45 (NZ$70) a share initial public offering (IPO) price fell 7.6 per cent on its first day of trading. It fell a further 11 per cent the following day to US$37.10 a share.

It has since fought its way back up to US$46.38 in June. But then it fell to a record low of US$28.87 last week.

At the time of writing, Uber’s price sits at an improved US$32.52. This improvement has been attributed to the news that Uber laid off 350 staff on Monday, bringing the total job cuts to 1000 since July, or 2 per cent of its workforce.

But the underlying reason for Uber’s iffy performance is simple enough. The company doesn’t appear to be profitable, and won’t be anytime soon. It turned over an operational loss of US$5.2 billion in Q2 2019. Yep, billion.

And Uber is still in the fight of its life with rival companies like Lyft and Ola, who offer largely the same service, often at a lower price. It gets worse.

Uber is also facing continued pressure and regulation from local authorities. Last month, California passed a bill that makes app-based companies such as Uber treat its workers as employees. Having to pay its drivers holiday pay and meet other worker rights will no doubt have a negative effect on its bottom line.

Meanwhile, over in London, Uber is operating on a 15-month ‘‘probation’’ licence as the city’s mayor, Sadiq Khan, continues to put pressure on the company to reform, accusing Uber of ‘‘operating poorly in London’’ for years.

Unperturbed by Uber’s bumpy ride, Airbnb is expected to follow suit and go public sometime next year.

Will it be a car crash like Uber? It’s impossible to say at this stage, as Airbnb guards its financial accounts pretty closely, something that will have to change come IPO day.

By piecing together information from press releases and media reports, here’s what we do know about Airbnb’s financials.

Airbnb earned over US$1b in revenue for second quarter of 2019

It spent a total of US$1.1b on sales and marketing in 2018.

It has made an operating profit for the two years and had US$3.5b in cash as at the first quarter of this year and a US$1b line of credit that it hasn’t used.

All of which makes it seem like Airbnb is running a profitable enterprise.

Airbnb also differs from Uber in that it’s already expanding into different markets. It now operates across four main pillars: Stays, experiences, adventures and restaurants.

It’s also been reported that Airbnb is developing its own hotel in New York, moving the company away from being just an ‘assetlight’ model.

This is smart. Airbnb has mountains of data about where its millions of users want to travel, how much they’re looking to spend and what amenities are important to them.

Using this data to design and build physical properties, and price them accordingly, is exactly where Airbnb should be putting its US$3.5b.

Because, as Uber has found out, sooner or later it’ll face stiff competition from an equally slick software startup. And the 15 per cent commission Airbnb currently takes from its users (3 per cent from hosts and 12 per cent from guests) is too big to remain unchallenged for long.

Suddenly, these gigeconomy apps start to look a bit less cool.