Investment opportunities such as Amazon (NASDAQ:AMZN) don’t come very often. When it was made public in 1997, relatively few people used the Internet on a daily basis. Fewer people dared to use the Internet to buy things. But internet adoption grew and consumer confidence in e-commerce increased and the rest is Amazon history.
For those who were brave enough to invest $10,000 in Amazon stock in 1997, that stake is worth nearly $20 million today – a truly once-in-a-generation investment.
But Why Was Amazon such a successful company? Many investors say this is because it is a pioneer in the e-commerce space. But Amazon founder Jeff Bezos disagrees.
Bezos says: “Our success at Amazon depends on the number of experiments we run per year, per month, per week and per day. » And it seems that this philosophy of success through experimentation is being adopted by another founder of a well-known $80 billion company – but we’ll talk more about this surprising news in a moment.
Bezos views success and failure as two sides of the same experimentation coin. If you consider returning it, sometimes it ends painfully in failure – remember Amazon’s Fire Phone? But sometimes the coin toss falls on success and results in something like Amazon Web Services (AWS).
Amazon wasn’t sure if AWS would actually work. As Bezos says: “If you decide to only do the things you know will work, you’ll be leaving a lot of opportunities on the table. » Amazon had to be willing to suffer Fire Phone failure to achieve AWS success.
To be clear, Amazon’s AWS has been a huge success. In the first half of 2024, it represented nearly 18% of Amazon’s net revenue as well as 63% of the company’s operating profit. These figures are extremely significant. If it hadn’t experimented with AWS, it’s possible Amazon would be worth only half of what it’s worth today.
Therefore, when Airbnb (NASDAQ:ABNB) Founder Brian Chesky is starting to sound like Amazon’s Jeff Bezos about experimentation, it’s time investors paid attention.
You’ll Never Believe What Airbnb Plans To Do Now
Airbnb is an online platform that allows owners to rent spaces on a short-term basis. Travelers can book a room, a house and more. And it’s already a huge business. Over the past 12 months, the company has processed nearly $80 billion in booking volume on its platform.
Furthermore, Airbnb’s market valuation is also over $80 billion.
In September, Chesky spoke at Skift Global Forum 2024 and said, “We are entering a new phase of the business.” Later, he added: “I anticipate that each year we will launch two to three projects that could ultimately generate $1 billion in revenue per year. » In short, Airbnb is entering an experimental phase of its activity, following in the philosophical footsteps of Amazon.
There is now an inherent challenge for Airbnb, as an $80 billion company. As Bezos says: “As a business grows, everything must scale, including the size of your failed experiments. If the size of your failures doesn’t increase, you’re not going to invent at a size that can actually make things happen. needle.”
It’s bigger than the journey. At the forum, Chesky said, “We’re going to take the Airbnb model and we’re going to expand it to many different categories. » He later added: “Ultimately, we think there’s a path here to do more than just travel.”
Why it’s a good thing
When it comes to big ideas, Chesky hasn’t provided many concrete details to investors. But it’s an exciting framework that Airbnb can adopt right now.
Airbnb’s core business is strong. Not only is the brand enjoying mind share among travelers, but key metrics are also growing. And it’s a hugely profitable business, consistently generating massive free cash flow.
In short, Airbnb can afford to invest money in big experiences that can move the business forward. As Bezos warns, big experiments will necessarily lead to big failures. But if a big idea succeeds, Airbnb’s business could eventually find its equivalent to Amazon’s AWS – something very valuable, unrelated to the core business.
As an Airbnb shareholder, I expect the next few years to be tough for Airbnb stock: Investors likely won’t like its inevitable failures. But for what it’s worth, I think Chesky is the right leader for this experimental phase of the company. Not only did he co-found Airbnb, but he also started a breakfast cereal company in 2008 to keep Airbnb alive when it was going bankrupt.
It’s a little-known part of Airbnb’s history that makes me believe Airbnb will use its profits to find an amazing new path to long-term growth.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jon Quast holds positions at Airbnb. The Motley Fool holds positions and recommends Airbnb and Amazon. The Motley Fool has a disclosure policy.
Amazon Stock was a once-in-a-generation investment opportunity thanks to an underappreciated trait. Here’s an $80 billion company that, surprisingly, is hoping to follow in his footsteps. was originally published by The Motley Fool
