Today HomeAway reported on second quarter earnings:

• Second quarter revenue of $125.8 million -up 19.5% versus a year ago
• Second quarter listing revenue of $99.8 million – up 16% versus a year ago
• Total listings of 1,185,000 -up 14% versus a year ago
• Completely transitioned out of the pay-per-lead product
• 50% of all listings were online bookable at quarter end

 

9 key takeaways from today’s earnings call with CEO and Chairman Brian Sharples:

 

1. Focus on Increasing Revenue from Listings

Sharples: In our core subscription business, monetization of our listings continues to improve with average subscription revenue per listing increasing 15% year-over-year FX neutral, and as more of these listings become online bookable, we’ll have opportunities for further monetization growth from ancillary products provided to travelers.

 

2. Moving From a Classified Model to a Transactional Model

Sharples: Our company, as you know, is transitioning from a classified model to a transactional e-commerce marketplace, and therefore we’re focusing on initiatives to improve both the owner and traveler experience with a goal of obviously increasing bookings. At the same time, we seek to improve overall monetization of transactions from both performance-based commissions on the supply side and revenue from travelers in the sale of ancillary products and services.

 

3. Ranking Higher in Sort

Sharples: For our platform suppliers more generally, improvements in response rate and adoption of online booking both now factored into sort order are big wins to traveler experience and net promoter score and we feel confident that these will pay off our shareholders long term.

Sharples: Every quarter we get a little bit more aggressive about taking those PPB listings and moving them up in sort. But they are still overall very under exposed, I mean our subscription listings get five times to 10 times the exposure that our PPB listing do.

 

4. Comparisons with Airbnb

Sharples: Airbnb certainly had a busy quarter. They launched a new campaign, which we actually liked quite a bit, because I think it very much helped the positioning that we’re trying to drive in the marketplace of us being the vacation rental company for families and groups. They obviously completed the big financing, whatever that means, and they started in the U.S. with some efforts with property managers. Although, we don’t really have any indications that’s been successful yet.

Sharples: “We’ve been doing some research in the U.S. and looking at property overlap for Airbnb, and we are surprised that how low it was. We actually did a very thorough job of looking at that and found (the overlap) in the 10% range in the U.S. We’re doing a similar study in Europe, and we do have an expectation the overlap will be higher in Europe -probably not substantially -so maybe 20%.

Sharples: In terms of traffic mix we’re still very heavily skewed towards vacation destinations. We’ve started doing some testing in cities. We have good traffic in cities. We can use a lot more supply in cities in general, but it’s still –relative to Airbnb –I think it’s a 90/10 both ways. They’re going to get 90% of their traffic in cities, and we’re going to get 90% of our traffic outside of cities. We’re competing for a very different kind of traveler. When we did the study on the overlap in U.S. business one of the things that was interesting to me is we found, I think it was about 75% -76% of Airbnb inventory is a one bedroom or less, meaning one bedroom or studio or room of some type. We’re obviously in the family and group business so we target very different kinds of people with our marketing.

 

5. Mobile on the Rise

Sharples: We saw a record level of visits this quarter on smartphone and so we are increasing our investment to improve the mobile experience for our travelers and suppliers. We’ve seen very positive early results from these efforts with booking conversion on our mobile devices up a 150% year-over-year in Q2 and we still think there is a lot of run way ahead to improve this further.

Sharples: We’re at about 48% of total traffic is mobile that includes pads as well as smartphones. Pads convert pretty close to desktop, so that’s not a big issue, but 31% of our traffic in Q2 is smartphone traffic and that’s the highest level that we’ve certainly seen. So we do have a lot of effort going on, on the conversion front with respect to mobile, and as I said it’s been paying big dividends for us.

 

6. On Acquisitions and Investments

Sharples: If you look at we’ve been doing for the last year and a half most of them have been investments in partnerships. So I think it’s safe to say that the reported valuations of Airbnb have gone to the heads of every small entrepreneur in the world that has something that looks like a vacation rental site. So when we go and look at new growth businesses that seem to be exciting in our category, it used to be very easy for us, because we’re essentially the only buyer, and we could buy on the basis of a multiple of cash flow. Most of the young companies in new geographies, A) don’t have positive cash flow, and B) have very high valuation expectations. So I think -for the foreseeable future unless something changes -you will be finding us doing more of the same, future investments in partnerships where it make sense.

 

7. Consolidation of Technology

Sharples: We now have 91% of our global listings on a common backend platform

 

8. Partnerships with Expedia and Kayak

Sharples: The partnership continues to go well with Expedia, and we’re working together well as companies. Probably the biggest news there is that we just went live with Expedia in Europe…They continue to be very much in a test mode, and it’s not having a big impact on our revenue today.

Sharples: With respect to Kayak, we had talked last quarter about the Kayak deal and the fact that we expected that to land sometime around the end of the year. I think we will be ahead of schedule on that, so the teams are hard at work at Kayak trying to get those listings up as soon as they can. We don’t have an actual date yet, but I do think it would be slightly ahead of what we have expected.

 

9. Guest Fees and the Future Monetization Model

Sharples: It’s (charging guest fees) certainly something we’re looking at. I talked about last quarter that we still believe that we’re under monetized as a business. So I just talked about an estimate this year of $14 billion to $16 billion in bookings. And if you look at our revenue estimates, you can calculate monetization is still relatively low versus our competitors and a lot of competitors do make up for that difference on the travelers’ side. We do have a number of options that we’re looking at. Traveler fees would be one, traveler products would be another, different kinds of pricing paradigms for owners were another. We are not prepared to discuss the answer on it yet, because we don’t have it, and we’re certainly going to let people know as soon as we do, but something we’re looking at very closely.

 

By Amy Hinote