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Airbnb Enters the Land of Profitability

Airbnb Enters the Land of Profitability

The room-rental startup made its first profit in the second half of 2016 and expects to remain profitable this year. Late last year, as many techno

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The room-rental startup made its first profit in the second half of 2016 and expects to remain profitable this year.

Late last year, as many technology startups were struggling to stay afloat, Airbnb Inc. quietly reached a milestone few of its peers had achieved: profitability.

Airbnb became profitable for the first time during the second half of 2016, according to people close to the company. The home and apartment-rental company anticipates it will maintain profitability in 2017 before interest, taxes and amortization, said the people, who asked not to be identified discussing the private company’s earnings.

Reaching profitability puts Airbnb on a very different footing than its fellow upstart, Uber Technologies Inc. The ride-hailing company lost an estimated $3 billion last year, according to a person familiar with the matter. Uber was consumed with keeping fares low to compete with rivals like Lyft Inc. at home and with garnering market share in China, a country it finally abandoned over the summer by selling its local business there to homegrown rival Didi Chuxing.

The intertwined stories of Uber and Airbnb, the two most valuable tech startups in the U.S., are the subject of a Bloomberg Businessweek feature, excerpted from the upcoming book The Upstarts: How Uber, Airbnb, and the Killer Companies of the New Silicon Valley Are Changing the World.

Airbnb has enjoyed a considerably less crowded playing field than Uber. It takes a commission of 6 percent to 12 percent from guest fees, in addition to a small fee it charges hosts. The company has no expenses related to maintaining and cleaning the properties. In November, it launched a new set of services that seek to connect travelers with locals providing authentic experiences, like mushroom-collecting expeditions and guided tours of neighborhood art studios.

Revenue at Airbnb increased more than 80 percent during 2016, said one of the people close to the company, even as cities like San Francisco and New York passed laws that would enforce limits on the number of nights hosts can list their properties. The company still has nearly all of the $3.1 billion in funding it’s raised and is looking at investments and acquisitions, the person said. It recently invested in reservation startup Resy. It’s now in talks to spend about $50 million in cash and stock to buy the payments startup Tilt, which makes a smartphone app that allows multiple people to split bills, said people familiar with the discussions.

As it develops new services, such as a flight-booking tool, Airbnb Chief Executive Officer Brian Chesky has made changes to his leadership team. His co-founder Nathan Blecharczyk, who coded the startup’s original website, recently transitioned to chief strategy officer, said a spokesman. In the role, he will evaluate potential investments and acquisitions, among other things. The company has yet to name Blecharczyk’s replacement as chief technology officer.