Brian Chesky, chief executive officer and co-founder of Airbnb Inc., speaks during an Economic Club of New York luncheon at the New York Stock Exchange (NYSE) in New York, U.S., on Monday, March 13, 2017.
Michael Nagle | Bloomberg | Getty Images
With the coronavirus pandemic hurting travel companies earlier this year, Airbnb got an extension for a cloud spending commitment from a data hosting provider that will help it manage costs.
Airbnb originally had a $1.2 billion commitment with AWS at the end of 2019 over the next five years, but at some point this year, the companies agreed to extend the agreement to eight years, according to the prospectus. That means Airbnb is on the hook to spend an average of $150 million per year, rather than $240 million per year, on these services.
It’s a helpful cushion this year, with people being more reluctant to take vacations or work trips. It’s not clear yet when personal and business travel will return to pre-pandemic levels.
Airbnb disclosed the adjustment in the prospectus for its initial public offering, which became publicly available on Monday. Airbnb didn’t name the provider outright but said elsewhere in the filing that its main hosting provider is Amazon.
Amazon provides remote computing and data storage capability to many companies that have gone public in the past few years, including Slack and Snowflake. An adjustment to terms can make sure that one of the hot names it has touted for so long won’t be switching to competitors like Microsoft or Google, or facing undue challenges because of one of its suppliers.
In May, with the pandemic in full effect, Airbnb said it was cutting 25% of employees. Airbnb’s revenue declined 24% sequentially in the first quarter, and it fell 60% in the second quarter, according to Monday’s filing. Revenue rebounded in the third quarter, although it was still down on an annualized basis.
The first AWS services became available in 2006, and Airbnb has been using AWS since 2008. The payments, search, reservations, messaging and content moderation functions of Airbnb have drawn on AWS resources, among other things, Airbnb executives have said during talks at AWS’ Reinvent conferences.
In the nine months that ended on Sept. 30, Airbnb saw a $63.5 million year-over-year decrease in hosting costs, which contributed to a $26% decline in Airbnb’s cost of revenue. Airbnb said the change stemmed from “better contract management and utilization of our third-party cloud services.”
Airbnb declined to comment on the change; Amazon didn’t immediately respond to a request for comment.