This article by Morgan Brown was originally found at https://growthhackers.com/companies/airbnb/.
In 2007, designers Brian Chesky and Joe Gebbia couldn’t afford the rent on their San Francisco apartment. To make ends meet, they decided to turn their loft into a lodging space, but, as Gebbia explains, “We didn’t want to post on Craigslist because we felt it was too impersonal. Our entrepreneur instinct said ‘build your own site.’ So we did.”
There was a design conference coming to town and hotel space was limited, so they set up a simple website with pictures of their their loft-turned-lodging space—complete with three air mattresses on the floor and the promise of a home-cooked breakfast in the morning. This site got them their first three renters, each one paying $80, and after that first weekend they began receiving emails from people around the world asking when the site would be available for destinations like Buenos Aires, London, and Japan. Gebbia explains:
“At that point we started to brainstorm what a larger, international version of the site would be. That was basically our market research. People told us what they wanted, so we set off to create it for them. Ultimately while solving our own problem, we were solving someone else’s problem too. We were at a point professionally where we were very ready to pursue our own idea. We were anxious though, like waiting in line for a roller coaster. We didn’t know exactly what was ahead, but we knew we were in for a ride.”
The following spring, they enlisted former roommate and engineer Nathan Blecharczyk to help them get Airbed & Breakfast off the ground. They planned the launch around the Democratic National Convention in order to capitalize on the resulting lack of hotel space.
Fast forward seven years, and Airbed and Breakfast is now Airbnb—a household name that has surpassed industry legacy Hilton Hotels in nights booked. As of spring 2014, the platform had 10 million guests and 550,000 properties listed worldwide, along with a $10B valuation—making Airbnb worth more than legacy players like Wyndham and Hyatt.
The company has received $776.4M from investors like Y Combinator, Sequoia Capital, Keith Rabois, Andreessen Horowitz, Ashton Kutcher, Founders Fund, and TPG Growth in a total of seven funding rounds—the last of which raised $500M alone.
But how did a few air mattresses on the floor of a San Francisco loft become the most widely-used anecdote for startup growth hacking?
“Pure, Unadulterated Hustle” in the Face of Initial Resistance
As they were starting out in the summer of 2008, the founders needed a way to raise money. They bought a ton of cereal and designed special edition election-themed boxes, released that fall—Obama O’s and Cap’n McCain’s, which they sold at convention parties for $40 a box. They sold 500 boxes of each cereal, helping them to raise around $30k for Airbed & Breakfast.
image via Source2
Still, the site did not gain much traction initially, and the founders resorted to living off of leftover Cap’n McCain’s (the Obama O’s sold out)—a time they refer to as a real “low point.” This low point did not last for long, however, as the following spring they had dinner with Paul Graham. Despite recognizing the startup’s potential, Graham admits to having some initial doubts, explaining “I thought the idea was crazy. … Are people really going to do this? I would never do this.”
Nevertheless, Airbed & Breakfast soon joined Y Combinator’s 2009 winter class, receiving another $20,000 in funding. They renamed the business Airbnb, and soon received another $600k in a seed round from Sequoia Capital and Y Ventures.
Not everyone was as impressed with Airbnb’s business model, however, and the young startup was also notoriously rejected by Fred Wilson and Union Square Ventures—a decision Wilson now admits wasn’t a good one. Wilson claimed in 2011 that Union Square kept a box of Obama O’s in their conference room to remind themselves not to make the same mistake again. It also serves as an example of an early stage startup doing everything necessary to get off the ground. As Wilson explains:
“Whenever someone tells me that they can’t figure out how to raise the first $25,000 they need to get their company started I stand up, walk over to the cereal box, and tell this story. It is a story of pure unadulterated hustle. And I love it.”
But it wasn’t just Airbnb’s business model that posed a concern. When Gebbia and Chesky—both of whom are Rhode Island School of Design alums—were initially seeking funding for their startup, potential investors didn’t know what to make of a company with two designers, despite the fact that Blecharczyk, with a solid background in tech, had already signed on as an engineer. Chesky explains that it was hard for many in the Valley to see the company’s potential because, “they thought we just made things pretty.”
Yet it was most likely this design background that helped Airbnb to find such innovative, unexpected solutions—like the limited edition presidential cereal campaign—to the very real problems that all early stage startups face. It is this ability to innovate that informs much of Airbnb’s growth strategy.
Craigslist Platform Integration
It’s unclear exactly when Airbnb implemented what’s become their most famous growth hack, but there is evidence of the Craigslist platform hack as early as 2010. Though the startup worked hard to distinguish themselves from the more impersonal, scam-filled super platform, Craigslist had one thing that Airbnb did not—a massive user base.
Airbnb knew through both market research and their own experience that Craigslist was the place where people who wanted something other than the standard hotel experience looked for listings—in other words, Airbnb’s target market.
In order to tap into this market, Airbnb offered users who listed properties on Airbnb the opportunity to post them to Craigslist as well—despite the fact that there was no sanctioned way from Craigslist to do so. Though fairly straightforward in hindsight, the execution was anything but simple, as explained by writer and entrepreneur Andrew Chen.
We’re going to touch on the high points without delving too deeply into the technical details. For starters, because Craigslist saves listing information using a unique url rather than a cookie, Airbnb was able to build a bot to visit Craigslist, snag a unique URL, input the listing info, and forward the URL to the user for publishing—as Rishi Shah documented in the screenshot below.
Image via Source6
But that’s just the beginning. The bot also had to fill out a handful of forms, the simplest of which was the Craigslist category. Region proved a bit more of a challenge since there are hundreds of different versions of Craigslist, some much more specific than others—for example, six sub-regions within a region for the Bay Area, yet one Craigslist for the entire state of Maine. This means it was necessary to visit every Craigslist and scrape the names and codes for every region.
Furthermore, there was the issue of the anonymous email assigned by Craigslist. This function had to be turned off and replaced with a link to the Airbnb listing. And to ensure that the listing stood out among the standard Craigslist fare, the platform’s limited HTML support had to be taken into consideration as well.
.As Chen explains:
“This kind of integration is not trivial. … I wouldn’t be surprised if the initial integration took some very smart people a lot of time to perfect. A traditional marketer would not even be close to imagining the integration above – there’s too many technical details needed for it to happen. As a result, it could only have come out of the mind of an engineer tasked with the problem of acquiring more users from Craigslist.”
The benefits of the Airbnb/Craigslist integration were numerous. Not only was it the sheer volume of potential users accessible via Craigslist, but the fact that Airbnb listings were far superior to the other properties available—more personal, with better descriptions and nicer photos—made them more appealing to Craigslist users looking for vacation properties.
Once those Craigslist users made the switch, they were more likely to ignore Craigslist and book through Airbnb in the future. Not only that, but those with properties listed on Airbnb ended up making more money on their listings, which kept them using the service as well.
While the first integration got much needed traffic to Airbnb listings, in Craigslist the company saw another opportunity for getting more users to list their properties on Airbnb in the first place. Dave Gooden, who admittedly works in the vacation rental sector, says that in late 2009 he began looking into Airbnb’s mysterious growth. He explains:
“When a competing company comes on my radar, I always do my due diligence. In my AirBnB research, I didn’t find great SEO results or a gazillion followers on Twitter or any massive advertising spends on Google or Facebook. I looked everywhere but I couldn’t find any rational or traditional reasons for this type of growth. All of these AirBnB users can’t be coming from tech blogs, can they? Word of mouth? I didn’t think so. After thinking on it for a day or two, only one possible answer popped into my head: ‘These guys are black hats!’”
To test his theory, Gooden set up a “mouse trap” by posting a couple of rental properties to Craigslist, both using Craigslist’s “anonymous” email option and clearly specifying that he did not want to be contacted about other offers. Within a couple of hours, Gooden says he received an email from a “young lady” who really liked his property and wanted him to check out Airbnb.
He claims that this email alone was 99% of the evidence needed to support his Airbnb/Craigslist spam theory. However, he wanted to be sure the email wasn’t simply from an excited Airbnb user, so he decided to dig a bit more.
Over the next weekend, Gooden built a site that used Craigslist email harvesting technology and mass mailing technology to target Craigslist users with vacation rentals. The result was over 1,000 vacation rental owners who signed up to list their properties on Gooden’s test site. He then re-listed one of the properties on Craigslist, and within a day he received the following email:
Image via Dave Wooden
The next week he listed two more properties, and received two more emails. The week after that, he listed yet another property, and received two more emails. As Gooden explains:
“When you scale a black hat operation like this you could easily reach tens of thousands of highly targeted people per day…and quickly gain 60,000 members on the supply-side, which again, is the hardest and most important part of growing a market place. I am pretty sure that AirBnB isn’t the only company that has used this strategy/technique, but I think they are the first to turn it into a one hundred million dollar investment at a one billion dollar valuation.”
Though this hack isn’t as clever as the Craigslist platform integration discussed above—and it and it definitely constitutes spam—it certainly helped Airbnb to grow their listings quickly and at almost no cost.
Start with the Perfect Experience and Work Backward
As we mentioned in the introduction, after hosting their first three guests in their San Francisco apartment, Gebbia and Chesky began receiving emails from people around the world requesting Airbnb in their own cities and cities they’d like to visit, or as Gebbia put it, “People told us what they wanted, so we set off to create it for them.” Indeed, much of Airbnb’s growth can be attributed to the fact that—despite what venture capitalists thought—people wanted the service Airbnb offered.
One way in which this is apparent is with their approach the photographs on listings. In the summer of 2009, as the company was searching for new office space, Chesky stayed exclusively in Airbnb listings in order to gather firsthand data about the service. That same summer, Airbnb wasn’t gaining much traction in New York, so Gebbia and Chesky flew out and booked spaces with 24 hosts to figure out what the problem was.
As it turned out, users weren’t doing a great job of presenting their listings. According to Gebbia, “The photos were really bad. People were using camera phones and taking Craigslist-quality pictures. Surprise! No one was booking because you couldn’t see what you were paying for.” Their solution was low-tech but effective. According to Chesky, “A web startup would say, ‘Let’s send emails, teach [users] professional photography, and test them. “We said, ‘Screw that.’”
Instead, they rented a $5,000 camera and went door to door, taking professional pictures of as many New York listings as possible. This approach led to two to three times as many bookings on New York listings, and by the end of the month Airbnb’s revenue in the city had doubled. What was stunting growth in New York was also stunting growth in Paris, London, Vancouver, and Miami.
This led to the Airbnb photography program, which was officially launched in the summer of 2010. Hosts could automatically schedule a professional photographer to come and photograph their space. Though initially only 20 photographers were contracted by Airbnb, the service became an instant hit.
Though this initiative wasn’t cheap for the cash-strapped startup, the founders felt that the long-term benefits—enhanced listings resultings from this program are two and half times more likely to be booked, and they earn their hosts an average of $1,025 per month—were well worth the cost. By 2012, that number had grown to more than 2,000 freelance photographers employed by Airbnb to photograph 13,000 listings on six continents.
Image via Analytics Lessons Learned
As Chesky explains, “We start with the perfect experience and then work backward. That’s how we’re going to continue to be successful.” However, this applies not only to their treatment of listing photos. Airbnb looked at the characteristics users valued and worked to engineer those into the entire site.
Disrupting an Established (Yet Stagnant) Market
When Chesky and Gebbia first advertised their loft-turned-lodging space and home cooked breakfast, they were promising more than simply a place to sleep. And as we’ve already discussed, as Airbnb grew, this nevertheless remained a core component of the user experience. It was this ability to deliver more than just a place to sleep that allowed Airbnb to disrupt the established lodging market in such a major way. Yet in order to really compete with hotels, they had to do more than just offer a better experience.
Another major advantage of Airbnb was that it tended to be substantially cheaper—generally 30-80% lower than area hotels. A 2008 TechCrunch article on the startup, which was still called AirBed and Breakfast at the time, explained:
“In general, the prices are usually much cheaper (rates in San Francisco, for instance, range from $10 to $175 a night, with the median being $85). And you get to stay with a friendly local who can steer you to restaurants and stores you probably would never find otherwise.”
Yet as one commenter pointed out, there is one drawback to Airbnb:
“If this ever becomes mainstream, the whole thing will come crashing down. The kind of people that *DO* rob, abuse, rape and murder people will start using these systems, and that will spread legitimate fear, corrupting the whole thing. Pray that this remains underground, that’s the only way it can survive.”
With more nights booked than Hilton and a greater valuation than Wyndham and Hyatt, there’s no denying that Airbnb has gone mainstream. Yet the whole thing has not come crashing down thanks to a number of efforts to help overcome the inherent trust issues—not that Airbnb hasn’t facilitated its fair share of robberies, which we’ll discuss in just a bit.
For starters, professional photographs did a lot to inspire trust on one side of the equation—not only by helping to ensure that listings weren’t complete dumps, but also by simply verifying addresses. In addition to enhanced photos, in the summer of 2011 the company introduced Airbnb Social Connections, which leverages users’ social graphs via Facebook Connect.
When Social Connections is enabled, listings show the avatars of mutual connections—friends who have stayed with the host or are friends with the host. Social Connections also allows guests to search for hosts based on other characteristics, like alma mater. The service is also quick to point out that the feature can be turned off with just a click, and that connections are only visible to those with you’re already connected.
Of Social Connections, Chesky explains:
“This has been one of our most requested features, particularly for people that want to have something in common with the people they are staying with. Social Connections helps you find places to stay with mutual friends, people from your school or university, or hosts that your friends stayed with and recommend.”
When the feature launched in 2011, Chesky also claimed that there were already 16,516,967 connections among current Airbnb members—a number that has surely grown since.
Heart vs. Star: Optimizing the Product for Engagement
In the summer of 2012, Airbnb redesigned the site around a new Wish Lists feature. Just four months later, 45% of Airbnb users were engaging with Wish Lists, and over a million had been created.
The Wish Lists product optimization started much smaller, however. The ability to save properties by starring them had been possible on the Airbnb site for a couple years, but the team wondered whether the function was optimized for maximum engagement. As with listing photos, they began with a test and waited to see what happened. In this case, they decided to change the generic star to a heart, and they were surprised to when engagement increased by 30% as a result of that simple change.
Gebbia explains that the heart, “showed us the potential for something bigger.” That potential was aspirational rather than utilitarian—something more than a simple accommodations search tool. “You have to have search,” Gebbia told Co. Design just after the Wish Lists launch. “But what if you don’t know where you want to go?”
It’s the aspirational difference between a star and a heart that led Airbnb to develop Wish Lists. Wish Lists are functional, designed to facilitate sharing and collaboration, but they also speak to the aspirational potential of the heart by helping positional Airbnb listings as content and giving users a reason to visit the site not only when they’re looking to book a room, but when work is boring or the weather is oppressive. Users can visit Wish Lists as a means of escape, browsing whimsical AIrbnb curated lists such as It Yurts So Good and Castles.
Ultimately, like the site’s use of social connections, Wish Lists have helped the site to stand out among competitors. Rather than merely a place to search for accommodations, Wish Lists helped Airbnb to move toward a more engaging social discovery model.
The same summer that Airbnb debuted social connections, they received $112M in a Series B funding round from Andreessen Horowitz, Digital Sky Technologies, General Catalyst Partners, Jeff Bezos, Ashton Kutcher—who also joined the company’s advisory board—and CrunchFund. Then on June 22nd, just three days after this funding—which valued Airbnb at over $1B—an AirBnB user’s home was ransacked. It’s unclear whether the company actually refused to help out the user, named EJ, as TechCrunch’s Michael Arrington initially reported:
“I spoke to Airbnb about EJ’s situation. They won’t reimburse her for damages, they say, and they do not insure against losses. They are helping police track down the person who did this, but their help ends there.”
Airbnb was quick to email TechCrunch with the following corrections, which appear as an update at the end of the article:
1. We have been assisting investigators and they have a suspect in custody.
2. We have been working with the host since the event and we have offered to assist her to the situation to [everyone’s] satisfaction. If you read the blog post, you’ll see that she points this out:
“I would be remiss if I didn’t pause here to emphasize that the customer service team at airbnb.com has been wonderful, giving this crime their full attention. They have called often, expressing empathy, support, and genuine concern for my welfare. They have offered to help me recover emotionally and financially, and are working with SFPD to track down these criminals. I do believe the folks at airbnb.com when they tell me this has never happened before in their short history, that this is a one-off case.”
3. We actually have an entire safety FAQ for our users. You can find it here: http://www.airbnb.com/safety
The same day the TechCrunch article went live, Chesky also contributed a guest post on TechCrunch entitled “On Safety: A Word from Airbnb,” in which he asserted, among other things that:
“We are committed to improving upon our product with safety as the cornerstone of the Airbnb marketplace. We are fully committed to the vision that one day you will be able to travel to any city or town around the world, and with the click of a button, access local people and cultures safely and easily. We will work tirelessly alongside our community until that day is fully realized.”
Among these improvements, Airbnb promised they were working to double their customer support staff, create a dedicated Trust & Safety department, create a Host Education Center with safety tips for hosts, design enhanced userprofile verification, facilitate richer communication between guests and hosts pre-booking, and offer insurance options to hosts—though the specifics of those insurance options were initially unclear.
Yet in the month that followed EJ’s initial post and Arrington’s coverage of it, the Airbnb media circus did not die down. In another blog post on July 28th, EJ asserted:
“On June 29 I posted my story, and June 30 thus marks the last day I heard from the customer service team regarding my situation. In fact, my appointed “liaison” from Airbnb stopped contacting me altogether just three days after I reported the crime, on June 25, for reasons that are unknown to me. I have heard nothing from her since. I blogged my story, and all these kind and supportive people just … disappeared.”
She goes on to claim that “one of the founders” (though not Brian Chesky) was the only person from Airbnb with whom she was had been in contact, and that he had repeatedly requested she take down her initial blog post, limit access, shut down the blog entirely, or “update the blog with a ‘twist’ of ‘good news’” because of “the potentially negative impact it could have on his company’s growth and current round of funding.”
To make matters worse, on July 30th Paul Graham accused Arrington of lying about Airbnb being unwilling to pay for the host’s damages, referring to Arrington’s claims in a July 29th TechCrunch article as “bullshit.” That same day, Arrington responded in another TechCrunch post, referring to the whole situation as a “grossly mishandled PR crisis.”
The next day, Arrington highlighted the case of Troy, another Airbnb host who’d had a similarly nightmarish experience two months prior—Troy’s valuables and identity were stolen, meth pipes were left strewn around his home, along with a random cat, and “thousands of dollars of bizarre damage” was done to his rented home. In a comment from one of TechCrunch’s initial posts about the Airbnb situation, the host explained:
“I had a similar problem with haphazard communication from people at AirBnB. I gave them multiple opportunities to make me a happy customer to which they did but then retracted their offer after [there] was miscommunication among the team. Sometimes days went by without hearing from anyone, while I was fear-stricken, totally disoriented, and angry. It was almost the most absurd customer service crisis one could ever imagine. But I am one squeaky wheel, and we eventually found an agreeable solution that I was generally pleased with.”
The user, who had used Airbnb as both a host and a guest since the incident, went on to accept most of the blame for the situation, explaining (much as EJ had) that he’d had a gut feeling when renting to this particular guest that something wasn’t right. Airbnb eventually gave Troy 21 free nights at up to $125 a night, restitution he was happy with. His main criticism was that, “The reason they’re able to charge these high fees is [because] they lull people into a sense of false security. If they disclosed that, people would just use Craigslist” —a point that was also echoed by EJ in her initial post.
Then on August 1st, Brian Chesky issued an unconditional apology via the company blog, announcing Airbnb’s updated guarantee to cover up to $50,00 in damages from vandalism or theft, a 24-hour helpline (something both EJ and Troy noted as lacking in their experiences), and several more improved security measures. Then in May of 2012, Airbnb partnered with Lloyds of London to expand their guarantee even further, covering every booking with their $1,000,000 Host Guarantee.
The company points out, however, that the guarantee isn’t a replacement for home or renter’s insurance, and it does not cover cash and securities, collectibles, rare artwork, jewelry, pets, or personal liability. Hosts making claims under the Host Guarantee must also “agree to cooperate with Airbnb and its insurers, including providing documentation of the loss they’re claiming and agreeing to inspection in the rare cases it may be necessary.”
Though the company’s initial handling of the situation was pretty poor, they certainly seem to have learned from their mistakes regarding damages and liability, and the $1,000,000 Host Guarantee is now one of the company’s greatest assets. By moving quickly to address these concerns Airbnb was able to continue growing with these incidents becoming hiccups on an otherwise frantic growth curve.
Current & Future Growth Engine
From the earliest days of Airbed and Breakfast when the founders received emails from people around the world requesting the site’s expansion, international users have played a significant role in Airbnb’s growth. In May of 2011, Gebbia told GigaOM’s Colleen Taylor:
“This year is about international growth. I mean, some of our biggest cities are in Europe and South America, and they are just starting to emerge. China and Asia are really interesting to us. … It’s about localizing the site and making it really easy, bringing the simplicity that we brought for people in the United States to these other countries.”
With the acquisition of German knockoff Accoleo for an undisclosed amount the following month, Airbnb opened its first European office in Hamburg, Germany, to be headed by Accoleo founder Gunnar Froh. The following spring, Airbnb acquired their largest UK-based competitor Crashpadder just in time for the 2012 Summer Olympics in London. The deal stipulated that Crashpadder shut down, but Airbnb provided an extension of their 24-hour customer service, a £30,000 guarantee (this was pre-$1,000,000 Host Guarantee), and the popular professional photography option in order to persuade Crashpadder’s hosts (1,700 of whom were based in London) to move their listings to Airbnb.That same year, Airbnb opened offices across Europe, in not only London by also Paris, Barcelona, and Milan.
In August of 2014, Airbnb’s Rebecca Rosenfelt gave a talk entitled “Going for Global,” in which she outlined some of the company’s recent international growth strategies. Rosenfelt began by pointing out that though people in the Valley think of Airbnb as a mature company, in parts of the world they are still more of a “scrappy startup.” She explained, “We’ve had to crack growth over and over and over again as we break into new regions.”
Part of the struggle, according to Rosenfelt, is that Airbnb is a two-sided marketplace, meaning that in every new market they attempt to enter, they have to grow both the demand side (travelers) and the supply side (hosts). As it turns out, the supply side is much harder to grow, as it takes a bit to get people comfortable with the idea of opening their homes up to strangers.
One market in which Airbnb knew they needed to grow was France—though people were traveling to typical tourist locations in France using Airbnb, not many people were using Airbnb to vacation within France. They decided to take two approaches to growing, setting up an A/B test in which they chose several small vacation markets within France that they thought would be popular. They randomly selected half of the locations to physically visit, and half to target using Facebook ads like the one below:
Image via source51
By contrast, in the markets they physically visited, teams of two to three people would talk to the few users already in that market to get an idea of what was going on. They’d also throw parties and info sessions, sets up booths around town, post flyers, and, as Rosenfelt says, “do whatever it takes.”They also made sure to get contact info for everyone they talked to who showed interest in hosting, and they followed up later with more information, an offer to create a listing for them to review, and the like.
Airbnb kept meticulous track of what it cost to send people (including the cost of throwing parties, setting up booths, and other “on the ground” activities) and the listings that resulted, and compared that to the Facebook ads and resulting listings in the markets they didn’t visit. It turned out that cost per acquisition was 5x better for actually sending people into markets.
Not only that, but after “kickstarting” these markets with a human presence, they kept growing 2x faster by themselves. Based on Airbnb’s experience, Rosenfelt claims that sometimes it’s beneficial to do things that don’t scale, because an un-scaleable tactic might be more scaleable than initially thought, as was the case with sending teams into new markets. At the very least, these initiatives result in valuable feedback in terms of what’s going on and other, more scalable opportunities for growth.
This push for international growth has proven effective for the company, as the shifting demographics of the company user base indicate. In 2011, for example, around half of Airbnb’s guests were from the United States, but as of March 2014 that number had dropped to less than 30%, all the while more than half of its guest over the previous year were from Europe. Furthermore, the company projected the number of European guests to more than double in 2014.
Expansion: “The Entire Trip”
But Airbnb didn’t just focus on expanding to offer lodging in more cities around the world; the company also expanded to offer more than just lodging. As Chesky explained to Fast Company in early 2014, “Our business isn’t [renting] the house—our business is the entire trip.” This has been achieved primarily through a focus on delivering a local experience, but the company has dipped its toe in other areas as well, including maid service and “experiences.”
An Entire Hospitality Brand
According to Fast Company’s Austin Carr, the concept of hospitality used to be considered “a relic of Old World grand hotels.” Now, by contrast, the word is used so frequently that it’s somewhat of an inside joke: “You hear it in the halls: Whenever an employee holds a door open for fellow coworkers or offers to clear their plates in the cafeteria, others tease, ‘Oh, so hospitable!’”
It is this concept of hospitality that drives much of Airbnb’s current and future growth initiatives. As Paul Graham explains, “If you ask Brian now what drives Airbnb’s growth, it’s not that people want to get a cheaper space. Airbnb could’ve spread out horizontally into the sharing of power tools and cars and stuff like that. But Brian has decided the growth is in hospitality.”
It all started in the winter of 2012, when Chesky somehow stumbled upon a hospitality textbook from Cornell’s hotel school. The 500-page book spoke to Chesky. As Carr explains, “Airbnb would no longer be about where you stay, but what you do—and whom you do it with—while you’re there.”
Since then, Airbnb has been working to suffuse hospitality throughout the entire user experience, even meeting with representatives from traditional hotel groups in early 2013. Yet, as Chesky explains, “[They didn’t] inspire us or fit with our culture. That’s what led us to Chip.”
Chesky is referring to Chip Conley, who in 1987 was 26 years old and fresh out of Stanford business school, when, despite having no experience in the hotel industry, he managed to raise $1M to purchase and totally reinvent a ‘50s era motor lodge in San Francisco’s Tenderloin district. His model was popular with younger travelers seeking an alternative to the standard family or business-oriented motels and hotels, and Conley went on to do the same with over 50 more hotels in the Bay Area and beyond, becoming one of the originators of the boutique hotel concept and creating an entire brand of Joie de Vivre hotels. After holding the position of CEO for close to 24 years, in 2010 Conley sold his stake in Joie de Vivre to Geolo Capital and entered semi-retirement.
In March of 2013, after the meeting and realizing those traditional hotel reps weren’t what Airbnb was looking for, the company invited Conley to give “a fireside chat on hospitality and innovation.” Chesky says he remembers thinking, “Wow, there’s a lot of things he’s done that we should apply at Airbnb.”
Chesky and Conley kept in touch, and in June Chesky offered Conley a job at Airbnb. Though he initially declined, Chesky didn’t give up, and over dinner one night he convinced Conley to consult for eight hours a week. By the end of the dinner, Chesky had talked him into agreeing to 15 hours, and Conley, now Head of Global Hospitality at Airbnb, has become one of Chesky’s most trusted advisers. He explains, “Within a month, it was clear that nobody does anything part-time at Airbnb.”
Conley’s first responsibility was to create a set of hospitality standards that made the guest experience more comfortable and reliable while preserving the unique and local flavor that each host contributes to the experience.
It is that local experience that draws many guests to Airbnb. Indeed, despite all the emphasis on hospitality, one of the major selling points—and, as we previously discussed, also one of the major drawbacks—is that Airbnb is not a hotel. Guests who use the site typically want to experience a city in a more local, authentic way. Tapping into this desire—perhaps an extension of Chesky’s “starting with the perfect experience and working backward” —the company has been placing increasing emphasis on facilitating this local experience.
In November of 2012, Airbnb launched two local initiatives—Airbnb Neighborhoods, which the company refers to as “the definitive guide to neighborhood experiences around the world” , and Local Lounges. In the company post announcing Neighborhoods, Vivek Wagle explained:
“Our users have told us that location is the single most important criterion when choosing a place to stay. And with such overwhelming choice, travelers often have trouble planning their accommodations. … But imagine if someone created a tool that matched you with the neighborhood that’s right for your trip.”
Airbnb Neighborhoods leverages many of the features that have proven successful for the company in the past, including professional photography and local perspective. For the first time, Neighborhoods allowed Airbnb guests to use their interests—from beaches to nightlife to mass transit—to help them select a place to stay.
At launch, Airbnb Neighborhoods featured more than 300 neighborhoods in seven cities. To pull this off, the company hand-mapped over 2,000 neighborhoods, enlisted local editors to curate content for each distinct neighborhood, and added 70 street photographers to the Airbnb team. As Ann Montgomery, Neighborhoods product lead, explained, “We want to show neighborhoods in the best light, but also in an honest light.”
Local Lounges, by contrast, was intended as a primarily offline experience. Airbnb partnered with 10 “quintessential San Francisco coffee shops” to provide Airbnb guests with “a warm welcome, free wifi, and a complimentary San Francisco guidebook filled with hidden gems and neighborhood secrets.”
Though as of July 2014, Neighborhoods had expanded to include 21 cities—each one with anywhere from nine (Venice) to sixty (New York) distinct neighborhoods—the link for the Local Lounges program is no longer active, so it seems that initiative was phased out.
The following month, Airbnb announced their acquisition for an undisclosed sum of the small, seed-funded startup Localmind, a platform that lets people with questions about places connect with locals who could answer those questions, leveraging Foursquare check-in history to help determine how qualified users were to answer about venues.
Vivek Wagle explained on the Airbnb blog, “This was always meant to be. Localmind’s mission centers on using online technologies to connect people offline. At its core, that’s what Airbnb does.” As part of the acquisition, Localmind’s creators, Lenny Rachitsky, Beau Haugh, and Nelson Gauthier, began working on social initiatives as part of the Airbnb team.
As Chesky explained to VentureBeat, “The role of social in travel is more important than ever. We’ve seen connections shape the experience for our community, so we’re excited to have the Localmind team join us and lead this next wave of social products.” Though an Airbnb spokesperson claimed to be unable to share just how Localmind’s technology would be used by the company, they did say that “connections to authentic, local experiences are foundational to Airbnb’s offering.”
One of the major ways in which Airbnb is upping its hospitality game is by offering a cleaning service in select cities—San Francisco, New York, and most recently Los Angeles—which was developed through observing the workflow of the cleaning services at Conley’s Phoenix and Hotel Vitale hotels. Chesky explains, “It’s full-service cleaning, with stocking, which means leaving towels, bed sheets, mints, and a welcome package, like Vitaminwater in the fridge. And also staging, which is making sure the heating and lights are on.”
Cleaning service starts at $55 for a one bedroom, one bathroom listing, and are available through third-party partners Homejoy and Handybook, both of which interview and run background checks on each of their cleaners. When the service expanded to LA In April of 2014, TechCrunch shared the following email, which was forwarded by a host:
We’re excited to invite you to try a new cleaning service we’re piloting for Airbnb hosts in select LA neighborhoods! Airbnb Cleaning is affordable, easy to schedule, and can be tailored to include amenities such as linen service. Pricing starts at $55 for a 1 bedroom/1 bathroom.
We built this service to address what Airbnb guests care about most (things like odors and refrigerators!). We also worked with hosts like you to understand how to cater to personal hosting styles and home setup preferences. We’ll save your preferences and set up your space exactly the way you want it every time.
Click here to sign up!
If you have any questions, simply reply to this e-mail and we’ll answer it promptly.
According to the company’s own help article, this experimental feature may be extended to more cities and more hosts in the future.
Other Initiatives and Upgrades
But the company hasn’t stopped at cleaning services, recent and impending improvements include both comfort and safety measures. For example, the company has attempted to improve the safety of US listings by requiring smoke and carbon monoxide detectors, even going so far as to provide hosts with devices to help meet requirements.
As far as comfort and convenience measures go, one unnamed source indicates that Airbnb has experimented with an Uber-style airport transportation option, while Conley himself mentions a New York City test involving “alternative ways to help with the key exchange.” Yet Conley goes on to assert, “We’re too strange to be uniform.”
Though the company’s aim is to improve the guest experience by providing universally-desired services, they aren’t trying to recreate the hotel experience entirely. After all, what draws people to Airbnb in the first place is the chance to experience each destination in a unique and local way. As long as that holds true, the company will work to preserve that experience as much as possible.
In the spring of 2014, Airbnb began experimentally offering “experiences” in San Francisco and Paris, in line with the company’s “entire trip” mentality. Available experiences included nature hikes, bike excursions, guided tours, food and drink tastings, and various classes. As of July 2014, however, experiences are no longer available on the Airbnb site.
In June of 2014, Airbnb signed a promotional deal with the UK-based social startup Citysocializer, a platform for organizing social events offering a £25 discount to Citysocializer members travelling to Prague. An Airbnb spokesperson explained, however, that the company had no plans for technical or product integration, and that the initiative was “simply about marketing Airbnb to a like-minded audience.”
Airbnb has been optimizing their service hosts and guests on mobile devices in response to the increasing consumer shift toward mobile—a shift that has been largely beneficial for Airbnb. Mike Curtis, Airbnb head of engineering, claimed in October of 2013, “We’re really concentrating on mobile right now, building out our mobile team and building out our mobile product.”
In July of 2013, Airbnb for the first time allowed hosts to create listing and upload photos via mobile devices, even offering a how-to guide for first-time hosts. By October, around 50% of hosts were using the mobile app, and those hosts tended to respond to guests three times faster than those on desktop—meaning bookings can happen as much as eight times faster via the Airbnb app. As Chesky explains, “Can you imagine if every Uber driver had to go home first to check their laptop in order to find their next ride?”
To assist with those efforts, in October 2013 Airbnb brought on Scott Raymond, co-founder and CTO of Gowalla, one of the first location-based mobile apps that featured Airbnb-esque social travel guides. According to Raymond, “Gowalla’s mission was to get out and explore places in the world. That experience has been percolating in my mind for years.” Gowalla was acquired by Facebook in late 2011, and Raymond worked for the company until leaving to join Airbnb’s mobile product team.
A month later, in November of 2013, Airbnb launched an all new, “rebuilt from the inside out,” mobile app for Android and iOS. The new app included features like Host Home, Hospitality Standards (as developed by Conley), and Host Groups—all aimed at making it easier than ever for hosts to post and manage listings and communicate with and keep track of guests via mobile. The company post announcing the update explains:
“Think of Host Home as your hosting mentor—always there when you need it. Host Home provides you the right information at the right moment, from coaching you through listing a space to allowing you to effortlessly manage multiple bookings. Hosting on Airbnb has never been such a snap.”
The new app also included updated features for guests. “Larger, more dynamic images, easily navigable maps, and thoughtful animations” contributed to a more immersive design, and a new Discover Feed featured Airbnb’s most unique and popular properties like lofts, treehouses, and castles, and allowed users to explore based on destination, theme, or trip type. The mobile booking process was also streamlined.
In late 2013, Airbnb decided to relaunch their “underutilized and underperforming” referral program. Because the majority of emails are actually read on mobile, they decided to support sending and accepting mobile referrals—something very few apps do. Gustaf Alströmer, Growth Product Manager at Airbnb, describes the referral system below as something they weren’t proud of:
Image Via Source 52
To begin, Alströmer says they looked at all the referral data they already had, which helped them to get an idea of how the product was doing and what was working, as well as make some forecasts as to what kind of growth might be possible from an improved referrals program. They also talked to companies with successful referral programs to get a better idea of industry standards and the potential for growth with a well-executed relaunch.
Though they knew it would be a challenge, they decided to redesign and relaunch web, iOS, and Android referrals simultaneously, and the five person team in charge of the project rented out an Airbnb apartment in order to work offsite and focus in on the task at hand. After 3 months and 30,000 lines of code, Airbnb’s referrals program relaunched in January of 2014.
From day one, they tracked everything about the relaunch using their in-house event logging platform air_events.
Image via Source53
They measured invites sent via email, Twitter, Facebook, and direct link, and they immediately A/B tested all kinds of variables to learn as much as possible. They wanted to ensure that invites felt like gifts (rather than promotions), and It turned out that invites with a photo of the sender helped to reinforce that feeling.
They also found that using the Recommended Contacts feature from Gmail and Android APIs resulted in a higher conversion rate, likely because these contacts are closer to the sender. Another A/B test involved the promotional emails sent by Airbnb to potential referrers. When testing self-interested versus altruistic language, they found that altruistic emails resulted in more invitations sent globally—which is also in-keeping with the idea of Airbnb referrals as a gift.
Image via Source 53
Airbnb’s new referrals program has already resulted in hundreds of thousands of nights booked by referred users in 2014,and referrals increased booking as much as 25% in some markets. Not only that, but Airbnb found that referred users tend to be better than the average user—in other words, they’re not merely in it for a free night. They tend to remain engaged with Airbnb and book future trips, and they are much more likely to send referrals themselves.
As Alströmer explained at a talk on the relaunch in August of 2014, Airbnb is still experimenting with their referrals program—including its use of the popular Recommended Contacts function—in order to keep driving and improving referrals. Nevertheless, he claims that Airbnb’s goal is user experience over growth, and rather than simply driving as many referrals as possible, the company wants to gain quality users who will continue to use and enjoy Airbnb.
Only July 16, 2014, Airbnb officially relaunched their site and mobile apps with an entirely new look and feel. This rebranding was the result of a full year of brand study, for which they collected user research, interviewed guests and hosts in more than a dozen countries, and brought in London-based DesignStudio for additional assistance. Their research also delved into competing brands, and, according to DesignStudio’s Paul Stafford, they found that too many tech companies rely on “cold, corporate blue.”
Up until July of this year, Airbnb was one of those companies playing it safe. The original logo for AirBed and Breakfast, along with the Airbnb logo that replaced it, were executed quickly out of necessity. Gebbia explains, “Those brand identities were created in a matter of hours, for a short deadline, and only for temporary use.” Chesky echoes that sentiment, explaining,”We were growing so fast, it became one of those things where you say you’ll figure it out later, but then you never end up doing it because you’re too busy.”
But with the company’s new focus on international expansion and becoming a more inclusive hospitality brand, it seemed like the appropriate time to tackle the branding issue. After conducting intense research into their own brand as well as others, Chesky claims he was able to distill it all into a single concept—belonging. He explains, “Airbnb is about belonging anywhere. The brand shouldn’t say we’re about community, or our international [reach], or renting homes—it’s about belonging.”
Image via source 47
heir new logo, the Bélo, embodies all this and more, combining visual elements of a person, a location pin, a heart, and the “A” in Airbnb. Chesky has high hopes that the logo will grow to become a “universal symbol of sharing.” He explains:
“Imagine one day you’re walking down the street and you see the Airbnb symbol in a window—you’ll know that it’s an Airbnb and a place that can be shared. … A restaurant could put this on its window telling travelers that it’s an Airbnb-friendly place. I can’t go into specifics, but you’re going to see this design continue to permeate the real world.”
The company’s ambition for the logo is just a hint at their ambition for the Airbnb brand as a whole. As Chesky explains, “We get compared a lot with Uber, Lyft, Dropbox, and Instagram; these are all really good brands. It’s an honor to sit next to them. But it’s not enough.” To help ensure that the logo takes off, Airbnb debuted Create, which allows users to customize their own Bélos, and, through partnership with Zazzle, have them printed on cups, stickers, postcards, and more.
But the Bélo hasn’t been received with excitement and positivity all around. Some have noted that it resembles the logos for Automation Anywhere, Couchsurfing, and The Sweethome, while others—in particular, a Tumblr that was started the same day as the redesign—have made more crass comparisons to genetalia. In regard to the Automation Anywhere comparison, in which the similarity is most marked, company spokesman Nick Papas told FastCompany Design:
“In early 2014 both Airbnb and Automation Anywhere began use of new logos that, by coincidence, have similar designs. Airbnb and Automation Anywhere are working cooperatively to address this issue, and Automation Anywhere is in the process of transitioning to a new logo design that is not similar to the Airbnb logo.”
Logo concerns aside, the fact that the redesign emphasizes experiences, sharing, and community is totally in-line with what users appreciate about the brand, and will undoubtedly help the company to move forward in the quest to deliver the “entire trip.”
Infographic By Valerio Pellegrini, via Fast Company
Thanks to effective user and address verification processes and the company’s $1M host guarantee, the safety and liability concerns of 2011 are less of an issue for Airbnb. As the company has expanded and refined their business model, they’ve grown from a more friendly, personal alternative to Craigslist into a more friendly, personal alternative to hotels. After all, based on the number of beds offered, Airbnb is the fifth-largest hotelier in the world, with prices at least one-sixth cheaper than traditional competitors and a presence in almost every country worldwide.
This explains why the company’s biggest concern for 2014 and beyond is dealing with blowback from the disrupted hotel industry, along with city and state officials—both of whom aren’t quite sure what to do when it comes to taxing and regulating Airbnb transactions.
On the one hand, there are people like Richard Solomons, CEO of InterContinental Hotels Group, who argues,”If they’re selling themselves as this big brand that’s going to be bigger than Hilton and InterContinental Hotels, they ought to be thinking about regulation and leveling the playing field.” The hotel industry in New York City has been particularly outspoken about their disdain and concern over Airbnb.
In August of 2013, Vijay Dandapani, Chief Executive of Apple Core Hotels complained, “These people [who rent out their apartments] don’t pay taxes…The web sites may tell them they need to pay all taxes, but they don’t require it.” In February of 2014, Lisa Linden, a representative of the Hotel Association of New York City, complained that “Residents who use Airbnb and similar sites to rent rooms to incoming travelers degrade the quality of life for neighboring residents, take revenue from local municipalities and jobs from local employers, and could deter travelers from returning.”
In March of 2014, Lisa Linden claimed, “These illegal facilities are impinging on available housing stock, lost revenues for the city, and potential job losses for NYC’s tourism industry.” Then in April of 2014, Lodging Magazine reported that “Many hotel owners have been up in arms because Airbnb hosts are not subject to traditional hospitality based regulations or requirements, such as paying lodging taxes…” Chesky, however, who met with hotel industry executives in Davos, Switzerland, in early 2014, asserts, “We are not seeking to go to war. I left those meetings imagining that I will be able to have a cordial relationship with some of the leaders of those companies.”
There’s also the issue of oversight and taxation. To determine if they’re in violation of the state law prohibiting renters for subletting for more than 30 days, New York Attorney General Eric Schneiderman subpoenaed Airbnb for information on its 15,000 New York state hosts in October of 2013. After months of fruitless discussion between the Attorney General’s office and Airbnb, the company eventually challenged the subpoena in the New York State Supreme Court. An Albany judge agreed with Airbnb’s claim that the Attorney General’s demand was too broad, all the while making it clear that a new, narrower subpoena would be accepted.
The very next day, the Attorney General submitted a new subpoena within those narrowed guidelines. After more work with the Attorney General’s Office, Airbnb announced on May 21, 2014, “we now believe we have reached an agreement that will protect the privacy of thousands of Airbnb hosts, while allowing the Attorney General to investigate bad actors and move us forward.” The terms of that agreement included Airbnb providing the Attorney General with “anonymized data about our hosts in New York … not [including] names, apartment numbers, or other personally-identifiable information.” To that effect, the Attorney General’s Office was given one year to review the data and request more information from Airbnb about specific hosts who might be subject to further investigation. Nevertheless, in the press release, Airbnb’s David Hantman explained:
“We believe the Attorney General’s Office is focused on large corporate property managers and hosts who take apartments off the market and disrupt communities. We have already removed more than 2,000 listings in New York and believe that many of the hosts the Attorney General is concerned about are no longer a part of Airbnb.”
Furthermore, Airbnb promised to provide more information about the laws in New York to both new hosts prior to listing as well as current New York hosts via email.
But it’s not just New York that’s trying to figure out what to do with Airbnb. The company’s home base of San Francisco is also in the midst of redefining and regulating the laws governing short-term rentals. After collecting more than 15,700 signatures—enough to qualify for the July 7th deadline and appear on the ballot in November 2014—a group of affordable housing activists decided to pull their proposed initiative restricting short-term rentals, choosing instead to work toward a legislative compromise.
While far from a long-term solution, this was nevertheless good news for Airbnb, as the initiative called for a public registry of all hosts, required hosts show permission from landlords and proof of insurance, and forced hosts to follow zoning regulations limiting spaces to certain parts of the city.
The group included former planning commissioner Douglas J. Engmann and housing activist Calvin Welch, among others. Dale Carlson, one of the initiatives biggest supporters, cited concerns that Airbnb was allowing citizens to subvert the very rent control and zoning laws meant to keep housing affordable in the city, explaining: “We have the worst housing crunch since the 1906 earthquake. This is not the time to be cannibalizing our housing stock for tourists.”
It’s true that residents technically need a conditional use permit to legally rent their spaces for less than 30 days, and some hosts have even faced eviction for violating the terms of their lease.
On the one hand, landlords are angry that tenants are profiting more on rent-controlled apartments than they are, as Jenson Lam, owner of a duplex in North Beach, explains, “It’s called overcharging subtenants in rent, defrauding the landlord and profiteering off the apartment. But there are no penalties.” After discovering that a long-term tenant had gone on vacation and rented her apartment for $4,500 per month—three times her actual rent—Lam paid the tenant $45,000 to move out in an attempt to avoid a jury trial for eviction.
Yet there’s also evidence that some landlords claim illegal activity merely to sidestep the “cure or quit” notice, as Gregory Brod, who has represented Airbnb hosts, explains:
“The landlords wanted any excuse to get them out of there … so they could take advantage of the skyrocketing real estate market. It was absolutely a false pretense to evict. They decided to bastardize the administrative code to say, ‘You broke the law, you’re done and don’t have an opportunity to fix.’
In the case in question, Brod charged the landlord with harassment and wrongful eviction, negotiating a buyout for the tenant.
San Francisco Board of supervisors President David Chiu has been working on competing legislation for the past two years that would have made short-term rentals legal but limited them to a total of 90 days out of the year. However, Chiu’s legislative aide Amy Chan notes that it would not affect individual lease agreements. Chiu’s legislation was developed with input from Airbnb, and the company has shown a willingness to work with officials, as in the following statement released in response to the pulled initiative:
“We have long believed that we can all work together to fashion responsible rules that protect the public interest and let San Franciscans share the home in which they live. We look forward to working with everyone on legislative proposals as we move forward.”
As early as March of 2014, sources began reporting that Airbnb was gearing up to collect taxes from renters. Fast Company’s Aaron Carr claimed that:
“When Gebbia gives me a tour of the company’s stunning new offices, we stop by one developer’s desk to ask what he is working on. He tells us that he’s building an engine to handle transient occupancy taxes for a place like New York City.”
In April of 2014, Airbnb released data indicating that the Airbnb community, “will generate $768 million in economic activity in New York and support 6,600 jobs this year.” They also highlighted the state law preventing Airbnb from collecting and remitting $21M in hotel taxes, asking leaders to work to change the law and allow Airbnb to do just that on behalf of hosts and guests.
Yet the company may face some unlikely resistance. Despite previous concern over the fact that Airbnb wasn’t paying hotel taxes, The Hotel Association of New York City claimed that if there was a proposal to allow Airbnb to contribute $21M to New York in hotel taxes they would “oppose it, entirely.” As Airbnb acknowledges in a press release on the subject, the hotel industry’s shifting rhetoric is “just one piece of a larger issue, which is that any new legislation holding Airbnb accountable for taxes would also legitimize the Airbnb business. And that’s something the hotel lobby doesn’t want.”
This back and forth between the hotel industry, state and local government, and landlords—all of whom want their share of the action—will be Airbnb’s biggest struggle. The shifting rhetoric of both San Francisco housing activists and New York hotel lobbyists indicates that a peaceable and equitable agreement might be hard to come by.