Why Airbnb copies experience Amazon

The Airbnb situation is complex, because in contrast to Google, which revolutionized everything from search to phones and cars, Airbnb still remained the expert of a narrow profile. The company connects people who have empty houses and flats, with people who want to rent them. Hence the newfound interest of Airbnb to selling tours through Experiences or reservation of tables in partnership with the restaurant service Resy.

Perhaps this is progress, the return of the magical feelings Cesky wishes all the users of Airbnb. The company has risen to that offered unique and affordable housing in the world standard. The first 10 years, Airbnb has grown into a generational shift in attitudes when, after getting used to the web, people suddenly started it is easy to agree on joint trips in a car with strangers, to choose their partners for the night with the swipe right and spend the night in the guest rooms in other people’s houses and apartments. Today the company is estimated at $31 billion, and it has already raised $3 billion in foreign investment. Along the way, Brian chesky and two other co-founder is Joe Gebbia and Nathan Blecharczyk – earned promotions Airbnb at $3.7 billion each, and they founded a startup entered the narrow circle of companies such as Google, Xerox and Uber, whose names have become verbs.

But all this money creates a unique problem (it can be called the curse of the unicorn): how Airbnb can now justify their market valuation, which is higher than Expedia, Hilton or American Airlines? Although Airbnb has accumulated a capital of $3 billion, last year the company earned only $100 million on revenue of $2.6 billion, or about 4%, whereas its larger competitors, which are publicly traded, have a gross margin of about 27%. In terms of competition and attention from regulators Airbnb may continue to grow and give a return on capital of 10 times the amount required by venture investors? The situation is aggravated by weak management team, which lacks a chief financial officer and Director of marketing, and despite the fact that before the IPO is less than a year.

“Scale of assessment of companies has changed, says chesky. – Earlier really had been the financial figures, but I think now companies have begun to realize that we have a great responsibility towards society: we need to make people’s lives better.” From Cesky has a plan: inspired by the experience of Amazon, Airbnb should also be a “store only”, but for travelers. Chesky hopes that by 2028 a billion people a year will use Airbnb. This is a huge leap compared to the 400 million who have used the service for the first 10 years (of which about 100 million have chosen accommodation through Airbnb this year). Following the scenario of Bezos, Cesky reconfigures the technology of Airbnb so that was easier and faster than before, attached to a company with hundreds of divisions and categories. “At some point the law of large numbers you just need to scatter more seeds,” says chesky.

But cally is concerned that uncontrolled growth will threaten the uniqueness of Airbnb. As a result, he is trying to position Airbnb as the “company of XXI century”, which should bring not only financial results, but also benefit other stakeholders such as hotel owners, employees and cities. For Cesky is not a matter of ephemeral corporate culture, but of survival – decision-making should be motivated by the good of the majority in the community Airbnb. Only then investors will receive full. “In the next 50 years, the public will not trust the companies that short-sighted, narrow focus on short-term goals or just a few aspects,” says chesky.

The result is a discrepancy between the need Airbnb in the rapid growth and desire practically not hurry up and create something responsible and long-lasting. “The reality is that long stretch, if you are not able to grow and generate economic attractiveness, says Kenneth chenault, the former head of American Express and a member of the Board of Directors Airbnb. – You will not last long, if your brand is not meaningful to the people.”

Knock twice on the bookcase, and a hologram of Joe Gebbia. This focus shows a real Gebbia, 37-year-old co-founder of Airbnb, going into the negotiation, stylized his old apartment half a mile from the headquarters of the company. Behind him a ghostly version of Gebbia continues to chant: “You are standing on the very spot where we put the first three inflatable bed…”

The history of the founding Airbnb, which has become a legend in Silicon valley, still is the basis of corporate identity. Graduates of the School of design of the state of Rhode island, Gebbia and practically not have enough money for rent, and in 2007 they started to take money from people who come to San Francisco for a conference on design, for the opportunity to sleep on an inflatable mattress on the floor of their apartment. Then they called my friend Nathan BlackICE, which helped to make them a website.

Originally called Air Bed and Breakfast (“airbed and Breakfast”), the startup did not become successful overnight. For the first 12 months that was only 10-20 reservations per day. But friends have already sought external financing: in June 2008, they contacted a family venture investors, received an award for the efforts of the five failures and two ignored emails. What did they ask? Only $150 000 for 10% of the company, today this share is worth more than $3 billion Being grounded, the founders collected credit cards, like baseball cards, and stuffed the cards exhausted the limit on the card. The biggest problem was the lack of trust. People felt uncomfortable to invite strangers to stay at home. “It was really hard to understand how to overcome worked against us a bias that a stranger is a danger, says Gebbia. It is a stereotype acquired in childhood”.

The founders could not solve the problem, sitting at their tables in San Francisco. They began to rent a home through their service to understand what can be done. They have built a system of feedback added around the clock support and improved photo quality. They were helped by the financial crisis of 2008, which forced travelers to cut back on budgets, and experiencing an acute need for money, the owners decided to let a “dangerous strangers”.

Early on in Airbnb cancelled the requirement that guests slept on air mattresses and got Breakfast, and soon on the website offered everything from houses on the tree in the backyard to separate bedrooms in shared apartments. To 2013, Airbnb was exposed to 500 000 objects. Now there are more than 5 million Owners usually learned about Airbnb from friends, and even today, the company spends more than 90% of its advertising budget on attracting visitors, not the hosts. All this time, this strategy worked.

But in 2008, the most successful periods through Airbnb booked accommodation 100 guests a day. In the peak day in August 2018, almost 10 years later, 3.5 million people found accommodation on Airbnb (on a normal day there are about 2 million). And for the first time Airbnb had the problem with the proposal. Why all of a sudden? There are two reasons.

First, the success of the service attracted the attention of competitors with big wallets. Booking Holdings (owner of companies like Priceline and OpenTable, revenue of $12.6 billion in 2017) and Expedia (revenue in 2017, $10 billion) started to actively promote apartments and vacation rentals on their websites. This spring, Booking Holdings allocated to “alternative accommodation” in a separate category for the first time stating that they have 5 million of such proposals – as well as Airbnb.

Secondly, local authorities have more to complain about. The claims are varied – starting with the fact that hosts use Airbnb to access informal hotel, to accusations that the company is exacerbating the housing problems in the region. According to the analytical company of Denver AirDNA, after the tightening of the legislation in cities such as Berlin, Santa Monica and San Francisco, the number of sentences in the month fell, in some periods more than 30%. New York and Paris are also up in arms against the service. In Japan, the change of legislation in June 2018 has forced Airbnb to cancel thousands of bookings and have a Fund of $10 million to compensate angry customers.

“When something is easy, there is no need to build muscle, says chesky, and we have given extensions of the base proposal.” So in February of 2018 Airbnb had not abandon traditional operators, from mini-hotels to holiday accommodation and even boutique hotels, having opened for each separate category on the website. This is an obvious path for growth, even though it undermines the unique original idea of Airbnb.

At Airbnb there is an obvious advantage – the company charges owners less, only 3% vs 15%, which charges a traditional travel Agency like Booking. “I would not say that they are the best option. But they the cheaper option,” says Alec, Strominger responsible for the renting of rooms through Airbnb boutique hotel Gowanus Inn.

Airbnb really cheaper, but the service is not yet able to offer the same scope of services. Booking growth Holdings was accompanied by numerous strategic acquisitions, and they already have much of what Airbnb is only beginning to build. At Booking there is a service Kayak for flights, OpenTable for reservations, Rentalcars.Com for transport, Agoda, travel in Asia and Priceline for discounted packages.

Glenn Fogel, head of Booking Holdings, said that his goal for the next 10 years is to link all the pieces together, to booking travel from the beginning to the end went smoothly. “Yes, it will be difficult to do, but more likely those for whom the scale and experience and who already have many basic blocks. So we have,” he says.

Cesky shares this vision of traveling without a hitch, he is aware of the obvious acquisitions: large chain hotels, tour operators classic, even the transport company. But he was not interested in simply buying growth. He refuses to compromise that, according to him, creates the uniqueness of Airbnb, and this sense of community. “I think the center of gravity for Airbnb still needs to be offer a unique experience not found anywhere else on the Internet,” says chesky.

If the dream is “amazonfail” Airbnb, the company has a long way. Cesky is also understood. To achieve this goal, he has lured the Bezos one of the top managers and the former head of Prime Greg Greeley, who has worked in the Amazon for 18 years, and in March of this year I joined Airbnb. He now runs a division of “Home”, the primary rental business of the company. When he came to Amazon, people doubt whether the company is to sell something besides books. Now Greeley works at Airbnb, which will carry out expansion of a similar scale. “Yes, I see an analogy with the situation of 20 years ago: another company on the “A” and “Amazonian” proportions opportunities for travel,” he says.

But in many ways compared with the Amazon of a stretch. Retail is a market volume of $5.8 trillion in the U.S. alone, much more the travel market, even in the broadest sense of the word. Amazon sells things like books, clothing and garden equipment – all mass production goods. Airbnb wants to be her complete opposite. “One of the most popular offers on Airbnb – this is the mushroom house, says chesky, referring to a tiny house with a roof rounded off the coast of California, which is leased for $130 per night. – Unfortunately, no matter how successful he was, we can’t build a million more of the same. We have a business that will have to do a lot of things, because everything in which we engage may not be huge, it is by definition a piece of.”

The first major attempt at expansion of Airbnb – Experiences this, try to log on to an extremely fragmented market tours. As well as Etsy turned Handicrafts online trade, and Uber – owner of each machine in a private driver, Airbnb with Experiences wants to give everyone – from sous-chef to yoga the opportunity to lead an online tour business. But how big is this market? “The restriction is not in space, says Joe Zadeh, managing service Experiences, and in time.”

Launched in November 2016, service Experiences develops slowly. The original idea of a fully scheduled three-day routes, turned out to be too costly in terms of money and time for budget travelers who use Airbnb. The company switched to the shorter options, but quickly faced the quality problem. If the housing put up for Airbnb without prior screening, with excursions it’s not working. The housing has a base architectural standards, first and foremost, the suitability for a stay. For programs this is not, and homegrown guides began to experiment in his own way. One of the first “experiments”, declared while the project was still in the testing phase, is a woman, who yelled at guests, while they are hour collecting garbage on the coast of San Francisco. Quite a experience, no doubt, but not what we had in mind in Airbnb.

The need to test the guides slowed the development of Experiences, but in 2018, the growth accelerated. If, at the time of launch of the project two years ago was offered 500 “experiments” in 12 cities, now they have 15 000 800 cities worldwide. The company takes 20% of each reservation that brought her $2 million in revenue last year. It is not a trifle, but for the company size – in the range of mathematical error. According to Forbes, Airbnb spent on product development more than $100 million But growth prospects are good: according to estimates of Forbes, Experiences could reach $90 million in sales this year, which will bring Airbnb approximately $18 million, the company Itself has not confirmed these figures, but details were not disclosed.

In December 2017 Cesky gathered the co-founders, to discuss the guidelines, which, according to him, will help in the future to make decisions on the company’s way to other indicators of success besides financial. “If you dressed a big responsibility, says chesky, – that is the question, to whom?” Most managers, especially those who are going to go on exchange, I would say that to investors. But not so cally. In addition to the interests of investors, Airbnb is going to guard the interests of four parties – employees, guests, owners and cities. In Airbnb I hope that some unusual initiatives will be perceived easier. For example, the appeal to the Commission on securities and exchange Commission with a request to allow Airbnb to give the owners of the shares as if they were employees, and offer them cheap loans for repairs. This reflects the company’s desire to stay true to its roots. “In fact, the Airbnb community has a virtual seat at a round table. His broadcast position of the founders, saying that was the right thing to do for growth,” says Reid Hoffman, co-founder of LinkedIn and investor in Airbnb.

After going public to support such inclusion will become more problematic. Airbnb has long been looking for a way to remain a private company, but after negotiations with the Bank Morgan Stanley in the fall of 2017, its leadership realized that such a possibility she is not. And now the company expects to go public before mid-2019. The window of opportunity will soon be closed: the 2020 deadline significant part of options of employees, and they must be able to implement them.

It is noticeable that Cesky hate to talk about the IPO. According to him, too often, companies lose the ability to see more important goal pulls them into the quarterly cycle. “The problem is that some simply forget that the main thing for them – to climb to the top,” he says.

“I’ve met many CEOs who say, “I’m focused on long term goals” or “I want to focus on the long-term goal.” But they are under strong pressure from different sides, and there are many conflicts of interest, says chesky. They say, “I want to work for the good of society”, “I want our products improve the world” but the only indicators that they consider the Board of Directors, is the numbers of sales”.

This doesn’t often hear from the head of the company, which is preparing to go public. Airbnb wants to come up with the rules of the game, but the thing investors – to decide whether they are ready to play.

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