Airbnb’s Growth Strategy: How they attract and retain 150 million users

Have you heard of Airbnb?

Just kidding, everyone’s heard of Airbnb.

Not only did they revolutionise the travel industry, they’re one of the first startup “unicorns” to emerge
in the mid-2000s and are emulated on every level – from their business model and their map and search
results, to their referral engines, and generally their outlook and approach to everything they do.

They’ve been around for more than 11 years and are still growing at a rate that most business can only
dream of. In fact, last year they turned over more than $1b in a single quarter and their most recent
stock sale values them at USD $35 billion!

So, how do you keep growing when everyone already knows who you are and will probably consider you
as an option for your holiday, regardless of your marketing?

How do you ensure that people who have stayed with you before do it again?

How do you convince people to open up their home and allow guests to stay?

And how do you ensure those hosts are happy enough to keep renting out their places?

In a previous role at a start-up it was very common to hear the question “How do Airbnb do it?” when
looking at implementing a website change or a new tactic.

This case study aims to answer all of the questions above by taking a deep dive into the specifics of each
of their digital marketing channels and tactics.

History
Airbnb started out in 2008 when founders Brian Chesky and Joe Gebbia realised they could make a quick
buck by renting out an air mattress in their living room to people visiting San Francisco for a big
conference. The idea then evolved into a website where others could do the same, and travellers could
get a cheaper option than a hotel.

The full history has been well documented several times (like here or here) so we won’t be covering it
here, but I think those early stages set the mindset of the business as one that would find a way to grow
using whatever technology tricks that they could. They famously did things that didn’t scale and then
growth hacked solutions so that they did.

The product

In its simplest form, Airbnb is an accommodation booking engine. It’s a place where people looking for
short term accommodation (usually for holidays) are able to find somewhere to lay their head down at
night. So why was it perceived as being so different to the booking engines that were already around at
the time, and are still huge today. Why would a traveller rather use Airbnb than Hotels.com, Expedia,
Trivago, or the myriad of other websites available?

Cynics will say it comes down to price, and in a lot of instances they’re right. Airbnb’s tend to be cheaper
than hotels, and so the cost-conscious traveller would prefer to pay less and go without some of the frills
and security that you get with a hotel. But there are plenty of properties on Airbnb that are more
expensive than hotels and still get booked out, so what else is there?

Differentiation

Airbnb isn’t a place where you book hotels (even though you can).

By listing the properties of ordinary people, they set themselves apart by offering a different experience
to travellers.

Nothing sums this up better than their “Don’t go there, live there” campaign.
“Don’t go to Paris, don’t tour Paris, and don’t do Paris. Live there”

What Airbnb offer isn’t a cheap place to sleep when you’re on holiday, it’s the opportunity to experience
your destination as a local would. It’s the chance to meet the locals, experience the markets, and find
the non-touristy places. Sure, you can visit the Louvre, see Buckingham Palace, and climb The Empire
State Building but you can do it as if it were your home town, while staying in a place that has character
and feels like a home.

This ramble has probably given away the fact that I’m a huge fan of Airbnb and have used it frequently,
but this just goes to show the power of differentiation. Airbnb has turned me into a huge advocate by
just connecting with my preferred way to travel. I’ve done a fair bit of travelling in my time and I
absolutely HATE it when people say they’ve “done” a certain location. Just by using the right words,
Airbnb make me feel as though they should be my first port of call when I’m visiting somewhere new.

But that doesn’t mean I would use it at all costs. I visited Japan last year, a place where Airbnb’s are quite
hard to come by. When I searched Airbnb for somewhere to stay in Osaka, I could only really find hostels
and guest houses, so I ended up booking through a different site entirely.

Airbnb created a whole new kind of vacation just by providing spaces other than hotels to stay. Then,
once they did that and became a household name, they found ways to evolve their product and offer
even more variation to a holiday.

Airbnb Plus (upsell)

Many people like the idea of staying in someone else’s home, but not everyone does. Some people
appreciate the luxury of staying in a hotel, knowing you’ll receive a professional service, including a
properly maintained room.

And not every Airbnb experience I’ve heard about is an overwhelmingly positive one. I’ve seen/heard of
some properties that haven’t been kept very well, are lacking basic holiday features, or don’t look very
good.

To counter this, they created a premium product called Airbnb Plus. In their own words

“Airbnb Plus is a selection of only the highest quality homes with hosts known for great reviews and
attention to detail.

Every home is verified through in-person quality inspection to ensure quality and design. Just look for
the PLUS badge.”

The homes are well designed, well maintained, and well equipped. Meanwhile, the hosts are all rated 4.8
or above. All of this is inspected by a real person so you’re ensured of its accuracy.

By creating this new tier of product, Airbnb have provided a solution to potential travellers who have
reservations about the quality of their properties.

Experiences (cross-sell)

I wouldn’t say Airbnb have exhausted their growth when it comes to ‘accommodation rental’, but most
travellers are aware of who they are and what they offer. Sure, they can nurture better and convert more
customers, but they needed a way to keep growing their revenue that isn’t reliant on just one product.

“Airbnb Experiences are activities designed and led by inspiring locals. They go beyond typical tours or
classes by immersing guests in each host’s unique world. It’s an opportunity for anyone to share their
hobbies, skills, or expertise without needing an extra room.”

If Airbnb Plus is an example of a product upsell, their Experiences are a great example of a cross-sell.

Given that most of their pitch to consumers is to experience a location like a local, it seems like a very
simple and logical step to offer paid activities provided by local hosts. But it’s one that many businesses
wouldn’t have made, and I think it speaks volumes to the type of business Airbnb see themselves as.

An accommodation platform would never offer experiences as a product, and nor should they. If your
business strength is that you have properties and people want properties, then that’s what you should
focus on. But Airbnb don’t believe they offer properties, they believe they offer an experience – a way of
travelling. That’s way more than a roof, 4 walls, and a bed.
Not only did they understand what their customers wanted, they created the desire in the first place!
You could argue that they knew their customers better than they know themselves, and I wouldn’t
disagree.

Assurance through insurance

As previously stated, Airbnb understand the importance of maintaining a healthy supply of properties.
And while many businesses have been created that rent out properties on Airbnb, there are still a
significant number of properties where the host still lives there. They either rent out a spare room or
their entire property when they go away.

For these people in particular, letting strangers into their home can be a scary concept. So how do Airbnb
ensure that hosts are comfortable enough to rent out their property, and continue to do so?

In 2011 Airbnb had to come up with an urgent answer to this very important question when a host in
San Francisco reported that their house was trashed after renting it out for a week. It could have been
something that ruined the company’s reputation and destroyed their business, but they reacted strongly
and turned it into a strength.

Within days, Airbnb introduced a Host Guarantee that every property would be insured up to
USD$50,000 for any damage incurred by guests. That value has since increased significantly to USD$1
million (I guess $4.4 billion in VC funding can really open up some doors).

With this guarantee, Airbnb have assured hosts that should the absolute worst happen, they will be
covered by the company that enabled the transaction.

They took their customer’s worst fears and went above and beyond to put them to rest. Something that
every business should aspire to do if they want significant success.

Product conclusion

Airbnb have built a hugely successful business off the back of understanding what their customers
want/need, and then providing products that match them.
By positioning themselves as a way to experience travel, rather than as an accommodation booking
engine, they were able to connect with a segment of the travel market who felt their options were fairly
limited.

By offering a guarantee on insurance they took away the biggest fear that their hosts (and potential
hosts) have, ensuring that they feel comfortable renting out their property.

Once they had built a solid base of customers and reputation, they expanded their offering.

They created an upsell opportunity by providing a higher tier property that had been manually vetted
to ensure the highest possible quality.

They began offering their customers ways to specifically experience life as a local, as well as sleep like
one.

With a product approach like this, it’s no wonder they’re such a successful business.

Airbnb’s Marketing Journey to Build a Global Community

Founded in 2008, Airbnb is a marketplace where people share private spaces all over the world to be
rented for the short-term. The spaces are mostly apartments, villas, houses or castles for a unique travel
experience available at various prices, and have grown in more than 81,000 cities and 191 countries of
the world.

Today, we are going to discuss the story of a fresh, new peer-to-peer vacation rental platform that spread
their marketplaces service through the world via creativity. Airbnb developed competitive brand
communication strategies that transformed the world into a global community. So, when you lookout for
the best places to stay-in on Google, you will come across Airbnb amongst the top searches.

The idea of Airbnb originated when founders Brian Chesky and Joe Gebbia realized an opportunity in
renting out an air mattress in their living room to people visiting San Francisco for a conference. The idea
then evolved to become a platform which offered short-term living quarters, breakfast and a business
networking opportunity for those who were unable to book a hotel because of saturation in the market.
In February 2008, Brian Chesky contacted his former roommate Nathan Blecharczyk, for developing the
website which was named AirBed & Breakfast. Nathan Blecharczyk joined as the Chief Technology Officer
and the third co-founder of the new venture.
The official site Airbedandbreakfast.com was launched on August 11, 2008. The venture served their first
customers in town in the summer of 2008, during the Industrial Design Conference held by Industrial
Designers Society of America, where travellers had a hard time finding the place to stay in the city.

As they were starting out in the summer of 2008, the founders needed a way to raise money. They
bought a ton of cereal boxes and designed special edition election-themed boxes- The Obama O’s: The
Breakfast of Change, and Captain McCain’s: A Maverick in Every Bite. Every box was sold at convention
parties for $40 a box. The cereal box idea went down in the Airbnb start-up story as it kept the company
afloat for a few more months. The proceeds from the cereal boxes almost pulled the company out of
debt and gained Airbnb some national press coverage.

In November 2008, the famous venture capitalist Y Combinator founder Paul Graham was not convinced
about Airbnb’s business model but was impressed by the presidential-themed cereal boxes and saw
spirit and passion in the founders. The company’s inclusion in the Y Combinator program pushed Airbnb
founders to focus on making the company profitable. With a clear goal, seed funding of $20,000 and a
better work structure, founders of the start-up decided to travel to New York- where a majority of their
community was located. Airbnb focused on developing relationships by uploading high-quality images of
the properties, creating an unforgettable experience for its customers and guiding the hosts to engage
the guests in the best homestay experience. By the end of the Y combinator program, the founders were
able to create a market of loyal customers who not only loved the company but also helped the company
grow its customer base. They were also able to secure a $600,000 funding from Sequoia Capital and Y
Combinator. From this point, Airbnb was unstoppable and expanded out of America, and today, it has a
worldwide presence in the hospitality industry.

Business Model of Airbnb

Airbnb is an aggregator-based business model. The hospitality brand does not own any property and yet
is amongst the largest accommodation providers. Airbnb’s business model is based on the needs of the
community, which is simple, innovative and effective.

Having the relevance of an economy-based model, the online platform serves the two categories of
audiences. Under the 1st category, Airbnb enables owners to list their property on the website to earn
revenue by renting it out, and under the 2nd, travellers looking for accommodation can choose from the
properties listed on the Airbnb website.

Customer satisfaction and low rental prices are the main factors which have led Airbnb on its path of
success. The brand has set its own set of community standards and they are mandatory to be followed
by owners of the spaces. An aggregator-based model always makes profits from various sources. Let’s
have a look at how Airbnb gained huge profits:

Airbnb’s Revenue Model

Airbnb offers free listings to property owners and lets travellers browse the listed spaces and select the
one which best suits their needs on the platform. All transactions are carried out on Airbnb’s platform.
Let’s have a look at the way through which Airbnb earns: –

Owners of the Property

Airbnb charges a flat 10% commission from owners for every booking made through the platform. The
platform also earns through payment processing fees. The usual payment processing fees is 2% while
Airbnb charges 3% for the same. The additional 1% is levied by the owner of the property.

Travellers

Airbnb charges a non-refundable fee up to 20% of the booking total, that is set as a service fee by
Airbnb for travellers for every confirmed booking.

Airbnbmag

Airbnbmag is a magazine product that the company has started. The idea behind the $15 magazine is
to help the traveller discover the place through local’s eyes.

Business Travel

Airbnb also provides the spaces for the travel managers of the companies that have certain
requirements like, home type, amenities, check-in, reviews, responsiveness, and owner’s commitment.

Due to its unique features and great customer service, Airbnb has created a well-reputed image
worldwide and is increasing its base every day. When it comes to giving a competition, the brand has
devised various digital marketing strategies to gain wide popularity on online platforms. With the help of
best digital marketing services, they have kindled the excitement and craze in the people to travel and
host.

Digital Marketing Model of Airbnb

As Airbnb wanted to target the people of every generation, they leveraged various digital marketing
tools that helped them in building a reputable online presence and a bigger community. They adopted
top-digital marketing strategies, if you are looking for the same, you must consult the best brand
activation agencies.
Airbnb is more than a Procure-to-Pay accommodation provider. With the aim of building a larger
community, Airbnb leveraged various integrated marketing strategies to build trust. Creating a
community has also simplified the booking process. Users must create their profile when they first sign
up but after that it’s as simple as entering their payment details. It is also the authenticity of the
experience that makes Airbnb such a successful community.

Now, let’s have a look at the digital marketing strategies adopted by Airbnb:

Website Development: As Airbnb relied mostly on their website for booking and sales, it was
important for them to provide their customers with a clearer look with easy-to-use navigation. By
leveraging the best website development services, they added a host of personalisation features which
turned out to be a complete game changer for the brand. They were able to make the booking processes
easier than ever.They added high-quality images of their properties, essential information related to
booking, additional product information, availability, reviews, supplier information (Host,
Neighbourhood), Policies/T&Cs and other such related products to enhance the customer experience.

Paid Search Marketing: Airbnb attracts approximately 12% of traffic via paid search. By investing in
paid search marketing as a part of their digital marketing strategies, Airbnb has been able to capture one
website visitor for every two visitors from organic searches. They have paid attention to keywords,
landing pages, important messages, ads and Calls-to-actions messages.Their most of the spend goes
towards the terms that feature “accommodation” as the chief keyword. Their ad copy speaks to their
unique points of difference and so stands out from their competitors. When it comes to landing pages,
they mostly feature local imagery to help provide a more relevant result.

Email Marketing: With the aim of increasing reservations and prompting customers to book their next
travel adventure, Airbnb leveraged the power of email marketing services to remind their users that the
hospitality brand is a one-stop-shop for organising a memorable holiday, so that users become familiar
with not only booking their accommodation via Airbnb, but also activities while they’re in a new city.
They made use of itinerary emails, emails which consisted of experiences of other users.

Search Engine Optimization: To establish brand presence, Airbnb drove the traffic organically by
leveraging best search engine optimization services. They attracted the audience through search
engines- by ranking for words which included “accommodation” in their keywords. By using intelligent
search engine optimization strategies, they optimised their whole website to compete against the
organized hospitality industry competitors.

Social Media Optimization: Nowadays, social media platforms have become an integral part of the
digital marketing strategy. If you want to connect with your audience in real-time, then it is best to
establish your brand image across social media platforms. As social media plays a vital role in the lives of
the people, Airbnb decided to leverage the best social media optimization services that made them earn
billions. They made use of following platforms:

Facebook

Through creative social media optimization strategies, Airbnb has managed to reach 16 million likes
on Facebook. They leveraged various types of ads like feature ads, facebook ads, video ads. Airbnb’s
timeline consists of various types of user-generated posts. They have adopted the policy of dynamic
remarketing by spending their budget on users which show interest in the ads and are likely to convert
them into leads.

Instagram

Airbnb’s Instagram page is highly visual and showcases the vast array of beautiful properties they
have on their platform to inspire wanderlust in potential travelers. Their posts are clever, creative and
leverage a number of features within it to make sure their followers actually engage with their content.
Guests can share their experiences with #airbnb and even book a rental place directly from the feed.

Twitter

Airbnb uses Twitter to promote its blog posts and extraordinary listings. Their hashtag
#belonganywhere is quite popular. They keep their feed updated by posting timely content. Airbnb
posted a 4.5-minute movie on Twitter using short video clips from Vine.

Brand Partnerships: Airbnb has shown many times that partnering can cause some serious impact on
the audience. Brands get to offer something unique to the customers. Successful partnerships include
KLM Royal, Dutch Airlines, UK bookstore chain, Waterstones and even the French government.In
partnership, a contest was created where the winners could spend a free night in a luxury ‘Airplane
Apartment’.With the French government it was a night in the Paris Catacombs at Halloween, which
helped raise the profile of a lesser-appreciated French tourist spot.

Influencer Marketing: Airbnb leveraged the power of creative influencer marketing strategies and
invited journalists, bloggers, YouTubers, podcasters and Instagram stars to the event. In 2015, Airbnb
hosted a ‘floating house’ publicity stunt on the Thames River in London with a variety of related events
including a #FloatingHouseParty where attendees were encouraged to live stream, take pictures and
splash the night all over social media. The result of the event was 70,000-page hits, 10,000 new users
and more than 200 million social impressions.

Inbound Marketing: With the help of integration of Craigslist, the two platforms drove more traffic and
business. Craigslist was being used by people to offer and look for short-term housing. Airbnb decided to
attract qualified leads and reverse engineered Craigslist form to make the two platforms compatible.
Whenever anyone listed accommodations on Airbnb, they got an option to automatically create a
posting on Craigslist as well. They helped create additional inbound links for the user.

Blogs and Storytelling:

blog.airbnb.com is an informative repository for travellers. The Local Lens section is dedicated to
individual narratives just like the Stories section on their website.

Storytelling: The brand has the stories section on the website which consists of various video
profiles of hosts and travellers, their stories as to why they rent out their place and the motivation of
travellers to leave their homes and travel the world with Airbnb.

Referral Marketing: Airbnb encouraged its users to refer new members to Airbnb via email invites.
They rewarded the referrers with a $25 travel credit when new members completed their first trip and a
$75 credit was offered when they acted hosts for the first time. This way Airbnb converted new leads
and had to pay out for referrals only after new users paid. This allowed Airbnb to grow in a sustainable
manner.

Digital marketing has been working very well for Airbnb, with over 470,000+ followers on Twitter and
2,750,000+ followers on Facebook, just to mention a few. Airbnb has been successfully able to disrupt
the Travel & Hospitality Industry. It has redefined how people interact with one another when travelling.
There are many campaigns that have helped Airbnb establish its image and have touched the values of
the people.

Campaigns done by Airbnb

We Accept

In 2017, Airbnb responded to accusations that some of its hosts were discriminating against guests on
the basis of race and gender by introducing a non-discrimination policy on their site. “We Accept”
campaign was launched to underpin Airbnb’s long-held values of community-led and culturally diverse
travel.

Experiences

The online marketplace introduced thousands of new ‘Passion Categories’, such as food and drink,
concerts and sports, across thousands of new locations by the end of 2018. To increase awareness of this
added functionality, Airbnb collaborated with brands like Vice and Pantone to produce immersive
experiences.

Freedom in Goa

With this campaign, we wanted to give travellers a new experience to discover new places and explore
new cultures, on their terms which is what Airbnb truly is all about.

Live There

In 2016, Airbnb further developed its brand proposition, rooted in travel, communities, people and
experiences. In 2016, Airbnb further developed its brand proposition, rooted in travel, communities,
people and experiences. Airbnb “Don’t Go There. Live There.” from TBWA Worldwide on Vimeo.
Will Airbnb survive Coronavirus?
Airbnb revolutionized how we travel and

not only that Airbnb along with similar

platforms shook up local economies and

the real estate market people listed

anything and everything from small

cramped rooms to luxury homes so Airbnb

s social impact is bigger than most

people think

Airbnb itself is no stranger to

controversy the past years have brought

criticism and backlash from local and

national governments alike this latest

crisis has only aided in putting the

company to the test layoffs

controversial refunds and a shaky IPO

Airbnb is going through turbulent times

will it come out on top let's talk about

it in this episode of company forensics

an air mattress in the middle of a

living room Joe Gebbia and Brian Chesky

shared an apartment in San Francisco and

needed some extra cash to pay rent they

noticed their living room was empty so

they just stood up put on an air

mattress in the middle and offered

breakfast it was in their own words a

bed and breakfast and it worked the

first guests paid $80 and night Hey san

Francisco's pretty expensive along with

Nathan black our CES CTO they launched

air bed and breakfast calm in 2008 it

offered short-term stays to those who

couldn't find hotel rooms in crowded

cities like San Francisco and New York

to help promote the platform they even

turned to politics and cereal but it

failed to catch on even when they

reached what seemed to be the final

version interest was still lackluster

and it was a good idea find a place and

make a reservation and only three clicks

it sounds great

right well investors weren't convinced

in fact 15 investors passed on the idea

I wonder how they feel now but then

there was one guy who did it and that's

Paul Gray hem from the Y Combinator

program he decided to take them under

his wing providing cash and training in

exchange for a slice of air bed and

breakfast so the founders used these new

funds around $20,000 to fly to New York

City to stay with hosts and write

detailed reviews and even take

professional photographs to help them

with advertising then there was the name

heir Ben and breakfast just didn't sound

right so they changed it to Airbnb which

really marked a new era a chaotic one at

that because people started noticing

your B&B and most importantly they

started using it in fact 2009 was so

chaotic that Chesky moved out of his

place because it worked both as an

office and as a rental place they

reached 10,000 users and 2,500 listings

and such numbers finally drew the

attention of investors in April of that

year why investors and Sequoia Capital

invested six hundred and fifteen

thousand dollars the pitch stick they

used to raise that money is actually our

most used template on slight beat you

can go to sleeping comm /youtube to use

the actual slides that these guys use to

raise money with some nice redesign by

our team after this the platform only

kept growing and by 2010 Airbnb reached

more than 7

bookings 80% of which came after the

investment with such success and only

then did investors really say hey Airbnb

might be worth a shot so for their

second round of funding

Airbnb raised 7.2 million dollars which

already valuated the company at 70

million not bad given that they started

in 2008

Airbnb says hello world 2010 was a good

year Airbnb won awards opened their

first international office in London and

reached 10 million nights booked they

secured more than 112 million dollars in

funding and the operations had grown so

massive other international offices

followed in places like Barcelona Milan

Paris and Sao Paulo in 2013 alone the

number of listings increased to a

quarter of a million Airbnb was all over

the world in fact it even became one of

the first us-based companies to operate

in Cuba after the Obama administration

eased restrictions on the Caribbean

country by 2015 the company had garnered

serious funding in its series e1 round

investors shelled out 1.6 billion

dollars
against the valuation of 25 billion

dollars aided by such funds it started

absorbing the competition they acquired

rivals at Colio and crash patter in

Europe and bought companies that works

at hyper local levels with valuable data

such as mapping and restaurant guides

this way Airbnb was consolidating itself

as one of the main choices for

short-term rentals but it's not all a

fairy tale because there's an

unavoidable phenomenon that comes with

having hundreds of thousands of guests

and hosts complaints began pouring in

trashed apartments theft racism some

guests were held at gunpoint and even

prostitution so in order to deal with

these issues which go back as far as

2012 Airbnb implemented actions such as

host guarantee funds change in policies

and they went as far as redesigning the

entire image to gartner a feeling of

belonging anywhere but prostitution and

theft we're into the biggest issues the

challenge was the cities themselves all

over the world local and national

governments applied more stringent

measures against temporary rentals take

New York for example it's one of the

biggest Airbnb destinations but still

the local government threatened to shut

down the platform even San Francisco

where Airbnb was born so a citizen

initiative to limit the platform and the

problem doesn't extend to the US alone

citizens in Barcelona and Paris have

openly spoken against the platform and

the reason is quite clear aiming at

tourism hosts have spiked prices up in a

matter of a few years and have made

entire cities completely unaffordable

for locals especially for the middle

class it has become a source of income

and jobs both direct and indirect and

though the company was growing there

were some ups and downs the famed IPO

you can find Airbnb anywhere maybe not

in North Korea but anywhere else q3 of

2019 saw double the losses of 2018 with

a considerable increase in marketing of

about 60% more than 2018 and this wasn't

good because it had long been known that

Airbnb planned to launch an IPO in 2020

Chesky however assured everybody that

the company was profitable many

companies have gone probably while not

having profit you know uber and lyft and

Twitter but here's an interesting nugget

of information recent years have seen

the highest number of IPOs from

companies that aren't profitable since

when take a guess well that's right

since 2000 right before the dot-com

bubble burst it's just a fun fact Chesky

was pretty evasive about the whole thing

this is what he said in an interview

with CNBC you and asked about funding

and the IPO we don't need to raise money

and so we haven't been in a rush to go

public all he did was hype about 2020 in

the climatic opening but that ideal

along with everything else had to be put

on hold the now and the future so we all

know what has happened in the past few

months

80% of lodging reservations around the

world have been cancelled the WTO

predicts that tourism will drop in a

conservative scenario about 60% all over

the world if not worse most Airbnb

markets so reservations drop 90% some

hosts at all reservations from April May

and June cancelled so what has Airbnb

done to deal with this situation first

it has come to grips with reality its

valuation formally at 36 billion dollars

have been lowered internally to around

1/2 Chesky announced that revenue is

expected to be 800 million dollars less

than last year the company managed to

race two rounds of funding each at an

estimated 1 billion dollars

in the middle of a crisis where would

this money go part of it 250 million to

be precise will go to a fund for hosts

this sounds like a lot of money but it's

only to cover a percentage of

cancellations as far as the IPO there

are no signs of that happening anytime

soon and experts agreed it would be the

wrong time to go public then come the

layoffs and that's by mid May when we're

shooting this video everyone be fired

1900 employees 25 percent of its staff

the decision did not come easy for

Chesky who took the high road in the

eyes of many in his letter to those

affected and the rest of the company he

was very clear this wasn't the employees

fault this was beyond what many could

comprehend so those affected will

receive 14 weeks pay plus one more week

for each year with the company as for

high executives they have reduced their

salary in 50% and chesley will not

receive his salary for the next six

months when it comes to reservations now

that's where it gets tricky

Airbnb sent out communications detailing

the refund process which was conditioned

between dates the process seemed easy

but many guests saw it's actually very

difficult hosts come up with excuses and

conditions that are impossible to

fulfill this leads us to the hosts

themselves big and small they've seen a

complete halt in their income and many

of them has said that the policies

around this crisis haven't been geared

towards their benefit as the refunds did

not consider them at all backlash was

such Chesky had to take it to social

networks to issue an apology and take

more actions which included this 250

million dollar fund these are actions

that can not compensate for the

financial impact this crisis has

generated and in fact it could reshape

the way we see temporary rentals and

cities themselves remember all these

locals affected by rising house costs

well some experts believe that they are

key to the future of housing as empty

apartments geared towards tourism might

become normal apartments again though

cesky have stated repeatedly that travel

will return and that it will be

different to him local and hyper local

reservations will leave at norm at first

and Airbnb will be there with newer

stricter cleaning policies the WTO

World Tourism Organization partially

agrees with him as it estimates that

travel will eventually bounce back by

the end of the year as borders gradually

open but this might not be enough Airbnb

has had a lot against it it has had to

funnel a lot of its

investment to cover costs governments

resist its presence and the future of

travel is still up in the air so

eventually might never come will another

platform replace Airbnb

Air BnB Business Model

Today we are going to talk about Air Bnb business Model

00:06

You might have not heard about it, but it has just launched in India

00:09

A model similar to Oyo Rooms

00:12

and a Bit Different in other sense

00:14

Oyo Uses its Own investment whereas they Don't

00:16

Air Bnb is Similar to OLX

00:18

On Olx, we can sell any item

00:22

and post an Add Accordingly, and if someone wants to buy it, then can buy

00:26

And that too in free, and They earn money Through Adds

00:28

But Air Bnb have a different approach

00:31

If you want to Post an Add, and you get a Buyer for it

00:34

I'll take commission from you as well as from the other party
00:37

Lets logically think about how they take commission from us

00:40

If someone buys it Online

00:43

then there will be a transaction

00:45

Maybe from the card, and you have to pay to the Payment Gateway

00:48

and if you know that gateway usually takes 2 Percent for it

00:51

and They are taking 3 Percent

00:54

and If Someone gets a Buyer

00:57

They take upto 20%

00:59

and They take around 12% of the commission from the buyer also

01:07

Which i think is Wrong

01:10

If Customer wants to buy a product from you

01:13

Then he/she have to give 12% Commission

01:16

Personally, i don't like it

01:19
I told you in the Oyo Rooms Model

01:21

that they take the hotel and makes changes accordingly

01:25

and they list that Hotel in their Website

01:27

and Customer takes the Service from their website

01:30

and Apply Discount coupons , other offers

01:32

But what happen here is

01:35

Suppose you have a Vacate Room, and you aren't getting anything from it

01:38

You can List Yourself in their Website

01:43

Now Customer will see Your Hotel Listing

01:46

just like what happens on Olx

01:47

you will see a Listing

01:50

If someone wants to come to your location

01:52

and cant Afford the expensive Hotel

01:55

He will come to your location and accommodate at relatively less price

01:59

And This in whole creates a demand

02:02

This will affect the Hotel's foot fall

02:05

as their room are much expensive compared to the Oyo rooms

02:09

02:10

And they will take rooms from Oyo

02:13

and take a vacate room for even a day

02:16

and ill offer multiple services to them

02:19

like Tea, A Shared Air Conditioner, wifi

02:24

02:24

and can uses the other available facilities

02:27

I have to Pay more price to the hotels than what i am paying

02:30

02:32

and lets Think About the Pros and the Cons

02:34

First of all they are creating opportunities for the Room owners

02:38

as they can earn by listing to the OYO

02:41

and the Customer is also getting an Opportunity

02:43

to take a less expensive room from OYO

02:46

at Lesser Price

02:48

They also have a Experience and the Review Section

02:52

Just like what we can see on Amazon and other E commerce sites

02:56

02:56

But if we talk about OLX, The doesn't offers anything like that

03:00

and In OYO rooms, you can read the Reviews

03:05

03:05

But what if i stayed in someones room and they try to Kidnap me

03:10

and beat me, then?

03:12

or any Mishap. happened

03:15

If a Girl stayed in the room and Boy tried to do something Wrong, Something bad could be happen

03:19

so for that, they have an Insurance Facilities too

03:21
to insure you Upto 1 Million Dollar

03:24

Nearly 6.5 Crore INR

03:27

When you accommodate in a room through them

03:31

03:31

and something bad happens like a Kidnap or a Murder

03:34

or something like that

03:37

You don't have to worry about anything, Your parents will get 6.5 Crore INR

03:40

and lets try to understand another thing

03:43

that our Homes comes in the Residential sector

03:46

not in the Corporate sector

03:49

So legally i can't open any shop or Business in my Home

03:52

That what we can usually see in Delhi

03:55

But legally I cant do it, So i Converted my

03:57

Room into a Hotel

04:00
I am paying House tax Only, not the commercial Tax

04:03

and If I registered myself

04:05

Goverment can takes some action against us

04:08

Like a Sue or a Case

04:11

Europe has seen a lot of cases like this

04:13

and People have suffered several cases

04:16

In India, Its new so we have to wait to see long term affect

04:18

If you have a vacate room

04:21

and wants to earn by giving an accommodation to someone for a day Or Ten or Even for a Month

04:27

04:28

Even you can add. a service for Boat Sailing

04:31

If you have some Skills

04:33

They have an option for experience also

04:36

Like a Body Massage

04:39
and they have different categories for different service and skills

04:42

Suppose i am going to USA for a Trip

04:44

and i dont think anything about the USA

04:47

I am a Homie Guy

04:49

and Habitual of living with my Parents only

04:51

But if stayed in the hotel, i might get scared during a Thunder

04:54

Their website also offers a room

04:57

with the different native families

05:00

and The family i get most comfortable with through their website, i can book the Room accordingly

05:03

I was reading some reviews and i really likes it

05:06

There were two brothers

05:09

and i went to meet a cousin and he wasn't available so i meet the younger one

05:12

and i really liked it

05:15

you can understand the level of Attachment people are getting through this was
05:20

Think about it, How you felt if you read a comment

05:24

and gets a Similar Experience

05:26

You will consider them as a Celebrity

05:30

So list yourself, and be a Celebrity

05:32

and you will be on Internet

05:34

and people will going to talk about you

05:36

that this perosn is very good and a great human

05:39

and i was talking about the service, they will take 20% Commission.

05:42

Flat.

05:43

If you are going for Massage service for 1000Rs., Their commission will be 200Rs Flat

05:48

From the Service Hoster

05:51

Not from the one who is taking the Service

05:54

But If we talk about the rooms

05:57
They will take commission from both the party

06:00

The one who is taking it will give 3% and the one who is Hosting their add will give upto 2O%

06:04

From the 2008, when the company started

06:07

They have served more than 26 Crore Guest

06:10

11 August, 2008 is their Founded Date

06:13

and Brain, Joe and Nathan

06:16

Three friends started this Company

06:19

06:19

I'll tell you later about their Journey, Idea

06:22

Its a California and a USA Based Company

06:25

and have been through 12 Funding Rounds

06:28

and till F funding, have received 4.4Billion Dollar Funding so far

06:32

and they have Acquire around 17 Companies

06:36

and if we Check their Acquisition

06:38
They have Acquire similar and a Related Industries

06:41

Like a Search based or Review based Industry

06:45

Basically they are developing their Model

06:49

and what have analysed so-far is that they do investment also

06:51

So they are making money from that thing also

06:54

buy Reinvesting their Profit

06:57

There were two friends Brain and Joe who used to study together

07:01

and moved to San Francisco and becomes the Roommate

07:04

and They did not have much money

07:05

So they rent a room in that Area

07:08

Due to some Financial issues and their Expenses

07:11

They think of renting their Another Vacate Room

07:15

So they Bought only Air bed as a Furniture

07:18

that what we usually see in Tv commercials

07:23

and placed it in that Vacate room

07:25

07:26

and They Publicise that room for the one who are in seek of staying it for a day or so

07:33

07:33

and They named it Air bed and Breakfast( Air Bnb)

07:37

Air BnB, Thats how the name originates

07:39

What actually happened later

07:41

They were Doing it Offline, and then their Friend came into the Business on 2008 Feb.

07:48

He came into Business as the C.T.O Chief Technical Officer

07:53

Basically, He designed their Website

07:55

Like what happens in Friends usually, that ill make you the CTO, If you do a work for me

08:00

He become the CTO By making their Website

08:02

Now they were listed online

08:07

and they got some increase in the reach

08:10
Now they planned a new strategy

08:12

of Providing a Breakfast also, as they had Breakfast in their Name

08:16

They made a Cereal Box

08:17

and sold 800 boxes of 40 Dollars each

08:20

and their strategy of selling it was very unique

08:22

as their were elections happening in the USA

08:25

And used Obama and McCain in their Label

08:29

Their Product marketed by this very easily

08:32

and they earned 30,000 Dollars

08:34

and they Re Invested this money in their Bussiness

08:37

Till March 2009

08:40

They got a listing of around 2500

08:44

08:45

and had around 10,000 Registered Users

08:49
After this, they start getting Funding

How Airbnb Became a $30 Billion Success!

00:01

hello friends this week the topic is

00:04

Airbnb and we're going to look at how

00:06

important it is to be early early to

00:10

connect with your customers number one

00:11

and also early to get help in mentorship

00:14

along the way and perhaps even consider

00:17

joining an incubator and we're going to

00:18

show you how that worked out for Airbnb

00:21

Airbnb who are they well you're around

00:23

the world you should be familiar with

00:25

them they connect people that have a

00:27
room an apartment or even a home to rent

00:29

with people that want to rent those

00:30

things for a short time they make a

00:33

little bit in the middle a little bit

00:34

off the person renting their room and

00:35

they make a cut of the transaction of

00:37

the person paying for the room or the

00:39

home that's how they make their money

00:41

and they are a global phenomena and

00:44

amazing levels evaluation I'm going to

00:46

take you through a record-setting

00:48

startup to establish global company

00:51

let's go back and look at where it all

00:54

started back in 2007 this is the story

00:59

of this company starting in 2007 and who

01:02

would know that 10 years later they

01:03

would have raised over 4.1 billion

01:06

dollars and they're out there

01:08

propagating a marketing and branding

01:10

message that promotes a sense of

01:12

belonging and a sense of being very

01:14

interesting the way they've done that so

01:16

it all starts with the gentleman named

01:18

Brian Chesky and his friend Joe Gebbia

01:20

and they had come from New York and they

01:23

were living in San Francisco and like

01:24

most aspiring entrepreneurs they were

01:27
broke and they were looking at money

01:28

being tight and they're saying gosh we

01:31

got to pay our rent we got to live while

01:32

they're trying to figure life out and

01:34

they were looking for a way to earn some

01:36

extra cash and they noticed that all the

01:38

hotel rooms seemed booked up in San

01:40

Francisco every time there was a

01:42

conference and there is an industrial

01:44

design conference coming to town and it

01:46

once again booked everything up and they

01:49

said listen what if we put up a fast

01:51

website called air bed-and-breakfast and

01:53

we'll get a couple inflatable air beds

01:55

you know air mattresses with a sleeping

01:57

bag or a blanket and we'll sell people

01:59

the opportunity to sleep in our living

02:01

room here in our flat they're like

02:03

seriously yeah let's try it so they

02:06

bought some air mattresses and some

02:07

other materials and set it up and put a

02:10

quick website up simply called the air

02:12

bed-and-breakfast

02:14

kind of a take-off on bed-and-breakfast

02:15

but it was an air bed and they priced it

02:18

at $80 and on that website the week of

02:21

the industrial design conference they

02:23
got three one two three visitors that

02:26

was it I was a gentleman from India

02:29

there's a woman about 35 or 40 years old

02:33

and a guy from Utah so it was a random

02:35

set of people but they weren't

02:37

20-somethings who's looking for a crash

02:38

pad like you're hiking across Europe

02:41

looking for a youth hostel these were

02:43

people that were professionals over 30

02:44

years old looking for a place to crash

02:46

and so they paid $80 each they said wow

02:49

that's really great

02:50

and right about the time that happened

02:53

they had found themselves a harvard

02:56

graduate who was be a tremendous

02:59

architect for the technical side of the

03:01

site and the systems that are behind it

03:04

to connect people that want to rent a

03:06

room that people that have a room to

03:07

rent

03:08

and his name is Nathan with charvak and

03:10

now they got the three guys that would

03:13

become the trio of founders of Airbnb

03:16

Brian Chesky Joe Gebbia and Nathan blech

03:20

are zyk and they would make history so

03:22

they went off to South by Southwest I

03:24

don't know if you know what that is

03:25
that's an incredible conference it's in

03:27

Austin Texas every year start out as a

03:29

music conference but now there's

03:30

interactive and education there's a

03:32

bunch of different topics that are there

03:34

so they headed down there because

03:35

there's a lot of startups down there

03:37

there's a lot of venture capital people

03:39

they head to Austin they set up shop

03:41

they announced that air

03:42

bed-and-breakfast is up there and going

03:45

strong and they get two bookings one to

03:49

that's hit and they're thinking huh

03:52

no this is not working come all the way

03:54

down to South by Southwest they said

03:56

well let's take another stab at it

03:58

so there's important thing to learn here

04:00

they were committed to their original

04:01

concept and they kept at it for as long

04:03

as they had resources and the next thing

04:05

that was coming up was in Denver and it

04:07

was a Democratic National Convention in

04:09

2008 and this is for Obama spoke where

04:12

we the world and the u.s. saw him

04:14

coronated as the Democratic nominee for

04:17

president happened in Denver and they're

04:19

like look at a bunch of places out there

04:21
and and people will be able to stay

04:23

there cheap because the whole world and

04:25

media

04:26

and press and everybody are convening in

04:28

Denver and converging on Denver and

04:31

there's going to be a shortage of hotel

04:32

rooms let's see if we could do it there

04:34

so they set up shop and they keep notice

04:37

out to the nine hundred delegates oh

04:40

they sent them the notifications he did

04:43

everything they could to let him know

04:44

and they got fifty reservations which is

04:47

better but it was still not nearly

04:49

enough along the way you may have

04:52

remembered this little news bit that

04:54

went kind of viral and he had cereal

04:57

Obama owes and captain McCain's the

05:00

cereal was branded for the two

05:02

candidates running in the United States

05:04

presidential election John McCain and

05:06

Barack Obama who would win and become

05:08

president of course well they made

05:10

thirty thousand dollars taking cereal

05:13

cereal it was made by cereal companies

05:15

but putting in boxes branded for the

05:17

candidates so they made thirty thousand

05:18

dollars to put a couple bucks in the

05:20
pocket and make up for the fact that

05:22

they had booked a whopping 50

05:24

reservations there at the Democratic

05:27

National Convention well at that time

05:29

they were just suffering their weekly

05:32

weekly revenue at that time was two

05:35

hundred bucks that's not going to cut it

05:37

that doesn't even pay for your servers

05:39

or anything so these guys are starving

05:41

to death

05:41

they make thirty grand on the cereal

05:43

with the presidential election and they

05:45

go on and said hey maybe let's try the

05:48

inauguration so I'm going to stop right

05:50

here and give you a bonus point for this

05:52

week and it is random event success is

05:58

not a path to sustainable success and

06:01

I'm sure Paul's going up a little

06:02

graphic up there for that but here's my

06:04

point you put up a website you're doing

06:06

videos for something you have a viral

06:08

video that's one viral video sustainable

06:11

success is building a repeatable

06:13

customer base and right now Airbnb did

06:16

not have a repeatable customer base but

06:18

nonetheless they said well we did okay

06:21

you know if 50 reservations is okay

06:23
let's head to Washington DC for the

06:25

inauguration because the press and the

06:26

media and people are going to be

06:27

converging on Washington DC to see Obama

06:30

a sworn in as president and you know

06:34

let's put up shop there well they did a

06:36

little better they got a hundred and

06:38

fifty bookings

06:39

and they went back to San Francisco and

06:41

they're on the brink of being shut down

06:45

what do they do they had a chance

06:48

meeting with Paul Graham who is the

06:50

founder and an entrepreneur behind the Y

06:53

Combinator incubator it was an incubator

06:56

where you could get some money you could

06:58

get mentorship from people and more

07:00

importantly it was a three month four

07:01

month intensive program that ended with

07:04

what's called demo day where you would

07:05

present what you've been working on in

07:07

incubating and improving with all this

07:09

great mentorship you would present it to

07:11

venture capitalists to see people go mmm

07:14

maybe me maybe give you your first round

07:17

of capital so they did that and in the

07:19

winter January of 2009 they get into the

07:23

Y Combinator incubator and so they're

07:26
often you know learning and things like

07:28

that and had about $20,000 budget to

07:31

work with during that that that little

07:32

phase there just a few months at the

07:34

incubator and they went with a new and

07:39

different logo which one you may

07:40

recognize right here

07:42

this became the Airbnb logo as as good

07:45

as I can draw it for you there and at

07:48

the end of it something happened a VC

07:52

from Sequoia said on demo day I think

07:54

there's something here and they gave

07:56

them six hundred thousand dollars in

07:58

seed capital so now they had mentorship

08:01

they had refined their idea and they had

08:03

the trust and belief of Sequoia Capital

08:06

and as very interesting Brian Chesky at

08:10

that time would say this is the most

08:12

important three months in the company's

08:14

history let's take a look at that when I

08:16

at the beginning of this video talked

08:18

about I talked about being early but be

08:20

early about getting mentors get mentors

08:22

right out of the gate find people to

08:24

know that they're doing in mentorship

08:25

and if you're in a town or a city that's

08:27

got a start-up environment get involved

08:29
in that environment or find an incubator

08:31

and see if you can apply for admission

08:34

so that your idea is good enough to get

08:36

you in the door where you'll get a

08:37

little bit of money you get resources

08:39

like servers and bandwidth but more

08:41

importantly you'll get mentorship from

08:43

people that have walked that path before

08:44

and that's exactly what happened here

08:46

and it led to them getting $600,000 and

08:49

seed they also talked to the legendary

08:52

venture capitalist Fred Wilson he's a

08:55

great guy he's done a lot of great

08:56

investments but as they say even Babe

08:59

Ruth struck out from time to time and he

09:01

said this problem of connecting spare

09:04

rooms and people is a and you

09:07

won't solve it and it's going to kill

09:09

you

09:10

well Fred was wrong but he's been right

09:12

about many many other things but it's

09:14

always a badge of honor for startups to

09:16

actually be able to say this guy was

09:18

wrong but we still made it anyway and

09:20

nonetheless I think Fred nowadays will

09:22

tell you hey you win some you lose some

09:24

you're right you're wrong and he moved

09:26
on and they moved on so the boys are

09:29

trio heads to New York and they start

09:32

talking to people one of those points I

09:34

brought up get close to your customers

09:35

they start talking to people that they

09:37

call the hosts the people that are

09:39

renting out the rooms they started

09:40

talking to people who are the guests

09:42

that were renting asking him questions

09:43

back and forth and what they discovered

09:46

was a lot of the pictures taken by host

09:48

people maybe like you and me they got a

09:50

room to rent we're terrible so they said

09:53

look this is all part of the branding

09:54

and marketing why would someone say yeah

09:56

I want to stay there for one night in

09:58

New York if it doesn't look good and so

10:00

they put a program in place where they

10:02

sent professional photographer out to

10:04

take quick pictures of these locations

10:06

and guess what they immediately noticed

10:09

that those that they had the better

10:10

pictures of over a one week time frame

10:13

were being rented two times the three

10:16

times more often as the others so there

10:18

you have it getting close to the

10:19

customer which is the host and the guest

10:22
and refining your marketing with

10:24

something that they learned at the

10:26

incubator and they were iterating very

10:27

very fast

10:28

and before you know it they were

10:30

suddenly at $400 a week and they were

10:33

growing a big hit happened when Barry

10:37

Manilow's drummer rented an entire house

10:40

now if you don't know anything about

10:41

Barry Manilow he was a kind of a pop

10:44

star in the 70s and 80s United States

10:46

and the word Manilow Swedish which

10:49

really means man is lame I'm going with

10:51

that and don't send me any notes on it

10:53

that's what I'm going with you've ever

10:55

listened to Barry Mann all of his music

10:56

and tortured in that way you'll know man

10:59

is land

11:00

lesson 1 Lord of all people rents an

11:02

entire house and that's like an aha

11:04

moment and the company is starting to

11:06

grow an interesting thing happens that

11:09

was an inflection point during that time

11:11

period and they went out in 2010 so

11:15

within one year and they raised 7.2

11:17

million in a a round from Sequoia again

11:22

joining and Greylock well now they're

11:25
pretty sure that they've got a pretty

11:27

good hit on their hands so let's talk

11:29

about the challenges that happen and

11:30

what the amazing growth statistically

11:34

and valuation wise so they at the time

11:38

that were well on their way and a year

11:41

later in 2011 check this out they hit

11:44

their one millionth booking this white

11:45

line here is the bookings and they

11:48

raised a hundred and twelve million

11:51

dollars in a series B from increasing

11:54

Horowitz you know Marc Andreessen the

11:56

founder of Netscape one the first

11:58

browsers way back well a hundred and

12:00

twelve million dollars from him and

12:01

others it's a 1 billion dollar valuation

12:04

let's take a quick reflection back two

12:07

years prior they were getting into the

12:09

incubator because they had almost died

12:11

$200 a week selling cereal at the

12:14

Democratic National Convention and look

12:17

at that two years later a billion dollar

12:19

valuation and in dreesen Horowitz

12:22

Sequoia and Greylock pillars of the

12:24

venture capital community are in this

12:26

deal fantastic it's now what we call a

12:29

unicorn

12:30
Tom's led a startups that get a

12:33

valuation of a billion dollars are

12:34

called unicorns and this unicorn was not

12:37

based on eyeballs like early Twitter or

12:40

users like early Instagram it was based

12:43

on money it had a business model I want

12:46

to rent a room you want to rent that

12:48

room from me

12:49

they take a cut of both it was a

12:50

business model so from the beginning

12:52

they were making revenue and they were

12:54

making profits we go driving down and

12:58

about this time you know came their

13:01

first controversy and they got over

13:03

there first controversy and that was it

13:05

was bound to happen somebody comes home

13:08

and she finds her entire house trashed

13:10

and everything stolen

13:12

find out well as a young company

13:15

sometimes you know what to do sometimes

13:17

you don't and at this time they refuse

13:19

to help you know you rented this at your

13:21

own risk

13:22

the publicity and backlash was terrible

13:24

and they finally came out and said wait

13:26

wait wait wait wait we will help you we

13:28

didn't do it right but we will we

13:31
weren't there cause of this but we get

13:33

it we got to put something in place so

13:35

they launched a fifty thousand dollar

13:37

insurance program for people that were

13:40

the hosts that were renting and they

13:42

also reached back out to the woman had

13:44

all that stuff happen and they helped

13:46

her out a little bit and work with her

13:47

there was another incident where

13:49

somebody rented their place out and they

13:51

came back in to find all kinds of drug

13:53

paraphernalia meth pipes and some other

13:55

things that were left there so people

13:57

obviously rented it to get together with

13:58

a group of people and have a party and

14:00

get seriously high and some really

14:02

dangerous drugs so nonetheless there is

14:04

some protection that put in place and

14:06

before long you know this one hundred

14:09

and twelve million dollars has carried

14:10

them and they have their five millionth

14:12

booking and what was very interesting

14:15

right here at the end of 2012 they had

14:18

sold that year more nights than Hilton

14:22

more nights than Hilton a three-year-old

14:26

company sells more nights than Hilton

14:28

one room at a time there was only one

14:31
word for that and that is damn that's

14:33

amazing and suddenly they were doing

14:35

more per night yo Reynolds then then

14:39

Hilton was that's incredible well they

14:41

continue to expand they continue to

14:43

drive forward and in 2013 they raid 200

14:47

million dollars in their ciri fee and

14:50

that involved founders fun peter thiel

14:54

somebody who I have incredible respect

14:55

for an admiration in the book zero to

14:58

one if you haven't read that I've

15:00

mentioned it in some of my other case

15:01

studies on here go get a copy of that

15:03

book and make sure you take notes in it

15:05

yeah book marks in it and it stays on

15:08

your shelf because it's exactly what you

15:10

need at the beginning and if you can get

15:12

into an incubator along the way so much

15:14

the better

15:14

but now Peter Thiel's and the deal

15:16

founders fun is in the deal and they're

15:19

headed toward ten million dollars in

15:20

bookings just a short time later you

15:24

know one year later they suddenly raised

15:25

five hundred

15:26

million dollars in a series D at a ten

15:29

billion dollar valuation so now their

15:31
valuation is in the double-digit billion

15:33

Club and along the way another

15:35

controversy with you may have seen this

15:38

in the media if you've studied Airbnb a

15:40

New Yorker was fine twenty four hundred

15:42

dollars for allowing people to stay his

15:44

apartment and they were calling it

15:46

unlicensed rental business or things

15:48

like that but Airbnb jumped in and they

15:51

said timeout we're going to help defend

15:53

this guy and we're going to help pay his

15:54

legal fees because we don't like that

15:56

law that doesn't allow people like you

15:59

and me just to rent a room out I mean

16:01

good grief I rented a room from

16:02

relatives when I was in college and I

16:05

was a relative and I'd paid three

16:06

hundred bucks a month and you know had

16:08

room and board well why not get 50 bucks

16:11

for somebody staying in an extra bedroom

16:13

and in many ways the New York law is

16:16

wrongheaded but nonetheless aaron B&B

16:19

jumped in because that's kind of

16:20

legislation that can get in the middle

16:22

of you go watch the case study I did on

16:25

uber and see how they dealt with

16:26

legislation and governments and trying

16:29
to stop the hand of capitalism and

16:30

startups there's some great points in

16:32

that one as well so here we go the ten

16:35

billion dollar club here and moving on

16:39

and in 2014 they change their logo and

16:41

that was also controversial because many

16:44

people thought that this logo was very

16:46

could be interpreted a lot of ways in

16:50

sort of a female interpretation way they

16:53

thought it was you think that's really a

16:54

good logo and good taste is a little too

16:56

suggestive but nonetheless they went

16:58

with it and the controversy just kind of

17:00

washed ashore and then wash back out to

17:02

sea as they were continuing to grow and

17:05

cross ten billion excuse me ten billion

17:09

I would be there Paul look at this I

17:12

have a be 5 million bookings 10 billion

17:15

bookings that would be 1.1 booking for

17:18

every person on earth and you know what

17:20

that would be damn

17:21

a lot of bookings but that's a mistake

17:23

that should be 10 million so I'm going

17:25

to leave that right there so 10 million

17:28

bookings so in the middle middle of

17:30

doing a case study now I discover an

17:32

error but anyway they go from one to

17:34
five to 10 million bookings now you can

17:37

see the things are just crazy and just

17:39

going very very well

17:40

all the raising money they're expanding

17:42

internationally and along the way here

17:44

they also expanded that insurance

17:47

program from $50,000 to $1,000,000 again

17:51

doing the right thing trying to set

17:53

things up so you and I can feel

17:54

confident about renting out our home or

17:57

a room in our apartment or our flat so

18:00

we move forward here to 2015 and they

18:04

raise 1.5 billion dollars from General

18:07

Atlantic Hillhouse capital and the great

18:11

kleiner perkins so now they are Series V

18:16

is in the bank and the valuation is now

18:19

twenty five billion dollars and then

18:22

eight hundred and fifty million in

18:24

middle of 2016 from capital G which is

18:30

Google Capital and that's how they go

18:32

that's their new branding capital G so

18:35

now you even have Google in the game so

18:37

if you think about search and search

18:38

technology and finding places to stay

18:40

now you've got the biggest search

18:42

company in the world on your board and

18:45

with big skin in the game and so you're

18:47
ready to go the next level and at this

18:50

time is very it's worth noting that

18:52

there thirty billion dollar valuation

18:54

that compares favorably with Hilton

18:58

who's worth twenty eight billion dollar

19:01

enterprise valuation so now these guys

19:04

are worth as much as Hilton amazing

19:08

stuff so what's next is they're sitting

19:10

here well there's a couple things

19:11

there's all there's still challenges in

19:14

the regulatory environment as a matter

19:16

of fact not too long ago Governor Andrew

19:18

Cuomo of New York trying to put another

19:20

bill in place trying to put fines on

19:23

Airbnb hosts if they do certain things

19:26

and so there's having to fight the

19:27

regulatory battle they've also got

19:30

something coming thing called

19:32

experiences where maybe a local person

19:34

as you use Airbnb to stay in New York a

19:37

local person could give you a tour of

19:38

the neighborhood and maybe some of the

19:40

more interesting sites so extending the

19:43

way that people like you and me could

19:45

use our room that we rent and our local

19:47

knowledge to make a little bit of money

19:48

and more recently the just closed in

19:52
February 2017

19:54

they bought luxury retreats which is out

19:57

of Canada had two rounds 16 million

20:00

dollars from I know via capital here's a

20:02

little lesson for you

20:03

I know via over just about I think it's

20:05

two to three years luxury retreats was

20:08

renting villas all around the world and

20:11

now they're talking about using the

20:12

Airbnb engine to be a way to connect

20:15

people that want to rent those villas

20:16

with the owners or the host of those

20:18

villas so two rounds of capital over

20:20

just a couple years from my novia cap

20:22

capital and they get bought for two

20:27

hundred million dollars by Airbnb so

20:30

they use some of the state hundred fifty

20:32

million dollars to go make an

20:33

acquisition of a high-end company that

20:36

had a ton of listings on villas so

20:39

here's another investment lesson for

20:41

those of you scoring at home

20:42

I know via capital it put in sixteen two

20:45

hundred comes out that's about a 10x

20:47

return so they made 10x so again for

20:50

those who's scoring at home trying to

20:51

figure this out

20:52
I know via capital investing and

20:54

probably got 10x back that's pretty

20:57

amazing and for those of you not scoring

20:59

at home get on Airbnb rent a room and

21:01

then download tinder maybe that will

21:03

help you air B&B the second most

21:06

valuable private company in the u.s.

21:09

venture scene second only to uber making

21:12

money with an estimate just came out

21:16

this amazing estimate that in 2020

21:19

people believe these guys could have two

21:22

to three billion dollars in profits in

21:26

just a few years amazing things so as we

21:30

look at it get connected to your

21:32

customers early the way they did in New

21:34

York and taking pictures and improving

21:36

it and get connected to mentorship early

21:39

and if you've got an opportunity to take

21:41

your idea and to pitch it to an

21:43

incubator to get in for a 90 day program

21:46

or something you go do that because what

21:48

you'll learn and a little bit of capital

The Airbnb Effect On Housing And Rent

The Wall Street Journal reported earlier this month that Airbnb had recorded a $322 million (£248.65
million) net loss in the first nine months to September in 2019. That’s a considerable drop from the
$200-million profit reported by the world’s largest online marketplace for lodgings in 2018.

For a company with a valuation of $31 billion, according to Pitchbook in 2017, it’s a sign that the horn of
this start-up unicorn might just be a carrot ahead of its hotly anticipated public IPO later this year.

However, although this is disappointing news for Airbnb stakeholders and investors, cities and countries
around the world suffering from extended housing crises may celebrate its diminishing market influence.

The influence of the so-called ‘Airbnb effect’ on local housing markets has grown into a significant cause
for concern, particularly when looking at its impacts on housing stock, prices and communities.

But even if Airbnb really is damaging local housing markets, can anything be done to stop the hugely
popular, multi-billion-dollar juggernaut?

Airbnb currently hosts over 7 million listings and is active in more than 100,000 cities across 220
countries and regions. It’s not lacking in vision either – Airbnb aims for 1 billion guests annually by 2028.

The platform is widely enjoyed for its access to holiday lets ranging from single rooms to entire
properties, varying in quality and affordability, and offering a markedly different experience to that found
in a hotel.

Then there are the clear economic benefits for local economies that stand to gain from the increase in
tourists supported with a wider variety of affordable and available holiday listings. Homeowners and
landlords also benefit, as turning their rooms and properties into short-term lets can offer an alternative
and lucrative source of revenue.

But in recent years the impact of Airbnb’s service on local economics and rental markets has come under
the spotlight. And analysis conducted by the Economic Policy Institute, a non-profit, non-partisan
American think tank, found that the economic costs of Airbnb likely outweigh the benefits:

‘While the introduction and expansion of Airbnb into cities around the world carries large potential
economic benefits and costs, the costs to renters and local jurisdictions likely exceed the benefits to
travellers and property owners.’

The ‘Airbnb effect’ is to some extent remarkably similar to gentrification in that it slowly increases the
value of an area to the detriment of the indigenous residents, many of whom are pushed out due to
financial constraints.

Cities, popular ones especially, seem to fare the worst. In major cities such as Amsterdam, Barcelona,
Edinburgh, and Los Angeles, studies on the ‘Airbnb effect’ have found that over-tourism facilitated by
platforms such as Airbnb negatively impacts on house prices and communities.

The short-term rental sector is just as affected. Research conduced by the Harvard Business Review
across the US found that Airbnb is having a detrimental impact on housing stock as it encourages
landlords to move their properties out from out of the long-term rental and for-sale markets and into the
short-term rental market.
A separate U.S. study found that a 1% increase in Airbnb listings leads to a 0.018% increase in rents and a
0.026% increase in house prices. It might not seem like much on the surface but there’s a cost creep for
those looking to rent long-term or buy.

It would be a mistake to say all markets are equal, but housing markets in the U.S. have a socioeconomic
cousin across the pond, and for the city with the world’s highest number of Airbnb listings, it should
indicate a warning.

What’s happening in the U.K?

Airbnb’s U.K. growth has been rapid and extensive. If you were wondering which global city has the
greatest number of Airbnb listings, it’s London, with over 80,000 listings – and 55% plus of these listings
are for entire properties.

Some see this as an opportunity for agents, that 2020 could be the ‘year of Airbnb’. That certainly could
be true for short-term landlords, and agents looking to take a bite of that market. But of this I would be
wary, as short-term gain can undermine long-term sustainability.

A recently published report from the London-based economic research consultancy Capital Economics,
commissioned by ARLA, analysed the scale of U.K.’s short-term lets sector and the wider implications for
the private rented sector. The research found that active listings on Airbnb in the U.K. increased from
168,000 in 2017 to 223,000 in 2018 – that’s a 33% leap, and a significant market share of the growing
U.K. lettings market. It’s also not the whole picture though, as data for similar short-term lettings
services like Booking.com and Homeaway are unavailable.

The report further showed that 2.7% of the U.K.’s 1.5-million strong landlord population have already
made the switch from long-term rental properties in the private rented sector to short-term lets,
equating to 50,000 homes made unavailable to long-term tenants.

And worryingly, around 10% of U.K. landlords surveyed responded that they are considering moving
their private rented properties to the short-term market.

The factors behind this are myriad, but over one-third of landlords surveyed acknowledged that it was
because of changes to mortgage interest relief, which from April this year will be reduced to a 0%
deductible.
Other forms of long-term regulation including higher stamp duty, the Tenant Fees Act, and the
abolishment of Section 21 legislation currently under consideration are also cited as factors persuading
landlords in the buy-to-let sector that the grass is greener on the other side.

Here’s the kicker. If every landlord in that 10% does move their properties to the short-term market, up
to an estimated 470,000 properties would be removed from the private rented housing supply – around
8.7% of the entire U.K. rented sector stock. And that would significantly stretch already strained housing
supply.

I’ve said previously that supply and demand in the lettings market is a leaking ship that threatens to
capsize landlords and tenants if not navigated correctly through rough waters. If more stock is moved
into the short-term lettings market through platforms like Airbnb it could have collateral impacts on the
wider market.

Airbnb claims that between July 2017 and July 2018, the U.K. economy gained £3.5 billion from hosts
and guests using the platform, with an estimated 8.4-million inbound guests using the platform over this
period.

Great for the economy, you might think? But a healthy housing market is the real bedrock of a healthy
economy, and the U.K. housing market is not in great straits at the moment.

Restrained confidence and uncertainty due to the earlier election and Brexit are only now loosening up.
But whilst market confidence is returning, low stock in both the sales and rental markets is pushing up
prices.

The latest Home Asking Price Index reports that total sales stock is down 10.1% year-on-year in February;
and it’s worse for the rental sector, with the supply of available rental properties in the U.K. down 18%
over the same period.

Low supply and increasing rents in the U.K. are a major concern. The latest official government statistics
on U.K. rental housing show that private rents have increased 1.5% year-on-year in the 12 months to
January 2020. But an extended trend outlook reveals that between January 2015 and December 2019,
private rents increase by 8.6%. That’s a significant increase.

It’s even worse for the London, Airbnb’s bread and butter. According to Rightmove, asking rents in the
capital have increased almost twice as quickly compared with the rest of the U.K.

Many Londoners are now paying more than half their income on rent each month. And with more than 1
in 50 London homes listed as short-term lets, it’s questionable whether Airbnb can continue its free
reign throughout the capital and the U.K. when the country is in such dire need for affordable housing
stock.

Pushing back against the short-let industry

With spiralling costs fuelling a chronic housing crisis, the voices calling for regulation of Airbnb-style
short-term lets are getting louder.

The U.K. lags behind other countries when it comes to regulation for short-term letting sites like Airbnb,
and it might be time to reconsider that. Research unveiled by The Guardian on February 20 reveals that
in some parts of the U.K. one in four homes is an Airbnb listing.

Simultaneously produced research from the publication highlights that Airbnb’s presence in certain
barrios (neighbourhoods) in Spain has pushed rent increases by as much as 50%, forcing locals to move
to more affordable areas. It’s a warning sign the U.K. would do well to take note of.

Several countries and cities have started to push back against Airbnb and other short-term lettings
platform because of the impacts felt on local communities and housing costs:

Berlin has enforced restrictions against short-term lets on platforms like Airbnb since 2016, requiring
landlords to acquire a permit if they want to rent 50% or more of their main residence as a short let.

New York City is currently embroiled in a legal battle with Airbnb regarding the turn-over of host data. In
fact, since launching in 2008, Airbnb has been involved in at least 11 lawsuits against an American city or
state, with the majority of cases taking place within the last two years.

Edinburgh will soon bring in a licensing scheme from 2021 empowering councils to regulate ‘holiday-
style’ lets if they feel it’s better for local communities. And in ‘control areas’, landlords will require
planning permission before they can convert a whole property for short-term lets.
Perhaps to pre-empt any future legislation in London, Airbnb introduced in January 2017 the ’90-Day
Airbnb Rule’, whereby short-term rentals for entire homes are capped at 90 days per year. But this has
had mixed results, and research commissioned by City Hall has suggested that as many as 23% of
London’s approximately 80,000 listings at the time of study were in breach of the 90-day limit.

Airbnb has disputed the figures, claiming the data is wrong as it comes from third-party scrapers which it
considers inaccurate.

There have been calls to introduce a licencing scheme for the rest of the U.K., similar to what’s being
introduced in Edinburgh. But this scheme is not being introduced by the government of city councils, it’s
an Airbnb initiative.

In summary

Whilst it’s easy to slay Airbnb as the cause of rising prices and lack of rental stock in popular cities, one
can’t help but wonder if they aren’t merely the backdoor escape for landlords that have been cornered
into an impossible scenario, with everything from scrapped tenant fee bans to zero mortgage relief, to a
list of compliancy legislation so lengthy that it’s near impossible to self-manage a property, counting
against them. Perhaps Airbnb is just the tip of the iceberg, where an unforgiving approach to landlords
and a lack of government capacity to deliver on their house-building promises are the bulk of the
problem that’s propping up Airbnb as the visible, easily targeted problem.

Short-term rental revolution is taking over the market

Have you travelled on business or vacation and booked yourself into an Airbnb room instead of a hotel?
Have you heard about how homeowners have significantly increased their monthly income by listing
their homes on sites like Airbnb rather than traditional rentals? Have you wondered how HNIs are
participating in investment properties across the most lucrative and glamorous cities of the world? These
three growing trends encapsulate the short-term rental phenomenon that has transformed the
hospitality sector over the last few years.

What are short term rentals (STR) though? These are fully furnished homes or apartments that are
rented out for short stays, offering travelers a spacious and convenient alternative to hotels. No company
better represents this seismic shift in hospitality than Airbnb, which now has properties in over 65,000
cities across 191 countries. In 10 years, this tech startup has overtaken century-old competitors like
Hilton and Marriott with a valuation of $31 billion. With CEO Brian Chesky's revelation of the company's
vision to host 1 billion guests by 2028, adds further ambition to an already rosy forecast for the overall
segment that is estimated to add $56 billion in the next three years alone. Therefore, it is the perfect
time to do a deep dive into why this segment is changing the way we travel, rent out our homes, and
profit from global real estate.

The growth of experiences

Underlining this STR revolution is the changing nature of how people wish to spend money. World over,
economies are growing, and more and more people are becoming at least moderately affluent. These
newly affluent people value experiences over things and travel is one of their most desired experiences.
The Travel & Tourism sector was accounted for a full tenth of the global GDP and amounted to $7.6
trillion in 2016.

The current generation of travelers are prioritizing authentic experiences that allow them to live like a
local in immersive settings over the standardized fare offered by hotels. Travelers are also starting to
realize that renting an entire home allows families and friends travelling together to have a more
enjoyable stay than being split into separate hotel rooms with no shared space for social interaction.
While a significant factor in the runaway success of this segment is the convenience of technology
platforms that companies like Airbnb offer to both travelers and homeowners alike, there a host of
drivers fueling the sustained growth of short-term rentals.

Sweeping tailwinds in the STR sails

Airbnb has created a hospitality marketplace of unprecedented scale, with more than 4 million
properties currently. The internet is the critical enabler, bringing several solutions from listings, online
bookings, payments, etc., without which this would not have been possible. More broadly, this is
another manifestation of the sharing economy, which is estimated to reach $335 billion by 2025 in just
its five top sectors. What Uber has done for transportation, short term rental platforms have done for
travel, democratizing asset ownership and hugely increasing the number of transactions that occur, to
the benefit of all parties.

For investors, this presents an exciting new asset class. Hospitality has traditionally been one of the asset
classes that are most out of reach for an investor - buying a hotel is only possible for a select few or
institutions. But short-term rental assets are typical homes, and therefore much more comfortable to
participate. Besides, unlike a large hotel that does not allow one to create a diversified portfolio easily,
short-term rental portfolios can easily be a diversified set of properties in different cities.
The end-consumers - travelers, have gained hugely with this new model. The scale of the marketplace
has vastly expanded the choice that travelers have while offering a rich variety of offerings catering to
every segment of tourist or business traveler. What's more, offerings in each segment represent
tremendous value compared to hotels. An upscale 3-bed property may cost on average $500/night,
which is less expensive than the cost of booking three separate rooms in an equivalent hotel. In terms of
luxury, function, and space, short-term rental properties are often far superior to hotel rooms, with large
living rooms, dining rooms, kitchens and, often, even games such as pool tables at the property.

Conclusion

As disposable income rises across the world, and society evolves in the things that it would most like to
spend this disposable income on, the hospitality industry is rapidly adjusting to both the enormous
opportunities as well as the new requirements.

Real estate investors have only begun to scratch the surface of this asset class and its unique role in
building high return portfolios. Today, an investor sitting in India can participate in the lucrative cash
flows of real estate in Las Vegas through a portfolio of short-term rental properties. Across the most
profitable travel destinations of the world, these portfolio opportunities are popping up and offering
savvy investors an unrivalled chance to tap into hitherto inaccessible markets and enabling them to build
highly profitable and diversified portfolios. Short term rentals have established their credentials now and
are poised to become an essential part of the portfolio of HNIs.

How Airbnb managed an IPO in the worst year for travel

So, you've probably heard the news. But if you haven't, let me get you up to date.

00:13

Airbnb is going ahead with its IPO, and everyone is excited but cautious.

00:18

It's been a tough year for the tourism industry, and Airbnb was no exception. Facing massive

00:23

cancellations, firings, and an unpredictable global situation, the idea of an IPO seemed bleak.

00:29

Then, Airbnb announced a positive third quarter in what seemed an improbable turnaround. In
00:35

mid-November, it filed its S-1 to go public. How did a company that relied on tourism

00:41

manage to do this? We'll tell you all about it in this episode of Forensics.

00:56

In case you haven't seen our video on Airbnb,

00:58

which you should, here's a quick summary of how the company was born.

01:01

Joe Gebbia and Brian Chesky shared an apartment in San Francisco. They

01:04

needed some extra cash to pay rent, so they put an air mattress in their living room

01:07

and offered breakfast. This air bed and breakfast idea actually worked. So,

01:12

after Nathan Blecharchzyk joined them as CTO, the three launched Airbedandbreakfast.com in 2008.

01:18

Though it offered short-term stays to those who couldn't find hotel rooms

01:22

in crowded cities like San Francisco and New York, it failed to catch on.

01:26

And their final idea seemed good: find a place to stay and make a reservation

01:30

in only three clicks. It sounds excellent, but investors weren't

01:33

interested. Fifteen investors passed on the idea until one guy decided to put some money on it.

01:39
From the Y-Combinator program, Paul Graham decided to take them under his wing,

01:42

providing cash and training, in exchange for a slice of Airbedandbreakfast.

01:46

After using the new funds to help with the advertising, both the founders and

01:49

Graham felt something was lacking. It was the name: Airbedandbreakfast; it sounded

01:54

rigid and uninviting. So, they came up with Airbnb, and so began a new era.

01:58

In the next two years, the company went from 10 000 users and 2500 listings to 700

02:04

000 bookings and, most importantly, a lot of investment. In their second round of funding,

02:08

Airbnb obtained $7.2 million, valuing the company at $70 million.

02:13

The app also won awards, opened its first international office in London,

02:17

and even reach 10 million nights booked by 2011. After securing

02:22

more than $112 million in funding, the operations had grown so massive,

02:25

Airbnb opened offices in hotspots like Barcelona, Milan, Paris, and Sao Paulo.

02:30

It even became one of the first U.S.-based companies to operate in Cuba, after the Obama

02:35

administration eased restrictions on the Caribbean country. The brand was attractive and, by 2015,
02:39

it obtained $1.6 BN against a valuation of $25.5 BN in its Series E-1 round.

02:47

With such funding, it started absorbing the competition. Airbnb acquired

02:52

Accoleo and CrashPadder in Europe, then bought companies that worked at hyper-local levels,

02:56

with valuable data such as mapping and restaurant guides. This way,

03:00

Airbnb was consolidating itself as one of the leading choices for short-term rentals.

03:07

But it's not all a fairy tale. Having hundreds of thousands of guests and hosts

03:11

comes with problems, and some quite severe. Complaints poured in from all over the world:

03:16

trashed apartments, theft, racism, some guests were held at gunpoint and even prostitution.

03:22

To deal with these issues, which go back as far as 2012,

03:25

Airbnb created funds, changed policies, and redesigned its image. But they couldn't do

03:30

much about the most significant challenge: the cities themselves. All over the world,

03:35

local and national governments applied more stringent measures against temporary rentals.

03:40

Major markets like New York threatened to shut down the platform. Other cities have

03:44
made it illegal for owners to rent apartments for more than 30 days without being present.

03:49

Even San Francisco, where Airbnb was born, saw a citizen initiative to limit the platform.

03:54

Behind all these are economic reasons. Aiming at tourism,

03:57

hosts have spiked prices up in a few years and have made entire cities unaffordable for locals.

04:02

It's not black and white as Airbnb has become a source of income and jobs,

04:06

both direct and indirectly. So, cities continued to struggle in

04:10

finding reasonable solutions to allow Airbnb to operate while regulating it.

04:17

Though Chesky had hinted of an IPO in 2020,

04:20

no one could've predicted how tough the year would be for the tourism industry. So,

04:24

talks of the famous IPO took the second stage, but they never really went away.

04:28

When the global health crisis started,

04:30

80% of lodging reservations around the world were canceled. April and May saw a decrease of 97%

04:37

in tourism-related activities worldwide, and the average hovers at about 75% less than last year.

04:43

Most Airbnb markets saw reservations drop 90%. Some hosts had all reservations from April,
04:50

May, and June canceled; the numbers only improved slightly after that. In fact,

04:54

the World Tourism Organization considers that any recovery better than -60% is unlikely.

05:01

By mid-May, the layoffs ensued. As part of an aggressive cost-cutting effort,

05:05

Airbnb fired 1900 employees. However, the company sought to help them find

05:10

a new job and provided insurance for them. Chesky and the rest of

05:12

the executives received high praise for their actions, which didn't stop there.

05:12

The top brass reduced their salary by 50%,

05:15

and Chesky received only a nominal salary per month for six months.

05:18

The company has even created a resource center for hosting during COVID-19, with FAQs, guidelines,

05:24

and requirements. There's even a section on what to do if your guest or host has COVID.

05:29

But many guests found the refund process difficult. Hosts put conditions that were

05:33

almost impossible to fulfill, such as medical certificates and letters

05:36

from employers stating that it was impossible to travel. Which it was!

05:40
The hosts complained that most of the actions favored the guests instead of

05:45

them and that the Airbnb fund wasn't enough. We have to keep in mind that,

05:49

big or small, they've seen a complete halt in their income.

05:53

On top of that, hosts complained that they weren't getting payments on time.

05:56

But Airbnb blamed the payment problems on technical issues within the system.

06:00

Though these actions were imperfect, they were substantial enough for people to believe in the

06:06

company. In fact, the media praised Chesky for his humility and sincerity in times of trouble.

06:10

With these actions, the company managed to raise two rounds of funding, each at an estimated $1BN,

06:16

totaling $2BN. Of this money, $250 million went to a fund to help those very hosts in need.

06:23

But Airbnb had to plant its feet back on the ground, so the company lowered its own

06:27

valuation from $36BN to around half. Despite all of this, the company managed to survive.

06:32

But some were still cautious about the IPO, saying it was the wrong time to go public.

06:39

The odds seemed entirely against Airbnb, so many were surprised when the company filed to go public

06:44

on the NASDAQ in mid-November. In such a year? It just didn't seem logical to the untrained eye.
06:50

It turns out that the very same situation that almost broke Airbnb ended up saving

06:54

it. With many offices closed, people needed a place to work in, so instead of tourism.

07:00

Airbnb did a survey that indicated that long-term stays (28 days or more) had seen a spike and that

07:06

65% of guests were working or studying instead of doing tourism.

07:10

This meant that, even if the numbers weren't right, and they weren't, the company had gained

07:15

some traction. Airbnb stated that, by July, its reservations were at pre-pandemic levels.

07:22

In fact, in their S-1 filing, their numbers were astounding. Even with all that happened in 2020,

07:28

Airbnb's Q3 revenue was only 18% lower than in 2019. It presented a profit of $219.3 million,

07:36

mainly due to the aggressive cost-cutting strategies,

07:38

the injection of funds, and a newfound travel-to-work niche.

07:42

But other, more subtle strategies helped the company. For instance, the company held back on

07:46

projects that involved media, transportation, and other markets. They prioritized that their core

07:51

business survives instead of looking for different ways to make ends meet.

07:57
"I know some people questioned if we'd make it at all," Chesky said in November. And,

08:02

well, he was right. The future wasn't that bright, and the company pulled through.

08:06

But questions still remain. While the company's ability to survive,

08:09

adapt and overcome has some motivated, others still believe that the pandemic

08:13

is too much of a hurdle to clear, especially with a rise in cases.

08:17

Airbnb is seeking to raise $3 billion, leading to a valuation of $30 Bn, which would equate

08:23

to six times the sales of 2019, close to the original value when the IPO was first mentioned

08:28

at the beginning of 2020. And whether this is a good or bad move has many divided.

08:33

Airbnb's strong points are that its numbers are better than

08:36

other companies in the tourism and travel markets, including Booking.

08:40

Airbnb is still led by the founding three,

08:42

who managed to take Airbnb to where it is now, with a massive 41,95%

08:46

of the company. Anyone who has liked how they handle business will feel comfortable knowing

08:51

that they will still have a lot of say in what happens, especially Chesky with more than 15%.
08:55

But, if you turn the page, the risks are there. Airbnb hasn't shown a profit on an annual basis,

08:59

and the pandemic isn't over. Nobody can answer whether there will be more strict

09:04

travel policies or another lockdown in months to come.

09:06

Then, there's the competition. While Airbnb managed to destabilize the hotel industry,

09:11

Forbes has stated that, with everything that changed in 2020,

09:15

hotels could get their act together and become a strong competitor.

09:19

Companies like Booking and Expedia historically have had more control

09:23

over long-term stays, which became one of Airbnb's strongpoints. Some experts agree

09:27

that Airbnb's quality control on hosts is deficient and might come to bite them back.

09:31

Finally, there's the money issue. Yes, Airbnb secured a lot of funding at a time where

09:35

no one was dishing out money. But the $2Bn can only last

09:39

for so long. For a sustainable future, Airbnb needs money.

09:43

And, when all of this is over, however it turns out, regulations will still be there.

09:48
Local and national governments might continue their efforts to regulate or even ban Airbnb.

09:53

But, even with all these questions, the overall consensus seems to be that, if travel bounces

09:54

back, Airbnb will definitely be an exciting choice to invest in. Its years of existence

09:59

have shown resilience. Airbnb has battled multiple PR nightmares throughout the years plus repeated

10:05

efforts to slow them down, and still, it lives on. The first pitch deck Airbnb built has become a

10:11

reference for startups all around the world. Just in our platform, it has been used as a starting

10:15

point for over 50,000 pitch decks. It just does a fantastic job at capturing their essence even if

10:21

it was built more than 10 years ago. You can use their pitch as a starting point for your deck or

10:25

pick from one of the dozens of other startup decks that we have made available as templates. Once you

10:29

are done, you can book a call with me or my team to review it or use our tool to get matched with

10:33

investors in your space. But back to Airbnb. So, as the world teethers in between the

10:37

uncertainty of another wave and a possible vaccine, let's just remember one thing.

10:41

It seems that uncertainty is part of Airbnb's game. So, one thing's for sure,

10:46

we'll be watching that IPO closely.

How Airbnb used Recession to become a 131 Billion Dollar Company?
On 1st of December 2008, the National Bureau of Economic Research officially declared

00:05

that the United States entered a recession in December 2007.

00:09

And by this time, the tremors of the economic nightmare were already being witnessed

00:13

not just by the United States but by countries all across the world.

00:18

2.6 million jobs were lost,

00:20

several billion dollar companies filed for bankruptcy

00:23

and it costed the global economy more than $2 trillion.

00:28

This financial crisis of 2008 was so bad

00:30

that it was known to be the biggest economic meltdown in the US since the great depression.

00:36

And it lasted for about 18 months.

00:38

Now, during such a terrible time, if I asked you

00:41

'Would you like to start a business?' What would your answer be?

00:44
You'd call me crazy, right?

00:46

Well, guess what?

00:47

Airbnb was one of the few companies that were not just built during the times of recession

00:53

but also became a billion dollar company because of the paradigm shift brought along

00:57

by the recession itself.

00:59

So, the question is- What is so special about Airbnb?

01:03

How did they succeed because of the recession?

01:05

And most importantly

01:06

What are the business lessons from the case study that you can apply to your business?

01:11

The answer to this question lies in the teachings of the deep rooted American culture.

01:16

People, ever since childhood, children in America and even in India for that matter

01:21

are taught that we should not talk to a stranger,

01:24

we should not take chocolates from a stranger and in fact

01:27

any stranger who talks to you sweetly is a creep.

01:30

And since childhood we have always had a problem breaking ice with a stranger.

01:35

This is the reason why

01:37

Americans back then or even present day Indians for that matter

01:40

would never let a stranger live in their bedroom

01:43

no matter how much they are willing to pay.

01:45

Similarly from a guest standpoint, if I asked you

01:48

to stay in a stranger's bedroom, even you would hesitate, right?

01:51

Well, this is the reason why multiple startups that had the exact same model as Airbnb failed

01:57

because people just wouldn't let a stranger live in their house.

02:01

Then the question is

02:02

When these people failed, what was so special about Airbnb that it became such a massive success?

02:08

And here's where you need to know about a timeless business lesson.

02:12

People always remember that everytime there is a crisis of any kind

02:16
whether that's a political crisis

02:18

whether it's an economic crisis or even something like the pandemic

02:21

it always leads to paradigm shift in social behaviour.

02:25

In this case, when recession hit America

02:28

millions of people were left jobless and they desperately needed money.

02:32

Now, this money that they needed was not to buy a fancy car or a house

02:36

but to feed their family 3 times a day.

02:39

Therefore, it was a question of survival.

02:43

In fact, the idea of Airbnb itself was born because

02:46

the founders Brian, Nathan and Joe couldn't pay their rent

02:49

and as a result of which

02:51

they actually started hosting strangers in their house in exchange for a rent

02:55

and at the same time

02:57

people who were travelling also needed an affordable option because even they did not have a lot of
money right?
03:02

And that's when Airbnb connected the host with the guest

03:05

and built their business model in such a way

03:07

that they could generate a passive income for the host

03:10

and provide a cheaper and a better alternative to the guest as compared to the hotels.

03:15

This is the reason why the concept of Airbnb became a game changer

03:19

and what followed next was the origin of a billion dollar industry

03:24

that redefined travel for millenials

03:27

which we know today as the short term home rental industry.

03:31

And this paradigm shift in the behaviour is what is known as

03:34

collaborative consumption movement wherein

03:37

the society believes in sharing the ownership of resources rather than keeping it to themselves.

03:42

And the economy that emerges out of it is what we call as 'The Sharing Economy'

03:48

FUN FACT

03:49
Using the valuation of Uber and Airbnb, a report from the Brookings Institution projects that

03:54

the sharing economy will grow from just $14 billion in 2014

03:58

to $335 billion by 2025.

04:02

And this emergence of the sharing economy is the reason why

04:05

if you observe closely

04:06

specifically from 2008 onwards, you'll see that

04:09

multiple startups that were built on the concept of collaborative consumption

04:13

have gone out to become million, evem billion dollar companies.

04:18

And as we move on to the 21st Century

04:20

the society is becoming more and more condusive for these kind of businesses.

04:24

This is the first and the primary reason why Airbnb was a super success.

04:30

Now, the question is-

04:32

Airbnb wasn't the only startup during that time, right?

04:35

In fact, their idea was not even new. Then the question is
04:38

Why did Airbnb specifically succeed?

04:41

And this brings me to the second element of Airbnb and that is

04:45

designing for trust.

04:47

People, back then

04:48

when people were actually renting out places out of necessity

04:51

in the initial days things were not very comfortable because

04:55

the speed of trust couldn't be established between the host and the guest.

04:58

But thankfully, Joe and Brian were design students

05:02

and they understood the importance of design in building human relationships.

05:06

So, they took it very very seriously and started experimenting with user experience models

05:11

to solve this problem.

05:12

And that is when after some experimentation they found out

05:15

that if the host introduced himself and described a little about himself and his family and his dog

05:21
the guests feel way more comfortable as compared to just knowing about the property.

05:25

And secondly they also did a joint study with Stanford to find out

05:29

exactly what are the factors that built trust between people.

05:33

And that's when they found out

05:34

the more different two people were, the more difficult it became to establish trust.

05:39

For example, if you're a 23 year old who lives in Pune

05:43

and you meet a host in Delhi who is a Punekar by birth.

05:46

You will begin to trust that person way more easily

05:49

as compared to trusting a 40 year-old Gujarati host who lives in Delhi.

05:53

But they found out that if you add social reputation to a person

05:58

regardless of how diverse their backgrounds are, the speed of trust increases by a large extent.

06:03

In this case

06:05

the social reputation were nothing but the reviews.

06:08

And they found out that if the host had more than 3 reviews
06:11

the guest was very easily able to trust her.

06:14

And for the guest they designed a small questionnaire that could help them introduce themselves very
easily

06:19

and in a way that is neither creepy nor cold.

06:24

And from my personal experience, I can tell you guys

06:26

that this idea of questionnaire has been a game changer for Think School.

06:30

You know, earlier when we used to ask students for feedback about the course

06:34

we used to ask them 'What is your feedback about the course?'

06:36

and we used to get answers like "Good", "Best" and for some reason people even used to say "Okay"

06:42

but then we started asking more detailed questions

06:45

that could help people direct their thoughts.

06:47

For example we started asking questions like "What do you like the best about the course?"

06:51

"If you were to change something about the course, what would it be?"

06:54

And suddenly we started get such insightful reviews

06:58
that even today when we sit down to design a workshop or a course

07:01

those reviews help us a lot in curating a better experience for the students.

07:06

Therefore, this factor of the speed of trust

07:09

separated Airbnb from the rest of the competition.

07:12

Now the question is- How are these guys so sharp?

07:15

I mean, how are they able to get such a deep understanding about their customers?

07:19

And this is what brings me to the third and perhaps the most important element

07:23

that separated Airbnb from the rest of the competition

07:26

and that is their ability to build a system based on empathy.

07:30

And this actually came from one of their investors named Paul Graham who is the co-founder of Y
combinator.

07:35

Paul Graham specifically asked the Airbnb boys

07:38

to go and visit every single one of their users

07:41

at their most popular location which was back then- New York.

07:44

Now, the point to be noted over here is all of this is happening at the peak of recession
07:48

wherein all 3 of them have been unemployed for 9 months

07:51

they are almost broke and they have no funding.

07:55

So, this trip alone was a huge burn in their pocket.

07:58

But you know what guys?

08:00

Inspite of all these difficulties, the Airbnb boys went all the way to New York

08:04

and spent 4 long weekends to meet every single host.

08:07

to talk to them about their experience.

08:10

And guess what?

08:11

They found the most valuable customer insight with every single conversation.

08:16

For example,

08:17

they understood that inspite of having a great house

08:19

people did not have good camera phones to click good pictures of their house

08:23

so these guys rented a camera and helped the hosts with the photos.

08:27
Some of them were not able to articulate their offerings in the website, so the Airbnb boys website

08:31

actually sat down and wrote the description for them.

08:34

And they also taught the hosts as to how do you write good and lucrative descriptions.

08:38

And most importantly

08:40

after they were done, they invited the host over for a beer later on that night

08:44

and sat with them and just built a relationship.

08:47

They exchanged stories, had a beautiful conversation and even told them abou the crazy Airbnb story.

08:53

And you know what guys?

08:54

They built such an amazing bond with the hosts

08:58

that they could actually call these hosts up later on and tell them that you know

09:01

their price is too high or that they needed to write better descriptions.

09:05

And guess what? Soon enough

09:07

all these listings began getting a lot more traffic

09:10

and people from all across the world who were travelling to New York
09:13

started to book these Airbnbs and eventually

09:16

the hosts were able to make a lot more money.

09:19

In fact, soon enough, the guests to visited New York became hosts

09:23

wherein they started listing their property and suddenly

09:26

property listings started popping up all across the world

09:30

including Germany, Spain and even Hong Kong.

09:33

This is how by turning hosts into brand ambassadors

09:37

Airbnb laid a solid foundation for the most powerful method of marketing

09:41

and that is word of mouth.

09:43

This is how,

09:44

timing, design for trust and empathy became the perfect recipe for Airbnb's success.

09:50

Today Airbnb is so huge that they've got 7 million listings in 191 countries

09:55

and generated a revenue of $4.7 billion in 2019.

10:01
Now, let's talk about the most important part of the video and that is

10:04

what are the lessons that you need to learn from this case study.

10:07

Before we move on, I wanna thank our partners Fi for supporting this video.

10:11

Just like Airbnb redefined travel and lodging for the next generation

10:15

Fi tends to redefine banking for working professionals.

10:19

So, if you're an aspiring entrepreneur or if you're looking for a smarter banking experience

10:24

you should check out this app for two reasons.

10:26

Number one

10:27

This app is an opportunity for you to witness the concept of 21st Century banking

10:32

which is something called the Neobanking.

10:34

Number two, if you observe carefully

10:36

this is a disruption of an age old industry in the making.

10:40

And just like any other disruption, it's got some golden business lessons to teach you.

10:45

And from the consumer's standpoint, there are 3 things that I absolutely love about this app.
10:49

Number one, its got a feature called Ask.Fi which helps you understand

10:52

where and how you are spending your money.

10:54

Just type Amazon spends and you will get an answer in a tap.

10:58

Secondly, the UI of the app is minimal

11:01

and it's got a fascinating usage of colours and illustrations that makes the app extremely fun to use.

11:06

And most importantly, it's got a feature called FiJars

11:09

This allows you to compartmentalize your own money and save them for different goals.

11:14

For example, you could save it for a rainy day jar or a holiday jar.

11:17

In fact, normally people even end up creating multiple bank accounts

11:21

just to separate their money which in this case

11:24

you don't have to do anymore once you start using Fi.

11:27

So, if you loved their idea

11:28

use the link below to get an early access to the app and get a chance to witness the evolution of
neobanking in India.

11:35
Now, let's talk about the lessons from the case study.

11:38

Lesson number one.

11:39

Every time there is a crisis or a recession of any kind

11:42

ALWAYS REMEMBER

11:44

that there will be a paradigm shift in the consumer behaviour

11:46

and the companies that are built upon this behaviour are the ones that will go onto become extremely
successful

11:51

even if they aren't the first, even if they aren't the best.

11:54

In this case

11:56

the recession gave rise to Uber, Airbnb and the shared economy.

12:00

In case of the pandemic, if you see

12:02

it boosted the sanitation industry

12:04

the edtech space and the creator economy.

12:07

Lesson number two and this is something that I've said multiple times, that is

12:11

market research is perhaps the most underrated and yet

12:14

the most powerful tool to build a business.

12:17

And what I've seen is in the race of digitalisation, we often tend to underestimate the power of face to
face meetings

12:23

and what a solid rapport can do.

12:26

In our case

12:27

the Airbnb boys could have easily done a Skype call

12:29

or they could have used a Google Form to do their market research

12:32

but inspite of being broke, inspite of being unemployed

12:35

they meticulousy followed Paul Graham's advise

12:38

and spent 4 long weekends to meet every single host

12:42

and that turned out to be a game changer for them

12:44

that helped them build a billion dollar company.

12:48

So, if you're somebody who is building a business right now

12:49

and if there's any chance that you could actually go and talk tot your customers face to face

12:53
please go ahead and do that because

12:55

that conversation could reveal such important insights