Why Airbnb's success is so surprising
Airbnb was not the first online “couch-surfing” site—far from it. Airbnb’s founders weren’t seasoned tech pros; two of the three were art students at Rhode Island School of Design. So how did the company take off so fast that in under 10 years, it now has 3 million active listings and a $30 billion valuation?
Leigh Gallagher, author of “The Airbnb Story,” the first in-depth book on the company, points to Steve Jobs.
The three Airbnb founders looked up to the Apple guru, and prioritized the “three-click rule” typically credited to Jobs, who wanted the first iPod to be so easy to use that you were never more than three clicks away from hearing a song. The Airbnb founders, Gallagher writes, “wanted their users to never be more than three clicks away from a booking.”
That speaks to user experience on the web site, but it’s also an anecdotal way of saying that the key to Airbnb was design. The art school backgrounds of CEO Brian Chesky and cofounder Joe Gebbia (on the cover of the book, Gallagher calls the founders “ordinary guys”) were not a disadvantage, but an asset: they made the visual aesthetic of the Airbnb web site a top priority from its inception.
That helped it gain a foothold with millennials, but Gallagher tells Yahoo Finance, “There’s a misconception that it’s just millennials who use Airbnb and that anyone older thinks it’s icky, and that’s really not the case any longer.Gallagher’s book, released this week, offers an extensive look at Airbnb’s founding and execution.
It may be a deeper dive than the casual reader might want on a 9-year-old, private tech company, and it may err on the side of awe at another inspiring tech founder origin story. But even as the book goes granular on the housing market and the hotel industry, Gallagher keeps the business case study exciting with real anecdotes about real people—often herself.
She did the same to great effect with her first book, “The End of the Suburbs.” Anyone who has stayed in an Airbnb and wondered about just what kind of engine is behind their experience would find something here to raise an eyebrow.
Airbnb has grown “like a weed,” Gallagher writes. It has notched around 160 million “guest arrivals,” the metric the company uses that counts three separate stays by the same person in one year as three arrivals. (The company does not share the total number of people that have stayed in an Airbnb.)
Its 3 million listings make it larger (by supply, not revenue) than any single hotel company. The closest is the merged Marriott and Starwood, which boasts 1.1 million rooms.
But the obstacle to runway is regulation. Airbnb, much like Uber (the two companies are often lumped together as the most prominent examples of the sharing economy, and both have had notable legal problems), has ruffled feathers in many markets, especially in popular tourist cities like Barcelona and Berlin, as well as in San Francisco, where it was founded.
As for Airbnb’s problems in New York, Gallagher cautions that while New York “gets a lot of the headlines,” it’s not among Airbnb’s biggest cities. (The company is in 34,000 cities and 80% of its listings are outside the US.)
The exact regulatory issues vary by city (and even by local municipality—it’s often more complicated than the city level), but in many cases, tenants renting out their apartments on Airbnb is a violation of short-term rental laws. And the company has publicly grappled with how to deal with that opposition—at times in its history going aggressive, like with ill-advised billboard ads in San Francisco, and, more recently, trying to play nice.
“The problem has been that the bigger Airbnb gets,” Gallagher says, “regulators get madder and madder.”
And hotel companies have shrugged off Airbnb publicly, but ought to be seriously scared now. “For the past several years, ask any hotel CEO,” Gallagher says, “they all say, ‘Oh, we had record performance.’ And Airbnb always says, ‘No, for us to win, no one has to lose.’ But it’s increasingly really hard to make that argument.”
Daniel Roberts is a writer at Yahoo Finance, covering sports business and technology.