AirBnB

From single rooms to vacation homes, apartments, and even boats, Airbnb revolutionized the short-term rental industry.  

Today, the $100 billion firm advertises over 7 million lodging opportunities for its users, but its history is far from smooth.

Airbnb’s story begins with Joe Gebbia. In 2005, Gebbia was a broke college student in Rhode Island. One night, in true college-student fashion, he let a stranger crash on an air mattress in his off-campus apartment. Not knowing the stranger, he was concerned, but the visit went fine.

Two years later, Gebbia moved to San Francisco and met Brian Chesky and Nathan Blecharczyk via a Craigslist ad for space in his apartment. Unfortunately, the three recent grads had barely enough for their rent.

A design conference came to the city, and Gebbia learned that all the hotels were booked. Thinking back to the stranger, he had an idea: weekend room rentals.

Gebbia emailed Chesky, “I thought of a way to make a few bucks—turning our place into a designers bed and breakfast,” and that’s just what they did. The roommates rented out three air mattresses on their floor and charged $20 apiece.

He and Chesky understood their idea’s profitability and brought it to Belcharczyk, a tech wizard. He designed their website, AirBedandBreakfast.com, and began advertising short-term housing.

Thus began the firm’s tumultuous period: The company launched in 2008 at SXSW but only had two customers—Chesky was one of them.

After the initial failure, the trio returned to the drawing board and recognized the firm’s large funding gap relative to others. They brought the idea to investors, advertising their site’s usability (only three clicks required to book a stay), but they weren’t convinced.

A lack of funding opportunities drove the entrepreneurs to raise money through unlikely methods: They sold cereal boxes named after the candidates in the 2008 election at the DNC. While unconventional, they managed to scrape together $30,000.

The group’s entrepreneurial spirit caught the attention of Paul Graham, who invited them to a season of his startup incubator, Y Combinator, for 6% interest. There, the group learned the skills necessary to start their company and focused on methods to increase listings by city and region and on usability.

They flew to New York to meet some users, trying to understand their target audience better. Users reported that “the cost savings provided by the site allowed” them to explore the city. They also determined that the site was helpful to those who’d lost their jobs, as users could rent rooms to help pay their rent.

After shortening the name to Airbnb in 2009 to eliminate confusion, the firm garnered 10,000 users by that spring. Success bred media and investor interest: That year, the firm earned a $600,000 investment.

Finally, with adequate capital and a strong site, the firm was poised for growth. By fall of 2010, Airbnb boasted 700,000 nights booked.

Early on, the founders relied on demonstrations and media attention to market their products. CEO Chesky stayed full-time at Airbnb’s for a year, trying to get a stronger sense of their target user. He spoke of this extensively, garnering more media attention.  

Gleaned from founders’ meetings and through Chesky’s time in Airbnb, one of Airbnb’s most important early value propositions was its user’s ability to ‘try on’ another culture or way of life. Gebbia says, “[People] use [Airbnb] because they want to get a better sense of the culture and to save money. A by-product was that they live in someone else's shoes.”

By 2011, Airbnb was established in 89 countries around the world. That year, it gained its first billion-dollar valuation, making it a ‘unicorn’ in the startup space. Over the years, Airbnb became a mainstay, disrupting the long-standing hotel industry.

Unfortunately, Airbnb’s growth hit a boulder in the mid-2010s: Poor guest reviews, large parties, and trashed homes were the firm’s major consumer drawbacks. Unlike hotels, which are regularly cleaned, short-term rentals don’t offer a daily cleaning service or guest surveillance. As a result, revenue and growth stagnated.

Quickly pivoting and addressing customer concerns, Airbnb founders implemented a coverage policy, or a “Host Guarantee” of up to $1 million. The trio also added new features to the site to cater to its target audience: They launched “Neighborhoods,” a city travel guide, and created an expense reporting service to make it easier for business travelers to report expenses.

Today, with listings in 191 countries and over 100,000 cities, Airbnb offers guests a taste of another culture. Social media, influencer, and digital marketing garner the firm an average of 6 check-ins a second.

The firm generated over $9 billion in revenue in 2023, with 18% growth year over year. Sticking to its initial value proposition, the average Airbnb costs $161 a night, less than the average hotel, and hosts add an average of $13,000 to their annual income.

Here’s what we can learn from Airbnb about consistent motivation, PR, and unified leadership.

Lessons

Meet and deeply understand customers throughout the product design process. Joe Gebbia, Airbnb’s co-founder, said, “We started Airbnb because, like many across the U.S. and New York, we were struggling to pay our rent and decided to open up our living room to fellow artists coming to town for a design conference.” Airbnb, more so than many other firms, deeply understands its customers, partly because its three founders were once much like them. Despite humble beginnings, Airbnb executives prioritize understanding customers, employing unconventional tactics to understand their needs better. For example, Brian Chesky “moved out of my apartment, and I have been mostly homeless ever since, off and on. I just live in Airbnb apartments and check in at different homes in San Francisco every week.” Another example of this in practice is the co-founders' early years when they stayed with Airbnb hosts across NYC. They quickly realized that their site was taking down host pictures; in response, Chesky picked up a camera and did photography for them. Today, Airbnb uses an iteration of Amazon’s working backward system to cultivate a stronger sense of user-centered experience and, thus, customer satisfaction. Instead of wasting time over-analyzing smaller components, Airbnb’s teams collaborate and ask, “What’s the ideal booking experience we want for guests?” The firm aligns its resources with its answer, even crafting fake announcements and blog posts for when the goal is achieved. While some of their tactics are nontraditional, the practice unveils product design and usability mistakes.

Keep launching, even when no one notices. Airbnb’s beginning was tumultuous but admirable. When the firm launched in 2008, it had only two customers–Chesky was one of them. While no one noticed their initial launch, Airbnb founders remained resolute in their business’s efficacy, even when their mentor said, “I hope this isn’t the only idea you’re working on.” By their third launch, Airbnb pivoted, focusing on the ‘breakfast’ part of ‘bed and breakfast.’ Founders launched breakfast cereal based on political candidates that year, and made $30,000 in the process. The PR stunt gained them plenty of publicity, but still, the firm was rejected by 15 investors. This is one of the most important takeaways I gleaned from Airbnb’s history: The firm failed multiple times, yet its founder remained resolute in their idea. In other words, they didn’t stop until their idea was realized. Such fortitude cultivated a growth mindset and a resilience to failure in the founders, one that any entrepreneur can leverage. When Airbnb faced more recent challenges like emerging legislation, they pivoted, understanding that failure isn’t an option.

Use events and PR to bootstrap. Airbnb’s business model relies on plentiful hosts with interesting spaces to rent—without hosts, their business model is ineffective. The firm’s founders uniquely understood this (primarily because they were hosts themselves), and turned to media exposure as a method to garner more advertising hosts. Believing that “If you’ve got a noteworthy idea, the more people will talk about it. The more absurd, the better because it’s worth writing about.” Airbnb reached out to bloggers, which led to more mainstream media attention. Leveraging SEO, Airbnb garnered enough media attention to maintain a consistent customer base and a steady flow of hosts. Besides PR, Airbnb did many events inspired by the design conference that sparked their initial idea. The firm advertised at the DNC, investor conferences, and music festivals, understanding this population’s need for inexpensive lodging. Combined, PR and event marketing bred word of mouth, highly effective with the millennial population the firm targeted in the early 2000s. The firm’s early marketing tactics were genius in their simplicity—they were cost-effective and targeted the firm’s chosen audience in a clever, need-focused way. Other firms looking to Airbnb should take note of this and determine a web of nontraditional marketing tactics that leverage their audience’s predetermined preferences.

Collapse barriers between marketing and engineering for greater customer satisfaction. Chesky says, “You can’t be an expert in making the product if you’re not an expert in the market of the product.” Airbnb employs an unconventional marketing and product design strategy: Instead of maintaining two separate divisions, the firm collapses barriers between the marketing and engineering (and product management) departments, making each responsible for communicating with the other. This leverages the firm’s notions of shared culture and collaboration and strengthens product design and marketing strategies. On the one hand, product managers are forced to build and engineer products that sell well and have a strong marketing image, therefore strengthening product market fit. On the other hand, Chesky argues, “If you build a great product and nobody knows about it, did you even build a product?” With this approach, Airbnb’s marketing team is constantly informed about the product they’re marketing, playing a key role in the design process. In other words, one strengthens the other. The messaging around a product defines the product itself. This tactic creates alignment internally and strong product market fit, enhancing sales.

Leadership with a strong and unified vision boosts transparency. One of the foundations of Airbnb’s culture is what its founders call a “shared consciousness.” This concept lends well to cross-department communication and a unified message. Still, the firm takes it a step further, ensuring that Airbnb’s founders and core leadership are heavily involved in its smaller inner workings. Unlike other executives, Airbnb’s founders refuse to delegate, believing it slows down agile companies. Also, delegation creates occlusion, the antithesis of transparency. Chesky says, “If you can’t row in the same direction, why are you all in the same company?” Airbnb creates leadership transparency through a simplified leadership layer and a system of clear, peer-led reviews. Transparent, assertive leaders with a clear vision unify their employees, yielding stronger, more informed decisions. Unification provides stronger adherence and progress to key performance indicators. Along that line, unification allows companies to remain more agile, shifting quickly (and transparently) to changes in consumer needs.

Speeches

• Airbnb CEO: “Airbnb Was Worth $100 BILLION & I Was Lonely & Deeply Sad!”---One of the firm’s founders speaks on building a brand.
• How Airbnb designs for trust–One of Airbnb’s founders speaks on TED.
• Airbnb co-founder Nathan Blecharczyk on the value of purpose, and building through a crisis.---Co-founder speaks on meaning and creativity.
• The real story about how Airbnb was founded - Nathan Blecharczyk Co-founder Airbnb - Startup Success—Co-founder explains the firm’s founding story.
• Airbnb Founder: The Number 1 Thing People Get Wrong About Happiness and Success | Brian Chesky—Founder Brian Chesky speaks on success and brand building.
• Digital Leaders: Airbnb Co-Founder Nathan Blecharczyk chats with Professor Arun Sundararajan—Co-founder speaks to NYU Stern.
• Airbnb CEO Brian Chesky at Skift Global Forum 2023—Brian Chesky speaks on the brand’s next steps.
• A decade of disruption: CNBC’s full interview with Airbnb co-founder Nate Blecharczyk—One of the founders speaks on Airbnb’s success.
• At Home With the Billionaire CEO Behind Airbnb | The Circuit–Brian Chesky discusses Airbnb and personal story.
• I'm excited to bring you a very special episode with Brian Chesky, co-founder and CEO of Airbnb.---Exclusive interview discussing Airbnb and product management
• How Boxes of Cereal Led to the Creation of Airbnb—Chesky discusses the firm’s early history.

Videos

• Airbnb Agrees To Make Reforms After Allegations Of Discrimination—NPR explains how Airbnb copes with challenges.
• The Story of Launching Airbnb | CEO Brian Chesky, Joe Gebbia, & Nathan Blecharczyk (TIP503)---Airbnb’s complete company story.
• Can Airbnb Outperform a Potential Recession? | WSJ The Economics Of—WSJ looks at Airbnb’s crisis management strategy.  
• How AirBnB Started - Founding Story—A brief founding story.
• How Airbnb Started—The firm’s early history.
• Airbnb - The Controversial History—How the firm copes with criticism.
• Airbnb Business Model: What makes Airbnb so successful?---A quick look at Airbnb’s business strategy.
• Why Airbnb Fails to Disrupt the Hotel Industry—Airbnb’s cultural impact and competitor strategy.

Book Recommendations

• The Airbnb Story: How Three Ordinary Guys Disrupted an Industry, Made Billions . . . and Created Plenty of Controversy–An extensive company history and biography.
• The Upstarts: How Uber, Airbnb, and the Killer Companies of the New Silicon Valley Are Changing the World—Airbnb and its cultural impact.

Further Readings

• Airbnb: the travel revolution in our spare rooms—The need for Air BnB
• How 3 guys turned renting air mattresses in their apartment into a $31 billion company, Airbnb—Airbnb’s company history and founding story.
• The Inside Story Behind the Unlikely Rise of Airbnb–Discussion about the firm’s early history.
• Airbnb Fights Its ‘Party House Problem’---How the firm responds to threats.
• Airbnb is turning itself into an ‘experience’ machine beyond just booking places to stay—The firm’s diversification strategy.
• Airbnb and the Internet Revolution—How the firm leverages cultural shifts.
• Airbnb and the Unintended Consequences of 'Disruption'---The firm’s cultural and economic impact.
• It’s Business Time: Airbnb Targets Work Travelers With Concur Partnership—Airbnb’s partnership strategy.
• Access all areas: Airbnb expands into stays for disabled travellers—The firm’s inclusivity strategy.
• Airbnb’s Surprising Path to Y Combinator—How the firm overcomes failure.
• Airbnb: A True Rags to Riches Story—The firm’s early history.
• Airbnb is asking for $2.6 billion from investors in its IPO — here are all the companies Airbnb itself invested in and eventually acquired since its founding—Airbnb’s acquisition strategy.
• From Crash Pad To Pizza Profitable, Start-Up Eyes Budget Travel Market—How the firm operates and key business practices.
• The Business of Politics—Political Influences on Airbnb.
• What Every Startup Can Learn From AirBnB—Key lessons from the firm.
• Airbnb: From Y Combinator To $112M Funding In Three Years—The firm’s early history.
• Airbnb raises $1.5 billion, valuing it at an eye-popping $25.5 billion—Airbnb’s valuation and business strategy.
• Introducing Airbnb Neighborhoods, a Local Guide for Travelers Deciding Where to Stay—Airbnb and diversification.
• Airbnb Acquires Luxury Retreats, Beating Out Expedia—Airbnb and competition.
• Inside the Hotel Industry’s Plan to Combat Airbnb—Airbnb and competition.
• Rural Airbnb bookings are surging as vacationers look to escape the coronavirus—How the firm pivots in response to challenges.
• Airbnb Was Like a Family, Until the Layoffs Started—Airbnb’s shifting people strategy.
• Research: When Airbnb Listings in a City Increase, So Do Rent Prices—HBR research and Airbnb’s economic impact.
• After a disappointing Airbnb stay, I realized there's a major flaw in the review system—Airbnb’s feedback system and how the firm copes with customer concerns.