Airbnb’s Growth Case Study

Airbnb, Chinese name:爱Airbnb , is a service website that connects tourists and homeowners who have vacant rooms for rent. It can provide users with a variety of accommodation information. Users can publish, search for vacation home rental information and complete the online booking process through the Internet or mobile applications. On August 19, 2020, Airbnb announced that it had submitted an application for listing. The author of this article sorted out the development process of Airbnb and analyzed its growth case for us.

Airbnb

In 2007, two designers living in San Francisco, USA, Brian Chesky and Joe Gebbia, were troubled by their inability to pay rent.

To make some extra money, they planned to rent out the loft. The traditional way is to post on Craigslist, "but we don't want to do that because posting the same old stuff on Craigslist will look cold, so we decided to build a website ourselves."

There was a design exhibition being held in the city at the time, and all the hotels in the surrounding area were fully booked. They quickly built a simple website to attract business for opening a "family hotel".

The website featured a photo of three airbeds on the floor and the promise of a home-cooked breakfast service – hence the name Airbed & Breakfast.

Soon they had three tenants, each paying $80. A week later, they began receiving emails from people around the world asking when the service would be available in other popular tourist destinations, including Buenos Aires, London and Japan.

The duo then tried to replicate the approach in other cities, following hot spots with large gatherings like SXSW and allowing people to pay online with credit cards. During the 2008 Democratic National Convention, Obama addressed a crowd of 100,000 people in Denver, Colorado.

At that time, there were only more than 30,000 hotel rooms in the city. In view of this, Airbed & Breakfast chose to expose itself to the public again in a timely manner, and once gained extremely high traffic and attention, although it gradually returned to silence for quite some time afterwards.

Fast forward seven years, and the Airbed & Breakfast has transformed into a world-renowned representative service of the "sharing economy" - Airbnb.

Its nightly rental room bookings even surpassed hotel chain giant Hilton. As of the spring of 2015, Airbnb had more than 10 million users, 1 million listings, and a valuation of approximately $20 billion worldwide.

2. Early Fundraising

When the project was first launched in 2008, the two founders needed to find a way to obtain start-up capital.

At first, they tried to support the team with their own marginal business, so they bought a large number of boxed cereals and redesigned the packaging of two presidential election themes - Obama and McCain.

They sold the cereals at the fall show for a little over $40 a box and ended up selling more than 500 boxes, raising nearly $30,000 for their project, but it still wasn't enough.

When the election results were finally settled, they had to figure out how to get rid of all the remaining McCain boxes.

This made several founders extremely anxious and they fell into a trough for a while. This unsuccessful trial vividly demonstrated that in the early stages of a small company's entrepreneurship, it is necessary to try every possibility in order to survive.

The following spring, they finally had the opportunity to have dinner with Paul Graham, the godfather of Silicon Valley entrepreneurship.

Graham bluntly said, "I think this idea is crazy. How could anyone think of doing such a thing?" But when he learned that they had sold everything they had for this project, Graham was still moved.

Although Airbed & Breakfast only earned $200 a week in 2009 and almost went bankrupt, it was fortunate enough to join the 2009 winter class of Y Combinator, a famous Silicon Valley startup incubator founded by Graham, and received an investment of $20,000.

Graham later admitted, "This group of people who can even make an income by selling cereal, their project will not die," and he thought this was one of the hardest-working teams he had ever seen.

After receiving the money, Airbed & Breakfast was officially renamed Airbnb, and subsequently received another $600,000 in seed funding. Despite the successful financing, there were still some people in the market who did not understand their business model and were not optimistic about the fact that the two founders both came from a designer background.

3. Mining users from competitor companies

Craigslist, the biggest competitor in the space at the time, had a massive user base that Airbnb envied.

Although Airbnb has been trying to differentiate itself from its competitors by creating differentiated product forms, one undeniable fact is that for supply and demand platform services such as booking rooms, the number of users is the primary factor in people's choice, because suppliers will choose to publish information on platforms with the most potential consumers, and consumers will also choose markets with sufficient goods to compare prices and place orders.

After realizing this, Airbnb regarded Craiglist's user base as a piece of fat meat and tried to get a piece of it. So they launched a feature that allows users to easily copy the same information and publish it on Craigstist at the same time as posting information on Airbnb.

Although Craigslist does not provide such a ready-made interface, according to engineer Rishi Shah, their method of implementation is actually not very difficult.

At that time, Craigslist submitted listing content through a string of plain text parameters in the URL, so Airnb wrote a robot to access and parse the URL, insert specific characters into it, and then forward the modified URL to the user for publishing.

After users post information on Airbnb, they will receive an email informing them that posting this information to Craigslist at the same time can help you increase your income by $500 per month. All you need to do is click this link and we will do the rest for you.

As a result, users often click on the link without thinking, after all, there is no harm in doing so, and it actually increases the exposure of many rental property information.

Next, Airbnb's script robot will automatically perform a series of actions. In addition to copying the content intact, it also needs to perform some in-depth processing, such as choosing which category directory on Craislist to deliver it to and assigning a reasonable geographical location.

This task is really time-consuming for engineers because they need to match each directory category, regional option, and postal code field one by one. In addition, the robot's work also includes blocking anonymous email addresses and bypassing restrictions that prohibit HTML code.

Engineer Chen recalled: "These tasks are very detailed. I even think that some very smart technical experts need to spend a lot of time to perfect it. Traditional marketing managers probably don't even think of this technique. There are too many technical details to overcome. I guess only engineers who are asked to acquire users from Craiglist can think of it."

This also reflects the technical requirements of growth hackers. It can also be seen that a harmonious team and reliable teammates can bring great help.

This successful technological breakthrough brought several major rewards to Airbnb:

• First, the return of traffic from Craigslist boosted Airbnb's popularity, and many people joined in and registered, posting more rental information;
• Second, users who used to post on Craigslist began to become Airbnb users, because now they can appear in both places by posting in one place.
• Finally, original Airbnb users have become more sticky because they actually earn more income here.

4. Poaching

Another way Airbnb “poached” employees from Craigslist was by using their email notification system to advertise for themselves. Airbnb would detect the latest rental information posted to Craigslist, and then simulate a customer to “leave a message” to the landlord, recommending Airbnb’s services.

Through the automatic email notification system sent by Craiglist, the homeowner will receive an email like this: I really like the house you posted, and I suggest you post it on Airbnb, which has more than 3 million page visits per month!

Although this approach is much inferior to previous techniques and does constitute spam in a sense, it is undeniable that it helped Airbnb grow faster in its early days and at almost zero cost. Craigslist naturally would not sit idly by and took measures to ban it soon after.

5. Importance of packaging and presentation

As mentioned earlier, Airbnb successfully attracted three travelers who came to San Francisco for a conference in its early stages. After that, it began to receive accommodation requests from people all over the world, who proposed the cities they wanted to visit and suggested that Airbnb set up a location.

It can be said that Airbnb has been able to grow so rapidly to such a scale because people do have such a strong and universal demand, and Airbnb's services meet them.

As the company grew, by 2009, Airbnb began planning to move to a new home.

While looking for new properties, they found that the transaction volume that summer was not very impressive. So Gebbia and Chesky set out to investigate, flying around and booking rooms at 24 different B&Bs to try to find the root of the problem.

Finally, the truth came out.

Many people who list their rooms on Airbnb don’t know how to present their listing in the best possible light. Their poor filming skills and poor copywriting organization obscured the advantages of the house itself, making it difficult for people on the other side of the world to judge through the screen.

"Well, it's not surprising. No one wants to pay for something they don't know what they're going to get," Chesky said. "The normal way a website would do that is to send out a mass email to users, teach them how to take photos, and rate them."

But Airbnb adopted an approach that seems inefficient but actually works.

Following Graham's teaching of "Don't care how many people like you, focus on those who truly love and use your product", they spent $5,000 to rent a high-end camera and went door to door to take free photos of many houses for rent in New York.

Good sales brought good profits. Local bookings in New York quickly increased two or three times. By the end of the month, Airbnb's revenue had doubled. This practice was later replicated in Paris, London, Miami and other places.

In the summer of 2010, they formally established a project team to provide filming services specifically for landlords. Any host could make an appointment with one of Airbnb's 20 contracted professional photographers to take photos at home, which triggered a sustained traffic surge at the time.

Although launching this project is expensive for a startup, the founder, who is a designer, is well aware of the long-term benefits it will bring. Homes photographed by professional photographers can receive two to three times the number of orders compared to similar homes, and Airbnb can then receive an additional share of approximately $1,025 per month from the homeowners.

By 2012, Airbnb had hired more than 2,000 freelance photographers to photograph more than 13,000 listings on six continents.

During the on-site shooting process, Airbnb was also able to find many typical users offline, which laid a solid foundation for the future product development.

6. Benefits of connecting social relationships

The advantages of the emerging Airbnb model are obvious. People can often stay in homestays at a price 30% to 80% cheaper without having to spend money to book professional hotels, and they can also communicate and get to know local people and become friends.

However, some media have pointed out that if this model becomes mainstream, criminals will take the opportunity to engage in crimes such as theft, robbery, illegal assembly, etc., which will benefit from this system, leading to the decline of morals and bringing fear and corruption.

If this concern does exist, then Airbnb will inevitably be suppressed and will not be able to grow bigger.

The media's concerns are not without reason. If Airbnb wants to continue to grow, it must face the issue of mutual trust among users.

So in the summer of 2011, Airbnb opened up its social network connection feature, allowing users to connect their Facebook accounts. When the social network connection feature is enabled, people can see who their mutual friends are with the host, or which friends have rented the room in the past.

People can also search based on the homeowner's location, gender, and other information to find properties of interest. To protect privacy, this feature can be set to be open only to all users who have registered with their own social network, or it can be turned off completely.

When this product feature was launched, Chesky quickly announced that there were 16,516,967 friendships on Airbnb and the number continued to grow rapidly. After solving the most basic trust issue between people through social networks, people can easily check the background information of the landlord and choose the right person to move in.

The connections and transactions between friends from the same city, the same university, and the same neighborhood are also closer.

7. “Wish List” Raises Functional Value to Emotional Value

In the summer of 2012, Airbnb redesigned the “Wish Lists” feature. Four months later, 45% of users had used the feature and more than 100,000 wish lists had been created.

Before this, the wish list function had actually been online for several years. But the team hopes to explore more possibilities through optimization to see if there is still room for improvement. In addition to completing a series of optimizations, the team also tried to change the star icon representing the collection function to a heart shape.

They were surprised to find that this simple little change alone increased user usage by 30%.

One explanation for this is that this change elevates the wish list from a simple functional value to an emotional value.

People can not only use it to mark their favorite rooms for comparison and reservation before traveling, but also seek a moment of peace and tranquility by appreciating the exquisite home photography here on bad days with rain, haze and wind, or during stressful and busy work - this has become a means of temporarily escaping from the cruel reality.

8. Embrace change: Promotion of mobile Internet

In order to meet the trend of mobile Internet, Airbnb began to prepare a dedicated mobile team in October 2013.

As early as July of that year, Airbnb had already allowed hosts to post information and upload photos via mobile devices; by October, about 50% of users had already used the mobile app. These people respond to customer needs more than three times faster than non-mobile users, which means the order conversion rate is eight times higher.

Subsequently, in the revision of the application, the team added and optimized other functions, including dynamic pictures, map positioning, and destination exploration.

IX. User Promotion Plan

At the end of 2013, Airbnb plans to relaunch their Referral Program. The program was previously identified as "underutilized" and "ineffective," and Airbnb's product growth manager Gustaf felt that something like this really needed to be rectified.

In order to completely transform the user promotion plan, they first investigated previous data, carefully studied the usage behavior and retention of each referring and referred user, and tried to predict what kind of people would be converted into real users.

At the same time, they communicated with companies in the industry that had successful cases to discuss what elements good execution includes.

By comparing the traffic characteristics brought by email, Titter, and Facebook external links through AB testing, Group B adjusted the copy to ensure that the referral invitation looked like a "discount for friends" rather than a random advertisement.

They believe that including a photo of the sender in the promotional content can enhance the feeling of gift-giving between friends. In addition, they also found that contacts obtained through Gmail and Android phone API calls to the address book tend to have a higher conversion rate, perhaps because these people are more closely connected to each other.

Finally, they also have a conclusion about promotional copy: showing users "altruistic" copy is more likely to bring conversions than "selfish" copy. Telling users "you can get $25 by inviting friends" is not as effective as "giving your friends $25 travel expenses".

After three months of closed development and 30,000 lines of code, Airbnb's new user promotion system was officially launched in January 2014, bringing a significant increase in conversions and a 25% surge in order volume in some areas.

Compared with ordinary users, these referred users have a higher retention rate and are more willing to continue to refer other people.

10. Controllable and rapid development

Airnb's development experience has attracted the attention of investors and international media.

Fortune magazine wrote in 2012 that "by any measure, the growth of home rental website Airbnb seems too fast. In just four years, the company has added about 500 employees, reached a valuation of $1.3 billion, and opened offices around the world.

Not long ago, Airbnb opened a new office in San Francisco and needs to recruit another 700 employees. But what’s most impressive is how much people are using the service: 50,000 people stay in rooms booked through Airnb every night. ”

Chesky, who became a CEO by chance, may never have expected that his experience studying design at the Rhode Island School of Design laid the foundation for him to build an extraordinary product experience in the future, and that the novel growth strategy also led to a new trend in promotion methods.

“We’re on the cusp of a new wave of Internet development,” he said. “It seems inevitable that people will gradually move from the online world to the offline real world, and our goal is to replicate people’s activities on Facebook in the real world.”

It seems that Airbnb's development path of connecting the online and offline worlds will continue to go further and further.

Author: Wang Deyu AIPM

Source: They are already on the way (ID: PM-Silence)