The unheard story of AirBnB

The article being shared by Neha Ghotane , IIM Banglore 4th runner up in Evolve 1.0

Once upon a time, there were two designers Brian Chesky and Joe Gebbia staying in San Franscisco. Poor fellas couldn’t afford the rent of their apartment. A design conference was going to happen in the city of limited hotels. There struck the idea of turning the loft space into lodging, renting mattresses and providing homemade breakfast. Being designers they built new website to post their offer.

On getting their first three customers, the two chaps thought, what would be a worldwide version on such an offering would look like. They discussed and decided to perform a market research. The findings of the market research were positive and the problem faced by them was faced by others too. Encouraged by the findings, they decided to go forward with pursuing their idea.

The two designers felt the need of an engineer and asked their former roommate Nathan Blecharczyk to assist them and obtain customers for airbed and breakfast. This airbed and breakfast is now AirBnB. The engineer planned to launch the website during the Democratic National Convention in order to make revenues on the resulting lack of hotel space. They did make revenues but at a steady of $200 per week. They realised that they need to raise money to expand their business. They bought 1000s of cereal and designed special edition election-themed boxes, which was released in the fall of 2008—Obama O’s and Cap’n McCain’s, which they sold at convention parties for $40 a box. They sold 500 boxes of each cereal, helping them to raise around $30000 for AirBnB. Few days later when the revenues were again steady, they found out that the apartment photos listed on the website were not appealing resulting to less preferences. On this, the trio decided to personally go and click photos in New York and posted on their website. This helped them by increasing the revenues to $400 per week.

Inspite of this, they did not receive funding from Paul Graham, the biggest investor in New York since he thought the idea to be crazy. However, on joining Y Combinator’s winter classes in 2009, they received another $20000 in funding. They received another $600000 in a seed round from Sequoia Capital and Y Ventures. The investors were not only concerned about the business model of AirBnB but also about the expertise of the two designers. Even though, Nathan, the engineer has come on board to assist with the business plan, the investors had a hard time in recognising the potential in the trio and the business idea. The reality was, despite of what the investors thought about the idea, people were interested in the service offered by AirBnB.

In 2010, people who didn’t want a hotel experience were logging into Craiglist, which was the target market for AirBnB. The user base of Craiglist was huge and AirBnB wanted to tap into this platform. The users who were listing their properties on AirBnB also could list it on Craiglist which was a facility offered by AirBnB. AirBnB was providing the following facility with a different promotion.

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The benefits of the Airbnb/Craigslist integration were numerous. Not just the sheer volume of potential users accessible via Craigslist, Airbnb listings were far superior to the other properties available—more personal, with better descriptions and better photos—made them more appealing to Craigslist users looking for vacation properties. Once those Craigslist users made the switch, they were more likely to ignore Craigslist and book through Airbnb in the future. Hence those with properties listed on Airbnb ended up making more money on their listings, which kept them using the service as well.

Since 2011, AirBnB is expanding in Europe, South America and Asia. It also acquired German knockoff Accoleo and opened its first office in Hamburg which is headed by Accoleo founder. In a few days time, it also acquired UK based competitor, Crashpadder in 2012. The company not just focuses on the lodging but also on providing local experiences in an authentic way.

In July 2014, Airbnb officially re-launched their site and mobile apps with an entirely new look and feel. This rebranding was the result of a full year of brand study, for which they collected user research, interviewed guests and hosts in more than a dozen countries, and brought in London-based Design Studio for additional assistance.

The two designers started with renting their loft space and are now a $1 billion company. They only tried to solve their problem and subsequently solved the problems of millions all over the world.

– By Neha Ghotane , IIM Bangalore

2 Comments

  1. sreshtha said:

    Simple, easy-to-read and beautifully arranged. Story telling at its best.

    December 30, 2015
    Reply
    • Neha Ghotane said:

      Thank you Sreshtha!

      January 21, 2016
      Reply

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