Airbnb is a privately held company headquartered in San Francisco founded in August 2008, operated and privately owned by Airbnb, Inc. The company is an online service that provides a platform for individuals referred to as “hosts”, generally private parties, to rent unoccupied living space and other short-term lodging to guests. As of November 2012, the company had over 250,000 listings in 30,000 cities and 192 countries. Listings include private rooms, entire apartments, castles, boats, manors, tree houses, tipis, igloos, private islands and other properties. 

 

Users of the site must register and create a personal online profile before using the site. All properties are associated with a host whose profile include recommendations by other users, reviews by previous guests, as well as a response rating and private messaging system. 

 

As of July 2011, the company has raised $119.8 million in venture funding from Y Combinator, Greylock Partners, Sequoia Capital, Andreessen Horowitz, DST Global Solutions, General Catalyst Partners and an undisclosed amount from A Grade Investments’ partners, Ashton Kutcher and Guy Oseary.
 

 

 

History

Origin

Shortly after moving to San Francisco in October of 2007, Brian Chesky and Joe Gebbia created the initial concept for AirBed & Breakfast during the Industrial Design Conference held by Industrial Designers Society of America. The original site offered short-term living quarters, breakfast and a unique business networking opportunity for attendees who were unable to book a hotel in the saturated market. 

 

At the time, roommates Chesky and Gebbia could not afford the rent for their loft in San Francisco. They made their living room into a bed and breakfast, accommodating three guests on air mattresses and providing homemade breakfast.

 

 In February 2008, Harvard graduate and technical architect, Nathan Blecharczyk joined as the third co-founder of AirBed & Breakfast. During the company’s initial stages, the founders focused on high-profile events where alternative lodging was scarce. The site, “airbedandbreakfast.com” was officially launched on August 11, 2008.

 

To help fund the site, the founders created special edition breakfast cereals, with candidates Barack Obama and John McCain as the inspiration for “Obama O’s” and “Cap’n McCains”. In two months, 800 boxes of cereal were sold at 40 dollars each which generated more than 30 thousand dollars for the company’s incubation and attracted Y Combinator’s Paul Graham.

 

After its inauguration, the site expanded to include properties in the market between hotels and CouchSurfing. In January of 2009, Y Combinator invited Chesky, Gebbia and Blecharczyk to join the incubator’s winter session for three months of training. With the website already built, they used the $20,000 Y-Combinator investment to fly to New York to meet users and promote the site. They returned to San Francisco with a profitable business model to present to West Coast investors.

 

Name change and growth

In March of 2009, the name Airbedandbreakfast.com was shortened to Airbnb.com, and the site’s content had expanded from airbeds and shared spaces to variety of properties including entire homes and apartments, private rooms, castles, boats, manors, tree houses, tipis, igloos, private islands and other properties. 

 

One year later, there were 15 people working from Chesky and Gebbia’s loft apartment on Rausch Street in San Francisco. To make room for employees, Brian Chesky gave up his bedroom and lived through the Airbnb service until the company moved into its first office space. 

 

The company continued to experience rapid growth through the year and in November of 2010 raised $7.2 million in Series A funding from Greylock Partners and Sequoia Capital, and announced that out of 700,000 nights booked, 80% had occurred in the past six months. 

 

By February 24, 2011, one million listings were booked through Airbnb and revenue from the month earlier had increased by 65%. On May 25, 2011, actor and partner at A-Grade Investments, Ashton Kutcher, announced a significant investment in the company and his role as a strategic brand advisor for the company. 

 

International expansion

In May 2011, Airbnb acquired a German competitor, Acceleo. This acquisition launched the first international Airbnb office in Hamburg.Then, in October 2011, Airbnb established its second international office in London.

 

Given the growth of international users, Airbnb opened 6 additional international offices in early 2012. These cities include Paris, Milan, Barcelona, Copenhagen, Moscow, and Sao Paolo.[24] These are in addition to existing offices in San Francisco, London, Hamburg, and Berlin where Airbnb maintains its international presence for the EMEA markets within a German incubator space.

 

At the beginning of November 2012, Chesky announced his focus on Australia, the second largest Airbnb market behind the United States, as well as Thailand and Indonesia. To support this effort, Airbnb opened its 11th office in Sydney. The Australian consumer accounts for one-tenth of the Airbnb user base. Weeks after announcing the focus on Australia, Airbnb announced its strategy to move more aggressively into the Asian market with the launch of their newest headquarters in Singapore. The company's goal is to acquire an additional 2 million properties within the continent. 

 

Company

Location and revenue

The Airbnb founding team acts as the key managerial staff for Airbnb: Brian Chesky, Co-Founder and Chief Executive Officer; Joe Gebbia, Co-Founder and Chief Product Officer; and Nathan Blecharczyk, Co-Founder and Chief Technical Officer.

 

Airbnb has its twelve offices in Barcelona (Spain), Berlin (Germany), Copenhagen (Denmark), Hamburg (Germany), London (UK), Milan, (Italy), Moscow (Russia), Paris (France), San Francisco (US), Sao Paulo (Brazil), Singapore, and Sydney (Australia).

 

Airbnb’s primary revenue comes from service fees from bookings. Fees range between 6% and 12% depending on the price of the booking. Airbnb also charges the host 3% from each guest booking for credit card processing.

 

Growth

In February 2011, Airbnb announced its 1 millionth booking since its inception in August 2008. Then, in January of 2012, Airbnb announced its 5 millionth night booked internationally through the service. Of these bookings, 75% of the business came from markets outside of the continental United States. In June 2012, the company announced 10 million nights booked doubling business in 5 months. 

 

Mergers & acquisitions

Since mid 2011, Airbnb has acquired several of its competitors. The first of which was Accoleo based out of Hamburg. This became the company's first international office. 

Prior to the 2012 Summer Olympics, Airbnb acquired London-based rival CrashPadder, subsequently adding six thousand international listings to its existing inventory.[37] This acquisition made Airbnb the largest peer-to-peer accommodations website in the United Kingdom. 

 

Airbnb acquired NabeWise, a city guide that aggregates curated information for specified locations, in November 2012. This acquisition shifted the company focus toward offering hyperlocal recommendations to travelers. 

 

In December 2012, Airbnb announced the acquisition of Localmind. Localmind is a location-based question and answer platform that allows users to post questions about specific locations online. These questions are then answered in by experts on the specified territories. 

 

Operation

Airbnb is an online marketplace for vacation rentals that connects users with property to rent with users looking to rent the space. Users are categorized as “Hosts” and “Guests;” both of which must register with Airbnb using a valid email address to build a unique user profile on the website. Profiles include details such as user reviews and shared social connections to build a reputation and trust among users of the marketplace. Other elements of the Airbnb profile include user recommendations and a private messaging system.

 

In addition to providing personal information, hosts display listing details including price per night, amenities, house rules, imagery, and detailed information about their neighborhood. 

 

Since 2008, the website has developed to include social connections pulling data from social networking services such as Facebook. As of May 2011, the site uncovered over 300 million connections between Airbnb and the Facebook user groups. 

 

Signup and reservations

It is free to create a listing using Airbnb. Users fill out form with initial details. Changes can be made at a later date. The listing will not go live until the user is ready to publish. Pricing can be determined by the user. User can charge different prices for nightly, weekly, and monthly stays as well as seasonal pricing. Users can use the Titles and Descriptions section to advertise their space. They can outline house rules or other descriptions regarding the residence. Airbnb allows users to publish up to 24 photographs of the place. Airbnb, on a limited basis, is offering free professional photography in most of the listed areas. Profile is a place where the guests can research more about the users. This section is often used for users to display who they are as well as their philosophies on hosting.

 

Users can communicate easily with potential guests. Guests are required to message the user directly through Airbnb to ask questions regarding the property. Users have 100% control over who books their place. When a potential guest puts in a reservation request, the host has at least 24 hours to accept or decline the request.

 

After user accepts a reservation, they can coordinate meeting times and contact information with guests. Reviews are the backbone of Airbnb. After the reservation is complete, users are encouraged to leave a review. Reviews help build validity and references both for the guests and the users.

 

Mobile

In addition to the Airbnb website, the company offers mobile applications for iOS and Android customers. As of September 2012, users had downloaded the mobile application over 1 million times which accounts for over 26% of the company’s overall traffic.

 

Through the mobile channel users have all functionality of the website which includes private messaging making communication three times faster between users. The application also allows users to find listings based on what is available using geolocation.

 

In December 2012, Apple honored Airbnb with the Editor's Choice award for the Best Mobile Application of 2012 in the UK market. Airbnb was also awarded Most Disruptive Service of 2012.

 

Security

Airbnb user profiles contain recommendations, reviews, and ratings to build credible online reputations within the platform. Additionally, the site provides a private messaging system as a channel for users to message one another privately before booking and accepting reservations. Hosts are never required to accept a reservation. After the guest has checked out, the parties review one another to build website credibility similar to online marketplaces like eBay.

 

Airbnb facilitates online payments from guest to host through its Security Payments feature which processes payment transactions 24 hours after check in. This protocol offers a guarantee for guests and helps to uphold host cancellations policies before processing payments. Additionally, the Airbnb website facilitates security deposits and cleaning fees, the former of which is held until the property is vacated.The company’s revenue comes from a 6% to 12% commission of the guest payment and 3% of what the host receives.

 

Wish Lists

In June 2012, Airbnb launched a wish list feature offering users the ability to create curated catalog of desired listing they would like to visit. Co-Founder and Chief Product Officer, Joe Gebbia and his team conceived the idea of changing the website from an online marketplace to a source for aspiration. Users can curate their favorite destinations into organized lists and share these with other users. Since the launch of the Wish List functionality in June 2012, engagement with the Airbnb website increased by 30%. 45% of users engage with Wish Lists and had added over 1 million accommodations to personalized lists.

 

In creating Wish Lists, the product team designed a proprietary scrolling source code which allows users to engage with these lists without the website slowing down the user experience. Additionally, Airbnb open sourced the code, Infinity.js to the software developer community. 

 

Neighborhoods

In November 2012, Airbnb launched the Neighborhoods product. This travel guide helps travelers choose to the ideal neighborhood match based on a series of collaborative filters and attributes such as Great Transit, Dining, Peace & Quiet, Nightlife, Touristy, and Shopping. Currently, the Neighborhoods product is enabled for San Francisco, New York, London, Paris, Berlin, Washington, D.C., and Rio de Janeiro giving in-depth information for selected neighborhoods in these cities through photos, essays, maps, tags from locals, and assessments of public transportation. 

The Airbnb product team hand-mapped 300 neighborhoods within these seven cities and had local editors curate content for each neighborhood. Airbnb also added 70 street photographers who generated 40,000 photographs for the project. 

 

Impact

Critical reception

The founders of Airbnb have been praised for tenacity and creativity by Paul Graham (co-founder of Y-Combinator, Airbnb's incubator). The Wall Street Journal, 

Airbnb has been compared to Craigslist, HomeAway, Flip Key, WorldEscape, Uproost, and Groupon, other sites that offer spur-of-the-moment rentals. Airbnb was awarded the "breakout app" at the 2011 South by Southwest conference. Along with Quora and Dropbox, The New York Times listed Airbnb among the next generation of multibillion dollar start-ups. Following Airbnb, other services such as Getaround, Vayable, Guidehop, myTaskAngel and Task Rabbit launched with a similar model.

 

New York's state legislature passed a law in July 2010 making it illegal to rent out Class A residential space for less than 30 days. However, the bill's sponsor, State Senator Liz Krueger said Airbnb and its competitors are not the law's target. 

 

Popular impact

In July 2010, the company received more than 300 emails from users whose livelihood had threatened their ability to keep their homes due to financial hardship from the economic recession. This phenomenon has caused much discourse for the American Hotel & Lodging Association as short-term private rentals continue to disrupt the hospitality industry.

 

In November 2012, Airbnb commissioned HR&A Advisors to conduct a study which measured the market impact of collaborative consumption by users within urban populations. Specifically, the study measured the impact these companies had on the economy of San Francisco. The study found that from April 2011 to May 2012, guests and hosts utilizing the service contributed $56 million in spending within the San Francisco economy, $43.1 million of which supported local businesses. Over 90% of hosts surveyed rented their primary residences to visitors on an occasional basis, and spent nearly half the income they make on living expenses. The study also found the average guest stay was 5.5 days, compared to 3.5 days for hotel guests, and the average guest spent $1,045 during their stay, compared to the $840 spent by hotel guests.

 

In the aftermath of Hurricane Sandy, Airbnb partnered with New York City Mayor Michael Bloomberg to offer free housing for persons displaced by the storm. Airbnb built a microsite for this effort alone where victims register for housing and meet property owners with free housing. Additionally, Airbnb waived all service fees associated with these listings while maintaining the Host Guarantee for all properties listed. 

 

Criticism and controversies

In June of 2011, blogger and competitor Dave Gooden claimed that questionable sales practices including sending mass, automated emails sent to property owners on Craigslist led to Airbnb’s success as an Internet startup company. This user acquisition tactic was used along with several others when building the company business in 2009. However, the company found the practice largely ineffective.

 

In July 2011, there was first reports from a guest, "EJ", who had her apartment burglarized and vandalized by an Airbnb guest. After 14 hours of no response, Airbnb initially indicated that they would not compensate the host for damages. They later reversed this decision amidst public backlash. After three days of helping the victim, she claims Airbnb encouraged her to remove her complaint noting the "potentially negative impact" it could have on the company, and stopped contacting her completely. Following the incident, more hosts came forward expressing similar experiences, including a man whose home had been rented through Airbnb to a meth addict who later stole the host's birth certificate, went through "everything he owned," and caused thousands of dollars in damage. He expressed similar dissatisfaction with Airbnb's response to the situation. 

 

Additionally, in 2012, two prostitutes rented a Scandinavian apartment which the police raided. 

 

In response to the property damages claims, Airbnb launched its “The Airbnb Host Guarantee” property protection program in August 2011 which covered property loss or damage due to vandalism and theft for up to $50,000. Additionally, the company initiated a 24 hour customer service hotline, established a taskforce to review suspicious activity, and implemented a suite of security features. 

 

In May 2012, Airbnb took insurance underwritten by Lloyd's of London to extend this guarantee for up to $1 million in property damage at no cost to the listing host.