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10 December 2020

Airbnb

3Frameworks
13Insights

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Frameworks in this episode

Strategy4 steps

Marketplace Take-Rate Model (Assign vs. Assist)

Whether a marketplace can charge Uber-level take rates or is capped at Airbnb-level take rates depends on who the customer thinks they're buying from.

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Strategy5 steps

Seven Powers Analysis

Diagnose which of the seven sources of persistent differential returns a business actually has before trusting its valuation.

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Strategy5 steps

Value Creation vs. Value Capture Audit

Are you a Craigslist that gives value away, or a Google that captures what it creates — and what does the world lose in the process?

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Insights & moments

The myth-busts, hot takes, explainers, and tools worth keeping.

Myth Buster· 1

Myth Buster1:14:00

Belonging Narrative vs. Transactional Reality

Airbnb leadership repeatedly emphasized belonging and community as the core value proposition, but the hosts argue most guests actually use the platform transactionally, comparing price and experience like any other option.

  • At the 2016 Airbnb Open conference, Brian Chesky framed the vision around belonging and connection between hosts and guests
  • The hosts note most users treat Airbnb as one transactional option among several (hotels, VRBO) rather than a community experience
  • This disconnect may explain the failure of aspirational products like Trips, Places, and Experiences
#brand narrative#product strategy#consumer behavior

Hot Take· 2

Hot Take1:20:00

Growth Was Slowing Long Before the Pandemic

Bookings growth decelerated from 70%+ to under 30% between 2016-2019, with dollar bookings added per year becoming flat even as costs kept rising like a growth company's.

  • Bookings growth fell from 70%+ (2016) to 50% (2017) to 40% (2018) to under 30% (2019)
  • Absolute dollars of bookings added stayed roughly flat ($8.5B in both 2018 and 2019), implying linear rather than compounding growth
  • Total expenses grew 46% in 2019 even as bookings grew only ~28-29%, with fixed costs growing 60%

“the growth the base is growing, but the amount that you're adding every year is now constant.”

Ben Gilbert · 1:20:30

“the company's cost structure keeps growing as if it were a growth company.”

Ben Gilbert · 1:21:00
#growth metrics#IPO#red flags
Hot Take1:11:30

Airbnb's Innovation Graveyard: Trips, Places, and the Airline That Never Was

Almost every major product launch outside Airbnb's core stays business — Trips, Places, a movie studio, flight booking, tiny homes — has failed or quietly disappeared, raising doubts about the company's ability to expand into adjacencies.

  • At the 2016 Airbnb Open, Brian Chesky called Trips (bundling Homes, Experiences, Places) the most significant development in company history
  • Places (a Yelp/OpenTable-style aggregator) and the Trips meta-product have both quietly disappeared
  • The company also explored car rentals, grocery delivery, flights, and even a movie studio (Ralph Street Films), none of which stuck

“it is every single product they introduced except for one has been a complete failure.”

Ben Gilbert · 1:11:30

“I just don't I don't think the company is a master executor outside of that initial opportunity. Like it's it's almost like the anti-Amazon”

Ben Gilbert · 1:56:30
#product strategy#adjacencies#execution

Explainer· 5

Explainer45:00

Growth Hacking With Craigslist and Facebook Ads

Early Airbnb used Craigslist cross-posting to capture demand and targeted Facebook ads by interest to recruit hosts, tactics that worked because the channels were new and unexploited.

  • Airbnb auto-published listings to Craigslist to capture demand, then kept bookings native to Airbnb going forward
  • They used interest-targeted Facebook ads (e.g., wine lovers, yoga fans) to recruit new hosts in specific cities
  • These growth channels have since been arbitraged away and can't be replicated as cheaply today

“the value has largely been arbitraged away, where you can't do it, you know, like a wide open fire hose the way that they were…”

Ben Gilbert · 49:00
#growth hacking#marketing#Craigslist
Explainer59:30

The Negative Cash Conversion Cycle

Airbnb collects guest payment at booking time but doesn't pay hosts until after check-in, creating a float that effectively self-funds growth — until growth reverses.

  • Guests pay months in advance; hosts get paid only after check-in, creating a large float
  • This float let Airbnb largely self-fund growth without needing all the venture capital raised
  • The same dynamic works in reverse during downturns, turning into a liability when bookings shrink
#cash flow#business model#finance
Explainer58:00

Why Reviews Beat the Samwer Brothers in Europe

Facing Rocket Internet's clone WimDu, Airbnb won in Europe not primarily through office openings or sales teams but because its existing listings already had reviews, creating a trust flywheel a listings-farm competitor couldn't match.

  • Airbnb is a true global network effect — unlike food delivery or ride-sharing, you can't win locally while ceding a whole continent
  • WimDu built a sales 'sweatshop' to acquire listings, but those listings lacked reviews and felt lifeless
  • Airbnb's pre-existing global reviews created enough trust and life on listings to out-compete a faster, better-funded clone

“Airbnb, because they've been operating globally from the get-go, they had listings with reviews already in Europe. And I think once you start to get…”

David Rosenthal · 59:00
#network effects#international expansion#competition
Explainer1:49:30

Host Multi-Homing Is Eroding Airbnb's Lock-In

Both hosts admit they've started listing on VRBO in addition to Airbnb, illustrating a broader trend of hosts multi-homing to maximize revenue and reduce single-platform risk, aided by new third-party sync tools.

  • Hosts increasingly multi-home across Airbnb, VRBO, and Booking to maximize revenue and reduce vacancy
  • Airbnb's 'smart pricing' tool optimizes for occupancy/revenue in ways that don't always align with host interests
  • New software tools (e.g., Beyond, Guesty) now make it frictionless to sync listings across multiple platforms

“I do think the pricing algorithms on Airbnb are biased to fill rates versus maximizing rent.”

David Rosenthal · 1:51:00

“the incentives are misaligned between Airbnb and their hosts for features like smart pricing.”

Ben Gilbert · 1:52:00
#competition#supply-side#moat erosion
Explainer1:32:00

IPO Pricing and the Overnight Stock Pop

Airbnb priced its IPO at $68/share ($47B valuation) and opened trading at $146, more than doubling to over $100B market cap within minutes.

  • Airbnb priced at $68/share, raising $3.5B at a $47B valuation
  • The stock opened at $146/share and quickly traded near $159, valuing the company at over $100B
  • This made the earlier $18B Silver Lake distressed-debt round from March 2020 look remarkably favorable in hindsight

“Opens at 146 a share at 159 a share now.”

Ben Gilbert · 1:32:30

“that silver lake investment at 18 billion just what six, eight months ago look like a genius move.”

David Rosenthal · 1:32:00
#IPO#stock market#valuation

Story· 3

Story11:00

From Crit Buns to Air Bed & Breakfast: The Founding Story

Brian Chesky and Joe Gebbia meet at RISD, bond over scrappy side projects like Crit Buns cushions, and eventually reunite in San Francisco to launch Airbed & Breakfast for a design conference.

  • Joe and Brian meet at RISD and become fast friends despite not fitting the artsy mold
  • Joe starts a novelty company called Crit Buns while still unsure of his career path
  • Joe mails Brian a Crit Bun as a symbolic invitation to start a company together
  • The first version of Airbed & Breakfast was built in three days on WordPress for a single design conference

“Hey, we've got this thing. One day I predict that we're gonna start a company together, you and me, and somebody's gonna write a book…”

David Rosenthal · 12:30

“So they take three days, they put together www.airbed and breakfast.com on WordPress”

David Rosenthal · 20:30
#founding story#Brian Chesky#Joe Gebbia#RISD
Story33:00

Obama O's and Cap'n McCain's: Bootstrapping With Cereal

Out of money before Y Combinator, the founders handmade election-themed cereal boxes to survive, and the story of their scrappiness (plus the cereal boxes themselves) is what got them into YC.

  • The founders made their own Obama O's and Cap'n McCain's cereal rather than reselling existing boxes
  • They made $20-30k in profit, enough to survive until YC
  • Paul Graham was unimpressed by the pitch itself but was won over by the cereal story showing grit and 'default alive' resourcefulness

“Well, growth covers a lot of sins.”

David Rosenthal · 1:08:00

“Joe tells him the story of how they've stayed alive, and of course, what is one thing that PG values above all else? It's survivorship…”

Ben Gilbert · 37:00
#bootstrapping#Y Combinator#grit
Story1:24:00

COVID Crash: Negative Bookings and Distressed Financing

In March 2020 Airbnb's bookings went negative as refunds exceeded new bookings, forcing a distressed $2B raise from Silver Lake and Sixth Street at a $18B valuation with debt priced at 9-11.5% interest, followed by 25% layoffs.

  • Gross booking values turned negative in March/April 2020 as refunds exceeded incoming bookings
  • Airbnb raised $1B equity at an $18B valuation (a steep haircut) and $1B in debt at 9% and 11.5% interest rates
  • The company laid off 25% of staff and cut $800M in marketing, calling it a 'second founding'

“they lay off 25% of the company which is that's a significant huge projection in force.”

Ben Gilbert · 1:27:00
#COVID-19#crisis management#financing

Q&A· 1

Q&A1:42:30

Bull Case vs. Bear Case Heading Into the IPO

The hosts weigh the bull case (unique global supply, 91% direct traffic, $1.8T TAM) against the bear case (decelerating growth, rising multi-homing, and unproven ability to run performance marketing at scale).

  • Bull case: a decade of unique supply creation gives Airbnb a brand moat and 91% direct/organic traffic, unlike OTAs that pay Google billions
  • Bull case: TAM is enormous ($1.8T short-term stays) with room to grow even after COVID
  • Bear case: growth was already decelerating pre-pandemic and the company has never proven it can profitably scale paid acquisition
#IPO#valuation#bull bear case

Takeaway· 1

Takeaway1:59:00

Is Airbnb Becoming the Next eBay?

The hosts compare Airbnb's trajectory to eBay's: massive early network effect and growth, followed by deceleration and share loss to specialized vertical marketplaces like Hipcamp and Outdoorsy.

  • eBay had a similar enormous TAM and global network effect but has been chipped away by verticalized marketplaces
  • Hipcamp is offloading camping-type listings and Outdoorsy is doing the same for RVs, both niches previously served by Airbnb
  • The open question is how much share these vertical competitors can take as travel preferences shift post-pandemic
#competitive comparison#vertical marketplaces#long-term outlook