This week, we consider Airbnb in our growth hacker series. Their story shows that a lot of the success of a startup is in creativity, and that it’s not just about the money, it’s about the idea.
The year is 2007, Brian Chesky and Joe Gebbia are two poor designers in San Francisco who can’t even afford to pay the rent. To get by, they put a few airbeds in their loft and offer breakfast – Airbed & Breakfast is born.
In 7 years time, Chesky and Gebbia will be at the helm of a business providing 10 million guests with 550,000 properties and sitting atop a $10 billion valuation. By the 9 year mark (based on the number of beds offered) Airbnb has ranked the fifth-largest hotelier in the world. Their prices are at least one-sixth cheaper than traditional competitors and they have a presence in almost every country worldwide.
So, how did Airbnb grow to the extraordinary global company it is today? IA investigates….
First step to success: Cereal
Chesky and Gebbia’s first break came in a very unexpected way: with a metric ton of cereal. With it they would gain their initial funding through the design of special election-themed boxes (Obama O’s and Cap’n McCain’s) which went for $40 a pop, raising them an unbelievable $30K.
But this didn’t get them the traction they needed, so they took the plunge and got a place on Y Combinator’s 2009 class, netting them an extra $20,000 and much needed guidance. This lead to the name change to the now infamous Airbnb and a much needed $600K seed round. Fred Wilson famously rejected the entrepreneurs, but later regretting his decision keeps a box of Obama O’s in the conference room as an example of how to get startups off the ground:
“Whenever someone tells me that they can’t figure out how to raise the first $25,000 they need to get their company started I stand up, walk over to the cereal box, and tell this story. It is a story of pure unadulterated hustle. And I love it.”
Black-hats or marketing wizards?
The issue that Airbnb and many other startups face early on is even if they have a great idea, its hard to get high level traction for a company that nobody has heard of. And this lead Airbnb to a highly controversial but unarguably very effective growth hack – The Craigslist ‘integration’.
Craigslist enjoyed mainstream success across the US and many of their users supported Airbnb’s drive for travel accommodation outside of the hum-drum hotel experience, therefore their huge user base was a target the nascent Airbnb would kill for. Therefore Airbnb created a hack that would offer their own current users the opportunity to post them on Craigslist as well in one click. The service would then acquire them a unique URL for their Craigslist entry and automatically fill out the posting with the requisite details from their Airbnb offering.
Not only did this hack give access to the sheer volume of prospective users on Craigslist, it also advertised the superiority of Airbnb listings compared to the other properties available: More personal style, with better descriptions and nicer photos made these new listings much more appealing. Then discovering they typically made more money on Airbnb led many of them to stay.The next step to truly capitalise on this venture was to turn the offer around, and poach Craigslist’s users directly. This involved creating an email harvesting tool that would collect all of the users emails in specific regions and then email them suggesting they should post on Airbnb too.
Start with a perfect product and build from there
“We start with the perfect experience and then work backward. That’s how we’re going to continue to be successful“
Airbnb started with one major benefit over other options even before they establish building their better experience, they were already substantially cheaper, generally 30-80% less than the hotels in the surrounding area, making them very attractive to generation Y, who want to travel but not be ripped off in the process. However this wasn’t enough to survive, they needed to build an identity.
The first USP that Airbnb implemented was their approach to photography.They recognised that those people who were using low-resolution or no photographs at all in their listings got significantly less rentals. So how to solve this problem? – They could have gone vanilla and simply given their users tips on how to take better photographs, something which of course they would implement later, however they need something no one else would risk doing. So they rented a $5000 camera and took professional grade photographs of as many New York listings as possible.
The result was immediate – nearly three times as many bookings in New York and their revenue doubled. This was the birthplace of the Airbnb photography program – hosts could schedule a professional photographer to come and photograph their space. This service was expensive short-term but long term the well photographed listings would earn their hosts $1025 more per year on average. They now employ more than 2000 freelance photographers worldwide. These ‘certified photographs’ help inspire trust among travellers wishing to rent a place to stay to be sure of what they’re buying into, and thus they wouldn’t accidentally be snoozing in an opium den.
So what do we learn from these two early growth concepts?
- There is no such thing as a crazy idea when it comes to getting off the ground, only inefficient and efficient (Obama O’s)
- Following on from this, is not necessarily the easy idea that will give you the most growth, it may require innovation far beyond the box you want to look outside of. It may even in this case walk in a questionably grey area! (Craigslist)
- What is expensive in the short term may be a worthy investment if a clear long term benefit can be proven with empirical evidence (Photography Program)
Turning a good idea into a social sensation
Over the next couple years Airbnb added a number of features that would boost their service to a whole other level. Airbnb had allowed users to save properties by giving them a generic star, very internet explorer. However following an A/B test they found that changing the star to a heart resulted in a 30% increase in engagement! And they loved that so it became at the centre of their next venture.
In summer 2012 Airbnb revamped their site around the new concept of Wish Lists. These were lists of properties that could be made by any user. But the key was they weren’t purchasing lists, they could be aspirational, like planning a holiday or road trip and could be shared with friends on social media. These lists gave Airbnb a crucial kicker card over rival businesses, a non financial incentive to return to the site even when not making a purchase, thus keeping their brand front-of-mind. Just four months after their initiation WishLists were being used by 45% of Airbnb users and over a million had already been created! Gebbia himself summarised it best:
“Its easy to search, but what if you don’t know where you want to go?”
This lead to Wishlists being used as a first party content creation tool by Airbnb itself, curating lists of their favourite properties with aspirational titles such as ‘It Yurts So Good’. They built on their aspiration to provide a local and authentic approach to travel through Airbnb Neighbourhoods with the intention of providing the definitive guide to the neighbourhoods of the world. It featured more than 2000 neighbourhoods across 21 cities and allows people to plan their holidays to an obsessive level, making their service just as accessible to the perfectionist as to the last-minute traveller.
“Our users have told us that location is the single most important criterion when choosing a place to stay. And with such overwhelming choice, travellers often have trouble planning their accommodations. … But imagine if someone created a tool that matched you with the neighbourhood that’s right for your trip.”
Airbnb is of course a two sided coin, and their success depends not only on the happiness of the traveller but the host as wellAnd their introduction of reasonably priced professional cleaning services in a number of cities allowed hosts to relax in the knowledge that a pre-vetted cleaning team would prepare their listing to their exact specifications every time, from fresh towels to pillow mints and Evian. Their introduction of the Host Home feature was like giving each newbie to Airbnb a masterclass in hoteliership, teaching more complex options as the users progresses from the basics of listing a property to creating a guidebook of their favourite spots for their guests to browse at leisure.
So what does this tell us about social growth? Its clear from what we’ve read here is that in order for a brand to be shared in such a viral way as Airbnb there has to be
- A clear benefit to the user of doing so (Referrals & Trip Planning)
- Content that is naturally sociable and can therefore easily be shared with peers through any channel (Wishlists)
Airbnb like any fast growing company did not do so without its share of controversy. In addition to the questions raised by the ‘Craigslist Integration’ we discussed earlier, in June 2011 Airbnb was rocked by a number of incidents regarding the safety of its services. These incidents largely revolved around theft or damage occurring during a rental, and they felt that Airbnb didn’t give them sufficient aid or recompense for these events.
However in August they implemented several security measures to increase the safety of their service. These included a $50,000 guarantee for damage or theft and a 24 hour helpline. This then became the $1,000,000 Host Guarantee on all rentals for damage or theft that is available today.
Rebranding to reflect their identity
In 2014, after a year of introspective brand analysis as well as competitor analysis Airbnb made the big change – no longer would they play safe with
cold, overly-corporate blue. Chesky wanted their rebranding to reflect the distilled essence of the company – belonging anywhere. And to serve this purpose he created the Bélo, to embody a location pin, a heart, the A in Airbnb and a person: the universal symbol of sharing.
Who wouldn’t give their friends a holiday?
Referral programs are one of the quintessential mainstays of growth hacking, one only has to think of the Dropbox Space Race to see how successful such campaigns can be in launching your user count to new height. But Airbnb wanted to do this scientifically, so they A/B tested messages and mechanisms and found a nice surprise: we’re not all greedy selfish pigs!
They found that when comparing self-interested and altruistic messages, those that were sending vouchers as a gift to friends sent more trial invites than those keeping vouchers for themselves. They have since found that referrals have increased booking as much as 25% in some markets but also that referred users to be more loyal to the service than the average user and also send more referrals themselves. Which fits perfectly with the company’s desire to gain quality users that will continue to use, improve and enjoy Airbnb.
I hope you enjoyed learning a little bit more about the early beginnings of one of the world’s fastest growing brands, and was also voted as the best place to work in 2016 according to Glassdoor!
If you’d like to read more about some of the world’s most innovative Growth Hacks, I’ll be writing another piece next week, in the meantime feel free to check out some other fantastic places to work on our website.