At this morning’s SXSW session Airbnb’s CEO Brian Chesky talked candidly about the challenges of growing and scaling a disruptive business model.
Chesky began by charting the road to investment: from financing the startup on personal credit cards, to dabbling in breakfast cereal (Obama-O’s, making $30k to keep the company afloat), to securing investment. A year-and-a-half from launch, Airbnb had just 100 users. But Chesky talked passionately about the power of these early adaptors as champions for the business: “better to have 100 people love you, than a million people sort of like you”. Embracing this concept, the founding team went door-to-door in New York taking “professional” photographs, for free, to help early users better represent their homes.
He encouraged the SXSW audience to have a lot of ideas, and not worry too much if they seem like bad ideas. “Airbnb seemed like a crazy idea at first, as did the free photography, as did the $50k guarantee (that is now a $1m guarantee)”. Chesky commented that too many entrepreneurs prioritise ideas that will promote growth – to drive growth metrics and investment potential – rather than simply focussing on good ideas that people want. It’s simple: “make good product that people love”.
Chesky and his co-founders made early mistakes, including a short phase focussing on apartment groups (believing that this would allow them to scale faster) rather than individual homes. Having stayed in a bland apartment building in London, followed by an old Parisian home, he felt convinced that the key is to “always use your product”. So, in June 2010, Chesky moved out of his apartment and since then has largely only lived in Airbnb homes…
Having built the company on personalised experiences, how do you scale? “Work out how to do something remarkable and then use technology to scale it”. Coming back to his central driver – make good product that people love – Chesky commented that the habits of the first 100 will be what the next 1,000,000 will look like. Get those first experiences right: tweeking it for 100 is simple; changing it for 1,000,000 will break the business. Like Steve Jobs, Chesky believes “design isn’t how something looks, it is how something works”. Design the end-to-end user experience in detail (Airbnb hired a feature film storyboard artist to capture the ideal user experience “frame by frame”) and then you can plot where the users’ journey deviates from this, and why. Create emotional attachments to experiences, as these are the ones that stick. Airbnb heavily prioritised growth from within their early community of users, prioritising cities which had global reach – such as New York and London – so that users would go home and spread the company message.
Talking about company culture: “I don’t want to do what will make me win, I want to do what I think is right and will make me want to come to work everyday. A community of missionaries will beat a community of mercenaries every time”. Good company culture runs deep, shown through the Airbnb and NYC team-up to offer free accommodation to Hurricane Sandy victims. But it’s not simply philanthropic: “the best marketing is investing in the user and they will do the marketing for you”.
Chesky briefly discussed the current controversy over alleged “illegal rentals” in New York, and the impact of Government legislation that is arguably out of date, lagging behind technological change. Moving on to Airbnb’s position as “the face of the sharing economy” – a people powered economic system – Chesky commented on the disconnect between consumption, production and product availability. He used the example of power tools: “people don’t want power drills – there are some 80m powerdrills in the USA, each one used on average for 13min in its lifetime – they want holes in their walls”. This leads on naturally to asset sharing – including time, the country’s largest asset – which is “naturally the thing after mass production, technology is allowing us to cycle back from generic brands and mass manufacturing, to personalised and local consumption. Ask yourself what won’t be local and personal in the future? You’ll probably conclude that the sharing economy could replace a huge amount of the existing economy…”.
Asked if they see the Airbnb becoming a larger platform beyond vacation rentals, Chesky commented that while there are now many “amazing spaces” listed on the site – boats and castles, tree houses and the entire country of Liechtenstein – they aren’t tempted to become the marketplace for everything. Chesky wants to do one thing well, namely travel. Efforts remain in this space, focussed on being vertically integrated rather than horizontally spread across multiple markets.
Five years on from the credit cards and breakfast cereal, some 50,000 to 60,000 people now use Airbnb every night across 170 countries. At this year’s SXSW festival alone, 8,000 delegates are staying in Airbnb sourced accommodation. AirBnB’s operational success can be traced to three levers of competition which form the basis of strategy on most platforms:
- Creation of new sources of supply
- Creation of new user behaviors on the demand side
- Architecting a strong curation system
Read more about Airbnb’s competitive advantage on TheNextWeb.