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I'm late to the party, but here's what bothers me about Airbnb: It's being treated like a technology company and not what it is, a retail company. Which is bad

I'm late to the party, but here's what bothers me about Airbnb: It's being treated like a technology company and not what it is, a retail company. Which is bad because wall street hates retail, but not as much as venture capital hates retail. And when people are delusion thats when mistakes are made. Look at this way, Airbnb is a broker for rental inventory that they never own or control. Since they don't actually control the inventory, the owner of the inventory is free to take it anywhere they want. Airbnb has no secret sauce. This leaves Airbnb's business totally unprotected and vulnerable to an unlimited number of competitors coming up. Eventually Airbnb will make a mistake, maybe they'll push hosts too far, maybe some catastrophic thing will happen to a guest, the point is something will happen that will shift favor to a competitor. Maybe not tomorrow or next year, but someday. But it gets worse, Airbnb is going to spend a lot of their vc funds fighting lawsuits, lobbying, and paving the way for their competitors. If I were to compete with Airbnb, I'd spend my time building a better platform and marketing strategy. Then wait for Airbnb to solve short-term rental legislation, then slip into those markets with a far lower cost to entry than Airbnb paid. But what about technology you say? They've built a great platform that will take time for a competitor to replicate you say. Well if your business defense is solely based on having a complicated website, you're going to have a bad time. They've hit on a great idea: home sharing. But they don't own the idea, they don't own the homes and those homes are free to list anywhere they want.

vidar 10y ago
They do own the accumulated trust
bernardlunn 10y ago
@spaceflunky they said that about Facebook as well. Tech matters a lot less than network effects.
- jonknee 10y ago
  It's not similar to Facebook at all, Craigslist would be a more apt comparison.
  - JBReefer 10y ago
    That is a better analogy, seeing as it's a direct Craigslist competitor (Craigslist has offered a similar short term rental listing for a very long time)
- spaceflunky 10y ago
  Fair point. I still feel the same way, but I understand about FB is that friends and family are hard to leave behind and its hard to corral people into a new platform, when most people don't see social media as that important to begin with. It's like people are stuck in this hole of apathy. It's also a free service, so most people don't give shit. So they don't leave then the person who does care doesn't leave because all their apathetic friends haven't left and so on... As for Airbnb, because money is involved and its a retail transaction the game changes. It's like in Freakonomics how once you introduce money into a relationship, a whole new set of dynamics emerge. Think about your affinity for retailers. Do you really care if your Moleskin notebook was bought from Amazon, Target, or B&N? You probably just went with the cheapest.
mentos 10y ago
Very insightful thanks for sharing. I would say that if AirBnb is still the market leader in 10-20 years it's because we underestimated the power of a trusted brand.
- spaceflunky 10y ago
  So you just pointed out another paradox: Products have trusted brands, retailers don't. People know and trust the products they use, not who sold it to them. I have no idea where I bought most of the stuff in my home after a few weeks if I didn't buy it directly from the producer. People LOVED Sears for a century and then when someone offered the same products some where else for cheaper in a snazzier space, Sears went down the tubes. People thought Target was a great experience, but then free 2-day shipping and a lower price from the comfort of your home for the same products came along and now Target is struggling. Nobody pays a more for a ticket on Priceline.com if they know they can get it cheaper on Expedia.com. If Airbnb, owned the homes and thereby owned the experience, they'd be able to build brand loyalty. But they don't own any of those things.
  - bksenior 10y ago
    You're talking about a general business cycle. Even if they owned the products say like (No Fear Clothing), the company is vulnerable to changing tastes, production problems and general operator disinterest.
    - spaceflunky 10y ago
      But look at Urban Outfitters, they were the COOLEST thing 10 years ago. Today they are struggling. In another 10 they may not exist. Being a retailer does not make you impervious, in fact it makes you more vulnerable IMO. How many products can you name that are more than >50 years old? How many retailers can you name that are >50 years old?
      - singlow 10y ago
        There are quite a few 50+ year old retailers. Quite a few 100+ years old. As for Urban Outfitters, their net sales are more than triple what they were ten years ago. They don't see 30% year-on-year growth anymore, but they haven't seen a decline.
bksenior 10y ago
You must also be bearish on; uber, Facebook, Yelp, Ebay, etc... Network effect + brand recognition is worth a TON. It's why you're probably wearing Nikes right now and not generics.
- spaceflunky 10y ago
  Super bearish on Uber^1. I mean when you get into a Lyft vs an Uber, do you REALLY notice a difference? Its the same thing with Airbnb. Uber is going to pave the way for someone else to come along. Look at Pets.com, people freaked out because they were first to sell pet stuff online. Investors said, look they built an ecommerce website (really hard to do back them), they are first so they have brand affinity, and they'll build trust. Where is Pets.com now? As for Nike, they're on an upswing now, but they are constantly under siege. But you're missing my point, which is that products (like Nike) build brand affinity, not retailers. Do you buy your Nikes from the same place every time? ^1 unless uber can use their capital to develop a self driving car before anyone else. This would give them a huge advantage. Competitors would struggle to overcome this and would make über virtually invincible.
  - notyourwork 10y ago
    > Do you buy your Nikes from the same place every time? This is precisely the point most are overlooking when they disagree with your point.
  - woah 10y ago
    Your analogy is not great, IMO. In this case, AirBnb is the shoe, the web browser and device used to access it is the shoe store.
    - spaceflunky 10y ago
      Airbnb is not the shoe. The apt is the shoe and airbnb is Footlocker. Have you looked at footlockers stock lately?
    - deleted 10y ago
      [deleted]
ulfw 10y ago
Pretty much all the sharing economy is retailer. AirBnB, Uber, Lyft, Postmates, all those "do your laundry by ordering a dude to pick it up from your home with an app" startups etc. None of it is tech anymore and thus you are right. They are by no means bad or insignificant businesses. Quite the opposite! But tech they are not. Twenty years ago AirBnB would have travel agencies and Uber a Black-Cab Call-In number. Now it's a website or app. The valuations are way off.
- yomly 10y ago
  I can understand the sentiment of the parent post but I disagree. The recent UberXPostgres articles are an insight into the engineering challenges that go into solving these business problems at scale. The projects probably started as some hacky glue programmed Frankenstein but their current iterations solve considerably difficult and expensive problems that I don't think is trivial for new entrants to come in and instantly replicate. So engineering and capital requirements aside, there's the matter of network effects and customer adoption to tackle. It'd be a very hard sell to convince users to stop using AirBnB or Uber - the inventory may be volatile, but it's deep and expansive. Any country I go to, I will first think AirBnB or Uber as I will be confident without even checking that they'll have coverage. Much like how I don't even bother looking anywhere else for products other than Amazon - they'll probably have what I'm looking for, it'll either be the cheapest or close to the cheapest product and the delivery experience will be dependable. We at HN consider ourselves being more acquired than most but are probably still prone to appreciating convenience over optimisation now and then. Current consumer trends suggest though that our behaviour is in the minority and so "first-mover"* advantage is king. *(AirBnB and Uber almost certainly were not the first in their respective spaces, just like the iPad wasn't the first ever tablet)
  - deleted 10y ago
    [deleted]
  - spaceflunky 10y ago
    Uber definitely has built some technology that allows them to scale out a real-time ride-sharing app with payment, locations, optimizations, etc, which is a real technological feat. However, I still question: 1.) how difficult that is to do (iirc its not like Lyft is far behind and there are others as well) and 2.) does uber have patents on these developments and 3.) how much of those UberXPostgres articles are just posturing to the investment community (i.e. Uber flexing it's muscles to show how it's spending that cash) vs. serious long-term competitive advantage? You're missing my point about Airbnb, by pivoting to Uber, which I think is in a totally different boat than Airbnb given that Uber does have greater control over some of their inventory than Airbnb and total control over some of the Uber inventory which Airbnb does not. Unless Airbnb starts buying apts and renting them out themselves, which be a better play for them, albeit politically disastrous most likely. As others pointed out, Airbnb has not published big engineering feats (ala UberXPostgres) nor does it need to, nor likely ever will. The point about Airbnb is that Airbnb is a retailer with total lack of control over inventory. Competitors will one day create a sleeker better platform because there's no defense for Airbnb. I think a good analogy would be dating sites. It feels like every year there's a new app: Match.com->eHarmony->OkCupid->plentyoffish->jdate->tinder->bumble, the list goes on and on. Where's the brand loyalty in dating sites? There is none because no one cares about the brand, they care about the inventory (i.e. booty) and so if a site has a better way of finding those dates (be it faster or more curated) or just better "inventory" then people are going to use those new sites. That's how I see Airbnb going. Eventually there are going to be different sites that do the same thing, but tailored to different needs. Airbnb will still be around, but it sure as hell won't be worth $30 billion dollars. Also, home-sharing is about as fickle as dating. People date until they find a mate and then stop. Most people don't live their home for more than 3 years, especially in popular Airbnb markets like NYC, LA, or SF. Therefore there's a lot inventory turn over that Airbnb has to deal with, just like dating sites, which makes it easier for a competitor to come in and swoop up people who new to home-sharing.
dawhizkid 10y ago
Have to agree on this one. It's a prettier Craigslist with a payment transfer mechanism. In my experience as both a guest and a host, AirBnB does basically nothing after the reservation is booked.
trimbo 10y ago
One strategy to fight this is to offer rewards programs and/or credit cards with special perks. Retailers you've pointed out in other comments do this -- Amazon has a credit card[1]. Target has one that gives you 5% off purchases at Target. Also airlines and hotels do points/miles and credit. Without them, people would only choose the best price every time. Does AirBnB have enough regulars to make those rewards programs worth it? Do travel-weekly business people use AirBnB? If not, it's like being given the buy-10-get-one-free sandwich card at the deli you go to once a year. [1] - Edit: And prime!
murtali 10y ago
I think their value over the long term is similar to tripadvisor/yelp - while anyone can come in a create a repository of home sharing they wouldn't have the reviews/reputation data as AirBnB has. Going into someone's home / letting someone in your home, just like hotel reviews or restaurant, reviews/ratings can matter in the decision making process.
- spaceflunky 10y ago
  The difference being that tripadvisor and Yelp own the reviews. They own the underlying core value. The value of Airbnb is the real estate which they do not own or control. Sure reviews help, but that's like saying only Amazon can sell something because they have reviews. Not to discount your point entirely, I still think there's value to reviews that validate hosts, but it's not he core value.
dispatcher68 10y ago
There is an entire blog dedicated to the topic of tech at Airbnb: http://nerds.airbnb.com/ http://nerds.airbnb.com/. Perhaps you will still feel the same after reading this? Peter Thiel's Zero To One described four pillars that were necessary for a monopoly. It appears Airbnb has most if not all of these. 1. Network effects - this is usually more important than proprietary tech. They have this - global network effect. This is not a "retail company" any more than Amazon's 3rd party marketplace or Alibaba's is. 2. Tech - read blog and decide for yourself. It's easy to imagine at sub-scale also being able to build Facebook, Instagram, Snapchat, etc. Most of the challenges come at scale (and are protected by #1 above). 3. Brand - the commenters seem to agree they have this. 4. Economies of scale - they have this.
- spaceflunky 10y ago
  I agree with 1 and 3. 2 and especially 4 don't resonate. Would love to know how you describe 'economies of scale' at Airbnb
- deleted 10y ago
  [deleted]
- ethanbond 10y ago
  Why does everyone think that a competitor must be able to operate at the scale of Uber/Airbnb the day it's released? How many taxi commissions thought "oh no one can dethrone us, no one has 10,000 cars!"
  - dispatcher68 10y ago
    Uber does not have meaningful network effects. Airbnb does. A competitor would need to be more than marginally better to compete subscale, as Airbnb was vs craigslist or original vrbo.
  - thesimpsons1022 10y ago
    Because I travel to paris one week and new york the other and seattle the other. If the listings aren't at all those places I discard the app and never use it again.
rjf1990 10y ago
This is a pretty terrible analogy. It's not a retailer; it's a marketplace. Marketplaces don't get commoditized. Is there another Ebay out there? Retailers can purchase the inventory at will, then earn the demand. Marketplaces have to earn both sides. Airbnb was not the first here; Homeaway has been away for a long time, owns all the web properties, and has far better SEO. Airbnb is kicking their ass. Sure their dominance won't last forever, but no company's does.

vidar 10y ago

They do own the accumulated trust

bernardlunn 10y ago

@spaceflunky they said that about Facebook as well. Tech matters a lot less than network effects.

jonknee 10y ago
It's not similar to Facebook at all, Craigslist would be a more apt comparison.
- JBReefer 10y ago
  That is a better analogy, seeing as it's a direct Craigslist competitor (Craigslist has offered a similar short term rental listing for a very long time)
spaceflunky 10y ago
Fair point. I still feel the same way, but I understand about FB is that friends and family are hard to leave behind and its hard to corral people into a new platform, when most people don't see social media as that important to begin with. It's like people are stuck in this hole of apathy. It's also a free service, so most people don't give shit. So they don't leave then the person who does care doesn't leave because all their apathetic friends haven't left and so on... As for Airbnb, because money is involved and its a retail transaction the game changes. It's like in Freakonomics how once you introduce money into a relationship, a whole new set of dynamics emerge. Think about your affinity for retailers. Do you really care if your Moleskin notebook was bought from Amazon, Target, or B&N? You probably just went with the cheapest.

mentos 10y ago

Very insightful thanks for sharing. I would say that if AirBnb is still the market leader in 10-20 years it's because we underestimated the power of a trusted brand.

spaceflunky 10y ago
So you just pointed out another paradox: Products have trusted brands, retailers don't. People know and trust the products they use, not who sold it to them. I have no idea where I bought most of the stuff in my home after a few weeks if I didn't buy it directly from the producer. People LOVED Sears for a century and then when someone offered the same products some where else for cheaper in a snazzier space, Sears went down the tubes. People thought Target was a great experience, but then free 2-day shipping and a lower price from the comfort of your home for the same products came along and now Target is struggling. Nobody pays a more for a ticket on Priceline.com if they know they can get it cheaper on Expedia.com. If Airbnb, owned the homes and thereby owned the experience, they'd be able to build brand loyalty. But they don't own any of those things.
- bksenior 10y ago
  You're talking about a general business cycle. Even if they owned the products say like (No Fear Clothing), the company is vulnerable to changing tastes, production problems and general operator disinterest.
  - spaceflunky 10y ago
    But look at Urban Outfitters, they were the COOLEST thing 10 years ago. Today they are struggling. In another 10 they may not exist. Being a retailer does not make you impervious, in fact it makes you more vulnerable IMO. How many products can you name that are more than >50 years old? How many retailers can you name that are >50 years old?
    - singlow 10y ago
      There are quite a few 50+ year old retailers. Quite a few 100+ years old. As for Urban Outfitters, their net sales are more than triple what they were ten years ago. They don't see 30% year-on-year growth anymore, but they haven't seen a decline.

bksenior 10y ago

You must also be bearish on; uber, Facebook, Yelp, Ebay, etc... Network effect + brand recognition is worth a TON. It's why you're probably wearing Nikes right now and not generics.

spaceflunky 10y ago
Super bearish on Uber^1. I mean when you get into a Lyft vs an Uber, do you REALLY notice a difference? Its the same thing with Airbnb. Uber is going to pave the way for someone else to come along. Look at Pets.com, people freaked out because they were first to sell pet stuff online. Investors said, look they built an ecommerce website (really hard to do back them), they are first so they have brand affinity, and they'll build trust. Where is Pets.com now? As for Nike, they're on an upswing now, but they are constantly under siege. But you're missing my point, which is that products (like Nike) build brand affinity, not retailers. Do you buy your Nikes from the same place every time? ^1 unless uber can use their capital to develop a self driving car before anyone else. This would give them a huge advantage. Competitors would struggle to overcome this and would make über virtually invincible.
- notyourwork 10y ago
  > Do you buy your Nikes from the same place every time? This is precisely the point most are overlooking when they disagree with your point.
- woah 10y ago
  Your analogy is not great, IMO. In this case, AirBnb is the shoe, the web browser and device used to access it is the shoe store.
  - spaceflunky 10y ago
    Airbnb is not the shoe. The apt is the shoe and airbnb is Footlocker. Have you looked at footlockers stock lately?
  - deleted 10y ago
    [deleted]

ulfw 10y ago

Pretty much all the sharing economy is retailer. AirBnB, Uber, Lyft, Postmates, all those "do your laundry by ordering a dude to pick it up from your home with an app" startups etc. None of it is tech anymore and thus you are right. They are by no means bad or insignificant businesses. Quite the opposite! But tech they are not. Twenty years ago AirBnB would have travel agencies and Uber a Black-Cab Call-In number. Now it's a website or app. The valuations are way off.

yomly 10y ago
I can understand the sentiment of the parent post but I disagree. The recent UberXPostgres articles are an insight into the engineering challenges that go into solving these business problems at scale. The projects probably started as some hacky glue programmed Frankenstein but their current iterations solve considerably difficult and expensive problems that I don't think is trivial for new entrants to come in and instantly replicate. So engineering and capital requirements aside, there's the matter of network effects and customer adoption to tackle. It'd be a very hard sell to convince users to stop using AirBnB or Uber - the inventory may be volatile, but it's deep and expansive. Any country I go to, I will first think AirBnB or Uber as I will be confident without even checking that they'll have coverage. Much like how I don't even bother looking anywhere else for products other than Amazon - they'll probably have what I'm looking for, it'll either be the cheapest or close to the cheapest product and the delivery experience will be dependable. We at HN consider ourselves being more acquired than most but are probably still prone to appreciating convenience over optimisation now and then. Current consumer trends suggest though that our behaviour is in the minority and so "first-mover"* advantage is king. *(AirBnB and Uber almost certainly were not the first in their respective spaces, just like the iPad wasn't the first ever tablet)
- deleted 10y ago
  [deleted]
- spaceflunky 10y ago
  Uber definitely has built some technology that allows them to scale out a real-time ride-sharing app with payment, locations, optimizations, etc, which is a real technological feat. However, I still question: 1.) how difficult that is to do (iirc its not like Lyft is far behind and there are others as well) and 2.) does uber have patents on these developments and 3.) how much of those UberXPostgres articles are just posturing to the investment community (i.e. Uber flexing it's muscles to show how it's spending that cash) vs. serious long-term competitive advantage? You're missing my point about Airbnb, by pivoting to Uber, which I think is in a totally different boat than Airbnb given that Uber does have greater control over some of their inventory than Airbnb and total control over some of the Uber inventory which Airbnb does not. Unless Airbnb starts buying apts and renting them out themselves, which be a better play for them, albeit politically disastrous most likely. As others pointed out, Airbnb has not published big engineering feats (ala UberXPostgres) nor does it need to, nor likely ever will. The point about Airbnb is that Airbnb is a retailer with total lack of control over inventory. Competitors will one day create a sleeker better platform because there's no defense for Airbnb. I think a good analogy would be dating sites. It feels like every year there's a new app: Match.com->eHarmony->OkCupid->plentyoffish->jdate->tinder->bumble, the list goes on and on. Where's the brand loyalty in dating sites? There is none because no one cares about the brand, they care about the inventory (i.e. booty) and so if a site has a better way of finding those dates (be it faster or more curated) or just better "inventory" then people are going to use those new sites. That's how I see Airbnb going. Eventually there are going to be different sites that do the same thing, but tailored to different needs. Airbnb will still be around, but it sure as hell won't be worth $30 billion dollars. Also, home-sharing is about as fickle as dating. People date until they find a mate and then stop. Most people don't live their home for more than 3 years, especially in popular Airbnb markets like NYC, LA, or SF. Therefore there's a lot inventory turn over that Airbnb has to deal with, just like dating sites, which makes it easier for a competitor to come in and swoop up people who new to home-sharing.

dawhizkid 10y ago

Have to agree on this one. It's a prettier Craigslist with a payment transfer mechanism. In my experience as both a guest and a host, AirBnB does basically nothing after the reservation is booked.

trimbo 10y ago

One strategy to fight this is to offer rewards programs and/or credit cards with special perks. Retailers you've pointed out in other comments do this -- Amazon has a credit card[1]. Target has one that gives you 5% off purchases at Target. Also airlines and hotels do points/miles and credit. Without them, people would only choose the best price every time. Does AirBnB have enough regulars to make those rewards programs worth it? Do travel-weekly business people use AirBnB? If not, it's like being given the buy-10-get-one-free sandwich card at the deli you go to once a year. [1] - Edit: And prime!

murtali 10y ago

I think their value over the long term is similar to tripadvisor/yelp - while anyone can come in a create a repository of home sharing they wouldn't have the reviews/reputation data as AirBnB has. Going into someone's home / letting someone in your home, just like hotel reviews or restaurant, reviews/ratings can matter in the decision making process.

spaceflunky 10y ago
The difference being that tripadvisor and Yelp own the reviews. They own the underlying core value. The value of Airbnb is the real estate which they do not own or control. Sure reviews help, but that's like saying only Amazon can sell something because they have reviews. Not to discount your point entirely, I still think there's value to reviews that validate hosts, but it's not he core value.

dispatcher68 10y ago

There is an entire blog dedicated to the topic of tech at Airbnb: http://nerds.airbnb.com/ http://nerds.airbnb.com/. Perhaps you will still feel the same after reading this? Peter Thiel's Zero To One described four pillars that were necessary for a monopoly. It appears Airbnb has most if not all of these. 1. Network effects - this is usually more important than proprietary tech. They have this - global network effect. This is not a "retail company" any more than Amazon's 3rd party marketplace or Alibaba's is. 2. Tech - read blog and decide for yourself. It's easy to imagine at sub-scale also being able to build Facebook, Instagram, Snapchat, etc. Most of the challenges come at scale (and are protected by #1 above). 3. Brand - the commenters seem to agree they have this. 4. Economies of scale - they have this.

spaceflunky 10y ago
I agree with 1 and 3. 2 and especially 4 don't resonate. Would love to know how you describe 'economies of scale' at Airbnb
deleted 10y ago
[deleted]
ethanbond 10y ago
Why does everyone think that a competitor must be able to operate at the scale of Uber/Airbnb the day it's released? How many taxi commissions thought "oh no one can dethrone us, no one has 10,000 cars!"
- dispatcher68 10y ago
  Uber does not have meaningful network effects. Airbnb does. A competitor would need to be more than marginally better to compete subscale, as Airbnb was vs craigslist or original vrbo.
- thesimpsons1022 10y ago
  Because I travel to paris one week and new york the other and seattle the other. If the listings aren't at all those places I discard the app and never use it again.

rjf1990 10y ago

This is a pretty terrible analogy. It's not a retailer; it's a marketplace. Marketplaces don't get commoditized. Is there another Ebay out there? Retailers can purchase the inventory at will, then earn the demand. Marketplaces have to earn both sides. Airbnb was not the first here; Homeaway has been away for a long time, owns all the web properties, and has far better SEO. Airbnb is kicking their ass. Sure their dominance won't last forever, but no company's does.