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What im not sure about is Airbnb's moat. They have a great brand name and all, but their service is very limited: 15% is a very large cut to take on these trans

What im not sure about is Airbnb's moat. They have a great brand name and all, but their service is very limited: 15% is a very large cut to take on these transactions. What prevents another company from doing the same at 12% and costing 50% to operate?

heurist 8y ago
Their social network and brand recognition is their moat for now. Hosts and guests trust Airbnb. An upstart will have overcome a lot of momentum to take on Airbnb in the broad market.
- xeromal 8y ago
  The reviews are worth the price of admission
  - conanbatt 8y ago
    They are valuable for sure, but are they 1/7 appts rented out? Traditional vacation rentals charge 15~20%, but they truly handle the key hand offs and such.
  - gehwartzen 8y ago
    I suppose the landlords could port their reviews to a new platform by linking to the Airbnb listing similarly to how people used to post their eBay reviews when selling on forums. But yeah having all those reviews viewable natively for comparison is nice for renters.
gringoDan 8y ago
Nothing prevents another company from doing that, but all of the hosts & guests are already on Airbnb. Two-sided marketplaces are very difficult to start, but once they have some momentum, it's even more difficult to unseat them. Look at Craigslist - terrible UI, hundreds of startups have tried to challenge it in the past 15+ years, and yet it's still my go-to when I need to sell some old furniture.
- polskibus 8y ago
  Moreover, booking.com existed long before Airbnb and is still going strong!
- conanbatt 8y ago
  Craigslist has a fantastic moat: they are insanely operationally efficient. To make more money than craigslist at a lower cost is virtually impossible. The real entrance cost to becoming a host in airbnb is not airbnb, its having a house. And a host will use airbnb or whatever to keep the appartment occupied. It can absolutely be commoditized, much like Lyft and Uber have. A service that posts your apt in multiple websites would make that permanent. Today they must own the demand side: i have never seen something become so popular with no little ads (particularly in argentina, it was incredible to see it going from 0 to ubiquitous in 2 years). But demand on apartment rentals is incredibly price sensitive, demonstrated by the competition airlines have.
  - asteli 8y ago
    I have friends who worked at Craigslist, and was astonished to hear them describe a team of IIRC 35-40 employees. They have somewhere around 50 now? Makes you wonder what those 3k+ employees at Twitter all do.
    - gammateam 8y ago
      A lot of companies have an affinity towards jobs numbers, and derive benefits from the local municpality by being able to print job numbers It simultaneously helps the organization’s tax efficiency and MAYBE something interesting gets developed
    - gfosco 8y ago
      Sales, Marketing, Partnerships, Content Moderation/Censorship.
    - samatman 8y ago
      While this doesn't explain all of the difference, Twitter tries, and largely succeeds, to distribute both Tweets and likes in mere seconds, all around the world, while maintaining a search that can find any string in relatively recent messages. That this is a substantially harder mandate than that of Craigslist I take as a given.
usrusr 8y ago
Same as booking.com: users won't spend a second on looking at the second largest directory and directory customers cannot afford to not be present the one end users are looking at, they will grudgingly pay. The only question is which of booking and airbnb will survive, as their market overlap keeps getting bigger. In any case, those providing the actual hospitality service seem to be getting the short and of the stick.
nerfhammer 8y ago
network effects. Buyers want to be where the most sellers are and sellers want to be where the most buyers are. to win over an existing market you need to offer something dramatically better somehow or angle it dramatically differently, not just a 3% cost difference. Remember craigslist was basically free.
rootusrootus 8y ago
Yeah I was thinking exactly that a couple days ago while I was booking a beach condo on a different site. Airbnb has a fair amount of competition in the vacation rentals market, and there doesn't seem to be a good defense against that. When I'm looking for a place to rent for vacation, I start with Google and end up visiting several sites. Airbnb is frequently one of them, but never the only one.
atombender 8y ago
I'm not sure about the moat either. While planning a trip recently, I checked out Airbnb, Booking.com, VRBO and Homeaway.com for the same area. I found that Booking.com and Homeaway.com both had some of the same listings. So landlords are certainly trying to bypass the moat. (Homeaway.com is in fact co-hosting Airbnb listings through a partnership, but they're also apparently transitioning away from that to become a full-blown Airbnb competitor.) I suspect the moat won't matter that much, since a consumer ultimately doesn't care about which service they end up booking with, as long as it seems trustworthy, and landlords have little reason to be loyal to one service when there's no downside to being non-exclusive.
a13n 8y ago
Marketplace network effects – Hosts are more likely to use Airbnb because they have the most guests. Guests are more likely to use Airbnb because they have the most hosts. Instant book – A host can only have "instant book" on for one platform at a time, otherwise their listing could get overbooked. They'll likely leave this on for Airbnb because they have more guests than any other platform, which adds friction to booking for other platforms.
briandear 8y ago
15% is a small cut. Ever sold inventory on Booking.com or Expedia? It’s a lot more than 15%. Plus AirBnB actually collects the money for you and you are paid on the day of check in. I own a small hotel in France and AirBnB is far more profitable and easy to use than Booking or Expedia. The marketing value alone is worth far more than 15% — but that 15 also includes credit card fees as well. It’s a great deal.
- distances 8y ago
  Interesting, are there also hotels in AirBnb now? In Europe I most of the time end up with Booking.com even though I regularly check AirBnb too -- if the prices are close to each other (as they surprisingly often are), I'll always go with a hotel.
- smueller1234 8y ago
  The standard commission rates for booking.com are 15% in fact. There are ways to push that up due additional marketing (preferred status takes it to to 18% and had requirements on average review scores last I checked). So I don't know where you're getting your impression from that booking charges more than those 15 percent, but you may wish to recheck your numbers. Can't comment on ease of use on the supplier side. Source: I know that because I used to work there, ran the infrastructure eng and prod teams.
martin_bech 8y ago
I have a vacation house, which I rent out. Normal booking fees for these houses are 30%. I have a different arrangement, but thats the default.

heurist 8y ago

Their social network and brand recognition is their moat for now. Hosts and guests trust Airbnb. An upstart will have overcome a lot of momentum to take on Airbnb in the broad market.

xeromal 8y ago
The reviews are worth the price of admission
- conanbatt 8y ago
  They are valuable for sure, but are they 1/7 appts rented out? Traditional vacation rentals charge 15~20%, but they truly handle the key hand offs and such.
- gehwartzen 8y ago
  I suppose the landlords could port their reviews to a new platform by linking to the Airbnb listing similarly to how people used to post their eBay reviews when selling on forums. But yeah having all those reviews viewable natively for comparison is nice for renters.

gringoDan 8y ago

Nothing prevents another company from doing that, but all of the hosts & guests are already on Airbnb. Two-sided marketplaces are very difficult to start, but once they have some momentum, it's even more difficult to unseat them. Look at Craigslist - terrible UI, hundreds of startups have tried to challenge it in the past 15+ years, and yet it's still my go-to when I need to sell some old furniture.

polskibus 8y ago
Moreover, booking.com existed long before Airbnb and is still going strong!
conanbatt 8y ago
Craigslist has a fantastic moat: they are insanely operationally efficient. To make more money than craigslist at a lower cost is virtually impossible. The real entrance cost to becoming a host in airbnb is not airbnb, its having a house. And a host will use airbnb or whatever to keep the appartment occupied. It can absolutely be commoditized, much like Lyft and Uber have. A service that posts your apt in multiple websites would make that permanent. Today they must own the demand side: i have never seen something become so popular with no little ads (particularly in argentina, it was incredible to see it going from 0 to ubiquitous in 2 years). But demand on apartment rentals is incredibly price sensitive, demonstrated by the competition airlines have.
- asteli 8y ago
  I have friends who worked at Craigslist, and was astonished to hear them describe a team of IIRC 35-40 employees. They have somewhere around 50 now? Makes you wonder what those 3k+ employees at Twitter all do.
  - gammateam 8y ago
    A lot of companies have an affinity towards jobs numbers, and derive benefits from the local municpality by being able to print job numbers It simultaneously helps the organization’s tax efficiency and MAYBE something interesting gets developed
  - gfosco 8y ago
    Sales, Marketing, Partnerships, Content Moderation/Censorship.
  - samatman 8y ago
    While this doesn't explain all of the difference, Twitter tries, and largely succeeds, to distribute both Tweets and likes in mere seconds, all around the world, while maintaining a search that can find any string in relatively recent messages. That this is a substantially harder mandate than that of Craigslist I take as a given.

usrusr 8y ago

Same as booking.com: users won't spend a second on looking at the second largest directory and directory customers cannot afford to not be present the one end users are looking at, they will grudgingly pay. The only question is which of booking and airbnb will survive, as their market overlap keeps getting bigger. In any case, those providing the actual hospitality service seem to be getting the short and of the stick.

nerfhammer 8y ago

network effects. Buyers want to be where the most sellers are and sellers want to be where the most buyers are. to win over an existing market you need to offer something dramatically better somehow or angle it dramatically differently, not just a 3% cost difference. Remember craigslist was basically free.

rootusrootus 8y ago

Yeah I was thinking exactly that a couple days ago while I was booking a beach condo on a different site. Airbnb has a fair amount of competition in the vacation rentals market, and there doesn't seem to be a good defense against that. When I'm looking for a place to rent for vacation, I start with Google and end up visiting several sites. Airbnb is frequently one of them, but never the only one.

atombender 8y ago

I'm not sure about the moat either. While planning a trip recently, I checked out Airbnb, Booking.com, VRBO and Homeaway.com for the same area. I found that Booking.com and Homeaway.com both had some of the same listings. So landlords are certainly trying to bypass the moat. (Homeaway.com is in fact co-hosting Airbnb listings through a partnership, but they're also apparently transitioning away from that to become a full-blown Airbnb competitor.) I suspect the moat won't matter that much, since a consumer ultimately doesn't care about which service they end up booking with, as long as it seems trustworthy, and landlords have little reason to be loyal to one service when there's no downside to being non-exclusive.

a13n 8y ago

Marketplace network effects – Hosts are more likely to use Airbnb because they have the most guests. Guests are more likely to use Airbnb because they have the most hosts. Instant book – A host can only have "instant book" on for one platform at a time, otherwise their listing could get overbooked. They'll likely leave this on for Airbnb because they have more guests than any other platform, which adds friction to booking for other platforms.

briandear 8y ago

15% is a small cut. Ever sold inventory on Booking.com or Expedia? It’s a lot more than 15%. Plus AirBnB actually collects the money for you and you are paid on the day of check in. I own a small hotel in France and AirBnB is far more profitable and easy to use than Booking or Expedia. The marketing value alone is worth far more than 15% — but that 15 also includes credit card fees as well. It’s a great deal.

distances 8y ago
Interesting, are there also hotels in AirBnb now? In Europe I most of the time end up with Booking.com even though I regularly check AirBnb too -- if the prices are close to each other (as they surprisingly often are), I'll always go with a hotel.
smueller1234 8y ago
The standard commission rates for booking.com are 15% in fact. There are ways to push that up due additional marketing (preferred status takes it to to 18% and had requirements on average review scores last I checked). So I don't know where you're getting your impression from that booking charges more than those 15 percent, but you may wish to recheck your numbers. Can't comment on ease of use on the supplier side. Source: I know that because I used to work there, ran the infrastructure eng and prod teams.

martin_bech 8y ago

I have a vacation house, which I rent out. Normal booking fees for these houses are 30%. I have a different arrangement, but thats the default.