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> And I see absolutely no reason why it won't happen again. It will happen again. And it was clear that it'd happen at some point. And worse will happen. Sh

by wheels 15y ago

> And I see absolutely no reason why it won't happen again. It will happen again. And it was clear that it'd happen at some point. And worse will happen. Shit happens, especially at scale. > I think this problem kills the business model. Nah. Let's do a little back-of-the-napkining: • Let's assume that this is the first incidence of such. • Let's assume that Brian's quoted 2 million nights of rentals is accurate. • AirBnB's fees are 6-12%. To make things easy, let's assume an average rental of $50/night and 10% fees. • There. AirBnB has now made about $10 million in revenue. • Total cost of fixing this is maybe tops of $100k. So this eats into their margins by 1% assuming the numbers are roughly correct and assuming that insuring against such would cost about the same thing as paying out of pocket (but would also cover the more catastrophic cases). Maybe it's a bit more and it's a couple percent, but it doesn't destroy the model by any means. Also, if they offered insurance, they could do it as a default-on-with-scary-red-confirmation-text-if-you-uncheck upsell at a premium (say, cost + 20%) and make more money. > But they have to change their company to address this problem Going over the top on this one is the cost of waiting too long. They need to turn this story around. The next time, when they have a process in place for this, they just let the process take care of things and don't end up with a shit-storm on their hands.

scott_s 15y ago
Once you do this as a matter of policy, you are open to fraud. Now you have to spend a significant amount of your resources on fraud detection - perhaps most of them. That's what I mean by they become an insurance company; their day-to-day operation would be indistinguishable fromt that of an insurance company. Both ebay and PayPay went through this, and that's what they spend most of their time doing. But ebay and PayPal don't need to support the open-ended kind of claim - "My entire apartment has been ransacked and my identity stolen" - that AirBNB does.
- wheels 15y ago
  Insurance (and by extension dealing with insurance fraud) for this sort of thing is a solved problem. They don't need to do it in house. They just pick up a policy from one of the institutional insurers and pass on the cost with a markup. Edit: To clarify, by "this sort of thing" I don't mean "Airbnb like businesses". There's nothing particularly novel about insuring homes, their contents or vacation rentals. An institutional insurer can crunch some numbers (with estimates on the average values of contents, caps on liability, frequency of incidents, cost of claims inspection, rate of fraud) and figure out what the risk profile on that is and then mark that up and sell it to Airbnb. What's actually unclear to me, however, after crunching out a revenue estimate for Airbnb (which I'd assumed was higher) is if they're a big enough fish yet for an insurer to bother with them.
  - scott_s 15y ago
    Then they're an intermediary for the same kind of insurance that hotels and bed-and-breakfasts have. I don't know if that's even possible to do - how do you approach a company for a policy that covers hundreds of thousands of homes around the world?
  - farrel 15y ago
    I would bet dollars to doughnuts that a traditional holiday apartment will only be able to get insurance that is viable if they meet a number of criteria (removal of valuables, cheap furnishings, inspection etc) that would not be available to someone putting their primary residence up for piecemeal rental on AirBnB
  - a3camero 15y ago
    I doubt it is a solved problem or AirBNB would be using it. Imagine what the negotiations would be like. They need insurance for: -An open-ended number of people worldwide (constantly changing) -Any sort of property from shitty apartments all the way to fancy houses (no estimate of value possible, requires appraisers) -Damage/theft caused by people with unverified identities (all they have is CC, stolen?) -Any and all damage (including accidental death of people staying there?), including stolen identities and fire damage (to other properties as well?) -No security requirements for properties (fire alarms? carbon monoxide detectors? checking up on the place?) I have a feeling that would cost more than 10%.
    - jonhohle 15y ago
      Imagine negotiating insurance for a mobile business where people are flung around 30+ feet in the air with no safety harness, others stick their heads in the mouths of lions or are "sat" on by elephants, and still others stick flaming swords into their throats. Meanwhile, children are riding on devices assembled by people who may not have a high school diploma (at least that's the impression I get). These businesses are generally very well insured. There are insurance companies that deal specifically with unique, high risk insurance situations that are only applicable to very few clients. You don't buy these policies from Nationwide (directly), but they likely have a subsidiary which handles policies like this. In turn, those subsidiaries take out insurance policies on the high risk policy (it's turtles all the way down). Disclaimer, my FIL used to work for an insurance company who dealt with high risk policies.
- contrast 15y ago
  OK, so they're an insurance company, just like ebay. And Google isn't really a search company but an advertising one. So what? Your underlying premise seems to be that a responsible business model isn't viable. Is your argument that therefore companies should be irresponsible where there is profit to be made? I would argue they become an insurance company, or make it clear that the householder assumes all the risk and makes it possible for them to minimise that risk i.e. by removing the obstacles they provide to investigating the other party. This incident is suggesting that instead they mislead the customer regarding the risk, deliberately reduce their ability to manage that risk, in order to maximise their profits. Setting aside the moral and legal aspects of such a strategy, I doubt that's good for business. Who wants to trust their home to a company with a reputation for cutting corners to make money?
  - scott_s 15y ago
    Your underlying premise seems to be that a responsible business model isn't viable. Is your argument that therefore companies should be irresponsible where there is profit to be made? Geez, that's a leap. I thought I made myself clear: they either need to change their company completely to deal with this problem, or they will cease to exist. I'm not certain that they can completely deal with this problem - the risks are much more open-ended than with ebay and PayPal. So I think it's possible the business model cannot survive - which I thought I made clear when I said it was not sustainable. I'm arguing that their company may cease to exist because of this problem. I don't know how you connected that to advocating for companies to be irresponsible.
dlss 15y ago
> Let's assume that Brian's quoted 2 million nights of rentals is accurate. The reason they haven't done anything is that 1 in 2 million isn't accurate. 1 in 50,000 is probably stretching it. Consider the accidental AirBnB trespassing/squatting reported by another HN reader here: http://news.ycombinator.com/item?id=2820644 http://news.ycombinator.com/item?id=2820644 It's starting to look like AirBnB's business model relies on tricking people into making a bad financial decision[1] and then ignoring and intimidating them when things go bad. [1] 99.99% chance of gaining $100 with 0.01% chance of losing $50,000 is positive expected value, but if losing $50,000 would bankrupt you it isn't a game you should play.

by wheels 15y ago

scott_s 15y ago

Once you do this as a matter of policy, you are open to fraud. Now you have to spend a significant amount of your resources on fraud detection - perhaps most of them. That's what I mean by they become an insurance company; their day-to-day operation would be indistinguishable fromt that of an insurance company. Both ebay and PayPay went through this, and that's what they spend most of their time doing. But ebay and PayPal don't need to support the open-ended kind of claim - "My entire apartment has been ransacked and my identity stolen" - that AirBNB does.

wheels 15y ago
Insurance (and by extension dealing with insurance fraud) for this sort of thing is a solved problem. They don't need to do it in house. They just pick up a policy from one of the institutional insurers and pass on the cost with a markup. Edit: To clarify, by "this sort of thing" I don't mean "Airbnb like businesses". There's nothing particularly novel about insuring homes, their contents or vacation rentals. An institutional insurer can crunch some numbers (with estimates on the average values of contents, caps on liability, frequency of incidents, cost of claims inspection, rate of fraud) and figure out what the risk profile on that is and then mark that up and sell it to Airbnb. What's actually unclear to me, however, after crunching out a revenue estimate for Airbnb (which I'd assumed was higher) is if they're a big enough fish yet for an insurer to bother with them.
- scott_s 15y ago
  Then they're an intermediary for the same kind of insurance that hotels and bed-and-breakfasts have. I don't know if that's even possible to do - how do you approach a company for a policy that covers hundreds of thousands of homes around the world?
- farrel 15y ago
  I would bet dollars to doughnuts that a traditional holiday apartment will only be able to get insurance that is viable if they meet a number of criteria (removal of valuables, cheap furnishings, inspection etc) that would not be available to someone putting their primary residence up for piecemeal rental on AirBnB
- a3camero 15y ago
  I doubt it is a solved problem or AirBNB would be using it. Imagine what the negotiations would be like. They need insurance for: -An open-ended number of people worldwide (constantly changing) -Any sort of property from shitty apartments all the way to fancy houses (no estimate of value possible, requires appraisers) -Damage/theft caused by people with unverified identities (all they have is CC, stolen?) -Any and all damage (including accidental death of people staying there?), including stolen identities and fire damage (to other properties as well?) -No security requirements for properties (fire alarms? carbon monoxide detectors? checking up on the place?) I have a feeling that would cost more than 10%.
  - jonhohle 15y ago
    Imagine negotiating insurance for a mobile business where people are flung around 30+ feet in the air with no safety harness, others stick their heads in the mouths of lions or are "sat" on by elephants, and still others stick flaming swords into their throats. Meanwhile, children are riding on devices assembled by people who may not have a high school diploma (at least that's the impression I get). These businesses are generally very well insured. There are insurance companies that deal specifically with unique, high risk insurance situations that are only applicable to very few clients. You don't buy these policies from Nationwide (directly), but they likely have a subsidiary which handles policies like this. In turn, those subsidiaries take out insurance policies on the high risk policy (it's turtles all the way down). Disclaimer, my FIL used to work for an insurance company who dealt with high risk policies.
contrast 15y ago
OK, so they're an insurance company, just like ebay. And Google isn't really a search company but an advertising one. So what? Your underlying premise seems to be that a responsible business model isn't viable. Is your argument that therefore companies should be irresponsible where there is profit to be made? I would argue they become an insurance company, or make it clear that the householder assumes all the risk and makes it possible for them to minimise that risk i.e. by removing the obstacles they provide to investigating the other party. This incident is suggesting that instead they mislead the customer regarding the risk, deliberately reduce their ability to manage that risk, in order to maximise their profits. Setting aside the moral and legal aspects of such a strategy, I doubt that's good for business. Who wants to trust their home to a company with a reputation for cutting corners to make money?
- scott_s 15y ago
  Your underlying premise seems to be that a responsible business model isn't viable. Is your argument that therefore companies should be irresponsible where there is profit to be made? Geez, that's a leap. I thought I made myself clear: they either need to change their company completely to deal with this problem, or they will cease to exist. I'm not certain that they can completely deal with this problem - the risks are much more open-ended than with ebay and PayPal. So I think it's possible the business model cannot survive - which I thought I made clear when I said it was not sustainable. I'm arguing that their company may cease to exist because of this problem. I don't know how you connected that to advocating for companies to be irresponsible.

dlss 15y ago

> Let's assume that Brian's quoted 2 million nights of rentals is accurate. The reason they haven't done anything is that 1 in 2 million isn't accurate. 1 in 50,000 is probably stretching it. Consider the accidental AirBnB trespassing/squatting reported by another HN reader here: http://news.ycombinator.com/item?id=2820644 http://news.ycombinator.com/item?id=2820644 It's starting to look like AirBnB's business model relies on tricking people into making a bad financial decision[1] and then ignoring and intimidating them when things go bad. [1] 99.99% chance of gaining $100 with 0.01% chance of losing $50,000 is positive expected value, but if losing $50,000 would bankrupt you it isn't a game you should play.