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Aside from first mover advantage, what is stopping copycats from moving in and starting a price war with Airbnb? If they are this profitable, that quickly, it

Aside from first mover advantage, what is stopping copycats from moving in and starting a price war with Airbnb? If they are this profitable, that quickly, it should only be a matter of time before competitors crop up. One could argue that user acquisition is the barrier to entry, but just like the Groupon copycats, it'll be worth it for copycats to "buy" users to gain market share. Airbnb has a great brand, great management, amazing infrastructure, et cetera, so I'm not suggesting that copying them will be easy. However, I think a lot of people that use the site are by definition budget conscious, or else they'd just get a hotel, so I could see both Hosts/Guests jumping ship to a less expensive option. Curious what you guys think.

bretpiatt 14y ago
They have a competitor in HomeAway already. They are a public company with an IPO last year (NDAQ:AWAY). Airbnb is the new entrant and doing a good job at growing more quickly right now and based on these estimates could pass them in revenue in 2013. AWAY has reported 242M in revenue (TTM ending Q112) with ~35-40% YoY growth.
- hoodwink 14y ago
  I'm aware of HomeAway. That company has a different business model which is more of an online classifieds site. Pay $300 per year and post your home. Potential renters can browse for free. All transactions are person-to-person, whereas Airbnb takes a more active approach and handles money collection, complaints, etc. Per my research, I think HomeAway does better in the traditional week-long vacation rental market whereas Airbnb is more geared up for the shorter duration stays in urban areas.
  - DanielCole 14y ago
    Correct. I've used HomeAway for two vacations. Their focus has always been the traditional vacation home owner. 99% of their listings are an aggregate of other perfessionally managed 7-day stay rental homes. Completely different business model, technology, culture, market, etc. HomeAway CEO Brian Sharples has remarked multiple times they see little to no overlap in their customers & listings. See his answer about half way down this 2011 WSJ article: http://blogs.wsj.com/venturecapital/2011/10/13/homeaways-ceo-talks-ipos-airbnbs-valuation/ http://blogs.wsj.com/venturecapital/2011/10/13/homeaways-ceo...
rwhitman 14y ago
The barrier to entry is that they have the largest marketplace. Anyone entering this space needs to acquire both buyers and sellers, and convince them that their network is more valuable.
- hoodwink 14y ago
  Yes, I acknowledged this point in the original post and I don't disagree that it is a substantial hurdle. One could have made the same argument for Groupon circa 2009. Look at it now. (see: http://www.nytimes.com/2011/03/10/business/smallbusiness/10sbiz.html http://www.nytimes.com/2011/03/10/business/smallbusiness/10s... or their stock price chart) Here's an example competitor: http://www.onefinestay.com/ http://www.onefinestay.com/
philwelch 14y ago
I think the attraction of Airbnb isn't so much saving money vs. a hotel, it's that staying in someone's home, or cabin in the woods, or igloo or whatever is more fun and more interesting.
kunle 14y ago
> Aside from first mover advantage, what is stopping copycats from moving in and starting a price war with Airbnb? First mover advantage is only part of the story. The network effect is already pretty powerful and only gets stronger. AirBNB has done all the work to polish the experience, and hosts are making money using the site. That's very sticky. On top of that, as a guest, you now know that there's nowhere you can go to get a bigger selection (which co-incidentally, gets bigger everyday) of reputable hosts. Same is true for hosts, with the added benefit that guests are insured. > just like the Groupon copycats, it'll be worth it for copycats to "buy" users to gain market share. Whatever the copycats can pay, AirBnB can pay more, and even then, the hosts have no incentive to switch from AirBnB to something else. They might list elsewhere, but as long as more guests are coming through AirBnB, they wont cancel their AirBnB accounts. Fundamentally - AirBnB enabled people to monetize something that lay fallow before. The thing that makes people switch wont be a lower transaction cost; it will be a greater chance of booking (and thus revenues).
- hoodwink 14y ago
  > Whatever the copycats can pay, AirBnB can pay more If AirBnB has to "pay" to defend market share, then this would be an example scenario of competitive pressure reducing margins. Again, I think AirBnB is an amazing company and agree with all your points. Just curious what the competitive landscape will look like in one or two years.
  - DanielCole 14y ago
    Great points. I think Airbnb competition will emerge beyond the international copycats (Wimdu). Their biggest risk is other small startups picking apart niche markets within he greater accommodations vertical. Others have thrived like crashpadder (acquired by airbnb) or Onefinestay. I think in two years you will see more Airbnb's in the accommodations marketplace competing on price and experience. The market has room for Marriott, and super8.

bretpiatt 14y ago

They have a competitor in HomeAway already. They are a public company with an IPO last year (NDAQ:AWAY). Airbnb is the new entrant and doing a good job at growing more quickly right now and based on these estimates could pass them in revenue in 2013. AWAY has reported 242M in revenue (TTM ending Q112) with ~35-40% YoY growth.

hoodwink 14y ago
I'm aware of HomeAway. That company has a different business model which is more of an online classifieds site. Pay $300 per year and post your home. Potential renters can browse for free. All transactions are person-to-person, whereas Airbnb takes a more active approach and handles money collection, complaints, etc. Per my research, I think HomeAway does better in the traditional week-long vacation rental market whereas Airbnb is more geared up for the shorter duration stays in urban areas.
- DanielCole 14y ago
  Correct. I've used HomeAway for two vacations. Their focus has always been the traditional vacation home owner. 99% of their listings are an aggregate of other perfessionally managed 7-day stay rental homes. Completely different business model, technology, culture, market, etc. HomeAway CEO Brian Sharples has remarked multiple times they see little to no overlap in their customers & listings. See his answer about half way down this 2011 WSJ article: http://blogs.wsj.com/venturecapital/2011/10/13/homeaways-ceo-talks-ipos-airbnbs-valuation/ http://blogs.wsj.com/venturecapital/2011/10/13/homeaways-ceo...

rwhitman 14y ago

The barrier to entry is that they have the largest marketplace. Anyone entering this space needs to acquire both buyers and sellers, and convince them that their network is more valuable.

hoodwink 14y ago
Yes, I acknowledged this point in the original post and I don't disagree that it is a substantial hurdle. One could have made the same argument for Groupon circa 2009. Look at it now. (see: http://www.nytimes.com/2011/03/10/business/smallbusiness/10sbiz.html http://www.nytimes.com/2011/03/10/business/smallbusiness/10s... or their stock price chart) Here's an example competitor: http://www.onefinestay.com/ http://www.onefinestay.com/

philwelch 14y ago

I think the attraction of Airbnb isn't so much saving money vs. a hotel, it's that staying in someone's home, or cabin in the woods, or igloo or whatever is more fun and more interesting.

kunle 14y ago

> Aside from first mover advantage, what is stopping copycats from moving in and starting a price war with Airbnb? First mover advantage is only part of the story. The network effect is already pretty powerful and only gets stronger. AirBNB has done all the work to polish the experience, and hosts are making money using the site. That's very sticky. On top of that, as a guest, you now know that there's nowhere you can go to get a bigger selection (which co-incidentally, gets bigger everyday) of reputable hosts. Same is true for hosts, with the added benefit that guests are insured. > just like the Groupon copycats, it'll be worth it for copycats to "buy" users to gain market share. Whatever the copycats can pay, AirBnB can pay more, and even then, the hosts have no incentive to switch from AirBnB to something else. They might list elsewhere, but as long as more guests are coming through AirBnB, they wont cancel their AirBnB accounts. Fundamentally - AirBnB enabled people to monetize something that lay fallow before. The thing that makes people switch wont be a lower transaction cost; it will be a greater chance of booking (and thus revenues).

hoodwink 14y ago
> Whatever the copycats can pay, AirBnB can pay more If AirBnB has to "pay" to defend market share, then this would be an example scenario of competitive pressure reducing margins. Again, I think AirBnB is an amazing company and agree with all your points. Just curious what the competitive landscape will look like in one or two years.
- DanielCole 14y ago
  Great points. I think Airbnb competition will emerge beyond the international copycats (Wimdu). Their biggest risk is other small startups picking apart niche markets within he greater accommodations vertical. Others have thrived like crashpadder (acquired by airbnb) or Onefinestay. I think in two years you will see more Airbnb's in the accommodations marketplace competing on price and experience. The market has room for Marriott, and super8.