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I agree with most of your points, but one thing airbnb does have going for it is a network effect. They have both the supply, and the demand and that makes it

I agree with most of your points, but one thing airbnb does have going for it is a network effect. They have both the supply, and the demand and that makes it difficult for other people to break into the space. If I'm looking for a place to stay, my default option will be the place with the most inventory. If I've got a place to rent out, I want to list it where most people are looking and where I can get the highest occupancy. Since airbnb is effectively an exchange, how would another exchange move in to replace it? Marketing and branding is one way, particularly since airbnb hasn't fully saturated the market. One strategy might be to include hotel rooms in listings since airbnb is unlikely to do that given their niche. Another way might be a series of negative events (eg. a serial stalker or rampant bed bugs) which could really tarnish their brand.

frandroid 13y ago
https://www.roomorama.com/ https://www.roomorama.com/
- ojbyrne 13y ago
  http://homeaway.com http://homeaway.com http://vrbo.com http://vrbo.com http://vacationrentals.com http://vacationrentals.com
toomuchtodo 13y ago
AirBNB is a commodity to me. I can replace the value they provide just by pointing my browser to another provider. That is the double-edge sword of being a tech company. Non-capital-intensive, but fast growth. Make it work, and make your money fast, because what you're doing has almost no barrier to entry other than code and server time.
- wepple 13y ago
  I agree - while AirBnB may have market dominance, it can be replaced: see myspace Trying to knock a major bricks n mortar hotel chain off it's perch is 1000x more difficult
  - ianstormtaylor 13y ago
    You're both insane... No one would have argued that Myspace was as easy to replace as simply "code and servers". Just like no one is going to argue that Facebook can be replaced with just code and servers. What delusion do you tell yourself to discount everyone else that talks about the importance of network effects? They're the crazy ones? Sorry, just blows my mind how people think in such black and white terms. Just because one thing is easier to displace doesn't mean it's immediately a "commodity" that can be replaced by the equivalent code and servers farms. Might be great dev-think but definitely gets you nowhere fast when trying to actually build a successful business.
    - kamaal 13y ago
      Both AirBnb and Holiday Inn are difficult to replace. But Holiday Inn is definitely far more difficult to replace than AirBnb. If you try today, you may be able to replace AirBnb, but it may take you 1000x the effort to replace Holiday Inn. For one simple fact, Holiday Inn is a physical entity providing service to people with massive brand in a industry which is capital intensive and requires endless customer focus. The easiest example is Elon musk trying to make a car company Vs building Pay Pal. Difference is so enormous, though both are difficult, they are yet no way comparable.
    - wepple 13y ago
      I think you missed my point - I never mentioned code or servers - I never argued that the likes of AirBnB as a business were just a collection of CPU cycles. I was illustrating that building a primarily online-based business (including code, servers, network, marketplace, branding, awareness, good people, etc) is faster and simpler than a classic business like a hotel chain (which requires all of the above, plus significant investments into geographically disperse physical structures. I'm absolutely not saying it's "easy", I'm just reflecting on the market valuation of an organization that (in my opinion) is more at risk of competition than a classic business.
- gfodor 13y ago
  This is ridiculously untrue. The value of AirBNB isn't the code and server time. The value of AirBNB is the marketplace. Building a marketplace is a long, hard slog, and a large economic moat for any business, online or offline.
  - toomuchtodo 13y ago
    You're free to have your opinion. AirBNB isn't the only marketplace, and not even the first one I go to when looking for this product. Yes, it takes time for your marketplace to reach critical mass. But there isn't anything that ties people there if there are viable competitors. If AirBNB doesn't have the inventory where I'm looking, I just open a couple of tabs and check out other sites with the same model. Just like I do with airfare.
    - gfodor 13y ago
      You're completely missing my point. You seemed to be claiming that since you can type in a competitor's address easily that somehow web-based businesses are inherently unable to build economic moats. The valuation of a marketplace like AirBNB has almost nothing to do with the fact it's an Internet based business. For marketplaces the natural convergence is one large player since sellers go where the buyers are and vice versa, and hence newcomers cannot overcome the big guys sucking all of the air out of the room.
- nikcub 13y ago
  > I can replace the value they provide just by pointing my browser to another provider. I actually can't think of an example of an established e-commerce tech company with a two-sided marketplace that this has actually happen to. eBay, Amazon, Paypal, Google, Alibaba etc. - even Silk Road quickly took up a monopoly position and required the feds to make it go away, it was very resistant to clones that were cheaper, faster, better etc. It is because they have network effects ^ 2. It is proven that they are resilient, there is tons of research in the field: http://www.hbs.edu/research/pdf/12-024.pdf http://www.hbs.edu/research/pdf/12-024.pdf This is the reason why these business models are so attractive to investors, the companies are incredibly difficult to bootstrap, but very lucrative.
  - larrys 13y ago
    "eBay, Amazon, Paypal, Google, Alibaba etc" One thing that is different about airbnb vs. the companies you mention is the amount of interaction as well as the transaction size and importance. The network effect at, say ebay or amazon, is bolstered by repeated interaction of small (and of course some large) transactions. That repetition is important because it keeps the service in the forefront of your mind as the go to place for many things, not just one thing. I am in the habit of using amazon so it's my go to place for things. I just bought a ladder from Lowes only after checking amazon first. Because I buy all sorts of small things from Amazon and rarely need to visit the Lowes site. Airbnb otoh has the same thing but to a much lesser degree. The habit part in other words. Because the amount of time you need a room is less there is less reason to think about it and more of a chance that (because of the lack of habit) you might try something else. Habits (and small transactions) are very important. Starbucks for example hates to close their locations for renovation because they have found that once people break the habit many times they fail to return (finding another acceptable morning place to get coffee.)

frandroid 13y ago

https://www.roomorama.com/ https://www.roomorama.com/

ojbyrne 13y ago
http://homeaway.com http://homeaway.com http://vrbo.com http://vrbo.com http://vacationrentals.com http://vacationrentals.com

toomuchtodo 13y ago

AirBNB is a commodity to me. I can replace the value they provide just by pointing my browser to another provider. That is the double-edge sword of being a tech company. Non-capital-intensive, but fast growth. Make it work, and make your money fast, because what you're doing has almost no barrier to entry other than code and server time.

wepple 13y ago
I agree - while AirBnB may have market dominance, it can be replaced: see myspace Trying to knock a major bricks n mortar hotel chain off it's perch is 1000x more difficult
- ianstormtaylor 13y ago
  You're both insane... No one would have argued that Myspace was as easy to replace as simply "code and servers". Just like no one is going to argue that Facebook can be replaced with just code and servers. What delusion do you tell yourself to discount everyone else that talks about the importance of network effects? They're the crazy ones? Sorry, just blows my mind how people think in such black and white terms. Just because one thing is easier to displace doesn't mean it's immediately a "commodity" that can be replaced by the equivalent code and servers farms. Might be great dev-think but definitely gets you nowhere fast when trying to actually build a successful business.
  - kamaal 13y ago
    Both AirBnb and Holiday Inn are difficult to replace. But Holiday Inn is definitely far more difficult to replace than AirBnb. If you try today, you may be able to replace AirBnb, but it may take you 1000x the effort to replace Holiday Inn. For one simple fact, Holiday Inn is a physical entity providing service to people with massive brand in a industry which is capital intensive and requires endless customer focus. The easiest example is Elon musk trying to make a car company Vs building Pay Pal. Difference is so enormous, though both are difficult, they are yet no way comparable.
  - wepple 13y ago
    I think you missed my point - I never mentioned code or servers - I never argued that the likes of AirBnB as a business were just a collection of CPU cycles. I was illustrating that building a primarily online-based business (including code, servers, network, marketplace, branding, awareness, good people, etc) is faster and simpler than a classic business like a hotel chain (which requires all of the above, plus significant investments into geographically disperse physical structures. I'm absolutely not saying it's "easy", I'm just reflecting on the market valuation of an organization that (in my opinion) is more at risk of competition than a classic business.
gfodor 13y ago
This is ridiculously untrue. The value of AirBNB isn't the code and server time. The value of AirBNB is the marketplace. Building a marketplace is a long, hard slog, and a large economic moat for any business, online or offline.
- toomuchtodo 13y ago
  You're free to have your opinion. AirBNB isn't the only marketplace, and not even the first one I go to when looking for this product. Yes, it takes time for your marketplace to reach critical mass. But there isn't anything that ties people there if there are viable competitors. If AirBNB doesn't have the inventory where I'm looking, I just open a couple of tabs and check out other sites with the same model. Just like I do with airfare.
  - gfodor 13y ago
    You're completely missing my point. You seemed to be claiming that since you can type in a competitor's address easily that somehow web-based businesses are inherently unable to build economic moats. The valuation of a marketplace like AirBNB has almost nothing to do with the fact it's an Internet based business. For marketplaces the natural convergence is one large player since sellers go where the buyers are and vice versa, and hence newcomers cannot overcome the big guys sucking all of the air out of the room.
nikcub 13y ago
> I can replace the value they provide just by pointing my browser to another provider. I actually can't think of an example of an established e-commerce tech company with a two-sided marketplace that this has actually happen to. eBay, Amazon, Paypal, Google, Alibaba etc. - even Silk Road quickly took up a monopoly position and required the feds to make it go away, it was very resistant to clones that were cheaper, faster, better etc. It is because they have network effects ^ 2. It is proven that they are resilient, there is tons of research in the field: http://www.hbs.edu/research/pdf/12-024.pdf http://www.hbs.edu/research/pdf/12-024.pdf This is the reason why these business models are so attractive to investors, the companies are incredibly difficult to bootstrap, but very lucrative.
- larrys 13y ago
  "eBay, Amazon, Paypal, Google, Alibaba etc" One thing that is different about airbnb vs. the companies you mention is the amount of interaction as well as the transaction size and importance. The network effect at, say ebay or amazon, is bolstered by repeated interaction of small (and of course some large) transactions. That repetition is important because it keeps the service in the forefront of your mind as the go to place for many things, not just one thing. I am in the habit of using amazon so it's my go to place for things. I just bought a ladder from Lowes only after checking amazon first. Because I buy all sorts of small things from Amazon and rarely need to visit the Lowes site. Airbnb otoh has the same thing but to a much lesser degree. The habit part in other words. Because the amount of time you need a room is less there is less reason to think about it and more of a chance that (because of the lack of habit) you might try something else. Habits (and small transactions) are very important. Starbucks for example hates to close their locations for renovation because they have found that once people break the habit many times they fail to return (finding another acceptable morning place to get coffee.)