2/22/2019

The Airbnb Story

The Airbnb story : How three ordinary guys disrupted an
industry, made billions ... and created plenty of controversy.
By Leigh Gallagher

Submitted to: Prof. Madhavi Mehta

Submitted by: Shubham Deshmukh
Roll No: P38048
Section: D
Bibliographical details[a]
I believe bibliography is not just the ‘works cited’, it consists of all the necessary and relevant
material one drew upon to write the paper the reader holds.[1]

1. Author name: Leigh Gallagher

2. Title of publication: The Airbnb story : How three ordinary guys disrupted an industry,
made billions ... and created plenty of controversy.
3. Date of publication: 2017
4. Place of publication: New York (NY)
5. Publisher: Houghton Mifflin Harcourt (Boston, New York US)
*(Note: I have read the book using Lithium Reader (EPUB format) page no. mentioned along
with the evidences in following sections are from e-book not the hard copy please take note of
it)

Fig 1: Important components of Airbnb logo.[2]

1) https://library.wur.nl/infoboard/7_citing/bibliographic_details.html
2) https://womenlovetech.com/people-see-sexual-image-new-airbnb-logo/
a) Evidences for this section (Front page and first two inside pages).

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Airbnb is a community-based[a] online platform for listing and renting local homes. It connects
hosts and travellers and facilitates the process of renting without owning any rooms itself.
Moreover it cultivates a sharing-economy by allowing property owners to rent out private flats.

Fig 2: Airbnb business model[1]

Business model canvas for Airbnb: Business Model Canvas[2] is a strategic management
and lean start-up template for developing new or documenting existing business models. It is a
visual chart with elements describing a firm's or product's value proposition, infrastructure,
customers, and finances.

Fig 3: Business model canvas for Airbnb.

1) https://bmtoolbox.net/stories/airbnb/
2) https://www.businessmodelsinc.com/exponential-business-model/airbnb/
a) Evidence: Page no. 56 (McAdoo from Sequoia, was impressed with their philosophy).

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Fig 4: Illustrating the differences between the sharing economy[1] and the public sector conditions.

When considering the sharing economy, the term disruptive innovation is used hand in hand
since this is a common feature of these businesses. Simply put, disruptive innovation refers to the
process by which a product or service [which] initially [started] at the bottom of a market and then
relentlessly moves up market, eventually displacing established competitors (Christensen, 2016, p.
1). Allen and Berg (2014) theorize that the distinguishing characteristics of disruptive innovation
include decentralized exchange, a focus on access over ownership of resources, firms becoming
the facilitator of exchange (rather than acting as a producer), and mechanisms of self-
governance.

Formalization
There are no rules written as such which have to be followed by the employees in the company
(Evidence: The stronger the culture, he argued, the more trust there would be for employees to do
the right thing and the less need there would be for formal rules and processes. Excerpts from
page no. 239 these are the words of founder Brian Chesky)

Hierarchy of Authority
There are clear evidences in the book where a clear line of hierarchy of authority can be seen
(Evidence: Blecharczyk developed an interest in strategy, especially when, as CTO, he began to
see more of the insights that were coming out of the data-science department, which reported
directly to him. Excerpts from page no. 236)

Specialization
Specialization is low at Airbnb, (Evidence: Hiring and training country managers[2] and tasking
them with opening and growing in their local markets. Excerpts from page no. 79)

1) https://www.ft.com/content/f560e5ee-36e8-11e6-a780-b48ed7b6126f
2) http://www.natgeotraveller.in/airbnbs-country-manager-amanpreet-bajaj-on-making-the-
world-home/

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Fig 5: Organization chart illustrating the hierarchy of authority for Airbnb[1]

Contextual factors that affected Airbnb

Airbnb claims that it revitalizes neighborhoods, but Airbnb according to a The Guardian report
just the opposite of this is happening in Barcelona.[2] had to fight out with hotel industry whose
arguments against Airbnb is that it doesn’t follow the norms and procedures setout for traditional
hotel and tourism industry. (Evidence: The fight has brought together an odd coalition of liberal
politicians, the real estate lobby, labor unions, and the hotel industry where any mention of Airbnb
has become a third rail. Excerpts from page no. 12 ) Regulators are behind Airbnb in every
major city of the world because of non-clarity of rules. (Evidence: When the attorney general’s
report came out, it said that 72% of Airbnb’s private listings in New York were in violation of
state law. Excerpt from page no. 151)

1) https://theorg.com/org/airbnb
2) https://www.theguardian.com/commentisfree/2018/oct/24/airbnb-unregulated-damage-
cities-barcelona-law-locals

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In reaction to regulators actions against clamping down Airbnb’s growth, Airbnb had to recruit a team of
Public-policy trained professionals and legal counsels. (Evidence: They’d get an update on the regulatory
battle from the head of legal and business affairs, Belinda Johnson, and public-policy chief Chris Lehane.
Excerpts from page no. 111)

Organization Effectiveness
Airbnb had adopted Resource-based approach towards organizational effectiveness, they
adopted a strong mission and a set of defined ‘core values’ which guide their organization’s
internal conduct as well as its relationship with its customers, shareholders and other
stakeholders. (Evidence: Chesky, Gebbia and Blecharczyk decided to compose their core values
before they hired anyone. They came up with ten traits, including ‘Hard-working Olympic
animal’, ‘Builds family spirit’ and ‘Passionate about Airbnb’. (these would later be replaced with
a set of six new core values in 2013, and then whittled down and refined again in 2016) Then
they started seeing people many people. Excerpts from page no. 61 & 62)

Fig 6: Company data reveal a colourful picture of Airbnb’s global ecosystem[1]

1) https://www.fastcompany.com/3054873/can-airbnb-unite-the-world

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Culture at Airbnb
“Culture is simply a shared way of doing something with passion.”
– Brian Chesky, Founder Airbnb

The first thing you need to know about Airbnb's approach to culture is it's the vision of the
founders - Brian Chesky (CEO), Joe Gebbia and Nathan Blecharczyk.

Brian believed that strong culture would lead to less corporate processes a company would need.

Fig 7: Airbnb office in SOMA, San Francisco, it deliberately aligns with the company's mission: to
create a world where you can belong anywhere.[1]

Airbnb also believes in extending the culture beyond employees to its community of hosts &
guests. It’s a part of their program to bring everyone up the commitment curve. (Evidence:
Conley went to work right away, trying to help bring organization and know-how to Airbnb’s host
community. He travelled to 25 cities giving talks and hosting tips to help regular apartment-
dwellers channel their inner innkeeper. Excerpts from page no. 104). (Evidence: Chesky also
said, from a brand perspective though, ‘our core community are our ordinary hosts, people
renting and sharing the homes they live in. We think that’s very special. Excerpts from page no.
160).

1) https://blog.cultureamp.com/how-airbnb-is-building-its-culture-through-belonging

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“Don’t Fuck up the culture”

All the silicon valley start-ups have this fixation for cultural focus in the company. Since Airbnb
exited from Y Combinator program the three founders primary focus was on building a strong
culture. But Chesky actually gave it a serious thought after 2012, when they raised Series-C round
of funding $200 million led by Peter Theil’s Founders Fund. (Evidence: The Airbnb founders
invited Theil to the office, and Chesky asked him for advice. Theil said simply “Don’t fuck up the
culture”. He said that Airbnb’s culture was one of the reasons he had invested, but he said it was
basically inevitable that after a company got to a certain size, it wold ‘fuck it up’. Excerpts from
page no. 239)

After this Chesky really took building the culture for Airbnb to a maniacal level, that’s why once
he once stood onstage at the company’s all hand meeting in 2015 and told workers that what will
kill the company is not the regulators or competition or anything like but rather losing their ability
to be “Crazy”. (Evidence: That’s why Chesky writes Sunday -night-e-mails; and why he
personally interviewed every job candidate until the company got to be more than 300 people.
Excerpts from page no. 240)

Airbnb’s workspace is one important pillar of their culture. The collective group of Airbnb
employees is referred to as the “Airfamily” or “Airfam” for short where they enjoy perks like
‘Air Shares’. (Evidence: “They pump something into the air,” says Andreessen Horowitz’s Jeff
Jordan How do you build the culture- from the top to the bottom- where everyone believes in
they’re changing the world?” In 2016, the company ranked no. 1 on Glassdoor’s Employee’s
Choice Awards beating out Google, Facebook. Excerpts from page no. 242)

Fig 8: Building a successful service culture by adhering to its core values.

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Rise and rise of Airbnb

Fig 9: Illustration of journey of Airbnb through good and bad times.[1]

Product/market fit[2]
It’s the holy grail in silicon valley when a proof-of-life milestone that a start-up hits when its
concept has both found a good market- one with lots of real potential customers. Product/market
fit is a key first achievement; without it, there is no company. Another way of saying this is Y
combinator’s mantra that the company has to “make something people want”. (Evidence: In 2009
Chesky, Gebbia & Blecharczyk reached a critical juncture when their “wiggles of hope” had
graduated into a full-fledged revenue stream. They had a product people wanted. Excerpts from
page no. 60).

1) https://blog.adioma.com/how-airbnb-started-infographic/
2) https://www.forbes.com/sites/hayleyleibson/2018/01/18/how-to-achieve-product-market-
fit/#1bb321f5476b

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Hacking Growth
Airbnb was adding customers every second but still the awareness regarding the company was
minimal. Blecharczyk was their secret weapon who was making clever use of new tools and
technologies available to implement several growth hacks. (Evidence: He’d created technology to
interface with Google’s AdWords advertising service, for example, to allow Airbnb more
efficiently target potential users in specific cities. He also cooked up a clever tool by building a
back door into Craigslist. Excerpts from page no. 65)

“It’s the most difficult supply game I’ve ever seen anyone play”, sys Arun Sundararajan[1], author
of The Sharing Economy.

Airbnb’s business is fundamentally about leveraging a network effect: the more people who list on
Airbnb, the more inherently attractive the platform becomes to anyone who wants to travel,
because there are more choice.

Two of the things Airbnb’s investors like most are its efficiency and its growth. Because it can
expand in such a low-cost manner, it has spent less than $300 million total over 8 years.
(Evidence: As of this writing the company was said to be adding 1.4 million users a week, and
those 140 million “guest arrivals” were projected to grow to 160 million by 2017. Investors were
expecting the company to see $1.6 billion in revenue and to become cash-flow positive in 2016
Excerpts from page no. 68)

The Steve Jobs Three-Click Rule

It’s all about ‘Product’ the way it looks, the way it works, the things it can do and the way one uses it and
interact with it. (The user experience reigns supreme). (Evidence: But from the start, Chesky and
Gebbia were emphatic about certain things regarding the website and the experience: specifically it had to
be frictionless, it had to be easy. The listing had to look beautiful. And, based on the famous three-click
rule from Steve Jobs, a design hero of Chesky and Gebbia’s- when Jobs conceived the iPod, he wanted it to
never be more than just three clicks away from a song- the founders wanted their users to never be more
than three clicks away from a booking. Excerpts from page no. 69)

1) https://hbr.org/2014/11/what-airbnb-gets-about-culture-that-uber-doesnt

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Interorganizational framework for Airbnb

Fig 10: A frame work of Interorganizational relationships by Anand Narasimhan.

Airbnb is competing with the established hospitality industry (Hotels, motels, indie hotels etc.)
they are into democratizing hospitality. I believe Airbnb fits into Population Ecology space
perfectly. It is filling the niches (voids)[1] left by the established industry.

Often the large established organizations become dinosaurs. Large firms have difficulty in
adapting to the rapidly changing environment. Established hotel chains are facing structural
inertia. The Airbnb strategy of targeting millennial travelers has given them magnifying returns
because Airbnb provides them what they were looking from an established hospitality partner
(Hotel, motel) something that is more adventurous, local and personal. Roughly 60% of the new
booking are coming from the millennials.

Fig 11: Millennials responses to a survey conducted.[2]

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Fig 12: Millenials responses to the survey conducted in US, UK & China.[2]

This above mentioned bar-graph shows us the preferences of millenials when they travel their main
priorities are,

1) A unique travel experience

2) Living like a local to learn more about that place.
3) And the travel has to be adventourous.

All these preferences were not fulfilled by the established hospitality players in one-complete package,
whereas Airbnb fill in the gaps (niches) to allow the millenial generation (which is the largest generation in
history) to have an enriching travel experience.

1) https://www.theverge.com/2018/2/22/17040684/airbnb-plus-hotels-standard-amenities-service-
loyalty-program
2) https://www.airbnbcitizen.com/wp-content/uploads/2016/08/MillennialReport.pdf
(Note: Very Important report in terms of future growth strategy for Airbnb)*

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