Airbnb Success Secret Story | How Airbnb used Recession to become a 131 Billion Dollar Company?

Airbnb Success Secret Story | How Airbnb used Recession to become a 131 Billion Dollar Company? thumbnail

On the 1st of December 2008, the National Bureau of Economic Research officially declared that the United States entered a recession in December 2007. And by this time, the tremors of the economic nightmare were already being witnessed not just by the United States but by countries all across the world. 2.6 million jobs were lost, several billion-dollar companies filed for bankruptcy and it cost the global economy more than $2 trillion. This financial crisis of 2008 was so bad that it was known to be the biggest economic meltdown in the US since the great depression.

And it lasted for about 18 months. Now, during such a terrible time, if I asked you ‘Would you like to start a business?’What would your answer be? You’d call me crazy, right? Well, guess what? Airbnb was one of the few companies that were not just built during the times of recession but also became a billion-dollar company because of the paradigm shift brought along by the recession itself. So, the question is- What is so special about Airbnb?

How did they succeed because of the recession? And most importantly What are the business lessons from the case study that you can apply to your business? The answer to this question lies in the teachings of the deep-rooted American culture. People, ever since childhood, children in America and even in India for that matter are taught that we should not talk to a stranger, we should not take chocolates from a stranger and in fact, any stranger who talks to you sweetly is a creep. And since childhood, we have always had a problem breaking the ice with a stranger..

This is the reason why Americans back then or even present-day Indians for that matter would never let a stranger live in their bedroom no matter how much they are willing to pay. Similarly from a guest standpoint, if I asked you to stay in a stranger’s bedroom, even you would hesitate, right? Well, this is the reason why multiple startups that had the exact same model as Airbnb failed people just wouldn’t let a stranger live in their house. Then the question is.

When these people failed, what was so special about Airbnb that it became such a massive success? And here’s where you need to know about a timeless business lesson. People always remember that every time there is a crisis of any kind whether that’s a political crisis whether it’s an economic crisis or even something like a pandemic it always leads to a paradigm shift in social behaviour. In this case, when the recession hit America millions of people were left jobless and they desperately needed money. Now, this money that they needed was not to buy a fancy car or a house.

but to feed their family 3 times a day. Therefore, it was a question of survival. In fact, the idea of Airbnb itself was born because the founder’s Brian, Nathan and Joe couldn’t pay their rent and as a result of which they actually started hosting strangers in their house in exchange for a rent and at the same time people who were travelling also needed an affordable option because even they did not have a lot of money right? And that’s when Airbnb connected the host with the guest.

and built their business model in such a way that they could generate a passive income for the host and provide a cheaper and a better alternative to the guest as compared to the hotels. This is the reason why the concept of Airbnb became a game-changer and what followed next was the origin of a billion-dollar industry that redefined travel for Millenials which we know today as the short term home rental industry. And this paradigm shift in the behaviour is what is known as the collaborative consumption movement wherein.

the society believes in sharing the ownership of resources rather than keeping it to themselves. And the economy that emerges out of it is what we call as ‘The Sharing Economy’ FUN FACT Using the valuation of Uber and Airbnb, a report from the Brookings Institution projects that the sharing economy will grow from just $14 billion in 2014 to $335 billion by 2025. And this emergence of the sharing economy is the reason why if you observe closely specifically from 2008 onwards, you’ll see that.

multiple startups that were built on the concept of collaborative consumption have gone out to become million, even billion-dollar companies. And as we move on to the 21st Century the society is becoming more and more conducive for these kind of businesses. This is the first and the primary reason why Airbnb was a super success. Now, the question is- Airbnb wasn’t the only startup during that time, right? In fact, their idea was not even new. Then the question is Why did Airbnb specifically succeed?.

And this brings me to the second element of Airbnb and that is designing for trust. People, back then when people were actually renting out places out of necessity in the initial days things were not very comfortable because the speed of trust couldn’t be established between the host and the guest. But thankfully, Joe and Brian were design students and they understood the importance of design in building human relationships. So, they took it very very seriously and started experimenting with user experience models.

to solve this problem. And that is when after some experimentation they found out that if the host introduced himself and described a little about himself and his family and his dog the guests feel way more comfortable as compared to just knowing about the property. And secondly, they also did a joint study with Stanford to find out exactly what are the factors that built trust between people. And that’s when they found out the more different the two people were, the more difficult it became to establish trust. For example, if you’re a 23-year-old who lives in Pune.

and you meet a host in Delhi who is a Punekar by birth. You will begin to trust that person way more easily as compared to trusting a 40-year-old Gujarati host who lives in Delhi. But they found out that if you add social reputation to a person regardless of how diverse their backgrounds are, the speed of trust increases by a large extent. In this case the social reputation were nothing but the reviews. And they found out that if the host had more than 3 reviews the guest was very easily able to trust her..

And for the guest they designed a small questionnaire that could help them introduce themselves very easily and in a way that is neither creepy nor cold. And from my personal experience, I can tell you guys that this idea of questionnaire has been a game changer for Think School. You know, earlier when we used to ask students for feedback about the course we used to ask them ‘What is your feedback about the course?’ and we used to get answers like “Good”, “Best” and for some reason people even used to say “Okay” but then we started asking more detailed questions that could help people direct their thoughts..

For example we started asking questions like “What do you like the best about the course?” “If you were to change something about the course, what would it be?” And suddenly we started get such insightful reviews that even today when we sit down to design a workshop or a course those reviews help us a lot in curating a better experience for the students. Therefore, this factor of the speed of trust separated Airbnb from the rest of the competition. Now the question is- How are these guys so sharp? I mean, how are they able to get such a deep understanding about their customers?.

And this is what brings me to the third and perhaps the most important element that separated Airbnb from the rest of the competition and that is their ability to build a system based on empathy. And this actually came from one of their investors named Paul Graham who is the co-founder of Y combinator. Paul Graham specifically asked the Airbnb boys to go and visit every single one of their users at their most popular location which was back then- New York. Now, the point to be noted over here is all of this is happening at the peak of recession wherein all 3 of them have been unemployed for 9 months.

they are almost broke and they have no funding. So, this trip alone was a huge burn in their pocket. But you know what guys? Inspite of all these difficulties, the Airbnb boys went all the way to New York and spent 4 long weekends to meet every single host. to talk to them about their experience. And guess what? They found the most valuable customer insight with every single conversation. For example,.

they understood that inspite of having a great house people did not have good camera phones to click good pictures of their house so these guys rented a camera and helped the hosts with the photos. Some of them were not able to articulate their offerings in the website, so the Airbnb boys website actually sat down and wrote the description for them. And they also taught the hosts as to how do you write good and lucrative descriptions. And most importantly after they were done, they invited the host over for a beer later on that night and sat with them and just built a relationship..

They exchanged stories, had a beautiful conversation and even told them abou the crazy Airbnb story. And you know what guys? They built such an amazing bond with the hosts that they could actually call these hosts up later on and tell them that you know their price is too high or that they needed to write better descriptions. And guess what? Soon enough all these listings began getting a lot more traffic and people from all across the world who were travelling to New York started to book these Airbnbs and eventually.

the hosts were able to make a lot more money. In fact, soon enough, the guests to visited New York became hosts wherein they started listing their property and suddenly property listings started popping up all across the world including Germany, Spain and even Hong Kong. This is how by turning hosts into brand ambassadors Airbnb laid a solid foundation for the most powerful method of marketing and that is word of mouth. This is how, .

timing, design for trust and empathy became the perfect recipe for Airbnb’s success. Today Airbnb is so huge that they’ve got 7 million listings in 191 countries and generated a revenue of $4.7 billion in 2019. Now, let’s talk about the most important part of the video and that is what are the lessons that you need to learn from this case study. Before we move on, I wanna thank our partners Fi for supporting this video. Just like Airbnb redefined travel and lodging for the next generation Fi tends to redefine banking for working professionals. So, if you’re an aspiring entrepreneur or if you’re looking for a smarter banking experience.

you should check out this app for two reasons. Number one This app is an opportunity for you to witness the concept of 21st Century banking which is something called the Neobanking. Number two, if you observe carefully this is a disruption of an age old industry in the making. And just like any other disruption, it’s got some golden business lessons to teach you. And from the consumer’s standpoint, there are 3 things that I absolutely love about this app. Number one, its got a feature called Ask.Fi which helps you understand.

where and how you are spending your money. Just type Amazon spends and you will get an answer in a tap. Secondly, the UI of the app is minimal and it’s got a fascinating usage of colours and illustrations that makes the app extremely fun to use. And most importantly, it’s got a feature called FiJars This allows you to compartmentalize your own money and save them for different goals. For example, you could save it for a rainy day jar or a holiday jar. In fact, normally people even end up creating multiple bank accounts just to separate their money which in this case.

you don’t have to do anymore once you start using Fi. So, if you loved their idea use the link below to get an early access to the app and get a chance to witness the evolution of neobanking in India. Now, let’s talk about the lessons from the case study. Lesson number one. Every time there is a crisis or a recession of any kind ALWAYS REMEMBER that there will be a paradigm shift in the consumer behaviour and the companies that are built upon this behaviour are the ones that will go onto become extremely successful.

even if they aren’t the first, even if they aren’t the best. In this case the recession gave rise to Uber, Airbnb and the shared economy. In case of the pandemic, if you see it boosted the sanitation industry the edtech space and the creator economy. Lesson number two and this is something that I’ve said multiple times, that is market research is perhaps the most underrated and yet the most powerful tool to build a business..

And what I’ve seen is in the race of digitalisation, we often tend to underestimate the power of face to face meetings and what a solid rapport can do. In our case the Airbnb boys could have easily done a Skype call or they could have used a Google Form to do their market research but inspite of being broke, inspite of being unemployed they meticulousy followed Paul Graham’s advise and spent 4 long weekends to meet every single host and that turned out to be a game changer for them.

that helped them build a billion-dollar company. So, if you’re somebody who is building a business right now and if there’s any chance that you could actually go and talk to your customers face to face please go ahead and do that because that conversation could reveal such important insights that it could be a game-changer for your company and it could also help you separate from the rest of the competition. And last and most importantly if you’re someone who is really passionate to build upon the learnings from this case study.

I’ve got 3 beautiful books for you. The first book is Change by Design. This will teach you how to use the superpower of empathy to build a business. The second book is this book called 21st Lessons for the 21st Century and this book will help you understand the happenings around the world. And lastly, I insist you read this book called ‘The Third Industrial Revolution”. That’s all from my side for today guys.

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