Few startups to come out of Silicon Valley in recent years have been as disruptive, to use an overused word, as Airbnb. The nine-year-old, $30 billion short-term accommodations platform, offering a way for people to host paying travelers in their home or to rent someone else’s when they travel themselves, has become a consumer sensation, a lightning rod for opposition, a major threat to the hospitality industry and one of Silicon Valley’s biggest success stories all at the same time. I found this company’s trajectory so fascinating that I recently wrote a book about it, and as I start to make the publicity rounds (a process that’s part fun part very stressful), one question keeps coming up over and over again: There were many other home-rental websites long before Airbnb. Why did it take off? What about it was so different?
Leigh Gallagher
It’s a great question; in fact, it was one of the first things I asked myself when Airbnb first started to edge onto the radar of Fortune’s team of tech reporters back in 2009 and 2010. As the keeper of Fortune’s 40 under 40 list, my colleagues were frequently coming to me with the names of the hottest new startups coming out of Silicon Valley that we should keep on our radar for the list. Someone mentioned Airbnb to me around that time, and I distinctly remember rolling my eyes. I should note that I’m not a Silicon Valley reporter who covers the tech sector day-in and day-out; I cover all aspects of business more broadly from far away in New York City. But I felt that distance gave me a healthy arms’ length perspective on some of the breathless euphoria that tended to waft out of the region. I often pointed out when I thought certain ideas were overblown and overhyped. This new company, I thought, was definitely one of them.
I made a mental list of all the other companies that already existed that did something similar: HomeAway.com, VRBO.com, both of which I’d used for years; Couchsurfing.com, BedandBreakfast.com, even Craigslist. I wondered how this new company could be so different. What is it about these tech startups, I remember complaining to a colleague at the time, that think they can take an old, unoriginal idea; gloss it up with a slick, minimalist, design-friendly website; and re-release it back onto the marketplace as something new?
Soon, it became clear that whether the idea itself was brand new or not, there was something different about this company. By January 2011, it had hit a million nights booked, then doubled that figure four months later. It became a “unicorn” that year, though the term hadn’t been coined yet—and today, it has a valuation of $30 billion. It has 3 million listings worldwide (more than 80 percent of them are outside the U.S.), as of last fall, 140 million trips had been taken on its platform since its founding. It is a verb; it is a thing.
So then, if it wasn’t the first in its category, what about Airbnb made it so different?
For one thing, it was designed differently. Much has been made of the fact that two of Airbnb’s three cofounders, Brian Chesky and Joe Gebbia, were graduates of the Rhode Island School of Design, and the role this played in Airbnb’s “user experience,” but this was a critical point of difference. The website was fun and easy to use. The photos were big and lush and inviting (thanks to the company’s heavy investment in offering free professional photography for any “host” who wanted it), users’ profiles and reviews were a big part of the experience, and payment was seamless and contained on the site itself.
Airbnb also popularized the idea of sharing a space when the host is there. Today, most of the company’s business is people renting out full spaces and entire homes—only about 1/3 of its business is “shared” accommodations—but Airbnb was founded on the idea of renting out space in one’s home while both parties remained present. And while that idea was perceived as radical at the time, it was also the depths of the Great Recession, and the creation of a new platform with that much more affordable way to travel had significantly more appeal than it might have had at any other time. (Other sites existed that did this, too—think Couchsurfing.com—but Airbnb was the first to do it on such a large scale.)
The inventory Airbnb offered was also famously whimsical: anyone could upload any space, and Airbnb listings were soon populated with treehouses, castles, teepees, shipping containers, and more.
One of the biggest ways in which Airbnb was different from the companies that came before it was simply that it was urban. Before Airbnb, most home-rental companies focused on second homes in traditional vacation or resort destinations (this is the way I’d used VRBO and HomeAway myself before, for beach and ski vacations). Despite all those treehouses and castles, the majority of Airbnb’s listings are studios and one- or two-bedroom apartments in cities, which is what makes it appealing to so many travelers—and so threatening to hotel companies. Being urban also gave it particular appeal to millennials, that demographic that was new, massive, perplexingly different in their wants and needs, and still un-won-over by hotel companies. As travelers, these urban-minded explorers could now be guaranteed a cheap place to stay when they visited cities around the globe; and as renters or “hosts” themselves, well, for the first time, you didn’t need to be a homeowner to monetize your real estate. You could profit from a rental revenue stream—the kind of thing typically reserved for adults with titles and deeds and mortgages—even if your only claim to real estate was a one-year lease on a rented studio apartment. (City regulators, coop boards and landlords, of course, had something else to say about that.)
Airbnb’s inventory has expanded to serve many other types of destinations, but in cities in particular, it presented a way to travel that offered a marked contrast to staying in a hotel: you could stay in a residential neighborhood far outside the traditional tourism zone and “live like a local,” as Airbnb puts it, an advantage it heavily pushes. Many of its users prefer staying in unique accommodations over hotel rooms that are more standard and uniform.
Of course, not everyone feels that way. Lots of people prefer hotels precisely becauseof their consistency, predictability and uniformity. There is a confidence that comes with knowing what you’re getting. Others like having access to hotel services, whether a spa, a lobby bar, room service or even daily linen change. You don’t have to look far to find an Airbnb user who has been disappointed by something that has gone wrong or is not quite as advertised.
But as it crosses the 160 million “guest arrival” mark this month, you also don’t have to look far to find a lot of people who really love it.
Today, there are plenty of other companies offering exactly what Airbnb does—there is a cottage industry of sites offering urban short-term rentals; even HomeAway has in recent years made a push into urban markets (while Airbnb has made a push into traditional vacation rental destinations).
So even while there were plenty of other competitors in its category, and while Airbnb didn’t invent short-term rentals—prompting my eye-roll back in 2009— its experience shows that you don’t always have to bring to market a completely new invention in order to be significantly disruptive (it also shows that editors can be wrong). In fact, as Arun Sundararajan, professor at NYU and author of the book The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism put it when I asked him, “One of the signature elements of the sharing economy is that the ideas themselves are not new.”
Any would-be entrepreneurs out there would do well to take this as a lesson: Sometimes, the most successful ideas can come from looking at something that’s already out there — just in a slightly different way.
Leigh Gallagher is author of the new book The Airbnb Story: How Three Ordinary Guys Disrupted an Industry, Made Billions . . . and Created Plenty of Controversy. She is an assistant managing editor at Fortune and the host of Fortune Live. She is also cochair of the Fortune Most Powerful Women Summit and oversees Fortune’s 40 Under 40 editorial franchise.
