Studying business at Aalto University, Finland

Here are some of my most read posts.

Business @ the Speed of Thought

How Quora and reddit solved the chicken and egg problem

How Dropbox got 75,000 waiting list signups from Digg

View Markus Kirjonen's LinkedIn profile View Markus Kirjonen's profile
The story behind Airbnb’s success
Monday, August 4th, 2014

Airbnb, the massively popular website for renting out lodging, was last valued at about $10 billion. Not bad for a company that got started in 2008.

It really is a great service too. But that’s not what I’m interested about when it comes to Airbnb. No, it turns out that their customer acquisition methods were quite fascinating. Did they really building a significant portion of their userbase by spamming Craigslist? Let’s take a look.

History of Airbnb

Airbnb was started by Joe Gebbia, Nathan Blecharczyk, and Brian Chesky in 2008. The origins of the website aren’t as glamorous as one might expect. When the rent for their San Francisco apartment went up, the team was left trying to figure out ways to make extra money. One idea that came up was renting airbeds on their apartment floor. A big design conference was coming to the city, and hotel spaces were scarce.

Being web designers and developers, building their own website for renting out the spaces was a much more appealing prospect than using Craigslist. After a few weeks of development, the earliest version of what would later become Airbnb featured the ability to rent out spaces in their apartment. It was complete with pictures and a little information about the place. The result was three people staying with them, and a profit close to $1000.

However, they gained something more valuable than a thousand dollars in this experiment. Soon after the weekend, they started receiving emails asking when the website would be available in different countries. “When is Airbnb coming to London, to Japan?”

Feedback like this is a pretty good indicator of having stumbled onto something worth doing. The group decided to go with it and see how big they could make their service. Using a small loan from their parents, as well as a lot of their own money, they put together a service that started attracting attention. Soon after, they were accepted into Y-Combinator. Once in the accelerator program, the next thing they had to figure out was getting users.

Spamming Craigslist to acquire users

When starting a business like Airbnb, you need users to make your service good. But unlike with Reddit or Quora, putting up fake listing wasn’t going to cut it. They needed real people with real houses to rent out. Luckily for them, there was already a marketplace with lots of inventory: Craigslist Vacation Homes.

The team behind Airbnb begun messaging people who were listing their homes, recommending that they try posting on Airbnb as well. The real kicker? It wasn’t an email directly from Airbnb, but rather, a normal person on a gmail account.

Re: $700 / 1br – Lake Tahoe – Lakefront Condo – Sleeps 4 (Tahoe City, CA)

Hello,

I am emailing you because you have one of the nicest listings in Craigslist in the Tahoe area, and I want to recommend you feature it to one of the largest vacation rental marketplaces on the web, Airbnb. The site already has 3,000,000 page views a month! Check it out here: http://www.airbnb.com

Jill D

I love it. Of course, Airbnb has denied having been involved with these emails, but it wouldn’t be the first time a big company has done this. PayPal used a similar strategy with eBay, buying auctions and messaging the sellers asking if they could pay with PayPal. And apparently it works. Dave Gooden posted an overview of his investigation on the matter.

After noticing Airbnb’s incredible growth, he started looking into what they were doing. After posting a fake listing on Craigslist and receiving an email from ‘a fan of Airbnb’ a few hours later, he took it a step further. He set up an entire fake vacation rental website and some spamming software. He harvested email addresses, and sent out a single email blast similar to the ones that Airbnb had used. The results? Over 1000 vacation rental owners signed up and listed their properties on his website.

After posting his findings, he went on to say: “When you scale a black hat operation like this you could easily reach tens of thousands of highly targeted people per day…and quickly gain 60,000 members on the supply-side, which again, is the hardest and most important part of growing a market place.”

Making their service look good, one photo at a time

Messaging people on Craigslist might be one of the more interesting methods Airbnb used to acquire users, but it certainly wasn’t the only one. Another major lesson to take away from Airbnb’s massive success is that looks matter.

In 2009, Airbnb was only making $200 a week. Not exactly the business it is today. There was a problem with Airbnb, but they couldn’t figure out what it was.

One thing the company had going for them was being a part of Y-Combinator. This allowed them to meet with Paul Graham, and look over the 40 or so New York City listings. After going through all the results for some time, they realized that there was a similarity between all of them: the photos were terrible. Many were taken with camera phones, and some were completely out of focus.

The solution? Helping the early listers with the photographs. The founders grabbed a camera and flew to New York, and began replacing the early photographs with great, detailed ones. In under a week, they saw great results. Improving the pictures had resulted in the weekly revenue doubling from $200 to $400. This goes to show how important visuals are. A problem many programmers face is trying to solve all their problems with code- when really, the best solution is to go out and take better photographs.

It seems that lesson stuck with Airbnb. Today, their website is amazingly designed.