The main thing is that Airbnb has a global economy of scale - having more hosts in Japan actually does benefit their guests who reside in New York year-round. Competitors to Airbnb similarly must achieve global scale in order to compete in a serious way. There are one or two meaningful exceptions (China, possibly the US domestic market), but essentially any Airbnb competitor must achieve global scale in order to be a serious threat.

By contrast, Uber has to fight to win each city, and most of its users will use Uber for the most part within that city. Adding more drivers to Tokyo does not have a meaningful impact on the resident of New York.

Why not? A New Yorker who visits Japan needs a ride around town as much as they need housing? Ok, maybe not quite as much. But they do benefit.

It’s not nothing, but the difference is at least an order of magnitude.

Consider: I am probably 0% likely to book an Airbnb in my own city. Almost all of my Airbnb’s will be somewhere else, so I only really care about remote stock.

By contrast, something like 90%+ of my Uber rides are going to be local. In many of the places I might travel to, I don’t need Uber at all (the location is rural/suburban, the public transit system is cheap and effective, cabs are widely available, etc).

Ehh. I rarely Uber in my home city and practically all my business is when I travel.

Especially internationally. If I’m in a country that doesn’t speak my language but they have uber, you better believe I’m ubering left and right.

That is a good point. But presumably most of Uber's revenue comes from the residents of a city who are in town most of the time. Opening up in a new city doesn't benefit Uber as much as it does Airbnb where all properties are accessible options to all of its users.

But the New Yorker knows that AirBNB is the place to find their place in Tokyo, with few non-hotel alternatives. When you got to Tokyo, even if you don't have Uber installed, you will find a cab.

I think those competitors at a global scale already exist in the form of the big hotel booking sites like agoda/booking.com, they have the global scale and global customer volume to directly compete with airbnb in this space and for them it's just adding another offering that compliments the offering they already have.

On the other hand Uber is now operating mostly aboveboard while Airbnb, at least in its single largest market (NYC), is like Napster in its second incarnation—-while it may itself not be violating any laws the overwhelming majority of its facilitated transactions are illegal. That’s a dicey thing to invest in.

> the overwhelming majority of its facilitated transactions are illegal.

Any source on that? I know some municipalities regulate rentals now, but to say that the vast majority of them operate illegally is a bold claim to make with no data presented.

In NYC, Airbnb’s largest market, with tiny exceptions, it is illegal to rent out an entire apartment (i.e. host not present) for less than 30 days.

NYC is crazy expensive. The govt will go after landlords first and then the subleases nest.. So if everyone in a building is airbnb but not directly owned by the landlord then forget it.

I don't think NYC is Airbnb's largest market.

The New York Times claims NYC is Airbnb's largest US market[1]. And CityLab claims NYC is Airbnb's 3rd-largest market worldwide.[2] However, with respect to whether "the overwhelming majority of its facilitated transactions are illegal":

Speaking strictly for NYC (the town I live + Airbnb host in), I think the more relevant metric is- what percent of Airbnb's revenue comes from the illegal kind of rental (i.e. rentals of the entire unit for more than 90 days of the year) vs the legal kind (whole-unit rentals totaling less than 90 days per year, as well as shared-unit rentals of any length)? According to Gothamist, 75% of its NYC revenue came from whole-unit rentals.[6] How much of that was legal is anyone's guess, but this is one reason why Airbnb was fighting tooth and nail to stop the recent city council legislation.[7]

NB- Another reason is that, once the city collects hosting data, it will likely use its housing inspection mandate to shut down most if not all Airbnb rentals in the city (not just illegal ones) at the behest of the local hotel employee's union. But that's me speculating, so take it with a grain of salt.

Keep in mind that Airbnb made $140 million in NYC in 2018[3], had $2.5 billion in 2017[4], and over $1B in revenue in Q3 of 2018 alone[5]. So the percentage of revenue it contributes is likely between 4-4.5%. If this went away overnight, the company would probably be fine as long as the damage ended there. But there's no guarantee of that, since other cities are considering similar legislation and are looking to see what the outcome of the above battle will be.

In the end, NYC will probably succeed in approving a permit system similar to San Francisco's, which will be enough to get the city the information it needs to shut down any Airbnb host it wishes.

[1] https://www.nytimes.com/2018/07/18/nyregion/new-york-city-ai...

[2] https://www.citylab.com/equity/2018/03/what-airbnb-did-to-ne...

[3] https://www.bloomberg.com/news/articles/2018-07-24/airbnb-s-...

[4] https://www.reuters.com/article/us-airbnb-results/airbnb-had...

[5] https://www.pymnts.com/earnings/2018/airbnb-third-quarter-re...

[6] http://gothamist.com/2018/06/28/city_council_takes_on_airbnb...

[7] https://ny.curbed.com/2018/7/19/17590164/airbnb-nyc-law-prop...

Cities all over Europe have restricted or banned short rentals and many more are considering it. It will be messy and probably the results difficult to measure. On the other end Airbnb is collecting tourist taxes on behalf of some cities. This is particularly interesting because you have a corporation helping a city in something they struggle with (collecting taxes) and making themselves irrepleaceable. Smart move.

> whole-unit rentals totaling less than 90 days per year, as well as shared-unit rentals of any length

The multiple dwelling law does not allow any whole units to be rented for less than 30 days. There’s no exception for less than 90 days in a year total.

From the MDL: A ‘class A’ multiple dwelling is a multiple dwelling that is occupied for permanent residence purposes… ‘Permanent residence purposes’ shall consist of occupancy of a dwelling unit by the same natural person or family for thirty consecutive days or more and a person or family so occupying a dwelling unit shall be referred to herein as the permanent occupants of such dwelling unit.

Per your own link that means 75% of nyc Airbnb revenue is derived from facilitating illegal transactions.

Yep, I stand corrected about the legality of whole-unit rentals less than 30 days. Looks like I was mixing up NYC and SF laws on that point.

I am curious if Mayor Bill de Blasio will go after landlords who permit or partake of this following his recent declaration they will confiscate property of landlords they consider abusive or failing to maintain property to new standards. Of course he plans to turn them over to non profits which is code for politically connected groups which support him, but the idea that they don't put an Airbnb clause into the abusive category isn't baseless.

AirBnb is going to get knocked down a peg or two once the states get involved, they are able to dance around many cities and their attempts to reign it in but once a state level attorney comes for them it won't be simple.

however as with uber this comes down to private property rights, who do you choose to side with. Me, I am with the property owners as a Libertarian but I am with government regulation so that it is not abused to the injury of others. Specifically the idea of evicting people or requiring them to vacate during high profile events in town

> however as with uber this comes down to private property rights, who do you choose to side with. Me, I am with the property owners as a Libertarian

What about the property rights of the landlord? The co-op? Fellow condo owners? In addition to violating state law most of these units in NYC are being rented in violation of signed agreements (leases, proprietary leases, condo rules incorporated into purchase agreements).

Here’s one recent lawsuit seeking $21 million: https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet...

What im not sure about is Airbnb's moat. They have a great brand name and all, but their service is very limited: 15% is a very large cut to take on these transactions. What prevents another company from doing the same at 12% and costing 50% to operate?

Nothing prevents another company from doing that, but all of the hosts & guests are already on Airbnb. Two-sided marketplaces are very difficult to start, but once they have some momentum, it's even more difficult to unseat them.

Look at Craigslist - terrible UI, hundreds of startups have tried to challenge it in the past 15+ years, and yet it's still my go-to when I need to sell some old furniture.

Craigslist has a fantastic moat: they are insanely operationally efficient. To make more money than craigslist at a lower cost is virtually impossible.

The real entrance cost to becoming a host in airbnb is not airbnb, its having a house. And a host will use airbnb or whatever to keep the appartment occupied. It can absolutely be commoditized, much like Lyft and Uber have. A service that posts your apt in multiple websites would make that permanent.

Today they must own the demand side: i have never seen something become so popular with no little ads (particularly in argentina, it was incredible to see it going from 0 to ubiquitous in 2 years). But demand on apartment rentals is incredibly price sensitive, demonstrated by the competition airlines have.

I have friends who worked at Craigslist, and was astonished to hear them describe a team of IIRC 35-40 employees. They have somewhere around 50 now? Makes you wonder what those 3k+ employees at Twitter all do.

A lot of companies have an affinity towards jobs numbers, and derive benefits from the local municpality by being able to print job numbers

It simultaneously helps the organization’s tax efficiency and MAYBE something interesting gets developed

While this doesn't explain all of the difference, Twitter tries, and largely succeeds, to distribute both Tweets and likes in mere seconds, all around the world, while maintaining a search that can find any string in relatively recent messages.

That this is a substantially harder mandate than that of Craigslist I take as a given.

Sales, Marketing, Partnerships, Content Moderation/Censorship.

It's irrelevant how many sites you can use to list your apartment. What matters is which site guests use.

Sure. Unless, let's say, a company that's already used by travelers to book travel options enters the space and/or syndicates the data to hotel search engines in addition to their own website. If I can find both hotels and apartments in hotels.com, why do you think I'd use airbnb? (Assuming apartment owners don't mind listing their space in multiple sites - which is a hard problem to solve but not an impossible one. It has less churn on the supply side compared to, let's say, Uber)

I'd argue that CL actually has a fantastic UI, it presents all the information you need, and nothing you don't, in a format that is quick to read. The only feature it's missing (or was missing the last time I needed it) is a map based list of housing for rent so you can simply filter out 90% of the listings that you'd never consider based on location anyways. That and a "prevent all Craigslist stereotypes from responding to my listing" button.

But it's not about presenting information. It's a completely different experience.

AirBnB handholds the traveller from the moment they start looking to when they're going on the trip. CL just presents an ad, and lets the parties email/text on their own. AirBnB handles the financial transactions, with all that that entails, and CL does not. AirBnB facilitates the communication between the landlord and the customer. They also let you add on "experiences" as part of your trip. They also include an identity verification system for both landlords and consumers, and there's a review/rating system for both. It might not be perfect, but Craigslist has nothing like it. For example, I generally avoid renting places that don't have reviews, and landlords can choose to ignore/reject renters who have built up a bad reputation.

CL, on the other hand, has a reputation for being full of scammers and other shady people.

CL UX is great, as both a buyer and seller.

It _could_ introduce more barriers to reduce scammers, but that would come at a cost to both buyer and seller UX.

There is value in simplicity, and the market thus far agrees.

Craigslist is the anti-thesis to the hubris-fueled notion that technology can and should solve every problem, including dishonesty. I've not yet been scammed on Craigslist because I've built up a valuable skill in identifying scammers in general rather than relying on an imperfect system implemented differently on all marketplaces. In return, I do not get scammed as a _seller_, which is something most marketplaces seem to neglect.

More broadly, we often blame human nature on software implementations, as if there was a software solution to (all of) such without trade-offs.

Thank you for putting my thoughts into words. Couldn’t agree more. Think of the comfort CL users have after 10-15 years of the same workflows, the same UI, the same expectations. The skill of vetting scammers shouldn’t be understated and transcends CL.

When I log into a “modern” app today there’s almost always a new feature in my face or an old feature moved to a new location (or simply deprecated)

Exactly. The kinds of transactions that take place by the thousands (just guessing, might be off by an order of magnitude or two?) on a daily basis on AirBnB, i.e. guests giving complete strangers money over the internet in advance to stay in their homes, and hosts inviting complete strangers over the internet into their homes in the first place, simply has no chance of ever becoming mainstream on a platform like Craigslist.

This is precisely because they're the kinds of transactions that most people would never even consider to take part in without first being able to establish a certain level of trust in the other party.

I think this is probably the biggest competitive advantage for AirBnB against challengers in the space. Bootstrapping a 2-sided marketplace is hard enough to begin with, but doing so while building up a network of trust among users so they can comfortably partake in transactions with a high trust-barrier is even harder.

Is it impossible to generate fake reviews, fake rental transactions, multiple accounts, etc. on air bnb?

The perception of safety could be more dangerous for some using air bnb as opposed to those on CL who are fully aware that there is no safety net nor hand-holding.

>Look at Craigslist - terrible UI,

I love their UI. It's fast and does exactly what it needs to do, with the bonus that I don't have to download 12 js frameworks to look at a damn listing.

Here in Utah, Ksl.com does the majority of classified transactions. Craigslist was late to market and never caught on. Source: https://www.theatlantic.com/technology/archive/2017/04/ksl-c...

I'm not arguing your point, but I think Craigslist's UI is very focused in scope and meets the expectations of its audience.

Moreover, booking.com existed long before Airbnb and is still going strong!

Does it actually have a terrible UI though? The UI is certainly basic and dated, but its so usable and distinctive.

You could argue that Craiglist's brutalist aesthetic is its genius.

Big hotel booking sites like booking.com/agoda already have the customers and the world wide logistics for handling this stuff, I can see them becoming direct competitors to airbnb in this space.

Airbnb actually disrupted them https://growthhackers.com/growth-studies/airbnb

Many of the exact same properties are on VRBO.com already, so Airbnb doesn't even have a lock on their own properties.

Curious.. why not facebook marketplace?

Because it's Facebook. I know they are heavily spamming that feature but I have literally never seen anything on there of any value. It's a crappy feature that should go away.

It works in my town. In fact it’s preffered.

Their social network and brand recognition is their moat for now. Hosts and guests trust Airbnb. An upstart will have overcome a lot of momentum to take on Airbnb in the broad market.

The reviews are worth the price of admission

They are valuable for sure, but are they 1/7 appts rented out?

Traditional vacation rentals charge 15~20%, but they truly handle the key hand offs and such.

I suppose the landlords could port their reviews to a new platform by linking to the Airbnb listing similarly to how people used to post their eBay reviews when selling on forums. But yeah having all those reviews viewable natively for comparison is nice for renters.

Marketplace network effects – Hosts are more likely to use Airbnb because they have the most guests. Guests are more likely to use Airbnb because they have the most hosts.

Instant book – A host can only have "instant book" on for one platform at a time, otherwise their listing could get overbooked. They'll likely leave this on for Airbnb because they have more guests than any other platform, which adds friction to booking for other platforms.

Same as booking.com: users won't spend a second on looking at the second largest directory and directory customers cannot afford to not be present the one end users are looking at, they will grudgingly pay. The only question is which of booking and airbnb will survive, as their market overlap keeps getting bigger. In any case, those providing the actual hospitality service seem to be getting the short and of the stick.

Yeah I was thinking exactly that a couple days ago while I was booking a beach condo on a different site. Airbnb has a fair amount of competition in the vacation rentals market, and there doesn't seem to be a good defense against that. When I'm looking for a place to rent for vacation, I start with Google and end up visiting several sites. Airbnb is frequently one of them, but never the only one.

I'm not sure about the moat either. While planning a trip recently, I checked out Airbnb, Booking.com, VRBO and Homeaway.com for the same area. I found that Booking.com and Homeaway.com both had some of the same listings. So landlords are certainly trying to bypass the moat. (Homeaway.com is in fact co-hosting Airbnb listings through a partnership, but they're also apparently transitioning away from that to become a full-blown Airbnb competitor.)

I suspect the moat won't matter that much, since a consumer ultimately doesn't care about which service they end up booking with, as long as it seems trustworthy, and landlords have little reason to be loyal to one service when there's no downside to being non-exclusive.

15% is a small cut. Ever sold inventory on Booking.com or Expedia? It’s a lot more than 15%. Plus AirBnB actually collects the money for you and you are paid on the day of check in. I own a small hotel in France and AirBnB is far more profitable and easy to use than Booking or Expedia. The marketing value alone is worth far more than 15% — but that 15 also includes credit card fees as well. It’s a great deal.

The standard commission rates for booking.com are 15% in fact. There are ways to push that up due additional marketing (preferred status takes it to to 18% and had requirements on average review scores last I checked).

So I don't know where you're getting your impression from that booking charges more than those 15 percent, but you may wish to recheck your numbers.

Can't comment on ease of use on the supplier side.

Source: I know that because I used to work there, ran the infrastructure eng and prod teams.

Interesting, are there also hotels in AirBnb now? In Europe I most of the time end up with Booking.com even though I regularly check AirBnb too -- if the prices are close to each other (as they surprisingly often are), I'll always go with a hotel.

I have a vacation house, which I rent out. Normal booking fees for these houses are 30%. I have a different arrangement, but thats the default.

network effects. Buyers want to be where the most sellers are and sellers want to be where the most buyers are.

to win over an existing market you need to offer something dramatically better somehow or angle it dramatically differently, not just a 3% cost difference. Remember craigslist was basically free.

Airbnb has long way to go to be major player in hotel/rental market space whereas Uber has effectively killed taxi companies and is the market leader.

IMO demand for ridesharing will not lower in bad economy compared to Airbnb which is driven by consumers mostly using during travel.

On the other hand, in a bad economy, more people are likely to rent their extra rooms at lower costs, and whether vacationing or even living for short term, consumers are more likely to pay.

There is then the argument that such a time would quickly be bad for aurbnb bc the fees quickly cost more than the marketing or insurance are worth.

Counter-intuitively, demand for travel tends to go up in rough times.

Do you have any sources on that? I have family in the hotel industry and anecdotally the entire industry in my area took a nose dive in the last recession. Not quite the same as general demand for travel but it's more relevant to how Airbnb would perform in a recession.

Agreed.

Adding to that, I'd say that a big part of how "monetizing labour" compares to "monetizing capital" is, in simple terms, that monetizing capital (homes) has more too to maneuver. Ironically, labour (drivers) is the more commodified market.

Uber is a market maker in a world with hard price competition on both ends: drivers and passengers.

Since "rentals" is more variable, a 5-10% change in price/cost/income is tolerable. You can redecorate a rental, for example, to affect its value. Seasonality can shift price by a lot. Etc. This generally lends better to a thick, market-liberal layer.

It's a slight irony (again) that this is the end point. Airbnb was innovative. It changed my travel habits immediately. But, conceptually it's just a holiday rentals site. Nothing new apart from quality and scale. One rental's ROI will be very different from another's. One consumer's choice will be very different from another's. It's a differentiation market. Diverse product, flexible prices.

For an Uber customer/contactor, both the app and the drivers are commodities. What Uber probably needs to do is ruthless efficiency, low marginal costs. Not many SV-startup style companies have that mentality, so hard road ahead.

Also, being capital-oriented, Airbnb gets better over the long term. At this stage, much of Airbnb's stock comprises properties bought or leased specifically to be an Airbnb business.

Which is worse on cities, Uber or Airbnb?

(My gut says Airbnb.)

What's bad for cities is not building enough housing for people who want to be there. That includes people who want to be there for a short time. Airbnb is bad for some city stakeholders, but good for other ones (e.g. people who want to rent out their apartment while they're away on vacation).

That assumes you have an infinite city. However, unless you want to destroy the historical center of the city with skyscrapers, you do not have unlimited space for the housing to grow.

Peter Thiel was specifically talking about people thinking that the businesses are similar, while they're not. AirBnB has a much higher network effect, because there's a huge difference in the listings, while I don't usually care which taxi company I use.

Not really.

AirBnB has renters and listings. Uber has riders and drivers.

As long as you have enough of the two sides, you can have a rival.

But as a customer, your approach to both marketplaces is very different. With Airbnb, I'm far more discerning because a bad host can ruin a long planned vacation.

With Uber, a bad driver means an uncomfortable 45 minutes. Uber can tolerate bad actors more than Airbnb

That's true, but that just means you the consumer can be more discriminating on other factors, like price.

Interesting point. I also think the non-fungibility of Airbnb's listings will help them maintain their margins. For many Uber customers, a ride is a ride is a ride.

Another angle is that Airbnb also carries differentiated inventory vs. a completely commoditized good. If you are booking a guys ski trip vs a romantic weekend vs family reunion you are looking for a unique property. Airbnb, as the largest player, is most likely to have differentiated inventory, and therefore, the first place someone looks. So as a two sided market place, Airbnb has more value.

They're compared because they own the distribution in their respective markets. That's key.

That being said, here are the risks on the supply side for both in very different ways:

- Uber: Drivers are fungible and can move to any platform they want. Two risks here...unbundling (already happening) and driver acquisition cost.

- ABnB: If their supply bundles itself together, it doesn't need to pay a distribution fee and ABnB is done.

The economics are also much works for an Uber driver than an AirBnB host.