The Biggest Lessons Entrepreneurs Can Learn From Airbnb’s Success

Leigh Gallagher photo by Christos Karantzolas

How did three young guys disrupt the hotel industry and create a company that’s now worth $30 billion?

That’s the question at the heart of Leigh Gallagher just-released book, The Airbnb Story. Gallagher, a Media native and editor at Fortune (she’s appeared twice at Philly Mag’s ThinkFest), tells the behind-the-scenes story of how the company’s founders, Brian Chesky, Joe Gebbia and Nathan Blecharczyk, took the germ of an idea and, in less than a decade, built a corporation that has millions of passionate fans and a valuation that’s now larger than that of Hilton and close to that of Marriott. Gallagher, whose first book was 2013’s The End of the Suburbs, chatted with me about the Airbnb phenomenon – and what entrepreneurs and business execs can learn from their success.

What made you want to tell this story?
It’s funny, I’m not a tech reporter. There’s lots of people out there in the media who cover companies like Airbnb and Uber day-in and day-out. I don’t. But what I saw in Airbnb was this incredibly disruptive business, social and cultural phenomenon. What was most fascinating to me was how it went from this fringe idea that everyone thought was completely crazy and a terrible idea to, lo and behold, a completely disruptive force that really did transform the way we travel, the way people make money for themselves, and the way we use space. Not without lots of controversy along the way. Put all those things together, and it seemed to me to be a business tale unlike any other.

You say in the book that you were among the skeptics.
I was a complete skeptic. I am the editor of the “40 Under 40” list at Fortune, and so every year we get these breathless pitches from Silicon Valley companies, and you never know. Some of them are all the rage one year, and then completely gone the next. When I heard about this, I literally rolled my eyes and I said to a colleague, “What is it about these tech companies? They think they can take an old idea, reissue it in a fancy, glitzy web site, and put it back out onto the market as something brand new.” I’ve used Home Away, I’ve used VRBO, I just thought … no. And I wasn’t the only one to dismiss them like that. But I learned a few years later that I was wrong to dismiss them. There are a lot of things that Airbnb did that were actually different.

Like what? What’s made them so successful?
There are a couple different things. One is how different their site was from other sties that came before it. The design was different. It was a really beautifully designed web site. And that repositioned the way you used something like this by putting the emphasis on the personalities of the hosts. They used professional-grade photography, so that surfing through the listings was actually more like an exercise in — somebody called it, “Pinterest meets real estate porn.” The inventory became very whimsical and quirky, and they got a lot of attention for the tree houses and the castles and the igloos.

It also pioneered the use of home sharing — you know, actually staying in someone’s place while they’re there. That was very different from what the other vacation rental sites in the past had done. And then also it was much more urban. So Home Away and VRBO and other sites were more focused traditionally on beach towns and mountain resorts and renting a vacation home.

It seems like their timing was right, too.
It came to be during the Great Recession, when people were really looking for a cheap way to travel or the ability to make money from their homes. It also really spoke to Millennials out of the gate. Millennials were not yet claimed by the hospitality industry. And Airbnb spoke to them through this adventurous, quirky, anti-corporate, authentic way to travel.

Yeah, they seem to have tapped into the way a certain generation wants to travel.
Definitely. I mean, Airbnb pushes that very hard with its whole “Live Like a Local” campaign. But that really is one of the more disruptive things about it. You can stay in these quiet, charming residential neighborhoods in cities.

It’s interesting how Airbnb has spun off its own mini-economy, including some of the “super hosts” you talk about who make six figures renting out spaces.
Lots of people have made this into a full-time job. It’s a little bit of an issue with Airbnb in some of the cities where they’re facing opposition — the whole notion of illegal hotels. But many people are making that money by just renting out a room in their house and being really good at it. It’s really encouraged regular people to put on their inner innkeeper hat.

You mentioned that there’ve been controversies along the way. One of them has been around race, with complaints of racial bias among some Airbnb hosts.
That was something that really took the founders by surprise. Many have said, and they would agree, that that’s probably because they’re three white guys who founded this company. It didn’t occur to them that people could use this platform for bad. And because it was a public platform, all the negative things that exist in our society around accepting people would also ultimately be reflected on the platform. So sure enough, there were two Harvard studies that came out [about the problem], and then people came out and said this happened to me. It really blew up and became a big controversy last year.

The company took ownership of it in a big way, and they instituted all these changes. Those changes were widely seen as positive and the right thing to do. But I think this really does go to a fundamental problem with being a public platform – you can’t control everything.

What lessons can entrepreneurs learn from Airbnb?
There are so many. I think the first one is, don’t be afraid when people say you have a bad idea. You have to have the conviction and the fortitude to persevere if you think you’re onto something really big, even when people are saying no.

Another thing is, just because the idea isn’t working at first doesn’t mean it’s flawed or it’s never going to work. These guys struggled for a year with no traction … no one was using this. And they kept at it. And a year is a really long time when you have no money and you’re broke and everyone’s telling you no. But a year in they really started to study their users, and it helped them figure out how to market their properties better. And that started to turn things around.

Another great piece of advice is something they got from Paul Graham, who runs Y Combinator, which was the accelerator program they got into that really transformed them: In terms of customers, it’s better to have a hundred people who love you than a million people who sort of like you. His point was to focus on the customers that love you and grow them and give them love. You really want passionate users, even if there are far fewer of them.

Another thing that Airbnb did – and often times entrepreneurs don’t think about this — they were also really obsessive about culture from day one. As soon as they got their first investment check, before they hired anybody, they said let’s come up with some core values. And they really thought about the culture. The culture of Airbnb is really an impressive part of the story. The company they get compared with so often, Uber, keeps running into these big problems because of culture. It just shows that culture really does matter. It’s part of a business success story. And Airbnb thought about it even before they had anyone else working with them.