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The flaw in AirBnB's billion-dollar business plan

Comments (5)

20-airbnbflaw.jpgI'm not a business analyst, but from a user's perspective, this is the problem with the business plan of AirBnB: the crowd-sourced rent-out-a-room for travellers website, just valued at $1bn.

The problem? It will become a victim of its own success.

We used Facebook to ask for an apartment in New York, and a friend pointed out a friend of his who has a profile on AirBnB for renting out her sitting room. So yes - I did look at AirBnB and it was really useful to browse through pictures of the room and information about it on the well laid-out site.

But when we messaged her on AirBnB, she sent us her email address and told us to deal with her through that so we could cut out the AirBnB charges that they levy on payments.

So in the end, though we used AirBnB as a reference, no money of ours passed through it.

The apartment was nice, it all went fine, and when we left she said we should recommend the flat to any of our friends from London and told us to get them to email her rather than go through AirBnB. Again - to avoid the fees.

You get what I'm saying. The more successful it is at putting people in touch, the more people are likely to skip using it.

People will use the nice layout of AirBnB to window shop for available apartments, and then carry out the transactions elsewhere - just a simple PayPal transfer over email.

I know AirBnB offer reliability ratings, which is a good thing, but I'd trust a friend's recommendation over an AirBnB rating as well.

Okay - sure a lot of this requires existing friend networks to work - but Air BnB takes away its own business by creating those friend networks in the first place.

The networks can then be sustained over Facebook and email.

I'm just saying, a bit like people who go to PC World to browse gadgets, but then go home and buy them on Amazon, if Air BnB is successful, it will start to take its own business away from itself.

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  • Taurusgirl

    Completely disagree with article. I've been a host and a guest. It's not worth the risk for guest and/or host to transact outside of the site. You can also list your place on other sites such as VRBO, Turnkey, etc. to increase exposure. Airbnb also issues a 1099 which is convenient at tax time.....unless the other individuals are trying to avoid the taxes. Hmmm, I thought this was illegal.

  • luke

    stupid post. They're valued at $1bn and have only got 30,000 rooms on the site globally. When they scale this and 3-4x the number of properties they list, the company will exit for $2-3bn. Tell the founders and shareholders then that the business model is flawed and see what kind of answer you get.

  • Leticia

    Itotally desagree. We've been airbnb hosts for 9 months now. I don't even like the idea of dealing with money from strangers directly. Airbnb does that for us. We know by the time people arrive to our house that airbnb has their money and that we'll get paid 24 ours after. My network of friends is not that big to assure that I have renters 80% of the time. Even when somebody that stayed with us for a while through airbnb approached us to rent directly next time, we told them to do it through airbnb. There's safety insured by renting through them.

  • Dee

    The fees are there so to help with insurance, in the event something happens to her property.

    She is unwise to do it on her own, that is a big risk and good luck with property damage theft if that ever happens to her.

    I disagree entirely.

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