How Airbnb printed $1.9 billion in profits? 💸
7 key lessons for marketplace business models.
Welcome to the 131st edition of the GrowthX Newsletter. Every Tuesday & Thursday I write a piece on startups & business growth. Today’s piece is going to 94,400+ operators & leaders from startups like Google, Stripe, Swiggy, Razorpay, CRED & more
2020 : Airbnb went public ✨
2023 : It made $1.9 billion in profits 💸
Here's how Airbnb is printing money ⬇️
Quick context 🗓
In 2008, Airbnb started by listing founders' spare rooms to strangers for one night. 15 years later, in Q3'2022, 100 million nights and experiences have been booked on Airbnb.
For the record, travel is extremely brutal category 🥺
The never ending death spiral of acquiring a travel customer again and again is the ugly truth of this category. And that's core to why most companies in the category hardly make any profits.
So, how did Airbnb get to $1.9 billion in profits? ⬇️
1/ Match supply (homes) to demand (travellers) ♥️
Airbnb has to match the equation, every single hour, day of the month and month of the year. That's core to the business. That's why it did few things from day 0.
2/ "Never owned" any real estate 🏡
It onboarded home owners who had a spare bedroom/ bed that they are ready to rent out for a night. It built the right narrative for home owners to earn some extra cash using their spare space. It saved itself from spending capital on leasing theses spaces.
3/ Prioritised "supply onboarding" 👑
Airbnb deeply understood - it can't compete with competition (hotels/hostels) in a city without a good supply of Airbnb homes. It prioritised onboarding homes before it created a demand from travellers.
4/ Never positioned as the "cheapest option" 🤔
Open any travel website right now - you will find every platform shouting "cheapest/best" deal on a hotel. Airbnb focused on building the right perceived value of "experiences at affordable prices". There is huge difference between "affordable" vs "cheapest". This allowed Airbnb to charge higher.
5/ Eliminated "profit eating parts" of the business 🛠
With strangers entering strangers - it had to secure itself from heavy damage law suits. It created damage insurance for hosts & trust design all across it's product. Try having an incomplete airbnb profile & book a stay - very hard to get anything.
6/ Focused on "average spending" expansion 🚀
Every single launch they did in last 4 years is optimised for helping travellers book longer stays. They do it by launching "longer stay" discounts or "split stays" or "airbnb categories". And it works cause they deeply understand their user
7/ Controlled "customer acquisition cost" 💰
With the likes of Bookings, Trip-advisor & others - it was never winning the "Google Search Ads" war. It built it's own iconic referral program that incentivised existing happy customers refer their friends in exchange of "Airbnb Credits". This was so successful that they had to shut it down, wow!
That's was the Airbnb story of "profits" ✨
Marketplace businesses like Airbnb requires extreme focus on low cost customer acquisition & strong monetisation design. Over 100+ marketplace product founders & leaders from Amazon, Zepto, MakeMyTrip, Meesho, 1mg, Zomato & more are solving these 2 key problems at GrowthX. Learn science of making a marketplace business profitable.
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