Scaling Airbnb from the Living Room to Across the Globe
Joe Gebbia , Co-Founder and Chief Product Officer, Airbnb
We have to say that Joe Gebbia, Airbnb's co-founder and chief product designer, is a great storyteller. He practically held court when he dropped by last month for his soapbox. Everyone was captivated as Joe told the story of Airbnb.
But Joe wasn't just spinning a yarn. He was laying down some solid insights, well-earned from the challenges Airbnb faced in scaling into an international service. He told us how his background in industrial design paid off when it came to building Airbnb and why it's OK to do things that don’t always scale.
Feel free to listen to the podcast as you read through the summary of the event below.
Put Yourself in the Other Person's Shoes
Joe trained in both industrial and graphic design, eventually getting degrees in both. When he told folks that he was going to do an internet startup, he would get asked how his background in physical products would pay off. However, as he said:
There’s this physical world and this virtual world. Surprisingly enough, the principals are pretty much the same.
He said he was trained to think about every moment of a user’s experience with a product, from the moment you open a package to the actual use of the product. Which is an approach that Joe takes with Airbnb.
Think about medical equipment, Joe gave as an example. You would go out into the world, into a hospital and observe the patients, nurses and doctors interact with that product. Then you would become the patient, the user at the end of the device. It’s something that he did while training to be an industrial designer.
We would put ourselves in the shoes of the person we were designing for. And I think that’s a universal principal whether it’s in the physical world or whether it’s online.
Put Us In the Same Room
The tale of Airbnb began 12 years ago when Joe meet his eventual co-founder Brian Chesky in design school. Joe said they realized early on that if you "put us in the same room at the same time that we could solve really tough problems together."
One day over pizza, Joe told Brian that they would eventually start a company. Brian thought Joe was a bit crazy, but years later that prognostication would come true.
Network in Your Jam Jams
When Joe got to San Francisco, he realized that he arrived at the land of opportunity, so to speak. The culture was perfect for young entrepreneurs. Eventually, Joe was able to persuade Brian to leave LA for San Francisco. The year was 2007 and both men left their jobs.
As soon as Brian hit town, an unfortunate bit of news hit Joe in the form of a letter. The rent on his San Francisco apartment was skyrocketing up by 25%. With dwindling bank accounts, both men found themselves unable to afford rent. But they didn't let them stop them from find a solution. Remember, put them into the same room at the same time and they could solve tough problems. And that’s what they did, sketchbook in hand.
Exploring crazy ideas to save their apartment, both men had opportunity practically hit their front doorstep. A design conference was blowing into town and every hotel in town was booked. Looking around at all the empty space in the apartment, they realized that they could toss down a few air beds and rent them out to attendees needing a place to stay.
But it was more than just the air beds. It was an entire experience that they would provide, making a home-cooked breakfast, providing BART passes and even change to give to the bums on the street.
This wasn’t a bed and breakfast. This was an air bed and breakfast.
They bought three air beds tossed them down and threw together a site in a day. Then they blasted every popular design blog they could think of. And the idea blew up with headlines like "Wanna Network in Your Jam Jams, Stay with Joe and Brian."
By day six, there were three people staying in our living room. That’s how fast all this happened.
They thought that their first customers would be college students, strapped for cash. But that was hardly the case. They were all over 30: a graduate student from India, a 38-year-old woman from Boston and a 48-year-old family man.
The assumption that we had made was totally inaccurate. We were like, "wow maybe there's a wider audience out there, that’s international." That’s men and woman. That’s an older demographic than we originally thought.
And the entire experience was magical, said Joe. They all shared meals, saw the sights of San Francisco and exchanged ideas. To give an idea of how profound the experience was, the grad student invited Joe and Brian to his wedding two years later.
The Light Bulb Goes Off
It was that combination of the financial and this amazing social experience that we had that you could see the light bulb start to glow. Wait a second, we're just two ordinary guys and we’re having this amazing time. We’re willing to bet there’s tens of thousands … hundreds … millions of other people around the world that would want to participate into this.
But it was a long road ahead to the Airbnb that exists today, including a pit stop at South By Southwest, where they ate their own dog food using their own service to stay in Austin. An important lesson they learned: a better payment system. Up until that point, all payments had been made on arrival.
So they set out to change the payment system and rebuilt the site for a global platform. They really didn’t have a lot of money during these early days. But the 2008 Presidential Election turned out to be a real boon for Airbnb.
The Democratic National Convention had the entire city of Denver pretty booked. There were talks of opening up the parks so that people could camp out. That's because then-Senator Barrack Obama was drawing huge crowds, the largest for a presidential candidate. So Airbnb decided to ride the coattails, so to speak, and solve the boarding problem in Denver.
They tried to get the attention of the top tier press, but no one was biting. No one cared. So they went to local bloggers, which the papers use to get their story ideas. Eventually, their story was picked up by the national media. However, the interest in Airbnb was short lived even with a major article in Techcrunch.
The Trough of Sorrows
The novelty had worn off. People went about what they were doing long before they heard of Airbnb. The service entered what Joe calls the "Trough of Sorrows."
The Trough of Sorrows is, I feel like, where your passion is truly tests. The Trough of Sorrows is where you will truly be pushed up against the wall and say do you really want to do this.
It could last weeks, months. For Airbnb, the Trough of Sorrows lasted a long time. The founders' savings were evaporating. Investors hadn’t shown the slightest bit of interest. They were doing a Visa round of founding, pocketing more and more debt in the process.
The only way out of the Trough of Sorrows is your creativity.
Once again, the Presidential Election provided an opportunity.
The Breakfast of Candidates
Late one night, to keep their spirits up, Joe and Brian joked about sending out a special Airbnb breakfast to their hosts. And maybe it should be tied to the presidential election. You know, "Obama-Os, the breakfast of change," they joked. And if there was an Obama cereal, there had to be a John McCain one too: "Cap’n McCain, a maverick in every bite."
And that’s just what they did. They had 500 boxes printed up and they charged $40 a pop for them. Their gamble paid off. They sold 500 boxes of Obama-Os. More than $20,000 worth.
Airbnb was funded by breakfast cereal.
Do Things That Don't Scale
The stunt got the attention both the national media and Y Combinator. Soon they were part of the now-famous incubator. One day, Paul Graham took a look at their plans for Airbnb and told them plainly that they weren't going to work. Then he asked the founders a simple question: "Where is your market?"
The founders said that New York seemed promising. To which Paul, gesturing wildly with his hands, said, "Your users are in New York and you're here in Mountain View."
The founders were dumbfounded, saying they were in Mountain View for Y Combinator.
Paul repeated himself. "Your users are in New York and you're here in Mountain View." After a pause, he added, "What are you still doing here?"
At that moment, the duo realized that they didn't have to do things just to scale. Up until then, they had the mentaility that things that scale were the only things worth pursuing.
It wasn't up until this moment that Paul Graham gave us permission to do things that don't scale. It was in that moment that everything changed. He taught us the beauty of doing things that don't scale.
They went to New York, visited their hosts and learned how to make the service better. One host sat down with Joe, serving him tea. That's when his design training kicked in and he conducted user research, going through the site with the host and taking plenty of notes. They found that other hosts had a slew of features they wanted, which they'd never have learned if they stayed put in Mountain View.
And they started making money after implementing the features. Of course, Paul told them why weren't they still in New York. So they made several trips back to New York, doing the same thing.
His message was go meet the people.
The lesson learned, however, was that you have to give yourself permission to do things that don't scale. A philosophy that continues to this day at Airbnb.
Our convesation with Joe continued as he took audience questions. We'd like to thank Joe for coming down and sharing his experinece with us. We'd also like to thank everyone who attended.