The deals industry went crazy in 2011, with seemingly everyone and their grandmother opening up some kind of business aimed at delivering discounts to consumers. It was easy to get in, because the technology powering the sites wasn’t particularly complex.
Now we’re beginning to see a similar dynamic in the “peer-to-peer accommodation” space (or, as we call it, the “home-tel” industry). Airbnb pioneered the model that now allows regular people to open up their homes to paying guests–to act as a new strain of hotel, as it were.
The Airbnb business represented a totally new market. While there’s long been a brusque business in renting out people’s vacation homes, the idea that people would want to open up their primary residences to strangers–and that those same strangers would want to stay there–was Airbnb’s game-changing idea.
Competitors and imitators are now beginning to spring up around the world, particularly in Germany, London, Brazil, and China. Not all are outright clones. Lauren Anderson, Collaborative Lab’s Innovation Director, who tracks the sharing economy, says some of the other companies, like Crashpadder in London and Fica La Em Casa in Brazil, were dreamed up by entrepreneurs who saw the same potential for peer-to-peer accommodation as Airbnb’s founders and were already hammering out their ideas before the U.S. company broke through.
Others, like Wimdu, founded by the Samwer brothers in Germany (who have become famous for replicating successful business models pioneered by others, like eBay, Zappos, and Groupon), are outright clones. And we’ll probably see more. In a move reminiscent of the deals Gold Rush, there’s now at least one site online hawking programming code that it says will enable anyone to drop an Airbnb-type exchange right into the middle of their own sites.
“The rate of knockoffs is fairly astonishing,” Jeff Jordan, a partner at Andreessen Horowitz who led a $112 million Series B investment in Airbnb last year, tells Fast Company. And the company is taking the competition seriously, says Jordan. “We’re a young company, and we have a lot to do.”
Indeed. There’s a massive battle going on for hosts and guests. Companies in this business are advertising aggressively, as well as throwing parties in key cities to try to lure users to their sites. Anderson said she’d even heard stories of people from one company booking stays with hosts from another company–and then trying to get them to switch sides as soon as they got in the door.
“It’s pretty clear that all these companies are spending a lot of money in cities around the world. They’re all now fighting over these customer bases,” Brian Sharples, the founder and CEO of HomeAway, tells Fast Company. HomeAway sits in an adjacent space: The online rental of people’s vacation homes, and Sharples has been keeping his eye on the home-tel industry as a potential area of expansion.
Whether as many players will ultimately dive into home-telling as they did into the deals business remains to be seen. Many people will be tempted. With Airbnb having raised $120 million so far, and Wimdu $90 million, there certainly seems to be money to be made.
Still, the home-tel business has scaled more slowly than deals. Both Airbnb and Groupon started in 2008, but the latter saw its industry ramp up much more quickly. Part of that is simply the newness of the Airbnb concept. Unlike the deals business, which is essentially a new take on a familiar institution, coupons, home-telling is trying to get consumers to try something they’ve essentially never done before: stay in a complete stranger’s home, or have a complete stranger stay in yours.
There are other reasons why this industry is less likely to become an all-out free-for-all as deals did. “This is a far more operationally complex business,” Redpoint Ventures’ Chris Moore, who has invested in German home-teller 9flats, tells Fast Company. “You have to make sure the experience is good for the renter and the host.”
Trust and safety will be a key component of succeeding in this space, says Anderson. To wit: Ask any person who’s never used Airbnb before about it, and they’ll likely ask whether that was the company where those people got their apartment trashed.
Indeed it was. The company suffered a PR nightmare last year when a San Francisco woman reported that her home had been vandalized by guests she’d found on Airbnb. The company took the incident seriously and implemented a $50,000 guarantee for hosts.
At the same time, as the company is quick to point out, that was just one case out of hundreds of thousands of stays where hosts and guests alike had great experiences. The fact that this incident is the one prospective users most closely associate with the Airbnb brand, however, points to the power of the issue.
“Trust and safety are so fundamentally important,” Anderson says. Unlike other operational aspects of an online service, like the appearance of an “apartment for rent” page (Wimdu’s website looks like almost exactly like Airbnb’s), “trust and safety can’t be replicated,” Anderson says. “They have to come from the right place.”
Jordan, who previously was an executive at eBay, says he thinks there will ultimately be one leader in each geography. That’s because, as with eBay, home-tel businesses will rely on network effects to grow and defend their markets.
Even if this industry has higher barriers to entry than the deals business, the space is going to heat up this year. At the end of my call with Jordan, the Airbnb investor, I ask him if there’s anything else he wants to add. He reiterates the point he made at the beginning of our conversation: “We take competition very seriously,” he says. “We’re focused on competing hard.”