Airbnb: scaling a platform born global
How a team without international experience built and defended a global advantage through a platform, culture and speed.
- Sector
- Accommodation (sharing-economy platform)
- Source
- Week 6 tutorial resource (Copenhagen Business School study, chapter 4)
The case in brief
In 2007 Brian Chesky and Joe Gebbia, unable to pay their San Francisco rent during a design conference, rented air mattresses to three visitors. With Nathan Blecharczyk they turned the idea into a two-sided online marketplace where hosts list space for free and travellers book it.
Airbnb owns no property. It earns a fee from each booking, so it can add supply without building anything. A curation system in which hosts and guests rate each other raised quality as supply grew, and travellers who became hosts spread the platform worldwide.
After a USD 112 million round in 2011 Airbnb opened offices at great speed, prioritising markets where clones threatened, such as Russia, over obviously profitable ones. Around 2013 it slowed its expansion to build a sustainable organisation. The Copenhagen study treats it as a platform-based born global that contradicts parts of the born global literature.
Key facts
- Founders
- Brian Chesky (CEO), Joe Gebbia (Chief Product Officer), Nathan Blecharczyk (CTO)
- First investment
- USD 20,000 from Paul Graham / Y Combinator, 2009
- Early funding
- USD 30,000 from selling election-themed cereal boxes (2008); USD 600,000 from Sequoia Capital (2009); USD 7.2 million Series A (2010)
- Series B
- USD 112 million in July 2011, valuing the company above USD 1 billion
- Fees (at the time of the case)
- 3% from hosts; 6–12% from guests
- Reach (at the time of the case)
- One million listings in 34,000 cities across 190 countries; site in 26 languages
- International roll-out
- Offices in 8 new countries within four months and 12 within six months of the 2011 round
Analysis through module theory
International competitive advantage
Differentiation (a new way to meet an old need), scale (supply owned by users), networks (the German competitor Accoleo acquired for market entry) and first-mover advantage (planting a flag in Russia) all appear. Its global network effect made the market close to winner-takes-all.
Founder competencies and teams
Proactive risk-taking, strong learning capability and networking are clearly present; international experience was weak and was supplied by investors and advisers. The design-plus-engineering team was complementary.
Governance while scaling
Chesky protected culture by personally interviewing around the first 200 staff, then training interviewers. Small cross-functional teams and the rating system kept innovation and quality under control during rapid growth.
Born global parameters
Airbnb fits the born global pattern on learning, flexibility and rapid entry, but breaks it by entering a stagnant industry and by combining differentiation with low cost.
Discussion questions
- 1.Which of the five mechanisms of international competitive advantage was most important for Airbnb, and why?
- 2.Why did Airbnb enter Russia before more obviously profitable markets?
- 3.What did Airbnb do to keep quality and culture under control while growing fast?
Takeaways
- In a platform business the users, not the product, hold the value, so speed of entry matters.
- Investors backed the team’s learning ability and determination rather than the original idea.
- Even a fast scaler had to slow down to build a sustainable organisation.