In merely four old ages. Airbnb had become a prime online market place where place proprietors and manque bed and breakfast proprietors could turn vacant suites into every night leases. Potential invitees could merely log on and hunt for available suites. transforming any house into a possible hotel. By July 2011. Airbnb was valued at $ 1 billion and had rented over 2 billion suites since operations began in 2007.
Airbnb created an on-line reserve system to ease minutess. which included a repute system to construct trust and dependability among market participants. In peculiar. a longstanding reappraisal system let tenants read about hosts before subjecting a reserve petition. Similarly. hosts could read about tenants before accepting.
Most of the ensuing reserves proceeded without incident. and in 2011. Airbnb was seeking approximately $ 100 million in a 2nd unit of ammunition of venture capital. 1 But in June 2011. a rush of unfavorable judgment called into inquiry Airbnb’s full concern theoretical account. A corporate events contriver traveling by the anonym “EJ” had rented her San Francisco flat to a invitee engagement via Airbnb. They had ne’er met. but followed the Airbnb protocol and had exchanged several messages through the Airbnb system. The invitee seemed absolutely friendly. and during his rental stay. he even sent EJ messages thanking her and congratulating the “little loft area” in her flat. When EJ returned. she found her place ransacked and her properties stolen. with harm numbering 10s of 1000s of dollars. EJ began blogging about the incident. An early web log entry described some of the irreparable harm.
They smashed a hole through a locked cupboard door. and found the passport. hard currency. recognition card and grandmother’s jewellery I had hidden indoors. They took
my camera. my iPod. an old laptop. and my external backup thrust filled with exposures. diaries. . . my full life. They found my birth certification and societal security card. which I believe they photocopied—using the printer/copier I kindly left out for my guests’ usage. They rifled through all my shortss. have on my places and apparels. and left my vesture crumpled up in a heap of moisture. molding towels on the cupboard floor. 2
EJ’s narrative spread rapidly. accelerated by the attending already ensuing from Airbnb’s rapid rise. Negative imperativeness was featured in the Wall Street Journal. New York Times. San Francisco Chronicle. USA Today. and ABC News. among other media mercantile establishments. The state of affairs was made worse when Airbnb was slow to react. Meanwhile. a 2nd victim came frontward stating that his flat had besides been ________________________________________________________________________________________________________________
Professors Benjamin Edelman and Michael Luca prepared this instance. This instance was developed from published beginnings. HBS instances are developed entirely as the footing for category treatment. Cases are non intended to function as indorsements. beginnings of primary informations. or illustrations of effectual or uneffective direction.
By July 2011. the tumult had subsided. and Airbnb proceeded with raising $ 112 million of venture support from Andreessen Horowitz. DST Global. and General Catalyst Partners. 4 But users were rattled by the experiences of EJ and others. and some critics questioned whether concerns about trust could sabotage Airbnb’s theoretical account. It was clear that Airbnb’s online reappraisal system was non sufficient to protect users and continue assurance. Airbnb directors had to make more to recover the trust of market participants—especially hosts. But how?
Airbnb
Founded in 2007. Airbnb created a forum where hosts could post room listings. along with descriptions and exposure. Interested invitees could seek for suites in a given country and analyze possible options ( including description. exposure. and reviews ) . Guests could filtrate consequences by monetary value scope. vicinity. handiness of a room versus an full flat or house. and other features. ( Exhibit 1 shows a listing for an available room. Exhibit 2 shows illustrations of reviews. ) Since reappraisals were the primary mechanism for verifying the features of a room. Airbnb placed reappraisals conspicuously on each room listing.
After taking a preferable room. a invitee submitted a reserve petition to the corresponding host. The host so had the chance to accept or worsen the guest’s petition. Before accepting a reserve. a host could see the profile of the invitee. Some invitees uploaded images to their profile. and invitees who had used Airbnb antecedently were noted as such ( with a listing of their anterior reserves ) . A host was asked to react to a petition within 24 hours. If a host did non answer to a petition within that clip. the petition would run out. Further. Airbnb included on each host’s room naming the proportion of reserve requests the host had responded to within 24 hours. A host’s arrangement in hunt consequences was besides affected by the proportion of petitions that the host had accepted. This provided the inducement to react to petitions in a timely mode. Before accepting a petition. the invitee and host could interchange messages through Airbnb but were non permitted to interchange e-mails or phone calls outside of the system until after a reserve had been made.
To do certain that all communicating prior to a reserve occurred within the Airbnb system. Airbnb developed an algorithm to barricade messages that contained phone Numberss or e-mail references. If a host accepted a petition. Airbnb authorized the payment and provided the host with the guest’s phone figure and e-mail reference. If a host declined. the invitee was notified. Airbnb charged a fee to both invitees and hosts. Guests paid 6 % to 12 % of the reserve cost. depending on the entire cost. In add-on. hosts paid a 3 % fee for each engagement. Guests paid Airbnb by recognition card at the clip of the reserve. Airbnb held the guest’s payment until the reserve began. and within 24 hours of a guest’s reaching. a host received payment from Airbnb by cheque. direct sedimentation. or PayPal.
On-line Reputation Systems
By enabling low-priced communicating and fiting between purchasers and Sellerss. the Internet facilitated the creative activity of countless new markets. A repeating job in many such markets was losing information—market participants missing the information they needed. or felt they needed. to take appropriate dealing opposite numbers. For illustration. a purchaser on eBay or Craigslist frequently worried that the seller’s ware was non as described. Even when old purchasers had reviewed a marketer. purchasers worried that the reappraisals were uninformative ( possibly because referees had different penchants. because the seller’s patterns changed. or because the reappraisals were bogus ) .
Meanwhile. Sellerss besides had concerns. For illustration. the consumers who decided to reexamine a eating house or hotel might be rather different from the usual clients of those constitutions. Online market places handled these concerns in different ways. From its launch in 1995. eBay included an online reappraisal system where purchasers and Sellerss could reexamine each other. Research showed that Sellerss with better reappraisals were able to command higher monetary values for a given merchandise. 5 At the same clip. there were many concerns about eBay’s system. For illustration. Sellerss could open multiple histories. As a consequence. undependable Sellerss could merely exchange to a new history after having a bad reappraisal. Further. the mutual feedback system ( purchasers and Sellerss evaluation each other ) raised concerns of collusion among referees.
Dedicated reappraisal web sites such as Yip allowed for reappraisals of merchandises provided wholly offline. Yip had greatest use in reexamining eating houses. but besides other services runing from tooth doctors to vesture shops. supermarkets. and watering place. Yelp created a societal web of referees. leting people to post profiles about themselves and go on-line friends with each other. Yelp besides rewarded referees who were particularly fecund. even offering periodic parties for “elite” referees. Reviewing hotels and other travel-related comfortss. TripAdvisor added construction to roll up information about referees: TripAdvisor asked referees to place whether their trip was for concern or leisure. Reappraisals for leisure travel were farther broken down into family- and couplesoriented reappraisals. Users shoping reappraisals could concentrate on reappraisals from others like them.
Bettering Airbnb’s Reputation System
After the two widely publicized summer 2011 incidents of untrusty Airbnb invitees. it was clear that Airbnb needed to make more to ease safe minutess. To better safety at its market place. Airbnb could implement the undermentioned options. in any combination.
Present More Sophisticated Consumer Reviews
While Airbnb solicited consumer reappraisals and featured these reappraisals conspicuously. Airbnb’s reappraisal system lacked some characteristics familiar to consumers from Yelp and TripAdvisor. For illustration. Airbnb included no impression of “elite” referees. and Airbnb offered no wages to users who submitted reappraisals. In rule. adding characteristics to the reappraisal system could assist to more rapidly place debatable hosts or tenants. Of class. there would be countless decisions—whether to make grades ( and if so. how many and with what standards ) . what benefits to offer. and what other categorizations to include.
Collect Other Information about Hosts and Renters
Before accepting a reserve petition. hosts were able to detect a customer’s profile. However. profiles were frequently uncomplete and contained small information. Further. invitees were non required to supply full names upon subjecting a reserve petition. Airbnb could promote or necessitate more complete profiles—providing hosts with images. names. and other information about possible invitees. Hosts would so hold extra information to see when make up one’s minding whether to accept a petition.
Make It Easier to Reject Tenants
Airbnb had a policy of punishing hosts who turned down reserve petitions for a posted room: the more often a host declined a guest’s petition. the lower the host appeared in the hunt consequences. Airbnb had established this policy to promote hosts merely to post suites that they were really willing to lease. and to assist invitees happen the suites that were most likely to be available. However. some hosts complained that they felt pressured to accept reserves even when they were uncomfortable with a guest’s profile.
Vary Monetary values Based on Evaluations
To day of the month. Airbnb had required hosts to post a individual monetary value for a given room on a given dark. Airbnb could let more sophisticated pricing to turn to differences between guests’ evaluations. Then hosts could accept invitees with small repute or assorted reappraisals. but charge those invitees a higher monetary value.
Provide Insurance for Hosts
Airbnb could reimburse costs associated with undependable hosts or harm caused by invitees. EBay had implemented similar purchaser protection to reimburse consumers who did non have points they ordered on eBay.
Add Discounts
Guests who had a good experience might go repetition clients. Airbnb could construct trust by paying for a part of each customer’s foremost rental. Consumers who had a bad experience were at hazard of abandoning Airbnb. But Airbnb could pay a fillip or refund to consumers who reported a debatable stay.
Prescreen Hosts and Guests
As of summer 2011. Airbnb did non prescreen invitees or hosts. Airbnb could add a screening procedure. Existing background-check services could verify a person’s name. reference. phone figure. and other inside informations by corroborating with public beginnings and even cross-checking with recognition records. apprehension records. and even consequences of Google hunts. Or Airbnb could add staff to interview users and analyze belongingss in cardinal metropoliss. a technique late added by several dating web sites.
The Decision at Hand
EJ’s experience had sparked ailments from other concerned hosts. A Gawker narrative described “Airbnb horrors. ”6 and Airbnb’s detractors—already raising inquiries from gross revenues revenue enhancement to unlicensed hotels—were speedy to foreground these jobs. Airbnb needed to repair these jobs and guarantee user assurance. But how?
