A traveler in 2007 chose between hotels, which sold out when a big event came to town, and vacation rentals: whole houses, condos and cabins that owners rented by the week, mostly as second homes AB33 ABH-3. Classified sites such as Craigslist listed private rooms, but offered no reviews, no reliable photographs and no safe way to pay AB15. Many people had a spare room or an apartment empty for a weekend and needed the income, yet there was no way to offer that space to travelers AB7. Neither side could judge the other: a guest could not tell whether a stranger's room was real or safe, and a host could not tell who was arriving AB26.
Airbnb
Airbnb opened a new kind of lodging, people's own homes and spare rooms, filled each city with it by hand, built payment, reviews and a guarantee into the booking, and ended with hosts and guests who arrive on their own.
How Airbnb won
- 1 · 2007–11Open people's own homes and spare rooms as lodgingAir mattresses at a sold-out conference, 600+ Denver bookings and hosts who needed rent money; paid per stay, not per listing.Blue Ocean Strategy
- 2 · 2008–12Supply seeded by hand, city by cityDoor-to-door New York visits, Craigslist cross-posting, free photography (2.5x bookings) and country teams in Europe.Cold Start
- 3 · 2008–16Payment, two-way reviews and a guarantee inside the bookingPayment through the site (2008), $50,000 Host Guarantee (2011), Verified ID (2013), two-way reviews and Instant Book (2014).Designed for Trust
- 4 · 2012–24Two-sided liquidity with guests arriving directGuests become hosts and come back; 91% of traffic direct or unpaid (2020); global share 28% to 44% (2019–24).Marketplace network effects
Versus HomeAway: HomeAway organized second homes that were already rented by the week and charged their owners a yearly fee to list. Airbnb created new supply from homes people lived in, made it safe to book, and took its fee only when a stay happened.
Arena: Market Conditions Before Airbnb
How each step happened
Step 1 of 4 · 2007–11
Open people's own homes and spare rooms as lodging
Airbnb's innovation was a new kind of lodging: the spare room or apartment of someone who lived there. Vacation rentals already existed, but they were second homes rented by the week, and HomeAway had organized that market online ABH-1 ABH-3. Airbnb's first guests slept on air mattresses in the founders' San Francisco apartment in 2007, when a design conference had filled the city's hotels AB1. In August 2008 about 80,000 visitors to the Democratic National Convention in Denver faced about 28,000 hotel rooms, and more than 600 people booked through the site AB33 AB21. It was new supply for travelers the existing market did not reach.
Investors missed it; Fred Wilson of Union Square Ventures wrote that his firm 'couldn't wrap our heads around air mattresses on the living room floors as the next hotel room' AB30. In New York in early 2009 the founders learned that many hosts needed the money to pay rent AB7. Airbnb's model fit those hosts. HomeAway earned its money from listing fees, while Airbnb took a percentage of each booking ABH-1, so a host who rented a room for one weekend paid only when a guest came. By 2019, 90% of Airbnb's hosts were individuals, and 79% of those had a single listing AB1.
Rivals HomeAway listed privately owned homes, condos, villas and cabins, and its $349 yearly listing fee was aimed at owners who rented at least 12 weeks a year ABH-3 ABH-2. Its CEO, Brian Sharples, said in 2011 that HomeAway was organizing second homes in a market that had always existed while Airbnb was creating a new one, and in 2013 he admitted the fee lost owners who only wanted to try renting ABH-1 ABH-2.
Step 2 of 4 · 2008–12
Supply seeded by hand, city by city
New supply had to be gathered one city at a time, because a guest going to New York needs listings in New York. In early 2009, with the site barely growing, the founders went door to door there and photographed hosts' apartments themselves AB7 AB9; Paul Graham says those visits made the difference between success and failure AB22. A guest could not judge a stranger's home from a phone snapshot, so in 2010 the photographs became a free Photo Service. By October 2011 contract photographers had shot 13,000 homes in 383 cities, and those listings were booked 2.5 times as often AB16.
From late 2009 Airbnb also borrowed Craigslist's users, emailing people who posted rentals there and letting hosts cross-post a listing in one click until Craigslist objected in 2012 AB15. Jonathan Golden, the first product manager, found that a city took off at about 300 listings, 100 of them reviewed, and staff got there with host meetups, invitations to guests to try hosting and trips to unreviewed listings AB28. After that, says Lenny Rachitsky, who led supply growth from 2012, host referrals were the most efficient source of new hosts AB29.
Europe was won the same way. In 2011 Wimdu, a copy backed by Rocket Internet, raised $90 million and hired 400 people when Airbnb had about 40, then offered to sell itself to Airbnb AB19 AB24 AB25. Chesky refused: 'There's no way we buy them and we win' AB25. Airbnb bought two small local sites to seed supply in Germany and Britain, opened ten offices in three months and sent country managers out with an 'Airbnb-in-a-box' kit AB28 AB24 AB25. Chesky says most of the business ended up coming from Europe; Wimdu wound down in 2018 AB25.
Rivals HomeAway grew by buying supply that already existed: by the end of 2012 it had more than 710,000 paid vacation-rental listings and had acquired 18 businesses ABH-3. In 2011 Sharples said he had never heard of a HomeAway owner leaving for Airbnb ABH-1. In Europe, Wimdu had ten times Airbnb's staff and recruited hosts by soliciting Airbnb's AB19 AB24 AB18.
Step 3 of 4 · 2008–16
Payment, two-way reviews and a guarantee inside the booking
Payment was in the booking from the 2008 launch, and the other trust features came as each new fear appeared, so this step runs alongside step 2. Travelers paid through the site and Airbnb paid the host after check-in AB21 AB1. Joe Gebbia names the obstacle, the belief that strangers equal danger, and the answer, design: profiles, a reputation system and messages that told a host who was coming AB26.
In July 2011 a guest ransacked a San Francisco host's home, and Airbnb's slow reply became a public crisis AB25 AB28. Chesky apologized and announced a Host Guarantee covering theft and vandalism up to $50,000, with a 24/7 trust and safety line AB20 AB25. He says the guarantee restored confidence and became one of the biggest growth drivers the company has had AB25.
Verified ID matched accounts to scanned identity documents from April 2013 AB27. From July 2014 host and guest reviews were revealed together only after both had written them, so neither side held back for fear of a revenge review AB34. Reviews became content users wrote for each other: over 68% of guests left one in 2019, and by 2020 there were more than 430 million AB1. Ben Thompson says reviews persuaded him to book, and being reviewed made him a careful guest AB10. With identity checked, Airbnb revived Instant Book, which lets a guest book without waiting for the host's reply, and booking conversion rose more than 60% AB28.
Rivals On HomeAway, travelers booked with owners directly, and online payment was an option owners could choose, at 2.5% ABH-3 ABH-1. In 2016 an Ontario family lost US$21,000 after a manager insisted on a money transfer, and HomeAway refused compensation because they had not paid through the site; its guarantee covered only on-site payments, and only from February 2016 ABH-5.
Step 4 of 4 · 2012–24
Two-sided liquidity with guests arriving direct
Steps 2 and 3 filled cities with reviewed, bookable homes; then the cities began to fill themselves. Guests became hosts: in 2019, 79% of hosts signed up directly and 23% of new hosts had first been guests AB1. Guests came back, producing 69% of 2019 revenue, and about 91% of traffic in 2020 arrived directly or through unpaid channels AB1. Airbnb says most of its listings are available only on Airbnb AB1. Ben Thompson's reading is that travelers start their search where the distinctive stays are, so Airbnb buys less demand from search engines, and its 2020 filing planned more brand marketing and less performance marketing AB11.
Card-spending data show Airbnb and HomeAway with nearly equal U.S. sales in 2012–14, then Airbnb's growing twelvefold by 2018 ABH-8. Skift estimates Airbnb's share of global short-term rentals rose from 28% in 2019 to 44% in 2024 ABH-9. The barrier works city by city and does not lock hosts in: they can list on several sites, and Booking.com and Vrbo carry overlapping homes AB1 AB6. A rival has to assemble reviewed supply and returning guests in each city, the work Airbnb did by hand in step 2 while HomeAway still charged owners to list.
Rivals HomeAway still led U.S. resort markets in 2016, with 33% of U.S. listings against Airbnb's 16% ABH-7. It added a 10% pay-per-booking option in October 2013 and, after Expedia bought it for $3.9 billion in November 2015, a 5–9% traveler fee that owners blamed for falling bookings ABH-2 ABH-6 ABH-4. Vrbo's global share fell from 11% to 9% between 2019 and 2024 ABH-9.
Marketplace network effectsBrandingGrowth LoopOwned MediaBrand Marketing
Key dates
- 2007Air mattresses for a sold-out design conference
- 2008-08600+ bookings as Denver's convention hotels sell out
- 2009Door to door in New York, photographing hosts' homes
- 2009Emails to Craigslist posters, then one-click cross-posting
- 2010Free Photo Service; photographed listings booked 2.5x as often
- 2011-06Accoleo bought; Wimdu's offer to sell turned down
- 2011-08$50,000 Host Guarantee after a ransacked home
- 2012-01European launch with local teams in each country
- 2012-12HomeAway reaches 710,000 paid listings through 18 acquisitions ABH-3
- 2013-04Verified ID
- 2013-10HomeAway adds a pay-per-booking option beside its yearly fee ABH-2
- 2014Two-way reviews and Instant Book on verified identity
- 2015-11Expedia agrees to buy HomeAway for $3.9 billion ABH-6
- 2016HomeAway's new traveler fee angers owners ABH-4
- 2017$2.6 billion revenue Full year AB1
- 2018$3.7 billion revenue Full year, +43% year over year AB1
- 2019$4.8 billion revenue Full year, +32% year over year; 69% from repeat guests AB1
- 2020-12IPO Listed months after 80% of the business vanished in eight weeks AB25
- 202444% global share Short-term rentals, up from 28% in 2019; Vrbo down from 11% to 9% ABH-9
Sources
Oldest first.
- AB21 AirBed and Breakfast takes pad crashing to a whole new level. Contemporaneous trade report
- AB30 We missed Airbnb. Investor's own account
- AB17 Airbnb buys German clone Accoleo, opens first European office in Hamburg. Contemporaneous trade report
- AB18 Airbnb freaks out over Samwer clones. Contemporaneous trade report
- AB19 Investors pump $90 million into Airbnb clone Wimdu. Contemporaneous trade report
- AB20 Airbnb offers unconditional apology, and $50,000 insurance guarantee. Contemporaneous trade report quoting the CEO's letter
- AB16 Airbnb's small army of photographers are making you (and them) look good. Contemporaneous trade report
- ABH-1 HomeAway's Brian Sharples Talks Growth, Competition, Daily Deals. Trade interview with rival CEO
- AB14 How to be a growth hacker: an Airbnb/Craigslist case study. Growth analysis
- AB33 Can lightning strike twice for Airbnb?. Trade report quoting the CEO
- AB32 Lessons from the world's most ruthless competitor. Magazine feature with rival interviews
- ABH-3 HomeAway, Inc. Form 10-K for fiscal 2012. Rival annual filing
- AB27 In an effort to connect users' online and offline identities, Airbnb introduces Verified Identification. Contemporaneous trade report
- AB22 Do things that don't scale. Adviser and investor essay
- ABH-2 HomeAway Adds Alternatives to Subscription Fees to Attract New Users. Contemporaneous trade report with CEO quote
- AB34 Airbnb revamps its review system: hosts and guests see feedback simultaneously, review period cut to 14 days. Contemporaneous trade report
- AB10 Airbnb and the internet revolution. Strategic analysis and customer anecdote
- AB23 7 rejections. Founder account
- ABH-6 Expedia Acquires Airbnb Rival HomeAway For $3.9B. Contemporaneous trade report
- AB24 Scaling Airbnb with Brian Chesky: class 18 notes of Stanford University's CS183C. Class notes of a founder talk
- ABH-5 VRBO luxury villa scam (Go Public). Consumer investigation
- AB26 How do you design trust between strangers?. Founder interview (transcript)
- ABH-4 A storm in vacationland: HomeAway's fees anger renters and owners. Contemporaneous trade report with owner interviews
- AB31 Airbnb expands beyond the home with the launch of Trips. Product launch
- ABH-7 Airbnb vs. HomeAway: Who is Winning the Race to the Top of the Vacation Rental Industry?. Industry trade analysis
- AB15 How Uber and Airbnb won over the people, outlasted rivals, and figured out the sharing economy. Book excerpt with participant interviews
- AB9 Do things that don't scale (Masters of Scale). Founder interview
- AB28 Lessons learned scaling Airbnb 100X. Early employee account
- ABH-8 Ahead of IPO, Airbnb's consumer sales surpass most hotel brands. Card-spend data analysis
- AB29 28 ways to grow supply in a marketplace. Early employee account
- AB2 A message from co-founder and CEO Brian Chesky. CEO employee letter
- AB13 An update on trust. Company trust and safety account
- AB1 Airbnb 2020 IPO S-1. IPO filing
- AB11 Playing on hard mode. Strategic analysis
- AB7 The Airbnbs. Investor and adviser retrospective
- AB8 Airbnb IPO: embracing the adventure. Board member retrospective
- R9 Acquired — Airbnb. Podcast transcript
- AB25 Airbnb: building (and rebuilding) user trust to revolutionize travel. Participant podcast (transcript)
- ABH-9 Short-Term Rentals: Airbnb's Dominance and Booking's Gains in 1 Chart. Outside market-share analysis
- AB4 Airbnb 2025 Summer Release. Product launch
- AB6 Booking Holdings FY2025 Form 10-K. Rival annual filing
- AB5 Airbnb Q4 2025 financial results. Results announcement
- AB12 The power of the elastic product team. Early employee interview
- AB3 Registration law. Regulatory guidance