Airbnb's untapped monetization lever(s)

Brian Chesky had an interesting session at GS Communicopia last week which made me think Airbnb has quite a few untapped levers of monetization. While it’s unlikely that they will tap all these levers anytime soon, I think it’s worth thinking through these potential monetization pathways which can come to fruition over the next two to four years.

I have said this before, but it’s worth repeating that Airbnb is one of those rare companies that unlocked somewhat unique demand and supply largely organically on both side of the marketplaces. I have touched on their unique demand driver before, so let me spend more time on their supply today.

Hotels are concentrated in cities, and classic tourist zones, while Airbnb supply is more geographically dispersed into small towns and rural tracts. In fact, in 2022, Airbnb mentioned that in the US “Airbnb welcomed more than 44 million guest arrivals to areas where there are no hotels, generating more than $10.5 billion in Host earnings”. Given ~60% of Airbnb’s 2022 Gross Booking Value (GBV) of $63 Billion came from the US, it implies almost one-third of Airbnb’s GBV came from such supplies where hotels are not available. Moreover, most of these supplies are only on Airbnb and nowhere else, creating this unique supply that travelers can access only on Airbnb.

Airbnb obviously deeply cares about fostering such unique element of their marketplace. They launched co-host network late last year which will certainly help convincing a lot more people to bring more unique supplies on Airbnb marketplace. From Chesky at GS:

We have about 10 million listings in Airbnb and for most of our history, we had the great fortune of most of supply coming organically to Airbnb, and the vast majority of supply still comes organically. Now this is a great characteristic of our business. My friends at like Uber and other companies did not have that quite that great fortune so they had to really build out these supply machines and have a lot of like driver referral programs.

At the same time, we want to grow supply much faster than organic nature. So we've done a number of things. I mean we've worked also on host referrals. We built this thing called the Co-Host Network. We observed something. We noticed there's a whole bunch of people that have homes. They would love for them to be rented out and make extra money, but they don't have time to host. There's a bunch of hosts that are making a lot of money, and they love to host more frequently, but they don't have the capital to get another home. And we thought we're basically existing in a very narrow Venn diagram of people that have time to host and have a home. So what if we actually created a marketplace to match those 2 together? We can unlock millions more listings. So we did that, and it's just early on. We've gotten 10 million nights booked through the Co-Host Network.

Admittedly, I was surprised that Co-Host network led to only 10 million bookings so far given that’s only ~2% of Airbnb’s overall nights booked on the platform. My surprise came from my own personal experience on Airbnb. When your booking is confirmed by your host, Airbnb automatically creates a messaging group to facilitate conversations between the host and the guest(s). Of the five Airbnbs I stayed so far this year, four of them had co-hosts and I just assumed this has been scaled throughout the platform pretty extensively already. But the disclosed number made me realize my personal experience may have been influenced by the fact that I only stayed in different parts of California and Airbnb is still in the very early stage of ramping up their co-host network across all the states in the US (and beyond). It does feel Airbnb is onto something here, and while networks can take time to gain momentum, a thriving co-host network should lead to a faster growth in supplies. I also think next year’s world cup could be a great timing to see this idea of co-host network flourish to a much larger extent:

The World Cup is coming here next year. It will, I think, be the largest event in human history. It's coming to U.S., Canada, Mexico. Events are how we started Airbnb, and it's the best way to get supply. And by the way, it's a great way to get supply, also a great way to normalize relationships with policymakers because this is the one time they're reaching out to you

More than acquiring new supplies, retaining such supplies is equally, if not more, important and Chesky mentioned this is the key area of focus for them:

take a guess what the #1 reason someone stops hosting us? It's too much work. So if you could help people host and reduce the burden of hosting that not only we create more hosts, you'll monetize the listing better and there'll be less like either churn. And the churn is something that we (think) is probably even more important than the supply acquisition. And so absolutely, as you add more services, more people come on the platform, they stick longer, they don't churn and they pay you more.

So, what could be some untapped monetization levers? Chesky gave some hints:

We have so many things they want us to do. I mean, like they want help with pricing. They want help with hosting. They want help with parts of hosting like help me register with the city, help me clean my apartment, help me get my place photographed. They want their house restocked with items that we could recommend to them. They want financial help with like doing their taxes and kind of doing essentially financial planning because these are essentially small businesses. And a lot of these people, they're not actually set up as businesses. They don't have accountants or CFOs. They're usually sole proprietors. So they need help with all those different things. They want to help to expand their business, add more properties. They want to help promote their listings.

I understand that helping hosts do all these tasks could be quite challenging for Airbnb in pre-AI world, but today I wonder whether Airbnb can launch some “Airbnb host agent” in a year or two that can indeed keep track of all these mind numbing tasks for hosts. Airbnb will likely have the most in-depth contexts of their hosts’ tasks/to-do lists than a general purpose LLM models, and by launching such an agent, Airbnb can truly address some key pain points of their hosts. I imagine they may be able to charge some sort of subscription or pro tier for hosts using such agents. Of course, the more pain points Airbnb solve for their hosts, it will also automatically create newer hosts and additional supplies on the marketplace itself.

Chesky also seems to have increasingly warmed up to the idea of promoted listings:

I think promoted listings is really, really interesting. We've looked a lot at this.

I don't think there's has to be a trade-off between ads and a great user experience. I think with AI, the whole paradigm of an ad has to change. I think the way Google did ads, and I think that's going to be different in a world of AI. Booking.com has done some really interesting things around the Genius program in loyalty, which essentially is a monetization program.

So I think there's like this company is not only under monetized, it almost like isn't really monetized essentially. We have travel insurance that we offer but we keep every year offering services for hosts for free, and they're telling us they want to pay for premium services. So I think a host ecosystem is a massive opportunity for monetization in the future.

Indeed, Airbnb may not be fully capturing the value it has created in both sides of the marketplace, but there may be too much surpluses left especially in the host side of the equation. Even for their services launch, I wonder if they missed a mark by focusing so much on the guests. Every single host on the platform needs to call for cleaning services every time a guest books, and it might have made more sense to address such an endemic demand for cleaning (and other related) services from hosts than focusing on guests.

Beyond the supply side, Chesky also had some interesting thoughts on building a “social network” in the real world:

I would argue that social network is the most successful product in human history that was invented and then uninvented. Because in 2012, social networking became social media and your friends became your followers. Instead of connecting you started performing. So suddenly, there's really no social networks anymore. There's no way to connect with people.

And we're not trying to build a social network. But I'd love to build something like a social network in the real world, where we can match you to people and communities all over the world to do all these products and services. So to do that, we'd have to build one of the most definitive profiles on the Internet, a really robust profile. We have 200 million verified identities. I think that's more than the U.S. passports in circulation at this moment

I’m not sure what exactly “a social network in the real world” would entail, but there are some hints on Airbnb today. On the “Connection” tab on your profile, you can see your friends you stayed with on Airbnb, and then it mentions: “Coming soon: connect with people you’ve met through experiences”.

I do wonder given the increasing consumer habit of “browsing” the app and Airbnb stays gradually transitioning from intent to discovery, wouldn’t it make sense to have a feed tab on the app? I would love to know where my “connections” stayed on Airbnbs (if they choose to make it public), and what experiences/services they availed from Airbnb (and their respective reviews). Any such feed would also be quite conducive to show promoted listings.

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