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Comment by pg | Hacker News Reader

You have a mistaken view of what makes a technology revolutionary. Sometimes what seems to outsiders like a minor design tweak makes something immensely better. For example, Watt didn't invent the steam engine. His big discovery (he also made several smaller ones) was something called the separate condenser. Unless you're fairly knowledgeable about steam engines, you'll have to look that up to know what it means. But this tweak to Newcomen's design was so important that it caused a qualitative change in the way steam engines were used.

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Is AirBnB eating VRBOs lunch? Reaching an untapped market?

Or is AirBnB a small (and staying small) player getting disproportionate lot of attention in the YC/HN world because they have friends here?

I'm not saying AirBnB is wrong or unsuccessful, just suggesting that sometimes "world-changing" really means "my friends and I personally like these guys better, so the other ones don't count".

Yes, Airbnb is eating VRBO's lunch. They and Dropbox are at this point the most successful of all the 253 startups we've funded.

Fred Wilson knows some of the details. That's why he wrote this unprecedented post about missing them.

If you don't understand the details of a situation, why not default to being nice instead of mean? Just look at the contrast in tone between Fred's blog post and your comment.

I'm curious -- VRBO could easily pivot and handle transactions themselves, directly. Instead they've chosen to offer optional insurance:

http://guarantee.homeaway.com/vrbo/

Why is that? Intuitively, it seems like handling transactions directly would paint a target on their back in regards to the unlicensed hotel business, where regulatory and community concern appears to be a growing issue -- but I may not understand the details of the situation.

I'm curious -- VRBO could easily pivot and handle transactions themselves, directly. Instead they've chosen to offer optional insurance:

In general it is true that BigCo X could do function/feature/integrate Y and totally kill Startup Z - but it doesn't happen all that much.

In general it is true that BigCo X could do function/feature/integrate Y and totally kill Startup Z - but it doesn't happen all that much.

I asked why they haven't done it. You haven't really addressed that -- you're attacking a strawman. I'm simply curious as to why VRBO's parent company hasn't decided to handle bookings directly.

VRBO already supports transaction processing -- they use it to sell the listings. They also went to all the effort of providing a consumer insurance service. Why didn't they add support for processing the booking transaction directly and guarantee it as a matter of course?

My guess is that because to do so would wading into a regulatory quagmire, and as an established company (rather than a disruptive startup), they have more to lose. Maybe Airbnb knows this, too, but is hoping to get away with it anyway -- at least long enough to either change the regulatory environment, or see their exit and leave the problem to someone else (see: napster) ...

.. but I could be wrong, so I asked the person who has the details :)

I could be wrong, but I suspect this is actually a problem with processing the transaction itself. Processing in the way that AirBnB does is typically frowned upon within the card processing industry from what I've discovered.

The processors and the banks have the power and can shut a merchant off if they determine that they're not playing by the card association's rules. The method that AirBnB employs is referred to as Third Party Payment Aggregation. They're processing payment on behalf of the hosts.

Venturing into this territory for an established company would likely cause a lot of pain. They might need to establish a relationship with a different processor and/or bank who would support the model. If they were to switch without first talking to the bank and processor they would likely be shut down quickly for violating the terms of their agreement. So it's not as simple as a relatively minor product pivot for VRBO.

A smaller startup can risk a lot more by carefully walking the line of what the bank/processor/association will accept. But they're still at risk, I believe. Unless maybe they have found some way to mitigate much of the risk (I can think of one or two that would be possible after building brand recognition), I'm not sure.

So I think you're right with your last paragraph but I think it has more to do with Credit Card regulation than hotel regulation... but I don't know anything about operating a hotel.

I own a hotel in Rome and operate a vacation rental site in Europe and although I don't if this actually concerns them or not, you are totally right. In France and Italy, for example, if you take the money, you cannot claim to just be a marketplace like craigslist. He who takes the money holds a different kind of a legal responsibility that maybe is avoidable in the US, but is hard (if not impossible) to justify here. I think big companies don't want to get involved in the tax and legal implications. That said, I don't understand why airbnb and their financial supports are not more concerned about this. Either they have a great legal department backing up their model or they are naive to how different the business environment is in Europe than in the US.

Orly? Granted, compete data is far far far from reliable, but: http://grab.by/grabs/70bf6fda125dad336eaadd829f2739f3.png

Look like vrbo has (and has been retaining) about a 10x multiple in traffic over airbnb. Granted, this isn't (again) reliable data, and also does not in any way speak to revenue, but this doesn't smell like unadulterated "lunch eating" to me.

I don't see how my comment was mean. At its meanest, I think my comment is dispassionate and pessimistic on a topic that you feel rightly passionate about, similar to how a a YC applicant feels if they don't win an invitation to join.

I think it looks mean to you because you have a high estimation of AirBnB and you think I am belittling them.

I have a lower estimation of AirBnB (compared to my estimation of VRBO), and so I thought your pitch to Fred Wilson was overselling the potential ("eBay") and Fred was right to not buy into the overselling.

Now, there is are significant gaps between

1. AirBnB completely fails as a business and wastes everyone's money, but at least the founders had a learning experience.

2. AirBnB team and pg and the investors and customers make more money and worthwhile experience from AirBnB than any other use of their time and energy and capital.

3. AirBnB gets bigger than VRBO.

4. AirBnB gets as big as eBay.

I'd guess (but I wouldn't bet, because I absolutely to not have the infromation and insight that you and the team and the investors have) that AirBnB is at least "1.5" now and will peak at "2.5" and need a major lucky streak to hit "3". It's successful, but in my estimation (worthy of no more than a forum post) it is not up to the "eBay" comparison.

Fred guesses now (after he refused to bet, which frankly makes his blog post less interesting than what he wrote when he did have his hand on his wallet) that AirBnB is "3" to "4".

I'll note that my best business venture is a small "1", (capital investment and costs under $1000, weekend labor, revenues smaller than that).

I disagree. I just cancelled my AirBnB listing. As a vacation house owner that rents their place out 3/4 out of every year, it was a waste of my time. I have been a VRBO user for 5 years, and they have driven a lot more traffic for those time periods, with a lot less hassle and restrictions. Frankly, for the serious vacation home owner, I don't think VRBO / HomeAway has anything to worry about any time soon.I want to stress that I think AirBnB fulfills a market need, for sure. Just not my market.Kind of like trying to race the Indy 500 in a cute Ford Focus.

Here is my experience so that you can compare for yourself. I am quite certain that I will probably have someone from AirBnB comment and tell me that I just didn't know how to set something up right. That's fine. Still doesn't change my perception of the system being to hardwired for the novice, single room renter:

1. The setup with AirBnB was a lot easier than VRBO. The AirBnB interface is slick and nice..definitely pulled me in. :-)

2. They have a major glitch in the system. I put in daily rates for the off-season, and weekly rates for inseason...yet the daily offseason rates kept over-riding the weekly in season rates, and this caused a lot of potential renters to be very confused when they thought they were getting the "steal of a lifetime" on summer rates. Left a bad taste in my mouth, and with the prospective renters. VRBO may be more difficult to set up, but it's pretty idiot-proof when it comes to rates (thank God).

3. WIthout exception, every single client that inquired via AirBnB wanted some sort of discount or deal. 99% of my renters via VRBO will rent at the full rental price. And,my prices were exactly the same on both sites.

4. I cannot control fee or deposit scenarios on AirBnB. I am forced to follow their sites rules - which are heavily in favor of the renter and do not protect the owner enough (IMHO). Payment isn't made to the owner until the renter checks in, and there is no way to note a pet fee requirement. This scenario is not acceptable to me. It's too easy for a renter to cancel at the last minute, which puts me in a huge bind if the rental period is during the high season. On VRBO, I require a deposit up front, equal to half the rent, in order to secure my property, and a pet fee (which is legal in my state) per pet. Been working this way for 3 years.

5. In addition, the refund system is lacking in AirBnB. I have to select from their refund options. I cannot employ my own refund system. This, to me, is a big drawback. Each rental home owner I know has their own refund policy.

6. AirBnB controls all monies. This, to me, is the biggest issue I have. I am a good owner. I always seek to make my renter happy. I will go above and beyond to do so. I resent having a 3rd party determine if and when I get paid on my rental property. This is why I got rid of property managers in the first place, it's a layer of bureacracy that I don't need.

7. Vacation rental rules - many vacation areas have their own county or state rental laws and regulations. To my knowledge, the constraints put in AirBnB's system for booking or refunds do not leave room to incorporate those laws, potentially putting homeowners at risk.

Have you used AirBnB yet? I just did a few weeks ago for the first time, and am about to again when I move up to the Bay Area.

It's amazing. Not only do they identify unused physical assets (extra space in people's homes/apts.) and create a market for it that undercuts an entire industry, they've created this amazing karmic serendipity of meeting new and interesting people from the very first moment you touch down.

Travel isn't just about seeing landmarks and whatnot, it's about immersing yourself in the local culture, and AirBnB provides that much better than most hotels can.

Combine the feel-good nature of the service with its recession/depression/financial-crisis/money-saving friendly, disruptive undercutting of a huge industry and I have no doubt they'll eventually be among the biggest incubator successes or exits.

And yes, they are growing:

http://blog.airbnb.com/airbnb-celebrates-1000000-nights-book...

I do wonder if they'll compete with Couchsurfing.com. The latter could pivot a little and offer the same kind of for-pay service AirBnB does, and already has a huge clientel.

Edit: just to elaborate on the recession-friendly bit. I've gotten very interested lately in companies like AirBnB and Groupon that enable people to continue spending despite adverse financial conditions, be it deflationary or inflationary. In the former, cash and credit becomes scarce, and in the latter cash loses its value and prices increase.

In either case, AirBnB has found an asset that has historically been priced at $0, and can hence undercut competitors all the way down to 0$. No established hotel can compete on price, only amenities, but in times of financial distress, customers tend to sacrifice amenities for lower prices. And what AirBnB can't offer in amenities, it compensates for with the social aspect that hotels can't offer.

Same with Groupon, they've created a win-win-win for the most part. Customers save money if the Groupon was something they wanted anyway, companies make money (assuming they did the math right on their deal), and Groupon makes money. Only the companies that people would have spent money on, but spent on a Groupon instead, lose, which is extremely difficult to quantify.

I don't know how much of this the AirBnB and Groupon founders foresaw, but I think both are brilliant. They've really got me trying to think up something similar now.

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