How Design Thinking Transformed Airbnb Into a Billion Dollar Business | Hacker News Reader

How Design Thinking Transformed Airbnb Into a Billion Dollar Business

firstround.com

104 pointsASquare45 comments

AirBnb is a billion dollar business now? I thought that usually refers to revenue and not valuation, otherwise we'd call a bunch of startups without a product "20 million dollar business".

In finance circles, when companies are referred to as "Million/Billion Dollar Businesses" it's typically in terms of their market capitalization, which is consistent with the OP's title.

Obviously we could quibble about the liquidity / depth of AirBnB's valuation, but it's pretty safely into the billion+ market cap realm.

One example why it makes sense to use market cap. rather than revenue comes from post-bankruptcy GM. When they re-IPOed in 2010, GM's market cap was roughly $50B. However, in 2010, GM had $135B in revenue. Would anyone really argue that GM is a "$130 Billion Business" when you could purchase the entire firm for $50B?

Not always. When Wall Street say "iPhone is a x billion dollar business for Apple" they refer to the revenue, not market share. When they say "SAAS is a X billion dollar business" they mean revenue, not the combined market cap of all SAAS companies.

But yes, I think it can be ambiguous.

Was really hard to figure out what in that article has anything to do with "design". If anyone is as confused as I was, it seems that "design thinking" is something totally different:

http://en.wikipedia.org/wiki/Design_thinking

and I'm not too sure what that phrase really means either.

From the Wikipedia article:

"This approach differs from the scientific method, which begins with thoroughly defining all the parameters of the problem in order to create a solution. Design thinking starts without preconceived problem definitions and solutions, in order to discover hidden parameters and alternate optimized paths to the goal."

Airbnb experimented with a different approach by going out and taking better pictures themselves, rather than the using the preconceived notion that startups should never do things that do not scale.

That doesn't sound like any scientific method I know.

was thinking the same thing ..how about a hypothesis and an experiment to test it :)

it seems to me design and scientific method need not be separate at all... i worked with some good designers at ziba on my last project and they were effectively following a scientific method - hypothesis for design, rapid implementation, then testing with users, observe and repeat. ( was fun too )

I attended a workshop on Design Thinking, the tl;dr version is here (a PDF which I recommend especially for startups):

http://dschool.stanford.edu/wp-content/uploads/2011/03/Bootc...

even better, try to get into the Stanford course (they give open, 4-hour workshops, the last one was full)

http://dschool.stanford.edu/

Edit: they also have a virtual "crash-course":

http://dschool.stanford.edu/dgift/

I was shown some of the materials students made (in full Stanford courses, not in the 4-hour introductory workshop :) ), and they were amazing.

I observed that one thing Americans have over students in my home country/culture is, they're way more likely to learn how to make awesome presentations :) .

Design Thinking is the new MBA, but coming from a design background. I'm not that fond of it since I just call it "good business brainstorming" or "good problem solving."

They owe a lot of success to craigslist. They had been sending emails to users who had been posting the rentals on craigslist. I had read this in some initial success story.

Not only did they poach users from Craigslist, but they also built a feature that allowed you to crosspost your listing to Craigslist.

The thing is, building a marketplace (or a community) is very difficult because you have to fill and balance both the supply and the demand sides.

That's why startups resorts to these kinds of "hacks" (whether it's ethical/legal or not is another problem), it's akin to Reddit owners having multiple accounts to give the impression of an active site.

I thought the same thing, but some say otherwise:

https://news.ycombinator.com/item?id=4497569

i like the underlying message (get out and try stuff, even if it doesn't scale), but is the core example (increasing revenue & possibly saving the company by iterating on the product) really a "design thinking" solution? it seems that this kind of thinking should pervade the whole team at a startup, not just be confined to the designers.

don't get me wrong, i love good design and have used google venture's design sprint methodology (http://www.gv.com/lib/the-product-design-sprint-a-five-day-r...) to great effect. but there's something about the term "design thinking" that draws a line that doesn't seem to need to be there, particularly in early-stage startups.

Design thinking means that the non designer employees should think like designers. Not that the designers should do everything. I don't necessarily think this was a design thinking solution. It was simply a pragmatic business necessity: do anything possible that improves the customer experience. Its what the boss of the company should have been asking his employees to think of.

Edit:spello

i think that's exactly what i was getting at: it should be something everyone on the team is doing.

i doubt that this is the intent, but the term seems to be exclusive rather than inclusive. i'd be happy to be proven wrong though.

"How A Huge Market Opportunity Let Designers Create a Billion Dollar Business"

I am feeling a tad jaundiced but can I give a reason for AirBnB's success as well:

They found a way to allow people who do not own property nor have the rights to rent out the property, to receive cash for renting out said property.

The recent BBC article estimated 40% of their bookings in this illegal / legal grey area.

When you have the ability to give income off capital to those who don't own capital it is an attractive deal - see stock shorting etc.

I am (depressingly) expecting a fair number of downvotes, but I do hate to see businesses which operate dubiously (albeit a mild version relatively speaking) not being called out on it. At least YouTube got a roasting off the music and movie lawyers.

And I would like to point to ethicalconsumer.org as a fairly eye watering list of the ways in which "dubious" is ingrained in our society. We have a long way to go.

> This was the turning point for the company. Gebbia shared that the team initially believed that everything they did had to be ‘scalable.’ It was only when they gave themselves permission to experiment with non-scalable changes to the business that they climbed out of what they called the ‘trough of sorrow.’

The place where everything changed is where the company literally started disregarding the concept of design (not saying it's a bad strategy, but afaict the entire point of design is to be forward thinking before you actually do something). It seems, if anything, becoming less designed saved them.

I must have read atleast 3 versions for the reason of airbnb's success.

As they say, history is written by the winners. Might as well write multiple versions.

Great article. Joe really nails it. I wrote about an early experience with them, and the resulting lessons learned from watching their evolution here https://medium.com/@adambreckler/its-like-craigslist-but-bet...

Having apartment hunted myself, I have the personal experience of noping right out of any listing with no / bad photography. Categorizing this realization as 'design thinking' leans on hyperbole, and that ultimately has more to do with editorial direction than AirBnB beating its own chest.

I only found out about airbnb around a year ago. At the time the map was ridiculously small. Is (was)that design focused?

(Actually design seems to be a particularly ambiguous words, that can mean anything from translating engineering requirements to "looks pretty and is in the current style")

I like how their success story keeps changing. I think it was a TED interview or something like that I heard a couple years ago of their success story. Which was Paul Graham, convinced them to go meet their customers face to face to learn their customers and form a personal relationship with them. Now it seems to be bright pretty pictures.

The graph of the data with the high quality, bright photos showed a "WOW!"-like increase. I think they have a copy of the graph in Lean Analytics now. It is a dramatic change. Not like "Oh we saw an increase in traffic" but more like hockey-stick difference.

I think everyone knows better pictures are better, but I don't think anyone realized how much of a large difference it could make--especially in their area.

—Oh here is a copy I found real quick. As far as I know, they hired a few photographers, saw a statistical difference, and then decided to hire 20 http://i.imgur.com/VpYTF9L.png

The graph you linked shows them already on the uptick before going to do the photos but the article doesn't mention that.

The title of the article is a bit grandiose; however I suspect their success is likely the net effect of many great small decisions like this.

Probably "helped transform" would be better.

This comment seems a little... prosecutorial.

Why should there be only one reason? It has been obvious for years that design is a huge factor in Airbnb's success, and that it's a lot more than "bright pretty pictures". That shit is hard and they nailed it. I'm sure they did some other things too.

I feel like you're contradicting yourself here. Yes, there are probably more than one reasons for their success. That is why focusing on one (design in this case) is silly.

Slightly meta here - but I think everyone here (including myself) is just being pedantic about the article. If you want to know what makes successful businesses reading 1 or 2 articles about one on globally distributed publications is not going to give you the whole picture.

Founders at Work is a good example of painting a better picture -> http://www.amazon.com/Founders-Work-Stories-Startups-Early/d...

I love that book, and I fully agree with your comment.

Its true, its not one thing that makes a good product. I think this article lines up with their recent release of their new branding, and this article is trying to turn that social snafoo into a positive. Which is a good move, and is what they should do. I agree nice pictures make a big difference. I was going to put a link to vrbo, but they went and copied airbnb's site. VRBO had average pictures and average functionality for years and the site and is much bigger than airbnb. I think it really all comes down to distribution in the end. Pretty pictures will get people to stay, but aren't end all be all.

In the classical 12-part monomyth, the visit with PG could be considered the "Supernatural Aid" part. [0]

[0] http://en.wikipedia.org/wiki/Monomyth#Supernatural_Aid

I've come across articles about the story of AirBnB's success a few times, and it's been pretty much the same one as linked here. Anyway I don't think there has to just be "one thing" that can be a turning point for a startup, they usually go through multiple ups and downs and any number of stories you could point to that was "the reason" for their success or ultimate failure.

The problem here is that you view these as two different things, not that the story keeps changing. Great design begins by spending time with your customers and truly understand their wants / needs. It's not about pretty pictures.

It's a BS marketing spin that keeps changing alright.

Neither design played a huge role, nor "meeting their customers face to face". The world is filled with failed startups with great design.

The simple explanation is: they simply offered a product people needed for it's value + some luck.

But I guess the product having a use value (as opposed to nice design or soapy stories about "connecting" with their customers) does not cut it as an offering anymore.

Let me ask you this, which one of these services looks more appetizing?

- http://san-francisco.eat24hours.com/

- https://www.trycaviar.com/san-francisco

Bright pretty pictures give a pretty damn obvious advantage.

I like how their success story keeps changing

Probably because it's difficult/impossible to identify the real causes of any company's success and we want to attribute it to something we can digest. This podcast episode on Survivorship bias is very relevant: http://youarenotsosmart.com/2013/05/23/survivorship-bias/

A lengthy article in NY Times with the word 'billion' is all that required now to increase the hype.

SUMMARY: "we were shocked, SHOCKED, to discover that an ad with a nice picture performs better than an ad with a bad picture."

I laughed.

However I think the article is trying to make the point that software engineering-types are sometimes prone to otherwise obvious oversights because they tend to think of solving all of their business problems with code.

Would be more interested in "How Actively Breaking Existing Laws Transformed Airbnb Into a 'Billion-Dollar' Business"

When white-collar financial institutions break the law it's called the cost of doing business. When hot startups break the law it's called disruption. When poor, lower-class folks break the law it's called breaking the law.

Design thinking and a flexible approach to property law.

Reply on news.ycombinator.com