Airbnb's Origin Story: From Airbeds to Global Marketplace — Joe Gebbia

How many of you have one of these? This is a Moleskine. This is a sketchbook. This is a container for ideas. Keep your hands up. Wow. That's a lot of people. Actually, hold your book up if you have one. Wow. Okay, in what I'm about to tell you, when I say 'Q Moleskine', I just need you to do that again, okay? Awesome. Well, my book is just like yours. My book is full of ideas. It's full of sketches. It's full of stories and inspiration. My book also has blank pages. Just like yours, right? Pages that are waiting for us to fill them with stories and concepts. This book has seen a lot. There are some crazy product and business ideas in here that have never seen the light of day. Today, I want to tell you about one that's jumped from these pages into the real world. And the story is Airbnb.

And it starts here at the Rhode Island School of Design, where I was pursuing a double major in industrial and graphic design. This Moleskine saw a lot of use. It got a workout. It was at RISD where we learned to solve problems creatively. It was also at RISD where I met this guy. This is Brian Chesky, and we were industrial design students together at RISD. And besides studying the same subject, we had something else in common. We both knew that one day we wanted to be entrepreneurs. So, this feeling was so strong that I actually sat Brian down before we graduated and said, 'Brian, I know that one day, at some point in the future, we're going to start a business together.' And Brian looked at me and he kind of laughed it off, but I knew there was some truth to that. So, he went off to Los Angeles, I moved to San Francisco. And I moved here to be an industrial designer. I was working in the city for a book publisher doing package design for them. I was living in this great apartment right in downtown San Francisco. It was spacious, it had lots of light. It was a great way to get Brian to move up from Los Angeles to San Francisco, and he did. The minute that he did, we both quit our jobs to become entrepreneurs. We let go of the salary, we let go of the paycheck and the benefits, and we took the plunge into the unknown. And there was a problem. The minute he moved up, our rent went up. And suddenly, we found ourselves unable to afford our own apartment. We had to think, and we had to think fast. It just so happens that same weekend, a design conference was coming to San Francisco that was so big, all the hotels had sold out in the city. So, Q Moleskine. We started to think creatively about how we could solve our problem of not being able to pay the rent. So, we're sketching away in our living room. And we're starting to sit to think, 'Hmm. Man, we've got some extra space here. There's more over there. Oh, look at all this extra space.' And we started to come up with this idea of what if we were able to blow up an air mattress, put it in our living room, and rent it out to designers who need a place to stay for the conference. We could go so far as to cook them breakfast. By the end of that night, we had this concept called Airbed and Breakfast.

So, naturally, we wanted to list our airbeds somewhere on the internet and we made the logical next move. We went and we looked at Craigslist. This made sense, right? No. These people are going to be sleeping in our living room. We want to know who they are. So, we decided to make our own site. This is the first version of Airbed and Breakfast. We made this in 24 hours. We had a site up and we encountered our next problem, which is how are people going to find out about Airbed and Breakfast? So, that night before bed, Brian and I, we emailed the top design bloggers that we could think of. And when we woke up the next morning, it felt like Christmas. There we were at the top of some of our favorite blogs: Swissmiss, Core77, Unbeige. And suddenly, this idea that we had 48 hours earlier was now live on the internet. And we had people start writing us from around the world who wanted to stay in our living room. So, think for a minute. What type of person do you think would sleep on an airbed in somebody's living room? Probably dudes. Probably pretty young. Strapped for cash, just out of college. That's what we thought, too. We were totally wrong. We had three people stay with us, all over the age of 30. We had Kat, Amol, and Michael. Together, the three of them helped us solve our problem. We made our rent that month. We made $1,000, right? They saved our apartment. But they actually did more than that. They shared their stories with us. Amol was a grad student in India, told us about this amazing thesis project he was doing in artificial intelligence. Kat's a web designer from Boston who gave us tips on how to improve the website. Collectively the three of them inspired us to make Airbnb and breakfast real. So we added a new teammate. This is Nathan Blecharczyk, our third co-founder. We now had design and engineering expertise on a founding team. And together the three of us decided, 'Hey, this works for a conference in San Francisco. What if we did this for conferences around the United States? That makes sense. People can share air beds for conferences.' So every year we saw that there was a conference coming up in Austin, Texas. Every year around March South by Southwest happens. And every year the same thing happens. Hotels sell out. People need a place to stay last minute. So we thought this was a perfect opportunity to launch the next version of Airbnb and breakfast. One problem. We had 14 days. After a couple of all-nighters, a lot of Red Bull, we got the next version of the site up. This was housing for conferences. Airbnb and breakfast 2.0. So we used the site ourselves to go to Austin. And we learned two invaluable things that forever changed the company. The first is that it's extremely awkward to exchange money in person, right? We were having a great experience with our host, and then suddenly the conversation turned to, 'Where's my money?' And we started to wonder, what if you could book a room with the simplicity of using your credit card just like a hotel. You could book an average person's room just like a hotel room. The second thing we learned is that people want to travel beyond conferences, right? We were so limited in our scope that we didn't see the bigger picture. And the bigger picture is that people want to travel this way anywhere around the world. And so we renamed the site Airbedandbreakfast 3.0 launched in the summer of 2008 and we now had online transactions and you could book a place anywhere in the world. We encountered the next problem. How do people find out about Airbedandbreakfast? Well, it just so happens in the summer of 2008 the press were writing stories about a really big event that was coming up. If you remember back to August of 2008 this was happening. The Democratic National Convention in Denver, Colorado. Barack Obama giving his acceptance speech to 100,000 people but only 30,000 hotel rooms. The press were having a heyday with this. They said, 'Housing panic hits Denver. Where will they stay?' Right? So we timed our launch just in time for the Democratic National Convention. And it worked.

It actually felt like the design blogs all over again except this time it was national. So we went from three guys working out of a living room with no money to three guys working out of a living room with no money but we had ton of press. We thought we made it. Look at this. Look at this spike. This is it. Hallelujah. We were wrong. In fact, it was this wall this time in the history of Airbnb where a lot of people don't know about us. They call this part in the startup world, they call this the trough of sorrow. Is what they call this time, where nobody's using your website, and you have to figure out how to get people to actually use it. So, when you have a marketplace, and nobody is using your marketplace, you have a lot of time on your hands. And that's when we cued Moleskine. And we started we had this crazy kind of late night brainstorm in the kitchen, where we thought, what if we were able to give our hosts a gift, maybe like a breakfast that they could give to their guests. So, we said, well, let's give them a breakfast cereal that they can hand off to their guests. And one thing led to another, and we just started to brainstorm, what if Obama had his own breakfast cereal? We said, man, that could be actually kind of funny. You have this caricature of him, rays of light coming from behind the cereal bowl. And we came up with a really funny name for this breakfast cereal called Obama O's. In fact, I brought a box here. So, we actually made the cereal from an idea that we had in our Moleskine. And we thought, man, this design is so cool. Like, we bet people would want to buy this. But, how are we going to get the attention of people? So, we went so far as to create a jingle for the cereal. Do you want to hear the jingle? Well, there's a really cool cereal that you ought to know. Everybody's talking about Obama O's. Just one bite, and you will understand, cuz every single O sings, 'Yes, we can.' Oh my god, it's Obama O's. Mommy, can I have some, please? So, we're a bipartisan company. If you do an Obama cereal, you have to do a McCain cereal. This is during the presidential election, don't forget. So, knowing that John McCain was an officer in the Navy, we came up with Cap'n McCain's, a maverick in every bite. And as you can imagine, we created a jingle for Cap'n McCain's, as well. Cap'n McCain's have all the squares you need to succeed. Driving that straight-talk express at full speed. Stay the course, never surrender. With every bite, you're a freedom defender. It's Cap'n McCain's. So, those are the two jingles. We ended up making 500 of each box. We numbered each one on the top. It was a very limited edition collector's item. And they ended up on CNN. So, here we were doing an interview on CNN about breakfast cereal. After that piece went live, orders started flying in. We were selling the boxes for $40 a piece. All right, these are very limited edition collector's items. So, we'd have to go to the grocery store and buy hundreds of boxes of cereal at a time. We'd bring them back to our kitchen. And we'd actually box every single box of cereal in our kitchen. Meanwhile, Nate's like, 'Cereal, guys, I got to go back to Boston.' The Obama O's went on to be resold on eBay. They went on to be sold on Craigslist for $350. And we ended up selling out of Obama O's, and at $40 a box and 500 boxes, we made over $20,000 for breakfast cereal. And this is how we funded Airbnb in the early days by selling cereal. The Cap'n McCain's, by the way, didn't sell so well. And we ended up eating those for breakfast.

But it was this project that got the attention of an incubator program in California called Y Combinator. They loved the hustle. They loved the scrappiness that we had. And we applied to the program and got in. The program's harder to get into than Harvard. So we were very, very fortunate to get into this program. The best part about it is that it brought the team back together. Nate flew back from Boston, and for 3 months he slept on an air bed on the floor of my room. And together the three of us decided for the next 3 months we were going to do whatever it took to make Airbnb a profitable company. And when I say profitable, I mean there's a term called ramen profitable, where you're making just enough to pay rent and buy ramen. So in order to reach this goal, we drew a graph of what we would have to make per week on the site to reach ramen profitability. We taped the graph to our bathroom mirror, and every morning we looked at it. Every night we saw it before we went to bed. And we got back to work. A lot of late hours working out of the apartment. But we knew that we needed to do something a little bit different. And that's when we cued Moleskine, and we started to think creatively about how we could get the site going a little bit more. And one of those ideas was to actually leave our apartment and go out into the world and go meet the people using our website. So we did just that. We traveled all around the country meeting our users. And they gave us some of the best feedback we could have ever gotten. Words started getting out. People were talking about us. I think Airbnb is about to change my life.

And then this guy signed up. This is David. He lives here in New York City. David is the drummer for Barry Manilow. Which means he's on tour quite a bit. He's out of his apartment two to three weeks out of every month and when he's not there, he lists it on Airbnb. And this is the first entire apartment that we had listed on our site. And so the marketplace started to widen a little bit. We went from airbeds to private rooms and now we had entire apartments. And the way you can book this now is very simple. You click the book it button, put in your credit card, you get a reservation. After the stay, David leaves a review for you and you leave a review for David. The marketplace continued to expand. We have places in the Hamptons now. We have beautiful places in the heart of Paris, entire apartments. You can even stay at a Frank Lloyd Wright house in Wisconsin. You can actually book this by the night. Before Airbnb, it would be impossible to even find this place. Another architectural great, the Richard Meier Smith house in Connecticut. Now available on Airbnb. The market's expanding. We actually have tree houses on the site. This is Harrison. He built this tree house for his kids who then went off to school and suddenly he's like, 'Hmm, what can I do with this tree house?' He discovered Airbnb and listed it. There's now a six-month waitlist if you want to stay in the tree house. Harrison pays his mortgage every month by renting the tree house. There's boats on the site. You can stay in boats all around the world. You can stay in a castle. We even have private islands on the site. You can literally book an island for $400 a night. So, do you guys think I can outdo this? You can even book an igloo. So, the market's expanding even beyond accommodations. People are listing all types of things including cars. You can book a Tesla in San Francisco through Airbnb. This is a co-working space. You can actually book an office or co-working space through our site. This is an event space. It's an art gallery in Chicago that you can book by the day. So, the marketplace is widening. In fact, just as this is a source of a canvas for us to get our ideas down, Airbnb has become a canvas, too. This is what we call the iPhone tent. This is the Apple Store in San Francisco. You can see where this is going. This guy decided he wanted to be first in line, and so he put his tent up on Airbnb. And he rented out the extra space in his tent. He got picked up across the internet. And he ended up renting the space, and it paid for his iPhone.

So, what's happened is we started with airbeds. And what we've done is we've blossomed into this open marketplace of space, much like eBay did with stuff. This is where we are today. We recently crossed a million nights booked on the site. And actually, a lot of those nights were right here in New York City. So, I asked a firm in California called Stamen Design to help us do some visualizations of Airbnb's story in New York City. And so, what you're looking at here is a heat map of where available Airbnb listings are in Manhattan. And this is back in 2008. These were our early adopters. Looks like quite a bit going on here in the Lower East Side. This is 2009. This is today. Let's zoom out a little bit. This is Manhattan, greater parts of Brooklyn. These are everyday New Yorkers renting the extra space in their apartment. This is last night. I'm staying on Airbnb right now. I have an awesome apartment in the West Village. Rented by a woman named Catherine. She's out on vacation right now, so I have the whole place to myself. And when I walked in, this is what I was greeted with. I had a very personalized welcome letter. I had a MetroCard waiting for me, and I had Catherine's favorite takeout spots ready to go. I just instantly felt like I lived here. In fact, this morning I walked out the door to come to the conference, and somebody stopped me in the street and said, 'Hey, can you give me some directions to this place?' I was like, 'Whoa.' I actually feel like a New Yorker. I'm living in an apartment.

So, it's this social connection, connecting with the person and their spaces. It's about real spaces and real people on Airbnb. This is what we never anticipated, but this has been the secret sauce behind Airbnb. I found a couple other people who feel these sentiments as well. The biggest difference between Airbnb and a hotel, I never want to leave a thank you gift in a hotel. Airbnb is probably the greatest thing since sliced bread. This is going to change the way people travel. So, speaking of traveling, I wanted to see how New Yorkers traveled on Airbnb, and we pulled up some more data, which I like to share with you now. So, what you're looking at is a graph. This is actually a really cool graph of how New Yorkers touch the rest of the world through Airbnb. And we just happen to pick a couple cities. There's many more, but you can tell the strength of the connection by the thickness of the line. So, this is how we're connecting New Yorkers with the rest of the world. But, it's more than just New York, we're actually connecting the rest of the world with each other. So, what started in our apartment with those three guests is now this. Every line that you see here is an idea that got shared, an experience that got created, a friendship that got made between two people from two different cities. All we did was scale what we did in our apartment. So, this is 2007. And this is the Moleskine where Airbnb came from. The same idea that came from these pages started in San Francisco. Over the last 3 years, these Airbnb listings are now available all around the world. So, I can't yet say that Airbnb is going to change the world, but based on this, I can tell you that we're changing the way people experience it.