Joe Gebbia: The Power of Story – How Airbnb Blended Entrepreneurship & Design

Started four years ago in October 2007, and that's actually the same amount of time it took me to finish college. So what have I learned over the last four years of doing Airbnb? Actually, it parallels what I learned in college. So let me take you back. You're a freshman at the Rhode Island School of Design and this is your art studio. You're sitting through art critiques or crits as we call them for up to eight hours a day. The surfaces are hard. They're uncomfortable. I saw a problem. I saw an opportunity. The surfaces are dirty. This was an opportunity. This was a problem. So, let's fast forward after college. I'm living in San Francisco in an apartment and I've just gotten out of college and I encountered my next problem. Actually, this is my apartment. I still live here. Bills, rent was piling up and actually I couldn't make the rent. I was broke. So, we had to figure out a way to help make rent. This was the second problem. Do you see where I'm going here? There's a parallel. The problem when I was a freshman and the problem after I graduated. Let's go back to RISD. So, we had a problem and actually, you know, the solution was in front of us the whole time. You know, RISD is about I think it's about 130 years old. So, thousands of freshmen have seen this problem before me, but none of them did anything about it. There was one lone freshman who saw the solution. It was me. So, I did what we all are taught to do as freshmen. I observed what was around me and used that to inspire design. Next part of the process is to discover materials. From there, you go on to make prototypes. This is a mold for a future seat cushion. Fast forward, San Francisco. We have this great space, but we can't pay the rent. It just so happens there's a huge design conference coming to San Francisco that's so big the hotels are sold out. So, get this. People need a place to stay and we have extra space. But we also have something else. We have an airbed. So we start to get this idea. What if we were to make a website where we could rent an airbed to a designer coming to this conference? And we got to work. We started to make a prototype of what the website would look like. This is actually our apartment. Those are sketches of the original website. So here we go. We've got a prototype on the left solving the comfort problem. And we have a prototype on the right solving the rent problem. Now, let's go back. We're in college. Okay, we've got the prototype. The problem has been in front of us this whole time. And so, so many people have seen this, but what I saw, what I came up with was a seat cushion that could keep you comfortable and keep you clean. And I called it Crit Buns. So, fast forward San Francisco. Remember the problem? Can't pay the rent. We're broke. We got air beds. Designers need a place to stay. What are we going to do? We made a website. We rented out three airbeds. We had, you know, the airbeds. We could cook breakfast. So, we actually put the two together. And by the end of that day, we had Airbed and Breakfast. And we made the website that looks just like this. Really simple website, airbedandbreakfast.com. We even made t-shirts to go along with the website. So here we have it. Two solutions to two problems. Crit Buns solving the comfort issue. Airbed and Breakfast solving the rent issue. And by the way, both these solutions are like completely absurd, right? We have a cushion that's based on the mold of somebody's butt. And then we have a website where people can book an airbed and stay in your living room. But this looks like success, right? No stories at all that easy. So, let's go back to Crit Buns. Here we are. This is my garage. We got product. We got inventory. But we don't have any customers. Surprise, surprise. They weren't coming to my garage. I had to go out to find them. So, what do you do? Well, in a problem like this, you come up with a formula. So, that's what I did. The Crit Buns sales formula. And I know there's a lot of professionals in the audience that you guys have seen this before, but for anybody that hasn't seen it, let me tell you what this actually means. So the formula: some will buy your product times some won't buy your product plus who cares equals move on. So I had my formula, I had my product, and I did what any freshman would normally do at this point. I went to design fairs to sell the product. This is me at my first design fair. And actually, that's really me up in the corner back there. And so it was at these design fairs where I got to actually sell the product and see how people like to buy it. And you know at every fair you had to have a demo chair so people could test it out. And it was in these where I'd sometimes join them in the demo chair and we talk in depth about the product and they could tell me what they liked about it, what they didn't like about it. And so what did I learn from this? I learned the sales process of the cushion and it looks something like this. Stage one, curiosity. What the hell is that? Nobody knows what it is, but it's cool enough that they want to get closer to it. Stage two, the touch and feel. They love to squeeze it. Stage three, the story. They turn it over and they read the back of the package. They understand the concept, why it's shaped the way it is. Where did it come from? Why does it look like this? Then they move into stage four, which is demo time. You always have the chair ready because people want to try it out. Okay, where can I try this out? Get the demo chair ready. They buy the cushion. They're not just getting the foam, they're also getting the story. And they'll share that with the next person in line. I've seen this hundreds of times now. It's unbelievable. So, back to Airbed and Breakfast. Remember where we were? We've got air beds that we got to rent out because we got to save our apartment. We actually netted from these three airbeds over a thousand bucks and we saved the apartment. These were our first three guests. These are actually the first three Airbed and Breakfast customers and Kat, Mo, and Michael represent like the first three stories behind Airbed and Breakfast. And the three of them inspired us to keep going, to actually make this a site where anybody could participate, to actually turn this into a real business. So we transitioned and we changed the name. We changed it to Airbnb and we made a site where anyone around the world could rent out their extra space on our platform. When we got this going, we did some things that didn't really scale. We did some things that are counterintuitive to the startup world about how you get a website off the ground. Things such as throwing meetups. We actually traveled the country and met users in all of our major cities. We went from city to city and we tried to find a hundred people that absolutely loved Airbnb. We wanted to meet all of them. Totally doesn't scale, but it was awesome. We did other things, too. We went around and actually took pictures of host apartments at no charge. Look at that. That's before. This is after we came. Where would you want to stay? This totally doesn't scale either, but it made a huge difference. Check this out. This is a heat map of San Francisco. The blocks are illuminated if there's an Airbnb listing there. This is also 2008. So, remember, we're doing non-scalable things to grow the business. This is 2009. This is 2010. This is Airbnb today. Look at this. We got here by doing non-scalable things. By the way, this is happening in every major city around the world right now. So, what did we learn from this? Well, naturally, the five stages of typical Airbnb booking. The first one is called curiosity. What the heck? You mean I can book somebody's house on the internet and book it with my credit card? Then there's the interaction phase where people start clicking out. Oh my god, it's more than just apartments. There's tree houses, there's castles, there's igloos. Stage three, this is really important. They start to learn the stories of the Airbnb hosts. They start to read the reviews of the guests and the dots start to connect. Stage four, it's basically the demo chair. Try it out. People go and take a trip. In stage five, they come back with a story and they share that story with friends, co-workers, colleagues, and that's how Airbnb has grown. So, here we go. This what you're looking at right now is the power of story. Look at this. On the left, you've got Crit Buns. People buy the foam, they get the story. On the right, you've got Airbnb. People take a trip, they come back with the story. So back to Crit Buns, we got to get the word out. So we designed some really fancy packaging. It was beautiful. And on the back of the packaging, we actually had the story printed out in detail for people to understand why this product existed. We even went so far to create a diagram so people understood how the product worked. And make sure step three, the cheek-to-cheek action is really, really important. So what do you do if you have the story? You ship it out. And we packed it up. We sent it out to all the retailers we could think of. And actually, I came up with a whole diagram that shows you how it all worked because you can't start at the top. Sometimes you can't start with the biggest retailers, but it's easier to start at the bottom and work your way up. So, I came up with the Crit Buns distribution strategy to show you how it all went down. So, we started with the easiest one, and that was the local shops, the places that you could go visit and you could go walk in person. And once they picked it up, college bookstores picked it up. And then the story progressed to online retailers. And then I started getting calls from national catalogs. Whoa. And then we went really big time. It got into the MoMA store in New York City. Right. So the story went all the way up to the pyramid. And the story is the reason that it got into the MoMA. It's really just a piece of foam, but the story makes it so much more. Just when we thought it could get bigger, global retailers picked it up. So fast forward, Airbnb again, think the power of story here. How Airbnb got press in the early days, right? We started locally. We found local bloggers who were looking for good story ideas that propagated up to local newspapers. Local newspapers became a local TV story. Local TV story became a regional story. And suddenly we get a call from CNN. Oh, what's this? This story is cool. Just when we thought it couldn't get any bigger, the story went global. All we did was start at the bottom and work our way up. The story did the work for us. So, guess how much this cost? Nada. This didn't cost anything. We did this on our own. So, back to Crit Buns. All right. Think global here, right? At one point, I physically took the cushion to Japan. So, here we are in Japan. Like, different culture, different language. The Japanese people loved the product. At least they wanted to love the product, but they couldn't necessarily understand. The story was lost in translation. So what do you do in a situation like this? Well, let me back up and say at the end of day one, we sold a total of zero Crit Buns. So we had a problem. We had to solve this problem. So what I learned to solve this problem is to localize, right? To find somebody on the ground in Japan who knew the culture, they knew the language, and they could help tell the story of Crit Buns. So, I'd like you to meet Min. That's Min. Min is a local Japanese guy who knew the culture, he knew the language, and with Min's help, we translated. And at the end of the design fair, we sold out. There were no Crit Buns left at the end of the fair thanks to Min's help localizing the story. So, back to Airbnb, we have a similar problem. We're in 192 countries. That's like thousands of languages, right? The Airbnb story has propagated. What started in our apartment here in San Francisco has gone completely global. So, we had to find our own version of Min. So, we found them. We have an office now in Germany, an office in the UK, many more on the way. And these offices have helped us localize. They've helped us connect with the local culture. And as a result of this, things have tipped. 60% of our business is now completely international because of this localization effort. Airbnb now has 100,000 properties around the planet. Last year was huge. We grew 800%. To date, there's been over 3 million nights booked on the site. And this week alone, there's going to be 13,000 stories posted to the site in the form of reviews. I had to throw in a line chart. I just wanted to show you like where the story started and where it is today. You know, this power of story is more than about just business. It's actually about people around the world, right? It's about these hosts and these property owners that are able to get out of the rat race because they found a new form of income and they find joy in sharing their local culture in their neighborhood with guests. It's also about the guests and the travelers who now have an affordable way to get into a neighborhood or to access a city's culture, right? They can actually embed themselves in the fabric and the heartbeat of a city. It's good for us as a company. We take a transaction fee which means that we can hire great people and continually evolve and improve the service. It's good for what I call local economies, right? We can redirect all this money into local neighborhood stores and shops, right? You don't have to go to Starbucks anymore. You can go to the local cafes of the world. It's good for the environment. I think Airbnb promotes resourcefulness, right? Why are we wasting what we already have an abundance of? And finally, society. You know, Airbnb is about connecting people in the real world, right? Using the internet to get people offline. How much better of a world would we live in if we all understood each other like this much more? Because we're sharing culture, we're sharing ideas, and we're sharing stories, right? It's the power of story. And this power of story is actually happening. At Airbnb, we call it travel like a human. Thank you.