When it comes to billion-dollar companies, Uber and Airbnb are often mentioned in the same breath. According to TechCrunch, Airbnb is currently valued at $31 billion. Uber is valued at $120 billion. Guess what these billion-dollar businesses (which aren’t even competitors) have in common aside from web, iOS, and Android apps? You guessed it: the sharing economy.
In this article, we’ll uncover some particularly interesting features of Airbnb’s underlying technologies. But first, we’ll talk a bit about what this online marketplace for house renting was like before it conquered the world.
How Airbnb got into gear
Just as Uber disrupted taxi booking services, Airbnb brought a wind of change to the hospitality market. This encouraged many entrepreneurs to create Airbnb clones. Who would’ve thought that the age-old hotel industry and the entire real estate rental industry could be disrupted by such an idea?
The strange combination of hotel and couch surfing called Air Bed & Breakfast was launched in 2008 by Brian Chesky, Joe Gebbia, and Nathan Blecharczyk. Though in the early days it seemed crazy to many, Air Bed & Breakfast, now known as Airbnb, was destined for greatness. Today, over 150 million Airbnb users rent spaces in 190 countries and more than 65,000 cities. There are over 4 million listings on the platform, and Airbnb corporate has expanded to 26 offices around the world.
Startups can often be described using Paul Graham’s “this for that” template: Airbnb used to be dubbed the “eBay for space.” Nowadays, how many startups do you know who call themselves the “Airbnb for X”? New members of the sharing economy are popping up everywhere.
It’s obviously not enough to have a great idea for collaborative consumption. You also need to do something to grow your idea into a platform – you need to growth hack. In order to get their first visitors, the co-founders of Airbnb integrated with Craigslist, allowing Airbnb hosts to automatically create postings on the site.
The Airbnb community started in New York, which was the test market for the co-founders to “do things that don’t scale.” Paul Graham’s advice became the main vision for the company. “It’s better to have 100 people love you than to have 1,000,000 people like you,” said Brian Chesky, the CEO of Airbnb.
Airbnb’s international expansion began in 2011, when they acquired a German competitor, Accoleo. From that day on, Airbnb started growing like crazy and acquired Gaest.com, Luckey Homes, AdBases, Accomable, Trooly, Deco Software, Tilt, Luxury Retreats, Trip4real, ChangeCoin, and even more companies. Now Airbnb is acquiring HotelTonight, a company that was recently evaluated at $463 million! Pretty soon Airbnb will substantially widen their offerings with rooms from the best boutique and independent hotels worldwide.
If you’re considering building an app like Airbnb to achieve its levels of success, you’ll have to deal with a few major challenges including global payments, search and discovery, messaging and communication, trust and safety, the user experience, and growth strategies. Let’s take a look at Airbnb’s technology stack that helped them deal with these challenges.
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Search & discovery
In New York alone, Airbnb has more than 35,000 listings. How does the platform compute relevance when there are so many factors that need to be taken into account? Airbnb’s technology stack is highly scalable. Here’s what they did to perfect their search and discovery process:
Built a sophisticated search algorithm powered by artificial intelligence to determine location and the relevance and requirements. This algorithm combines dozens of signals to surface listings that correspond to a user’s search.
Created an engaging discovery experience called Saved, allowing users to like search results. This led to a 30% increase in user engagement.
Hired a discovery team to figure out where people wanted to go based on the details of user profiles. The team processes natural language in reviews, listing descriptions, and searches to reinforce the machine-powered travel agent.
To help users make informed decisions while searching for a place to stay, Airbnb has added even more goodies:
Experiences and restaurants to find the best places to eat or discover sophisticated ways to relax and be entertained, like, say, a violin concert by a local musician.
Airbnb Neighborhoods to let users see the places they’re planning to visit. This pushes Airbnb into the area occupied by travel apps such as Hipmunk, Gogobot, and Triposo.
New property categories that allow users to filter by boutique, bed and breakfast, unique space, vacation home, entire home, private room, and shared space.
Travel themes including family, wedding, social stays, honeymoon, work, one-of-a-kind, and group party. For instance, if you choose the work theme, the properties shown will supply all amenities for work and private sleeping quarters for each of the colleagues you’re travelling with.
Additional tiers of listings – Airbnb Plus and Beyond by Airbnb – to offer properties with verified quality and comfort or only high-grade alternatives that offer custom experiences and great hospitality.
Airbnb’s tech stack is impressive, to say the least. However, they do use some standard tools, such as filters, to help guests find the right place to stay. Users can search by date, number of guests, listing type (private/shared room, entire house), price, listing info (bedrooms, beds, bathrooms), amenities (anything from Wi-Fi to the number of fire extinguishers), and whether they need an instant booking or can wait 24 hours for the host to accept or decline the reservation.
[The Airbnb mobile app]
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Messaging & communication
You might wonder what measures Airbnb takes if hosts don’t respond to requests within 24 hours. Somebody needs to ping them, right? Airbnb’s experience suggests two ways to handle this situation: call the host manually or have technology do it for you.
Airbnb sends push notifications to hosts who haven’t responded to a request, and, in case those notifications don’t work, sends automatic SMS messages using a communication API by Twilio (definitely a great tool for those who want to develop an app like Airbnb). The message to the host contains information about the potential guest, booking dates, and the price for the stay.
To help users and hosts communicate with each other, Airbnb provides real-time chat. It’s a truly comfortable tool that lets users instantly ask a question or request additional services from their hosts even after they’ve checked in. It’s also great for hosts, as providing extra services may persuade travelers to stay longer or come back again, meaning more money.
Users can text multiple hosts at once and create chats with other users while planning a trip together. Hosts can not only start threads and send real-time messages but also save common responses to their current and potential clients. And both users and hosts can easily navigate these chats, which are presented as a feed with a search bar. This feed is actually more of a message center, as it’s where users and hosts see all types of messages.
As Airbnb operates in 191 countries, you can only imagine how many e-commerce transactions they must process every day. Airbnb is licensed as a money transmitter, but it doesn’t handle payments by itself. To facilitate the massive number of transactions that move through the app, they integrate with dozens of local payment providers and maintain bank accounts in several currencies.
Airbnb allows users to pay with PayPal in the US and other countries where this service is popular and has no restrictions. But for payments in other parts of the world, Airbnb uses Braintree, one of the best payment systems out there (Uber also uses Braintree). We compared Braintree with Stripe, its main competitor, and came to the conclusion that Braintree is more impressive given the wider range of payment possibilities it provides. For users, Braintree is also more convenient, as they only have to tie their cards to the payment system to pay for reservations and hosts only need to do the same to withdraw their money. It takes more effort to create an account and pay or withdraw with PayPal.
And to make things even better, Airbnb (like Uber) has integrated with Apple Pay in their iOS app and Google Pay in their Android app. Not only are these payment options easy to use, they’re also secured by Apple and Google.
[Listings on Airbnb]
Transactions on Airbnb can be complex, as they may include recalculations, taxes, and fees. Moreover, each financial operation has to be associated with a definite type of payment: payment for accomodation, security deposit, coupon, etc.
However, the checkout flow has to be flawless and smooth. This is why Airbnb built an interface that looks the same for all payments on the platform:
First, the product inventory is checked.
Next, the user goes through a standard checkout flow.
Finally, the checkout is complete.
At the final stage, users see all the fees and taxes along with any additional costs. This system allows Airbnb to quickly change products on the platform while users have a consistent experience paying for them.
To help hosts set the best prices for their listings, Airbnb has implemented a dynamic pricing feature based on their Aerosolve machine learning system. This feature predicts if a listing will be booked on a certain day at a chosen price. This way hosts can optimize their pricing and get more revenue from listings.
Trust & safety
Reliable service is probably the most important criteria for users, especially if you’re developing a rental app like Airbnb. But a valid email address and phone number, which were initially the only requirements for creating a profile on Airbnb, aren’t a solid foundation for trust. Now Airbnb ensures trust and safety in a number of ways:
Private messaging before a reservation is booked. Any message that includes a user’s contact details gets deleted automatically by Airbnb’s messaging system. This way the platform makes sure all transactions go through the site. Users may exchange their emails and phone numbers, but only after the reservation is made.
Reviews and references. Reviews are written by guests only after the stay, whereas references are endorsements that both hosts and guests can receive from friends at any time. A user can write a reference only when one is requested.
Superhost certification. This helps travelers discover places by hosts with good reputations who have minimum 4.8 ratings, a 90% positive response rate, over ten stays per year, and no cancellations.
Social connections. Users can find places to rent from hosts who are Facebook friends or friends of friends, and can see if a Facebook friend has reviewed a host. This feature makes users more confident about booking. To enable social connections, Airbnb integrated with Facebook’s Graph API, which represents Facebook objects and the connections between them.
$1,000,000 Host Guarantee. Airbnb provides up to $1 million in compensation to hosts should their property be damaged by guests.
Verified images. Hosts are offered the option of having photographers take photos of their accommodation for free. If a host opts to do this, the photographs taken will be included in their listings with the tag “ Verified Photo.”
When Airbnb had only just launched, New Yorkers did a poor job of presenting their listings. That’s why the co-founders went door to door taking professional pictures of every apartment registered on the platform. This resulted in Airbnb’s revenue in the city doubling.
Reliability & scalability
Airbnb currently has about 150 million active users worldwide, and all of them enjoy a stable and quick platform. The secret behind this reliability is a properly developed platform architecture.
Just like most high-end solutions, Airbnb is a cloud-based application, which allows it to quickly scale and handle heavy workloads:
Amazon RDS cloud database — to store data and simplify administration
Redis — for cache infrastructure and for the main database
Amazon S3 and EBS cloud storage — to store user data
Amazon CloudFront — to deliver content to users around the world instantly
Amazon EC2 cloud hosting — to carefully distribute incoming traffic and handle sudden traffic increases
Big data tools by Airpal, Presto, and Druid — o store, process, analyze, and manage huge amounts of data.
Let’s have a look at Airbnb’s business model. Airbnb makes money by charging fees on bookings made through the app. Guests pay a 6% to 12% non-refundable fee when a reservation is booked and approved by the host.
Airbnb also collects a 3% service charge from hosts. In addition to these fees, Airbnb may also charge value-added tax (VAT) depending on local and federal tax laws.
According to one MIT study, people tend to spend more money when the payment process is easy. Following this logic, Apple Pay and Google Pay may lead users to spend more in the Airbnb app.
Airbnb doesn’t decide how much to charge for accommodation. They let the hosts define the price for their properties and whether to charge any of the fees permitted on the Airbnb platform, including taxes.
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Growth and customer experience
Airbnb positions itself as an e-hospitality brand aimed at improving the customer experience. According to Gustaf Alströmer, a growth product manager at Airbnb, the philosophy of the company is to have users tell the story.
This is why they launched neighborhoods, included local recommendations and host guides, and even bought Localmind – a startup that knows how to get the right answers about places directly from the people that live there.
Airbnb’s growth strategy is evolving around features that touch non-users: referrals, wish lists, neighborhoods, listings, references, and their amazing blog. Word of mouth, though, has proven the most efficient growth tool for the rental service. Airbnb’s daily bookings tripled when they implemented their referrals program.
The next horizon for the sharing economy in general and for Airbnb in particular is business travel. Airbnb is taking promising steps in enterprise with their digital marketplace for business. Uber’s business edition is pursuing the same goal.
Depending on the type of your stay, there’s a good chance you could save up to $100 per night staying with an Airbnb host instead of in a hotel room. The benefits of the sharing economy make the Airbnb platform a great tool for companies trying to save on their employees’ travel expenses.
Who knows? Maybe you can knock on the door of the business travel industry with a platform similar to Airbnb? If you need any help with lodging app development, you know where to find a web and mobile app development company — us!