Excerpt from “The Airbnb Story”
Airbnb, Approaching IPO, Could Face an Identity Crisis
Whenever Airbnb does choose to make its entry into the public markets, there’s one group of people outside of Wall Street that will be paying close attention: some of Airbnb’s hosts. There’s no doubt that many of the millions of Airbnb hosts will see the occasion as a victory and an important milestone for the company that has afforded them an income stream. But some are starting to feel that they should get some shares, too. They helped build the business, after all, and they control the product and experience that makes the entire platform possible.
Hans Penz and his wife rent out two rooms in their house in Staten Island, New York. Penz, thirty-eight, is a baker and originally started hosting as a way to raise money to grow his business; now, the couple do it because they like the extra income and having people from all over the world stay with them. Penz loves hosting and is one of those people who genuinely believes Airbnb “is making the world a better place.” He also feels that hosts, or at least the most engaged hosts, should be able to get pre-IPO shares. “The hosts are the company,” he says. He says he’s talked about this with other hosts and with the company. He says that if he were one of the company’s existing investors, “I would definitely ask the company how they’re going to make sure hosts stay with Airbnb and don’t decide to start their own business.” When I ask Chesky about this issue, he says the company has looked into it and talked about it internally. He says it’s hard to give a million people equity in the private market, where every investor must be given access to the company’s financials. “It’s not without its complications.” This same issue came up way back when eBay went public, but that company in the end did not end up granting shares to its sellers.
There are many potential problems with the idea, among them that hosts could wind up unhappy if the stock doesn’t perform. That said, if Airbnb doesn’t find a way to reward hosts, it could turn the spectacle and celebration of an IPO into a potential moment of resentment for some in the company’s most important stakeholder group. Much bigger questions are these: What happens to the company’s soul should it become a public company? What happens to the mission of “belonging”? What happens to changing the world? What happens to “the United Nations at the kitchen table”? Can you have a social mission and be a big behemoth on Wall Street? Plenty of tech-industry giants, of course, claim they have missions. Facebook’s is “Make the world more open and connected.”
Google had “Don’t be evil” until its new parent, Alphabet, changed it to “Do the right thing.” But balancing mission and Wall Street expectations is a tricky thing, to put it mildly. “I really like these guys — they are genuine,” says Jessi Hempel, head of editorial for the online technology publication Backchannel, about the Airbnb founders. “But the bigger question is, is an Internet company that has to scale a flawed endeavor? If you believe in a mission, start a nonprofit. Be a Wikipedia, or a Craigslist,” she says, referring to Wikipedia’s nonprofit model and what Craigslist refers to as its noncommercial, public-service nature (it is a for-profit company but did not take venture funding). Hempel’s point is that the moment a technology company takes its first dollar of venture capital, it becomes hostage to investors’ desire to maximize returns. “The peculiar parameters of venture-based start-ups are that the demand for growth is so important that it takes precedence over everything,” she says. Chesky recognizes this conflict. (For a fleeting moment in 2008, back when he knew nothing about business, Chesky himself felt that a nonprofit was the right direction.) But he says that as a private company that is founder-controlled and -run, “if you control the board, it’s your decision.” So far, Airbnb has also been able to choose investors who share the company’s view on such matters as the importance of its mission and its long-term goals. Being public, though, is another matter entirely. “I do think there’s an issue with being public that I haven’t sorted out,” he says. “The mandate of a public company is to act in the best interest of your shareholders. But the problem is, you don’t pick your shareholders.” Their interests might just be short-term returns. “It’s hard to reconcile,” he says. He points to strong-willed CEOs like Steve Jobs and Jeff Bezos: “I don’t think Steve ever listened to an investor. And maybe Bezos has been able to, like, just drown them out. But a lot of CEOs haven’t.”
Airbnb investor and board member Jeff Jordan takes a stronger view. “People think it’s evil [to go public or to take venture funding], but to build an enduring long-term company where your invention will last for long periods of time, almost all of them are public companies,” he says. “Google, Facebook, Alibaba — these are the companies that are changing the world. If you want to build something that will last and you want to control your own destiny, going public is the way you do it.” Clearly, Airbnb has grown by leaps and bounds. No one would confuse it with a nonprofit these days. But as any company gets to the size of Airbnb, it inevitably reaches a point of backlash, where its early users start to complain that it has grown too large and has lost the essence of what made it so special in the early days.
Some of Airbnb’s earliest users, who prided themselves at being in the forefront of a new paradigm and part of a counterculture movement of sorts, take issue with the fact that the company’s platform has gotten so big and gone so mainstream. Rochelle Short, a host in Seattle, started using the site in 2013, became a Superhost, and started a popular blog, Letting People In — but, as she recounted in The Verge, she stopped hosting in 2015, because the people using it had, in her view, become too conventional. “I think the demographic started to change.” In 2013, she said, it felt like a true social experiment, “pioneering new territory, attracting people who were open-minded, easygoing, don’t worry if there’s a fleck on the mirror in the bathroom.” She said that by 2016, it “became the vanilla tourist who wanted the Super 8 motel experience. I don’t like these travelers as much as [in] the early days.” Phil Morris, a host in Barcelona who created the host website Ourbnb, expressed similar sentiment in an oral history of Airbnb published by the producers of the Get Paid for Your Pad podcast. “We do feel from time to time that the old Airbnb was much more fun and personable,” he said.
Chesky hopes the company’s new “Trips” platform, its ambitious new expansion launched last fall that includes a new category offering of custom experiences and itineraries offered by locals, will help bring back some of that early-adopter sense of social experimentation. The new products and platform, he says, will allow Airbnb to get closer to the company’s roots. And, by better segmenting its business, he hopes that different parts of the site can appeal to different kinds of travelers at the same time. Cofounder Nathan Blecharczyk, too, feels that this is an opportunity for innovation: “How do we make sure we have the right experience for an early community member who loves personal hospitality a host might provide, and also provide it for the person who wants to have a luxury experience? That’s the challenge and the opportunity.” But the company still has to walk a fine line without seeming too corporate or “vanilla.”
Excerpted from THE AIRBNB STORY: How Three Ordinary Guys Disrupted an Industry, Made Billions . . . and Created Plenty of Controversy by Leigh Gallagher. Copyright © 2017 by Leigh Gallagher. Used by permission of Houghton Mifflin Harcourt Publishing Company. All rights reserved.