Airbnb Is A Fad


airbnbAirbnb is an easily reproducible marketplace that would have competition by now if its business were completely legal.  Competition means hosts would list on multiple services, driving down listing costs and Airbnb’s profitability.  The share economy company recently announced its new brand image.  The company has also launched a new Airbnb NYC website to argue after-the-fact that its service should be legal.  Here is a company that’s raised so much money at such high valuations that its only option for investors is an increasingly unlikely public offering.  I have my own opinion about a failed plan to take Airbnb public.  Airbnb may end up being just a fad.

New Brand Image

Airbnb’s new brand image consists of a new logo, color scheme, and revisions to its website layout.  The timing of announcing the new branding seems unusual, though.  Why make such an announcement by itself in the middle of July?  And if Airbnb’s original branding was working, then why replace it?  The answer to both questions may involve the new Airbnb NYC website recently launched by the company.  Airbnb’s agreement with the New York Attorney General required the company to provide information about its hosts by mid-July 2014.  Fines and legal action against hosts appears imminent in that state.  The sudden announcement of new branding may be the company’s attempt to mitigate against bad press.

A Failed Attempt At Rushing Airbnb To An IPO

Its instititutional investors should’ve known the legal risks associated with Airbnb.  The company was not adequately disclosing to any of its hosts the possibility of fines or even eviction for using Airbnb.  However, none of the legal risks had caught up with Airbnb while it was raising extremely large rounds of funding.  My educated guess is the plan was to take Airbnb public so investors could cash in before any of the risks could catch up with the company.  My personal opinion, completely unsubstantiated, is Y Combinator brought on Groupon co-founder Andrew Mason to further that plan and assist with an initial public offering of Airbnb.  Andrew Mason is the only YC partner with any experience taking a company through a public offering.  His IPO experience is also specifically with a consumer web service.  I can’t imagine Y Combinator having a specific need for Andrew Mason as a partner other than to assist in some sort of IPO.  So I think Y Combinator offered the Groupon guy a partnership and office to work from at its new “YC SF” San Francisco office in exchange for his professional services in assisting with a public offering of Airbnb.  But then the investigation by the New York Attorney General’s Office and bad press associated with that derailed any short-term plan to take Airbnb public.

What’s Next For Airbnb

I admittedly have never used Airbnb.  And I don’t know anybody that wouldn’t just spend the extra few dollars for the safety and convenience of a real hotel.  Some people apparently really like Airbnb, though.  Yet I would imagine the novelty of “living like a local” would eventually start to wear thin.  Guests and hosts are both realizing the value of Airbnb may not be worth the risks.  This company that was once the darling of startup investors now has an uphill battle in proving its long-term prospects justify all the money it raised.  If it can’t do that, the Silicon Valley history books may write that Airbnb ended up being just a fad.

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