Transcript

Hi, this is Viram from Vested and today we are going to talk about how you can expand your geographic presence by highlighting two interesting strategies that Airbnb followed to establish a strong foothold in the European markets.

Let’s dive right into it.

When founders Brian Chesky and Joe Gebbia saw initial success for Airbnb in the American markets, the next growth frontier for them was to expand into Europe.

What worked in the US was rapid network effects and word of mouth, but like most other businesses expanding beyond their home market, Airbnb also needed a unique strategy to enter a new market which was Europe.

The first strategy that Airbnb used is actually quite simple. Acquire your competitors to get a foothold in new markets!

The first step Airbnb took to enter into Europe was to acquire its Germany based clone, Accleo. This helped Airbnb cover initial ground in the European markets, with its first office set up in Hamburg.

The next market Airbnb entered was the UK by again acquiring a direct competitor called Crashpadder. Interestingly, Crashpadder was shut down shortly after, but Airbnb was able to retain a large chunk of its users and onboard them onto its own platform!

Germany & UK were two large markets that Airbnb first entered in Europe by acquisitions. The next steps were to identify high-tourism locations and set up shop there.

They identified France as having a huge market potential. What’s interesting is how the team approached penetration into the French market.

This brings us to the second tactic that Airbnb used, which was to build human connections and A/B test when you’re uncertain.

In the French market, Airbnb wasn’t sure whether to reach users through Facebook ads or to physically visit the communities and interact with them, to build relationships.

So first what they did was they set up ads on Facebook which was the easy part and also something that they could keep doing in the long run. But they didn’t know whether it was sustainable to keep spending on these ads or whether it would actually build trust for the brand in the new market. So, what they did was A/B test.

After setting up advertisements directed at homeowners in France the team visited high-tourism locations at the same time, and engaged local communities with parties, information sessions, booths and flyers all across town. Every interaction was recorded and the users received detailed follow-ups with information on how they can sign up on Airbnb, what the advantages are, and how Airbnb helps them earn a side income while also helping them engage with travellers.

What followed was an interesting insight:

The Cost Per Acquisition was actually 5x better for the second strategy where the team actually interacted with the users in France vs just purely setting up cold advertisements on Facebook. Once launched with the human presence, the company has seen the market grow 2x faster just organically!

Today, France is Airbnb’s second largest host market in the world, while also being the second largest in terms of revenue!

So, Airbnb picked a strategy that didn’t seem sustainable in the long run at first, but looking back, building human connections drove organic growth for the company, and was in fact more sustainable in the long run as they got more and more revenue from these customers.

In conclusion,

Airbnb’s Europe expansion was driven by two key strategies which you can also apply to your business:

  1. Acquiring competitors to get ahead in new markets
  2. Building human connections in these new markets which in turn fuel organic growth in the long run

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Our team members at Vested may own investments in some of the aforementioned companies/assets. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for an investor’s portfolio. Note that past performance is not indicative of future returns. Investing in the stock market carries risk; the value of your investment can go up, or down, returning less than your original investment. Tax laws are subject to change and may vary depending on your circumstances.

This article is meant to be informative and not to be taken as an investment advice, and may contain certain “forward-looking statements,” which may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, without limitation, estimates with respect to financial condition, market developments, and the success or lack of success of particular investments (and may include such words as “crash” or “collapse”). All are subject to various factors, including, without limitation, general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors that could cause actual results to differ materially from projected results.

This video is meant to be informative and not to be taken as an investment advice and may contain certain “forward-looking statements” which may be identified by the use of such words as “believe”, “expect”, “anticipate”, “should”, “planned”, “estimated”, “potential” and other similar terms. Examples of forward-looking statements include, without limitation, estimates with respect to financial condition, market developments, and the success of or lack of success of particular investments (and may include such words as “crash” or “collapse”.) All are subject to various factors, including, without limitation, general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors that could cause actual results to differ materially from projected results.