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Over 13 years after its founding, one of the defining startup companies of the past decade finally makes its public debut — and boy was it a big one. But for all the hype (and all the legitimately great things Airbnb has accomplished), this is a company that looks very different today than in the past. Even before COVID, Airbnb's once-exponential bookings growth had declined to linear levels while the company's costs continued to balloon at accelerating rates. What’s going on here? Are public investors smart to bet on a permanent shift in travel behavior coming out of the pandemic? Or is this a case of unrealistic expectations? As always, we dive in.   If you want more more Acquired and the tools + resources to become the best founder, operator or investor you can be, join our LP Program for access to our LP Show, the LP community on Slack and Zoom, and our live Book Club discussions with top authors. Join here at: https://acquired.fm/lp/   Sponsors: Thanks to Tiny for being our presenting sponsor for all of Acquired Season 7. Tiny is building the "Berkshire Hathaway of the internet" — if you own a wonderful internet business that you want to sell, or know someone who does, you should get in touch with them. Unlike traditional buyers, they commit to quick, simple diligence, a 30-day or less process, and will leave your business to do its thing for the long term. You can learn more about Tiny here: http://tinycapital.com Thank you as well to Bamboo Growth and to Perkins Coie. You can learn more about them at: https://growwithbamboo.com https://www.perkinscoie.com/   Playbook Themes from this Episode: (also available on our website at https://www.acquired.fm/episodes/airbnb ) 1. If you can create value for all sides in a market ("expand the efficient frontier"), you really can’t help but be successful. Born out of the 2008 financial crisis, Airbnb was able to fundamentally change the nature of the travel market and provide guests with more quality for less money, while also enabling hosts to earn meaningful extra income during a very difficult economic period. This led to incredible market adoption of the service, at times almost despite the company's own actions and activities. 2. When you create a market, you have an opportunity to set the terms. By virtue of creating a whole new class of supply that had never participated in the travel market before, Airbnb was able to enact much more platform-favorable payment terms versus the hotel industry. Unlike Booking.com and the OTAs, guests pay Airbnb at the time of booking, and Airbnb keeps that cash (including fees) until after check-in — which could occur weeks or even months later. This created an enormously beneficial cashflow dynamic for Airbnb that allowed them to grow while burning much less cash than otherwise would have been required. 3. When you don't fly low to the ground, you aren't forced to operate at the lowest level of detail. Unlike DoorDash which needed to create an enormously efficient operational machine just in order to survive, Airbnb's capital-light business model, low operational intensity and favorable cashflow dynamics meant they've never had to operate in a particularly cost-disciplined or product-focused manner. While the core business has been insulated from competition due to its global network effects, the company has missed or poorly executed on Amazon-like opportunities to expand into adjacent markets and services that could have continued to drive new growth. 4. Relying solely direct/organic traffic is both a gift and a curse. Undeniably, direct/organic customer acquisition is a wonderful goal for any business to strive for. Who wouldn't want to acquire customers without paying for them? However, if you don't also build the muscle for profitable and reliable growth through paid channels, you can be left vulnerable vulnerable when organic growth slows, as it inevitably will.   Carve Outs: David — San Francisco Ballet's Nutcracker: https://www.sfballet.org/productions/nutcracker-online/ Ben — Star Wars Lofi HipHop: https://open.spotify.com/playlist/5iu1sp3UBb1rjf8KNKETtJ?si=WxPdJcRpSnelHN9qh0xYSw     Sources:  http://www.critbuns.com/index.html http://www.paulgraham.com/airbnb.html https://avc.com/2011/03/airbnb/ https://diff.substack.com/p/understanding-airbnb https://en.wikipedia.org/wiki/Airbnb https://en.wikipedia.org/wiki/Brian_Chesky https://en.wikipedia.org/wiki/CouchSurfing https://en.wikipedia.org/wiki/Joe_Gebbia https://en.wikipedia.org/wiki/Timeline_of_Airbnb https://gadgets.ndtv.com/internet/features/airbnb-ipo-ceo-brian-chesky-nasdaq-december-debut-stock-market-2328441 https://growthhackers.com/growth-studies/airbnb https://hbr.org/2019/04/research-when-airbnb-listings-in-a-city-increase-so-do-rent-prices https://medium.com/traveltechmedia/airbnb-vs-booking-holdings-51e79b8cc489 https://news.airbnb.com/brian-cheskys-open-letter-to-the-airbnb-community-about-building-a-21st-century-company/ https://news.airbnb.com/designing-the-future-of-airbnb/ https://nextviewventures.com/blog/airbnb-s-1-part-1-so-how-profitable-is-this-thing-really/ https://thegeneralist.substack.com/p/airbnb-the-disaster-artist https://twitter.com/danprimack/status/1337101820007768064 https://www.amazon.com/Upstarts-Airbnb-Battle-Silicon-Valley/dp/0316388416/ https://www.bloomberg.com/news/articles/2020-12-09/airbnb-s-3-1-billion-ipo-hinges-on-hosts-who-make-rentals-feel-like-home https://www.cnbc.com/2019/12/10/airbnb-gitlab-considering-direct-listings-and-bankers-coming-around.html https://www.cnbc.com/2020/04/14/airbnb-raises-another-1-billion-in-debt.html https://www.cnbc.com/2020/12/09/airbnb-sells-shares-at-68-in-ipo-pricing-above-range.html https://www.epi.org/publication/the-economic-costs-and-benefits-of-airbnb-no-reason-for-local-policymakers-to-let-airbnb-bypass-tax-or-regulatory-obligations/ https://www.forbes.com/sites/davidjeans/2020/11/16/airbnb-cofounders-own-nearly-42-of-covid-dented-business-ipo-filing-shows/ https://www.linkedin.com/in/brianchesky/ https://www.npr.org/2017/10/19/543035808/airbnb-joe-gebbia https://www.nytimes.com/2019/09/20/technology/airbnb-employees-ipo-payouts.html https://www.nytimes.com/2020/07/17/technology/airbnb-coronavirus-layoffs-.html https://www.phocuswire.com/booking-holdings-expedia-group-marketing-spend-2019 https://www.sec.gov/Archives/edgar/data/1559720/000119312520294801/d81668ds1.htm https://www.sec.gov/Archives/edgar/data/1559720/000119312520306257/d81668ds1a.htm https://www.theinformation.com/articles/10-questions-airbnbs-ipo-investors-should-ask https://www.theinformation.com/articles/airbnbs-biggest-ipo-winners?utm_content=article-5102&utm_campaign=article_email&utm_source=sg&utm_medium=email https://www.theinformation.com/video/313?utm_campaign=Live_Video_QA_Call_P&utm_content=565410&utm_medium=email&utm_source=cio&utm_term=197334 https://www.wsj.com/articles/airbnb-expected-to-price-ipo-above-56-to-60-a-share-range-11607527468?mod=hp_lead_pos5 https://www.wsj.com/articles/airbnb-operating-chief-to-step-down-join-board-11574439482?mod=article_inline https://www.wsj.com/articles/airbnb-paying-more-than-10-interest-on-1-billion-financing-announced-monday-11586297484?mod=rsswn https://www.youtube.com/watch?v=efNyRmTLbjQ https://www.linkedin.com/in/blecharczyk/ https://www.linkedin.com/in/jgebbia/ https://news.airbnb.com/brian-cheskys-open-letter-to-the-airbnb-community-about-building-a-21st-century-company/