How Airbnb Reached Product Market Fit by Testing Assumptions
Airbnb's customer discovery for going zero to one.
Airbnb are one of the most-used examples of smart business and brilliant design in the startup world.
But on launch, they had just two bookings. And one was from their co-founder. Despite their success today, their idea wasn’t a massive hit from the start.
So how did they find and test the insights that led to the travel behemoth they are today? I’ve dug for the details behind their customer understanding. See just how Airbnb understood their market to go from failing conference hotel alternative to global travel disrupter. 👇
The 0-1 Timeline
The Airbnb founders didn’t waste time. Shortly after realizing they could rent out a room with airbeds to conference attendees, they started testing the idea.
The first “test” they ran generated attention, booked three people to sleep on their air beds, and gave them a life-changing experience as hosts.
As the tiniest MVP, it worked. They must have made $240, and they say they made some new friends.
But it didn’t continue so easily. Let’s take a look at exactly how they continued to test their idea and the insights they build the business around.
The Discovery Steps
Here’s how the Airbnb founders tested their concept and started understanding their market.
🛏️ 1. The first airbnbs were rented to 3 guests. Within 1-2 weeks of having the idea, they’d made a simple website to offer three airbeds for rent. They pitched it to design blogs, got attention, and three bookings.
📢 2. They told their friends and family about the idea. The responses were strong - for better and worse.
🏠 3. They tested their “context” assumption again. They re-launched a better site for SXSW - where hotels were sold out just like in their first test. Only 5 hosts signed up, 2 people booked, and 1 was their co-founder.
🧳 4. Founder Brian Chesky became a guest. He stayed with a host and experienced the guest life first-hand.
🏹 5. Testing a slightly new context, still with sold out hotels. They jump on the “housing crisis” of the Democratic National Convention. They get their first 100 bookings, 800 listings, and some emails that shifted how they viewed their context and audience.
📩 6. The Craigslist hack. They realized that more listings on-site meant more visitors. So they met future hosts where they were - on Craigslist. They started first manually emailing people who listed their homes on Craigslist. Later, they automated these emails.
📸 7. They rapidly tested their assumption about the impact of “bad photography.” After looking at photos of listings on their site, they noticed a trend: bad home photos. So they flew to NYC and took better photos for the hosts - and increased bookings in the process.
🤝 8. They stayed with 24+ hosts and observed the host experience. They stayed with and interviewed hosts to see the host life from their perspective.
♻️ 9. They applied what they learned in NYC to other markets. They used insights to solve home photography challenges, and applied the lessons to Paris, London, and Miami.
♾️ 10. BONUS Chesky lived out of Airbnbs for months. Even after reaching product market fit, Chesky continued digging into the user experience first-hand by moving out of his apartment and living in Airbnbs.
Here’s how they ran each discovery step in detail -
🛏️ 1. Renting the first three airbeds
Just 1-2 weeks after finding their idea, they’d created a simple website to offer three airbeds for rent at $80/per night. They “guessed” they would be solving a problem for a few conference attendees that didn’t already have a room in the sold-out conference hotels.
How they did it -
They created a simple 4-page website with information about them, the airbeds, the location and prices
They pitched their idea to design bloggers
They got many design blog posts and requests to stay with them. They booked three guests who did not fit the demographic profile they expected
They acted as city guides for their guests, not just accommodation. They piloted the experienced. They picked them up at the airport, showed them San Francisco, brought them to get Mexican food in the Mission…
A few questions and assumptions they formed from this test:
Question: Would this work for other conferences when hotels are sold out?
Question: Is there a broader audience for this than we expected?
Assumption: People would use an online platform for hosting for the added benefit of making real-world offline connections, and even friends.
📢 2. Sharing the idea with friends and family
In October 2007, each founder went home and told friends and family what they’d been working on for the past month. Responses were not neutral.
Everyone they told had a strong response. It was either, “You had a stranger in your home? Are you crazy?” or “I would LOVE to stay with a local when I travel.”
Some of you might think it’s silly to even call this a “test. But it is. Getting those early responses from anyone who might be the target audience can help founders figure out if the idea has enough spark to be worth continuing with.
A few questions and assumptions they formed from this test:
Assumption: A strong response meant their idea was exciting enough that people would talk about it and drive attention
Question: One of the founders at once point asked himself, “What would it take to convince my mother to stay with a stranger?”
🏠 3. A second test of their “context” assumption at SXSW
In their first air-bed test, they starting wondering if this could scale. Could it work at other conferences where there are more attendees than hotel rooms?
But their concept was still renting air mattresses in living rooms for people going to conferences when hotel rooms are sold out.
In theory, this was just another test of the same type.
Even with a nicer website, only 5 hosts signed up, 2 people booked, and 1 was founder Brian Chesky.
Here’s how they did it -
They created a new website with more than the 4 pages they had in Test 1
They re-launched with 6 host listings in the Austin area
They planned to launch around SXSW because they’d seen other startups like Foursquare use SXSW to launch with major attention and success
A few questions and assumptions they formed from this test:
Assumption: Something along the lines of “if we launch a nicer website, at a popular event, they will come.” —> Rejected hypothesis.
Question afterward: Is there some barrier in potential guests’ minds that we need to overcome?
🧳 4. Founder Brian Chesky became a guest.
Founder Chesky was one of only two bookings from their SXSW re-launch. But it led to a great opportunity to learn first-hand.
Chesky stayed with a host and experienced the full booking and stay process, with an awkward exchange that left a mark.
After staying one night, the host asked Chesky the following morning when he would get paid for hosting him. Chesky realized he forgot to take out cash, and promised to get some before coming back that night.
He forgot again.
Forgetting twice was uncomfortable. He didn’t want any other guest or host to experience that situation.
A few insights and assumptions that came from this experience:
Insight: It’s easy to forget to take cash out and pay the host. The guest shouldn’t have to think so much about it.
Insight: It’s awkward to pay someone in cash, and embarrassing to forget to pay the host as promised. Payment should be more automatic, and not in person.
Assumption: If payment could be done online during booking, it would remove any awkwardness
Assumption: If payment could be done online during booking, it would enable them to take a transaction fee
🏹 5. Testing a slightly new context, still with sold out hotels.
They jumped on the “housing crisis” of the Democratic National Convention where 100,000 people needed somewhere to stay, but just 30,000 hotel rooms were available. They got their first 100 bookings and 800 listings through press coverage.
A few insights and assumptions that came from this experience:
Insight: They receive some emails from people who wanted to book a place to stay, but there weren’t any conferences happening near them.
Assumption: If we shift from conference hotel alternative to broader travel platform, we will attract more hosts and guests.
“We had this website, and maybe 50 people a day are visiting it, and we’re probably getting like 10-20 bookings a day, and we’ve been working on it for a year and a half. That was our traction.” - Co-founder Brian Chesky
📩 6. They ‘hacked’ Craigslist to reach more hosts.
Maybe you’ve already heard the semi-famous growth-hack story of the founders emailing people who listed their short-term rentals on Craigslist to lure them to Airbnb.
They were desperately trying to attract more hosts. They scoured Craigslist to see how people were listing homes for rent, and were learning how they could attract them to Airbnb instead.
They assumed they could lure them with the potential of increased earnings - so they tested that, among other messages.
They started by manually emailing people who listed homes for rent on Craigslist. Later, they set up automated email outreach to new listers for faster testing and growth.
📸 7. They tested their assumption about bad photography.
Despite no data to support the hypothesis that bad home photos were blocking bookings, they simply decided to test it, and fast.
Within a week, they’d gone to New York, helped hosts take better photos, and they saw results. Better home photos led to 2x their weekly revenue.
It was the first time in eight months that their finances moved in a positive trend.
Insight: Homes often looked much better in person than they did in photos because hosts didn’t know how to take nice home photos.
Assumption: Improving the quality of home photos on the site will increase bookings.
“We noticed a pattern. There's some similarity between all these 40 listings. The similarity is that the photos sucked. The photos were not great photos. People were using their camera phones or using their images from classified sites. It actually wasn't a surprise that people weren't booking rooms because you couldn't even really see what it is that you were paying for.” - Co-founder Joe Gebbia
Image via Joe Zadeh🤝 8. They stayed with 24+ hosts to observe their experience.
YC founder Paul Graham famously pushed the founders to go to where their customers were to figure out what to build for them.
They started visiting New York on a weekly basis: staying with hosts, observing their homes and ways of welcoming guests.
They interviewed the hosts, though I doubt they referred to it as “interviewing” when telling hosts what to expect.
“It’s really hard to get even 10 people to love anything. But it’s not hard if you spend a ton of time with them. So if I want to make something amazing, I just spend time with you. Then I’m like, what if I did this, what if I did this, what if I did this…?” - Brian Chesky
Here’s how they did it
Gebbia and Chesky flew to NYC every week for a few days to stay with hosts and spend some time with them, observing one side of their marketplace “in the field”
Gebbia and Chesky collected feedback, then went back to SF, designed based on the new input from users, handed the designs over to Nate, then he’d continue building, and Gebbia and Chesky would go back to New York to do that cycle again
They asked people about “the product of their dreams.”
When spending time with hosts, they asked these specific questions
Q1: “What could we do to surprise you?”
Q2: “What could we do, to make you tell everyone about it?”
Q3: “What would it take for me to design something that you would tell every single person you encountered [about]…?”
Q4: “What do you want in the [guest’s] profile?” << figuring out how to build trust.
Q5: “Do you have any other feedback?” Opening up to topics they didn’t know to ask about.
A few insights and assumptions that came from this:
Insight: Some people should be saying, “I love this,” “I need this,” “it’s super important to me”. Passionate feedback is a sign you’re on the right track.
Insight: Lack of trust between host and guest is a big barrier to both booking and hosting.
Assumption: Increasing trust between host and guest will drive more home listings and bookings.
Assumption: Profiles for both the guest and the host - with information like where they work and live - will increase the sense of trust between them and drive Airbnb bookings.
♻️ 9. They tested their NYC insights in other markets.
They realized during their New York field study that to grow listings and bookings, they needed to make it easy for hosts to photograph their homes well.
Using New York as a pilot test location, they created a full photography service - with founders Gebbia and Chesky playing photographer themselves. They solved the photography challenge and saw rapid growth follow.
Assuming that the same issues were happening in other major markets, they applied these insights and solutions to Paris, London, and Miami. Growth followed.
A few insights and assumptions that came from this:
Insight: Solving home photography for New York hosts increased bookings in New York.
Assumption: If we offer the same photography solutions in other key markets, bookings will increase in those markets, too.
Image via Joe Zadeh♾️ 10. BONUS: Chesky lived out of Airbnbs in 2010.
The founders say they had product market fit by the time they got a $615k seed investment in 2009. They had 2,500 listings on the platform, and 10,000 registered users. Technically, the product market fit story could end there.
But Chesky continued digging into the user experience first-hand. He actually moved out of his apartment to live and work from Airbnbs over several months.
There isn’t much information on this particular phase of the journey. But the fact that he opted to live as a guest shows that Chesky persisted in being the user, spending time in the guest’s shoes and testing the experience as often as he could.
The Insights that Built the Business
Airbnb have built a massively successful and dominant business. But every step they took was a test to gather more customer insight, or figure out if their beliefs were right.
Here are some of the insights and hypotheses they had that formed the foundation of the business.
💥 1. Assumption: The idea should trigger a strong response (or it won’t get noticed). They had an instinct that an attention-grabbing idea would help them stand out. They further developed this hypothesis when they told friends and family, and got strong reactions. No one was neutral about it, and they took this as a good sign.
👯 2. Insight: This feels like getting paid to make friends. Their first experience hosting three people on airbeds at their apartment showed them that being a local host and playing tour guide in a city could connect people to new friends in new places. And that was more than any hotel could do.
✈️ 3. Assumption: Maybe this could be for travel, not only for conferences that sell out hotels. After testing their idea at three events with sold-out hotels, they received requests from people who wanted to book when they wasn’t a conference coming to town. They expanded their belief about the required context to include travel more broadly.
🤝 4. Insight: Lack of TRUST between a host and a guest is a big barrier to hosting and booking. They noticed early that the hesitation they heard from people they talked to often came from a feeling of mistrust in people they don’t already know. “You had strangers in your home? Are you crazy?” That feeling needed to be minimized for the platform to be successful.
💵 5. Insight: Paying for your stay should be simpler and less awkward than using cash - and remembering to hand it over. Chesky first stay with a host showed him how awkward it could be for everyone when a guest has to pay in cash in person, and forgets to do it on time.
📸 6. Insight: Bad home photography is a major barrier to increased bookings. Seeing homes in person and comparing to the photos hosts took enlightened them to a huge barrier to booking. They needed to solve bad home photography for hosts to increase the attraction of Airbnb listings to guests and drive more bookings.
🤯 7. Hypothesis: They needed to surprise guests beyond expectations to create a viral movement. They realized people wouldn’t talk about their experiences - and drive viral growth - unless home stays were above and beyond the typical hotel experience.
Apply Their Tactics 🗺️
Here are a few ways you can replicate some of Airbnb’s successful customer discovery.
Embrace “observation” in your customer’s actual context.
Look for any opportunity to observe your target audience where they encounter the problem you’re trying to solve.
If you have a product already, get yourself into the situation where the customer deals with your product in real use cases.
Airbnb’s founders did this by running a “field study” by staying with hosts and interviewing them at their homes. They observed first-hand how hosting works, what doesn’t work, where they struggle, and how to help them.
Be the user.
Tons of startups are founded on an idea that isn’t solving the founder’s own problem. Airbnb was one of them.
The founders weren’t starting a platform to solve their inability to find a hotel room for a design conference. They simply saw that the problem existed for others.
Their greatest insights and progress came later, though, once Chesky stayed with a host and experienced the “Airbedandbreakfast.com” process himself.
There were problems in the experience that they wouldn’t have noticed without being the user on at least one side of their marketplace.
Follow strong responses.
The Airbnb founders did a great job hunting for and following big signals.
The started by looking at big events with outsized problems that made it into the news coverage, and piggybacked on them.
Then they shared their idea with friends and family, seeing strong responses as signals to keep going.
Something that triggers “neutral” responses doesn’t drive attention, and it definitely doesn’t create fans.
Test assumptions as fast and light as you can.
Airbnb’s founders looked for opportunities to test their assumptions at every turn. They first tested the connection between sold out hotels around events and their business model multiple times. This led them to insights that helped them expand beyond the narrow scope of conferences.
They also created test materials fast. They didn’t waste time building a perfect website, or a full photography service right away.
They took their assumption that bad photos were blocking bookings and went to New York with cameras to test on the smallest scale whether better photos increased nights booked.
What assumptions are you building your product or business around today?
How might you run a fast, light test to check whether your assumption is worth trusting, or not?
Ask the user about dream products and how to surprise them.
The Airbnb founders weren’t interested in incremental optimization. They knew early on that they needed to find big, ‘wow’ improvements fast.
It stood out to me that the founders asked hosts about the “product of their dreams” that they would want to tell everyone about.
You could copy exactly what they did. Try the same questions and see what you hear.
My favorite questions from them were:
“What could we do to surprise you?”
“What would it take for me to design something that you would tell every single person you encountered about?”
The products you want to tell everyone about are rare. But Airbnb did become one of them for many of us.
After the Airbnb founders joined Y Combinator in 2009, YC-founder Paul Graham famously said something like, “if your biggest market is in New York, then what the hell are you doing here?”
If you do nothing else, go to where your customers are and get immersed in their world.