AirBnB has become “boring old hotel chain” and Uber “boring taxi company”
They put their “global change” mission statements on the shelf when switching to value extraction mode
Disrupt and “uberize”
The story of AirBnB and Uber started almost at the same time, around 2007–2009. (On a side note: this also coincides with the time Apple allowed third party app developers to sell on their platform, but that’s less important for the story). Both have the classical romantic beginning of “couple of guys find a way to change the status quo”.
AirBnB, founded by three roommates faced with horrendous rental fees (Business Insider), while Kalanick and Camp founded Uber, when they were unable to get a cab on Obama’s Inauguration Day. Both startups essentially kick-off the narrative of a sharing economy which challenged the status quo of industry incumbents, be it the taxi companies or hotel chains.
Both models proved to be so successful and appealing, that the name itself became a strategy countless startups used to pitch their own iterations of the platform economy. “Uber for …” and “disruption of the old boring…” are quite common terms.
“Democratizing access” is a general parole that is very appealing in todays world, where growing inequality led to subjective feeling that any startup breaking the “fat cats” business model is positive for society. Indeed, the collective AirBnBs and Ubers have enabled Average Joe to participate in the economy and monetize his assets be it a flat or a car.
→ Read here more on how AirBnB disrupted Hotels (did it really?)
Shareholder financed price wars
But “democratization” also essentially meant a price level reduction be it taxi hailing or hotels. What is quite common for all “Uberize this…” startups is to burn cash for years. Main motivation behind is based on critical mass: attract customers will low prices (or discounts) and then think how to monetize these.
While obviously a consumer benefiting approach, after all shareholders paid for consumer surplus, but experiencing ongoing losses of those startups.
But that’s all part of the part of the bigger Attract-Extract plan, as show below. It is obvious that price war cannot sustain business for long.
And it seems that time has come for the extract phase. “Democratization” ends here.
It makes totally sense. Shareholders want to see returns — even if their investments aim to “change the world” and “uberize”, making profits remains the basic requirements. No wonder that VC are calling for price raises:
- 2016 Marc Andreessen called for price hikes
- Sequoia on pricing approach startups should consider
- Don’t be afraid to be more expensive than competition, cryout
I am all in. Pricing = Revenue.
But where is the disruption there?
Disrupters = New (old?) boring
So, why do I think that the infamous disrupter become the new old boring? Lets look at the Q3 report of AirBnB. I’ve cut out main items below.
The company had less nights booking (-7% to pre-pandemic 2019), but more revenue. A clear indication for a price surge. Complains about hidden charges are rising. An interesting take of NY Times comparing Hotels and AirBnB Covid-resilience shows extreme cancelation fees at AirBnB.
So, at least AirBnB has switched to extraction mode: increasing prices to monetize on its customer base they have acquired through discounts. “If you build it they will come” motto is just the beginning of the attraction cycle. Extraction comes next (but movie ends before we know how)
Uber and Co are not much different and raise fares, while their driver are not getting a share in it.
And so lets welcome the new old boring “disrupters”. They have sold us on “change the world” and now want their investments back.
On a side note: as far as disruption goes, at least the pre-pandemic 2017/18 years were the best years for hotels.
Video did not kill the radio star this time.
