Airbnb Offers Unconditional Apology, And $50,000 Insurance Guarantee

http://techcrunch.com/2011/08/01/airbnb-offers-unconditional-apology-and-50000-insurance-guarantee/

by sahillavingia • 15 years ago

135 62 15 years ago

techcrunch.com

barredo• 15 years ago

Almost a perfect response. Only a week after. But being this their first "defcon 1". It's pretty great.

The AirBNB guarantee is spot on. Buen trabajo

eli3• 15 years ago

A week and a ton of negative press later.

I still give them credit for doing the right thing, but it'd be a lot more impressive if they did it back when it was just the "right thing to do" and not "the quickest way to end this crisis that threatens to destroy the company"

Cushman4• 15 years ago

That negative press means nothing anymore. They haven't just fixed it, they've come around spectacularly and destroyed their competitors. From now on this is a story about what could happen if you go with a service that doesn't have Airbnb's $50,000 Guarantee.

Cushman4• 15 years ago

And there it is. That thing that Airbnb could do to not only fix the problem, but turn it into a spectacular value add for relatively little cost to themselves, and something which absolutely cannot be matched by their competitors.

Well done.

Powells2• 15 years ago

really? how is this not going to be matched by their competitors? Wimdu has tons of funding and it is scaring the hell out of Airbnb

Cushman4• 15 years ago

Hey, I could be wrong. But every day that goes by without announcing the Wimdu Guarantee is distance between them.

pseudonym• 15 years ago

>>>It’s never too late to fix bad press with a straightforward, unconditional apology.

I'd debate that.

That said, given that the snail-news services like CNN have picked up on this fiasco, it'll be interesting to see if they also pick up on this follow-up, or if it's already outside of the news cycle and, as such, too late for an apology to anyone who follows CNN but not HN or Techcrunch.

andrewcooke• 15 years ago

so they pivoted to insurance fraud detection?

[you can downvote this to your little gung-ho-yc heart's desire, but the problem won't go away as easily]

pemulis• 15 years ago

The guarantee is probably handled by pure insurance companies, who have been dealing with fraud successfully since before the Code of Hammurabi.

hugh33• 15 years ago

Are you sure?

In a low-fraud world, it's probably cheaper for airbnb to insure against it themselves than to outsource that to somebody else. You don't insure against a large number of small losses, you insure against the possibility of one big loss -- this is why you buy car insurance but Avis doesn't.

fletchowns• 15 years ago

Is a big insurance company going to be willing to insure people that are illegally subletting their apartments?

Powells2• 15 years ago

last I heard, they are still shopping around for insurance companies and that was at lunch today.

hugh33• 15 years ago

I don't know why you got downvoted, but yes, insurance fraud detection is gonna be a significant problem for them now, especially since they don't have any expertise in it.

No doubt they'll need to hire some claims examiners. But if I say "omg, the person who stayed here last night has run off with my $30,000 necklace" then what evidence do I have to provide?

jamesbritt• 15 years ago

But if I say "omg, the person who stayed here last night has run off with my $30,000 necklace" then what evidence do I have to provide?

A police report, at the very least.

BasDirks• 15 years ago

Bravo.

dasht• 15 years ago

I think they need to sharply pivot to some very different products or else fold and return investor money.

What is their guarantee to guests? What prevents them from being a target for scams to collect host insurance? What statistics can they provide us about the wellbeing of all past guests and hosts?

If I'm going to rent out a room or a flat for the prices they advertise -- but apparently I better have an extra $50K of insurance before doing so -- is the two or three digit per night rent really worth it? This new guarantee sounds like an admission of failure.

cletus• 15 years ago

AirBnB reminds me a lot of early days of Ebay.

Ebay has a trust problem. The seller needs to trust the buyer will send whatever is sold. The buyer needs to trust the seller to pay.

Part of this is handled by the transaction process where the seller doesn't typically send something until paid but the buyer if unnscrupulous can always do CC chargebacks, cancel checks or the like. The buyer just has to trust the seller.

Reputation is the big part in this but is no guarantee. Actually what Ebay needs is to show the total value of buy and sell transactions separately, not just the number of transactions.

AirBnB seeks to solve these same problems with reputation.

The problem? At worst on Ebay, the buyer or seller loses 100% of the transaction's value. On AirBnB, the potential loss is many thousands time the value and can include irreparable harm (eg murder, serious assault, rape, etc).

What's more they're facilitating people doing something generally not allowed by their leases (if they rent) or by legislation or regulation. That's potentially a huge problem.

So it's fitting they set up this kind of insurance guarantee. Much like Ebay securing transactions (to some degree at least), the extra confidence in the system promotes its use.

I don't believe this is an end to AirBnB's problems however. They're simply kicked the can further down the street.

Imagine this scenario: someone rents a house through AirBnB while the owner is away. They set up a meth lab. The meth lab explodes, burning down the house, burning down 2 neighbours' houses and kills three people, two of them innocents. What a huge liability mess that would be. Who is responsible? Clearly the person who set up the meth lab are responsible but a canny lawyer will argue that AirBnB and the owner were negligent in their actions.

chrisbroadfoot• 15 years ago

> The seller needs to trust the buyer will send whatever is sold. The buyer needs to trust the seller to pay.

ITYM "The buyer needs to trust the seller to send whatever is bought." etc.

redthrowaway• 15 years ago

Well that settles the matter for me. Wish they'd done it sooner, but better late than never. Hopefully EJ is satisfied with the outcome.

tptacek• 15 years ago

This is a story about the #1 story on HN right now, and its only contribution is the last sentence where Arrington continues to try to stir up shit about the way Chesky wrote one sentence in the post.

I flagged it. Fuck this shit. I'm sure the story does a service to TechCrunch readers, but it's a drag on HN.

hugh33• 15 years ago

I thought it provided something new, in that it has a more useful headline. I clicked on this one before "Our Committment To Trust And Safety", which was much less informative.

oasisbob• 15 years ago

From http://ycombinator.com/newsguidelines.html:

Please submit the original source. If a blog post reports on something they found on another site, submit the latter.

An arguably more-informative headline isn't worth bifurcating the discussion.

c2• 15 years ago

Agreed. It seems for all the vitriol against AirBnb, there seems to be a vitriol against the criticism of AirBnb as well.

Either way, all the articles, from TechCrunch and on Hacker News, have been useful to me in understanding both the issue, the reaction in the press, the sentiment on hacker news and among tech circles, and beyond. This one in particular does add some new information which I found useful.

I will keep upvoting stories I find interesting about the whole ordeal and I encourage others not to be deterred by the extreme comments in either way.

kevin_morrill• 15 years ago

I don't understand why our community has so much adulation for TechCrunch. Arrington is a Yellow Journalist all the way. Why give TC the clout and role as a spokesman for our industry? Seems like we could do a lot better.

dmlevi• 15 years ago

well done Airbnb. However que the fraudulent charges team...

staunch• 15 years ago

They did what every great startup should do: respond to user problems with solutions that make the product better for every user. Most startups don't have products that interact with the real world so directly, so their learning is more painful, but the concept is always the same.

I'm rooting for Airbnb. I hope this incident will just spur them on to do a better job and move even faster.

jcc80• 15 years ago

This is all very disappointing. What am I supposed to read about now? Where is the drama, intrigue and scandal? Oh well, guess I will do some actual WORK.

curt• 15 years ago

Great response but there's still going to be a ton of damage done to the brand that will really hurt their long-term growth. How many millions of people are hearing about Airbnb for the first time in a negative light. That's hard to overcome. They raised their round to fight off any potential competitors, but they just made a huge opening for one of them to exploit.

ibejoeb• 15 years ago

Wow, I would have liked to listen to them come up with this plan. Nobody else is concerned at this announcement? Good for being aggressive, but retroactive $50k pseudo-insurance? That seems like a bit much to commit to right now.

edit: the new customer service operation sounds fantastic, btw. Nice assembly in just a few days.

WordSkill6• 15 years ago

Okay, so, it's a major u-turn, so major that they're now denying they even ever had the previous policy of simply denying all responsibility. But the past is the past and the $50,000 is, well, $50,000 more reassurance than their users had before.

It's just a pity that in this final coming clean with their customers that they couldn't, you know, come clean.

"... we weren’t prepared for the crisis and we dropped the ball".

How is it possible that no-one predicted that something like this might happen?

With multiple founders and employees thinking about the business day and night, this never occurred to anyone? Really?

And what about the investors? Not one single investor, these Gods of fine detail, raised the question of what contingency plans were in place for just such an event?

I don't buy it.

Airbnb had a plan, and that plan was to boldly deny all responsibility, to flat out ignore the human consequences of their flawed model - a flaw that affects only a tiny fraction of their hundreds of thousands of users but one that, nonetheless, has massive, life-changing consequences for the unlucky few who get caught beneath the wheels of statistical inevitability.

Brian Chesky knew this, every employee knew it, every investor new it and Paul Graham damn well knew it too.

Unfortunately for all of them, they didn't think about the possibility that one of the unlucky few might have the communication skills and, more importantly, the sheer tenacity to tear down the illusion that they have so carefully crafted. In the past few days, she became a victim again as a panicked company and horrified investors, watching $1.3bn start to swirl down the drain, launched a concerted slur campaign against her, casting aspersions on her sanity, as if that had any bearing whatsoever on the tragedy that befell her - they owe her a quite separate apology for that nasty, mean-spirited assault.

Hilariously, they also owe Michael Arrington an apology, but you shouldn't hold your breath waiting for that one.

So, yesterday is yesterday, we stride bravely into the future with a somewhat more humane policy in place. What hasn't changed is that the model is still fatally flawed and, sorry to be crude, but how is $50,000 meant to be applied to a serious beating or, God forbid, a rape?

We all hope that won't happen but, again, I look at this whole concept and I know in my heart that, eventually, it will. Does anyone really believe that this model has a future? Are we in that much of a bubble?

P.S. Just for the record, and Brian Chesky take note, this comment "reflects my true feelings".

drink• 15 years ago

Have you ever tried to collect a claim against insurance? They will find any loophole possible to avoid a payout. Have fun trying to turn that $50,000 guarantee into something real.

WordSkill6• 15 years ago

Absolutely, I couldn't agree more - the devious way they've tried to manipulate this whole situation, I would honestly be shocked if normal victims (i.e. people who don't have the energy and determination that EJ did) ever got to see a cent of that $50,000.

Effectively, what we will see in the future is that Airbnb will make quick assessments and zoom in to shut victims who have the potential to attract publicity, while the less savvy will be swamped in insurance red tape until they give up and quietly slink off.

The $50,000 means nothing - after the incredible amount knocked off their value this week, Airbnb was obviously going to have learnt the financial wisdom of paying off some people, that is the only real change.

JamesNK• 15 years ago

Going to the press looks like an effective way to get results.

SkyMarshal2• 15 years ago

>Does anyone really believe that this model has a future? Are we in that much of a bubble?

Sure it has a future. There are always problems to be solved with an original business model, but they will be (or at least continuously mitigated as a proportion of the overall business). Some examples:

1. AirBnB already ties into your FB network so you can see and rent to and from friends and friends of friends. I've found this very useful, though ABB should make it a more prominent feature of the site.

2. Now they've got insurance. If I were them I'd find some intrepid banker or actuary to figure out additional optional insurance they can sell to both hosts and renters. $50k is a good start, but I bet many places will want more. If a bunch of meth addicts trashed the country of Lichenstein, $50k sure wouldn't cover it. I also bet the risk model is relatively stable and they could turn that into a secondary cash flow.

3. I was actually surprised people rent their apartment/house to strangers without being there. That was definitely a little nuts, no idea what EJ was thinking there. But who knows, maybe it's another opportunity. For example, someone with strong online rep and thousands of FB friends, or real-life security or military professional, might start up a gig where they rent themselves out to any AirBnB host in their city to stay in their apartment while the host is gone. For, say 30% of the rental, they'll be a trusted caretaker. AirBnBouncers.com.

On a side note, why are we hearing about these problems with AirBnB when Couchsurfing has been doing basically the same but free for longer? What's the difference? Has CS created a stronger, more connected/verified community, or do CS hosts never offer their couches without being there themselves?

WordSkill6• 15 years ago

I am not saying that there is not a future for regular people renting out their excess accommodation capicity.

I am saying that the $1.3bn valuation is based upon a serious misconception of the viability of the market and the extent to which Airbnb can build an unsullied brand.

In short, this is not the clean, scalable industry they are trying to tell you it is, they are pulling a bait and switch, please see my other answers for a fuller explanation.

grellas• 15 years ago

What hasn't changed is that the model is still fatally flawed

A business model is not flawed simply because it offers a service that entails inevitable risks of injury or harm to those who use the service (airlines have crashes; banks have embezzlers and thieves; anesthesia has an inevitable x% fatalities when used with operations; eBay has frauds and swindlers, and so on).

HomeAway just went public with a different but related business model as that of Airbnb. Its S-1 registration statement identified all sorts of contingencies by which the company might face liabilities from the wrongdoings of third parties in connection with its vacation rentals - everything from bogus listings by which prospective renters are swindled to robberies and bodily injury suffered by renters to physical injuries from conditions on the premises. In spite of all this, its business model has not proved to be flawed.

This world is not perfect and much evil can lurk in and about the nooks and crevices of human relationships. The fact that a service provider can't act as guarantor against all such risks does not mean that it can't offer a reasonable or even valuable service.

Airbnb probably did downplay the risks to its users up to this point (and it certainly messed up this particular incident) but it has now gone a long way to correcting that problem. If it can offer a desired service that will bring benefits to 99.99999% of its users year in and year out, and if it guarantees against a significant range of risks as it has now done, that is a lot better than most businesses do. It may or may not succeed in its venture (I for one wish them well) but that will be an issue of execution, not of a flaw in the business model tied to the inevitable risk that people sometimes do bad things.

WordSkill6• 15 years ago

It is flawed, on two important levels.

Airbnb's Unique Selling Point, the factor upon which its notional $1.3bn value rests, is the claim that it is a marketplace for real people to rent out their own homes - that is to say, the properties in which they themselves live - while they are away or individual rooms in their house while they are present.

This is an intriguing idea and, if you don't think it through, it is easy to jump to the conclusion that most of us have homes, most of us have spare rooms and most of us have vacations, during which our homes lie empty and unproductive. Hotels have been screwing us for years (who hasn't, at some stage, been personally offended by minibar prices?), wouldn't it be great if we could all somehow route around those archaic hotel monopolies?

So, that is the Airbnb pitch, it would clearly be of interest to investors if it could be shown to actually work and, at first glance, it appears that Airbnb has done this - over 2 millions nights have been booked through their system, each raking in a healthy commission of around 15%.

Unfortunately, Airbnb has a dirty little secret, and any of you who have used it will know this: the vast majority of the properties available are actually the same vacation rental properties that have been available for years and are still available through all the other websites, provided by professional landlords with multiple properties - the only real difference is that these landlords charge about 15% more if you book through Airbnb.

Now, when I say majority, I don't mean overwhelming majority but certainly more than half of the actual beds per night. There are, for sure, lots of people new to renting out their places, there are lots of people renting out their actual homes but the point is that they do not represent very many of those two million nights - the two million nights that supposedly prove that Airbnb's unique angle - real people renting to other real people - is a moneymaker.

On closer observation, you will notice that of the many real people listed in a given city, you can look at their photos and read their endearing bios, but their beds are not actually available anywhere near as often as those offered by the pro landlords.

This is because they are real people with real lives - they listed their room because they figured it would be a handy way to make money and perhaps they even bought into Airbnb's charming message that it is an excellent way to meet good-looking hipsters from other countries but, whatever the initial motivation to list, people with real lives often find themselves too busy with real life to deal, right now, with fricking guests.

Also, when they do accept guests, it often doesn't turn out to be the sun-dappled cultural exchange that the Airbnb promotional video so artfully and persuasively suggests. So, very often, upon learning that accepting guests is less about receiving cheeky blowjobs from stunning French models, and more about changing sheets besweated into by fat Greek geeks, a lot of the real people owners tend to drop out of the system by simply blocking off their calendars for months at a time.

So, the supposed point of Airbnb actually represents only a fraction of their actual bookings and perhaps you can see the longterm problem with that. As they reach greater scale, it becomes clear that, actually, the market there are depending upon, the bookings that are bringing in actual revenue, are not some virgin territory, exclusive to innovative Airbnb, but the same hard-bitten professional vacation rental landlords that all the other companies are chasing after.

Certainly, there is nothing there to justify a $1.3bn valuation and if you know anyone who is seriously considering sticking some of their savings into the Airbnb IPO, do them a favor and slap them to their senses.

Now, the second bomb fuse, happily fizzing away, lies in the essential difference between real people who are dabbling in rentals and those hard-bitten pro landlords: the pros know that, while most people are lovely, a regular percentage will surprise you by turning out to be complete scumbags. Pro landlords know this, they've experienced this and they accept it as an unfortunate but inevitable part of doing business.

Now, the real people owners, they aren't necessarily idiots but, certainly, compared to the pros they are sitting ducks. As yet, Airbnb has been fortunate to have been largely of interest to tech hipsters such as ourselves. As a general rule, such people are what is technically known in the industry as "nice", meaning they are unlikely to smash your toilet cistern while in a meth-induced frenzy. Unfortunately, as Airbnb grows and, more importantly, as word filters down to the criminal underclass that all these Macbook-owning fools are opening their doors to anyone, you are going to all sorts of interesting guests turning up and, inevitably, a good old-fashioned crime wave.

You are also going to see some rapes. I am sorry, I don't mean to be crude, but this is going to happen. If you look at Airbnb properties, you'll notice that they are selling the owner as much as the place. This is endearing and I have stayed with some lovely people, but I am always struck by how vulnerable young female owners are. Just for a moment, go to Airbnb and search for rooms within homes in any city. Look at a few and, in particular, take the time to look at the owners - read their charming bios, read the nice things that previous guests have said about them, click to enlarge their photos and admire their young, beautiful, trusting faces.

No, ask yourself this question: given that we know, for a fact, that there are some truly dangerous men out there. And given that we know that rapes occurs in every city, every day. Ask yourself, would you be happy if one of your sisters, needing a little extra dough to cover her mortgage, decided to start renting out a room in her apartment to a different stranger every night?

So, okay, I don't want to dwell too much on the awful implications, the all-too-likely disaster waiting to happen, so, let's think about it as investors - if just ONE person does get raped ... or .... if just one owner CLAIMS to have been raped ... what happens to Airbnb?

Well, obviously, it tarnishes the brand, that much is obvious but, more importantly, it effectively means that far fewer young women will continue to rent out rooms and, you'll notice, women in their twenties make up the majority of the real landlords. Even some who might be willing, themselves, to continue, they will be under tremendous pressure from their family and friends to quit.

So, suddenly, Airbnb's loincloth of real people landlords becomes far smaller and, suddenly, the difference between them and HomeAway is a lot less clear. Suddenly, the IPO become a much harder sell.

And that, my friends, is why Brian Chesky and Paul Graham have gone nuclear, because these two major flaws are slipping beyond their ability to control the story and, after so much hope, it is turning out that Airbnb might not be the next ebay after all, it might just be the next Pets.com.

geoka9• 15 years ago

> Airbnb had a plan, and that plan was to boldly deny all responsibility, to flat out ignore the human consequences of their flawed model...

Even if they did, how is the model flawed? I don't understand all the heat Airbnb is getting - after all, they were upfront with that disclaimer and hadn't tried to persuade their users that there's absolutely no risk... Or have they?

How is AirBnB different, as far as responsibility is concerned, from a classifieds paper that publishes adds for apartment rentals? Or from Craigslist, for that matter.

I mean, vilifying them for asking the victim to take down her blog (_if_ it's true) is one thing, but blaming the vandalism on Airbnb is completely different and something that I don't understand.

WordSkill6• 15 years ago

No-one is blaming Airbnb for the actual act of vandalism.

They are different from Craigslist because they take a percentage of the transaction. This makes them a participant in the transaction and this is important in legal terms.

The heat is mostly because young, inexperienced and overconfident executives overplayed their hand and then tried to salvage the situation by blatantly and very obviously lying about what their position had been 24hrs earlier. It was astonishing to watch and caused quite a feeding frenzy.

lclaude01• 15 years ago

One week later ! a sign of weak leadership...it may be time to shop for a new CEO and let the founders enjoy life (step aside)

shareme• 15 years ago

hmm you do something illegal according to your lease..Airbnb now going to give out $50,000 for doing some illegal?

Read the fine print folks..it does not match..

nkassis• 15 years ago

They are not giving any money yet, just offering in case something happens and there was always making money on it so this doesn't change much. Also, i'm not a lawyer but subletting is a breaching of your contract (lease) not something illegal it's just something between the renter and his landlord. And it's not even clear to me that it's really subletting as you still live there and have stuff there you are just not present at the time.

drgath• 15 years ago

Original: http://news.ycombinator.com/item?id=2834334

Please post comments there.

callmeed• 15 years ago

I think this is progress, but I'm still wary. The following 3 things are still question marks for me:

1. Who is underwriting this insurance and–most importantly–is it still valid for hosts who are technically breaking the law of their city/county/state?

2. Are we sure this policy wont make these situations more common or targets for fraud? I'm thinking of bank heist movies where they always say "don't worry, your money is insured by the federal government" ...

3. What about guests? If I were to guess, I'd say the next big AirBnB scandal will be "guest attacked by host's dog" or "guest slips in host's shower, breaking rib". Who's going to cover that?

lhnn• 15 years ago

I must be the only one who thinks this isn't Airbnb's fault.

wccrawford• 15 years ago

It's partially their fault because they prevent owners from doing proper background checks on tenants, and don't offer the service themselves.

But it's also partially on the owner for not watching their place carefully enough, and not being prepared for people who are less than honest. You can't do business with the public without having a plan for that.

jeremyarussell• 15 years ago

I'd like to think that AirBnB is founded by decent people that wanted to make money making something as complicated and common as house renting an easy to do thing for many people. I'd like to think that EJ will get some financial help. I'd also like to think that AirBnB did a good job admitting their wrongdoings and responding to the situation at hand. Years of experience have told me I'd like to think of a fantasy world :).

That said I really do hope it works out, but it's to soon to tell how this will all turn out. For now I'm content with the fact that they are trying to make things right.

charlieok3• 15 years ago

It would be nice to be able to use an "internet-wide" reputation on sites like Airbnb, instead of recreating it on each site.

If I can easily prove to Airbnb things like, "this is my identity on couchsurfing, that is my identity on ebay, this is my identity on [wherever]". Airbnb could provide the service of verifying those claims and presenting a summary to the seller.

SkyMarshal2• 15 years ago

They already integrate with Facebook, just not prominently enough imho. And I don't know why Couchsurfing would cooperate since they're pretty much a competitor.

charlieok3• 15 years ago

I guess I'm hoping for standards in this area to hurry up. Then you could do it between any major site and any other major site.

Kinda like linking accounts for easier sign-in (one site becomes the identity provider, the other becomes the relying party). But in this case, the purpose is to satisfy another end user of the validity of the claims, not the site a user is signing into.

charlieok3• 15 years ago

That was fast! http://blog.airbnb.com/introducing-new-trust-safety-features

jpdoctor• 15 years ago

$50K is not even close to the right number.

flocial• 15 years ago

They did what they had to do to turn this around. I think it came out a lot more expensive had they been more prepared and $50,000 is one whopper of a liability. Hopefully, they did some simulations for worst case scenarios.

One thing is, you have to require due diligence on the part of renters and vary coverage accordingly. Otherwise you just encourage carelessness now that the illusion of trust and safety is tarnished.

This fiasco might have dented their velocity but I'd say overall, better now than later. They now have a major asset, getting through a crisis. Now they need to bullet-proof it like PayPal's epiphany that their main business is not digital money transaction but fraud detection (because it can rock their bottom line and tank the business). For this you need hardcore engineers who can apply rigorous analysis to the problem of shady renters not more community guidelines.

gfaremil• 15 years ago

That which does not kill us makes us stronger. So it seems AirBnb is stronger than ever after this.

Airbnb Offers Unconditional Apology, And $50,000 Insurance Guarantee

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