Airbnb: a case study in diffusion of innovations
Around a third of the 100,000 delegates at last week’s Mobile World Congress (MWC) in Barcelona chose to rent Airbnb properties rather than staying in hotels, a figure that highlights the validity of Everett Rogers’ Diffusion of Innovation theory (DOI), first outlined in 1962, particularly in this age in which everything is now pretty much connected.
Quite simply, young people no longer stay in hotels, unless taking a genervacation with mum and dad, and sometimes not even then. What’s more, it’s not about saving money: I know from my own experience as a teacher in one of the world’s leading business schools that experienced executives and entrepreneurs taking the most expensive MBAs, a collective about as far removed from the stereotype of the backpacker as is possible, largely shun hotels when in town for the classroom part of their studies, opting instead for elegant properties close to the school in an upscale neighborhood in the center of Madrid, often sharing with others they’ll be studying with. If you still think Airbnb is the cheap option for budget travelers, think again.
Airbnb’s phenomenal success is largely down to two things: it works on recommendations — often accompanied by photos — via the social networks, and it offers an incredible range of accommodations, from sharing a room in a down-at-heel district in the boonies, all the way up to a grade-A listed building in the smartest uptown neighborhood that can cost more than a suite in a five-star hotel. This is a platform that is constantly innovating and that is always in the news.
The process by which people first hear about the service, check it out, look for recommendations, and then use it, is fast: each person that uses Airbnb tells a bunch of other people via the social networks, and so on. These are exactly the phases described by Rogers: knowledge, persuasion, decision, implementation and confirmation. As a professor, I can’t imagine a better case to discuss these phases, one by one, in a classroom.
In less than seven years, Airbnb has gone from an idea a couple of friends had to make some extra cash to pay the rent on their San Francisco apartment by buying some airbeds visitors to the city could sleep on for a few dollars to being totally mainstream and valued at several billion dollars. In the summer of 2010, 47,000 people used Airbnb. Five years later, that figure had risen to 17 million. Since then, its popularity has grown, thanks to the social networks and generous media coverage, along with investment in a range of technologies that have helped improve perceptions of the product and its value proposal, for owners as well as guests.
Once a certain take up level has been reached, and the platform is working properly, momentum picks up: the number of properties available keeps growing, as does the number of investors. And as more and more people try Airbnb, around half of them say they are not inclined to go back to staying in traditional hotels.
In short, a case study in innovation if ever there was one.
(En español, aquí)