Lessons from Airbnb’s China Expansion: Nathan Blecharczyk

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A self-made billionaire, Nathan Blecharczyk made his first foray into entrepreneurship during high school, when he launched a business and sold to over 20 countries. Years later, the Harvard computer science graduate became Airbnb’s first engineer, establishing the tech company’s engineering, data science and marketing teams. This ultimately saw him playing a crucial role in leading the brand’s global expansion.

We sat down with Nathan at Airbnb’s San Francisco headquarters, where 150 audience members gathered to hear about the company’s strategy when entering China, how it has evolved through the years, what lessons were learnt and more.

The Introduction of Airbnb in China

Having quickly secured the markets in the U.S. and Europe, Airbnb began its strategic initiative “Win Asia” in 2014. The initiative was driven by the realization that China drove a lot of the network effects in Asia. Travellers in large numbers were coming from China and formed a huge percentage of inbound travel into countries all around the world.

The only issue was that the track record of Western tech companies entering the Chinese market had not been encouraging. To succeed, Airbnb had to be decisive and very meticulous in the choices they made.

Airbnb’s key advantage lay with its global network of more than 4.5 million homes in 191 different countries - a much-needed outbound travel solution to Chinese travellers on the increase. Instead of focusing on domestic business in China, the tech company chose to improve the product.

The technology was heavily dependent on Facebook and Google. Both platforms were banned in China - to make it work, they needed a brand new solution. On top of that, the market demanded social network integration with local app stores, local social networks and local payment providers. Once these were out of the way, growth started to take off.

Once China users adopted the software for their outbound travel, their positive experiences drove them to duplicate that experience by becoming Airbnb hosts themselves. Very quickly, the domestic business grew organically and had an impressive 175,000 homes hosted on the platform by 2018.

Growing a Brand While Staying True to Local Culture

Having found its sweet spot in the Chinese market, the company chose to focus on two key areas: to constantly improve the product - a crucial lever in the business, and to start hosting community operations.

These community operations were to help the company keep its eyes and ears on the ground, hosting social events, inspecting properties and more. The team wanted to build up an autonomous team, one that reduced dependencies from San Francisco as much as possible.

Another goal was to always deliver quality in its product without alienating any users. For instance, when matching Chinese travellers with Chinese hosts abroad, they ensured that the product in China was on par with the global standard. This could be challenging with the difference in price points due to an abundance of Airbnb vacancies in China.

If the business were to grow completely organically in China, it would gravitate towards serviced apartments, and professionally kept lodging. However, the Airbnb brand was built on unique, local, and authentic travel,aiming to inspire travellers and preserve tradition.

This philosophy motivated them to support hosts by offering on-ground photography, in-person inspections and phone calls to coach hosts in improving their offerings.

Approaching Local Competition

Many western companies with western-centric brand identities had difficulties connecting with local users, many of whom hail from lower-tier cities. For Airbnb, launching its Chinese brand name Aibiying (爱彼迎) encouraged local brand recognition, as well as allowing them to branch out into Tier 2 and Tier 3 cities.

Having a localised brand also eased Airbnb’s collaboration with local companies who wanted a piece of the home rental industry. What started out as a dozen companies in the earlier days dwindled to a small handful.

Industry competition was nothing new to Airbnb, and certainly not unique to China. Numerous clones with the same business strategy had sprung up in Europe and other places. As a C2C marketplace which depended on word of mouth, user testimony and trust-building, Airbnb still had an edge with its community, one which took time to grow organically and authentically. This was the one aspect of its business model others could easily replicate.

This was also the reason for Airbnb’s steadfast commitment to its C2C model - new entrants tended to adopt the easier, quicker B2C model, a tactic which made it difficult to switch over to a C2C model later in the game.

“The minute all your homes feel like they are from professionals, suddenly the average person doesn’t feel like they belong in that community,” Nathan explained.

As they overcame competition, Airbnb also maintained a keen awareness of their own limitations. “I think we’ve been very honest with ourselves in recognizing that we will never move as fast as a truly local company. You have to be honest about what your strengths and weaknesses are,” Nathan stated. To make up for this, they doubled down on fine-tuning the experience they could offer outbound Chinese travellers.

The Importance of Building Relationships

It has been said that China is not a place for transactions, but instead is a place for relationships. This shaped Airbnb’s entry strategy and mindset - be the student, don’t assume anything, and always ask questions.

As a new entrant into any market, comprehending its cultural quirks, language and customs was an unavoidable hurdle. For China, the value in relationship-building from the get-go was very essential - even with officials. Casual interactions opened a lot of doors for Airbnb’s success.

“Going to the conferences, talking about the topics that are important to the officials, having the meetings, telling the story, signing the memorandums of understanding - all of these things go a long way and I’d say are fairly unique to China,” Nathan said. “These things have really opened doors for us, where if we had taken the Western approach I think we would be shut out.”

And all these would not have happened without Airbnb’s dedication to localising. “I wouldn’t have known any of this without having a local team,” Nathan said. “They basically guide me on how to create these more constructive relationships, versus taking what would otherwise be probably the naive approach.”

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