In-depth Case Study of How AWS Migration Helped Airbnb Take Over the Rental Market

Introduction:

Airbnb can be described as an online community marketplace for advertising and selling short-term or long-term homestays and experiences. It is a San Francisco based company that makes use of Amazon Web Services(AWS) to optimize its marketplace and to enhance user as well as company experience.

Airbnb uses AWS to manage compute capacity, optimize storage and also to build a custom cost and usage data tool. These solutions have helped airbnb provide the best experience at reasonable costs.

On Airbnb, buyers can pick and choose from a vast variety of properties listed by owners and that too at any price range.

History:

Airbnb was founded in 2007 by San Francisco based flatmates Joe Gebbia and Brian Chesky. They were completely broke at the time and had to find ways to make ends meet. A design conference was going to be held in San Francisco due to which all hotels were booked for the next week. The two flatmates came up with the brilliant idea of buying mattresses that they then set up on their apartment floor. They planned to accommodate anyone who was willing to shell out a few bucks a night to sleep on said mattresses. Alas, their business venture started from there. They set up a website called airbedandbreakfast.com, where they advertised this idea for $80 a night. They were then joined in February 2008 by Chesky’s former roommate, Nathan Blecharczyk, who then became the CTO and the third co-founder of the company.

Today Airbnb has provided experiences to almost 150 million users that have booked about 1 billion stays.

Problems faced by the organization:

• Small operations team: The company only had 5 people in their operations team that handled all operations such as computing, networking, and marketing. Naturally, it was hard for them long term as the company was growing substantially at the time.
• Growing customer demand: Sales grew faster than the founders could have predicted. With a small team of just 5 people, it was almost certain that the demand would not be met.
• Difficult to scale: They realized that with their ever increasing demand combined with meagre resources and low manpower, the company would simply just not be able to scale quickly. The company did not want to keep the customers locked out.
• Non-profitable: With their current service providers, the founders faced the challenge of expensive on-premise operations. In 2009, Airbnb was close to failing. Like other startups, it was becoming hard for them to manage under their working conditions at the time. The company’s revenue was flatlined at $200 a week, which was split between the three founders. This meant that there was zero growth.?

Solutions provided by AWS:

As a result of all of the aforementioned problems, the company decided to migrate almost all of their functions to AWS. The CTO and co-founder of the company, Nathan Blecharczyk once said, “Initially, the appeal of AWS was the ease of managing and customising the stack. It was great to be able to ramp up more servers without having to contact anyone and without having minimum usage commitments. As our company continued to grow, so did our reliance on the AWS cloud and now, we’ve adopted almost all of the features AWS provides. AWS is the easy answer for any Internet business that wants to scale to the next level.”

Here are some ways how the migration to AWS helped Airbnb:

• Speed: The migration was effortless. It was extremely easy and only took 15 minutes. The cloud services of AWS provide the company with an easy and fast way to cater to their increasing daily traffic.
• Auto Scaling: Amazon automatically scales EC2 instances depending on requirements and needs. It helps Airbnb to automatically scale and cater to its ever-increasing customer base.
• RDS: The integration of AWS provided a way for Airbnb to run MySQL in the cloud. RDS benefits the company passively as it reduces the administrative overhead and the effort it takes to maintain a MySQL database. This in turn frees up their clients to focus on other important tasks.
• Security: AWS, as we know, is a very secure IaaS which guarantees infrastructure security. AWS provides a service called Identity and Access Management that is the backbone of user security on the platform. AWS provides data protection as well as comprehensive reports during or before any security related issue takes place which makes it extremely fault tolerant. So the security provided by AWS is another reason why the founders chose AWS as the first choice for cloud migration.
• Business agility: AWS provides a way for the company to thrive in the current rental market. It allows the company to quickly respond to the ever-changing market and to also apply innovative ideas without any repercussions. The mantra of Fail Fast, Fail Often applies to the business agility provided by AWS as it enables the company to come up with innovative ideas without worrying much about failing as AWS is extremely elastic in the sense that it allows the organization to shut down failed ideas using the simple click of a button.
• Economical: As we know, AWS is extremely economical as it follows the pay-as-you-go model, meaning the company only has to pay for the resources it uses. This was one of the major reasons why Airbnb migrated to AWS as it gave them the ability to host servers, store data, maintain databases, and so on, at extremely cheap prices. The organization is only charged for the resources it uses. AWS also constantly works on finding ways to make its resources cheaper for its users.
• Staff productivity: The responsibility of managing on-premise resources like servers, databases, and so on, is now taken by AWS. The company’s staff is now free to perform other important operations and also to work on maintaining the company’s thriving nature. This, in turn has also freed up resources that were previously being used up by on premise operations. Migrating to AWS has enabled the company to constantly keep innovating new ideas and to make sure that it is thriving in the marketplace.?

Amazon Web Services used by Airbnb:

Airbnb mainly uses the following AWS services:

• Amazon EC2: The company has been using just over 1000 virtual instances at any given time to support its applications, search servers, and so on.
• Amazon Elastic Load Balancing: Since Airbnb has grown exponentially in the past few years, it has naturally made the use of Elastic Load Balancing to route traffic to its multiple EC2 instances. This has helped the company grow massively in the past few years.
• Amazon Elastic MapReduce: Airbnb is an organization that encounters daily traffic at large scales. It has to process and analyze up to 50 gigabytes of data daily. Amazon Elastic MapReduce helps the company to cater to its daily traffic.
• Amazon S3: Airbnb uses S3 to store up to 10 Terabytes of static data that includes house backups, pictures, profiles and also the codes. S3 provides Airbnb with an economical and secure way to accommodate its storage needs.
• Amazon CloudWatch: The organization uses CloudWatch through the AWS Management Console, CLI, or any interface to monitor all the services it uses but more importantly, its EC2 instances.
• Amazon RDS: The company shifted its main SQL database to RDS due to its simplification of time consuming administrative tasks and also a simple relational data model. RDS helps the company’s staff to focus on other important tasks as it reduces the administrative overhead and the effort taken to manage the company’s database.

Customer outreach:

Due to Amazon’s many services, Airbnb has been able to reach new customers almost everyday. Autoscaling has allowed Airbnb to reach great heights. As we can see in the graph, when compared to another prominent app in the rental market, CouchSurfing, Airbnb started off substantially later than the former but as the company migrated to AWS only a year into its operations, it has been able to obtain an exponential rise in customer outreach.?

Revenue Generation:

After the migration, the company has scaled massively and has experienced an exponential customer growth, which naturally resulted in an exponential revenue growth as we can see in the graph.

The company’s annual revenue currently stands at a whopping 8.4 billion USD. As compared to the revenue in 2021 which was 6.0 billion USD, the revenue has grown a massive 40.17% in 2022.