The Lessons We Can Learn From Airbnb Going After Tripadvisor

Here's how Airbnb is doing some big moves "under-the-hood" which signal that they're going to the next level, by going after the market share of Tripadvisor and their friends. I will walk you through the story of how I've stumbled upon this small insight (a hypothesis) and how it might benefit any business owner and marketing person.

The story

I recently landed in Budapest for a couple of business meetings. While in the car on my way to the hotel from the airport, I was wondering what could I do with my 2hrs available tonight and 2hrs tomorrow that would be interesting and enjoyable.

I recently started to love going to symphonies, but I will be leaving tomorrow night and tonight it's booked. I need something that lasts 60 minutes and I can go before 5 PM (2 PM when I was thinking about this)

Yes! Museums, I love museums. There's something transcendent about going to a museum in a foreign place. You assimilate the meta-narrative of that place by going to a national museum of art, history, etc.

So I went on Google (isn't that what we all do?) and searched for "best museums budapest". My apologies for the grammar-freaks but I don't use capital letters when I search for things in cities, I'm just too lazy to do that and Google doesn't seem to care.

Here's what I've received as results:

Interesting right? What can you notice in these pictures? Here's what I notice: First: House of Terror looks weirdly attractive to me, so I'll probably go there! Second: What's the thing about the Airbnb ad? They sell accomodation and experiences but not museum tickets. What's that about?

You can see in the next picture/screen (nr 2) that they take you to a list of the best things you could do in Budapest. Isn't this what Tripadvisor does?

On the third picture/screen, you can see that they allow you to add the place to your plans. Interesting!!!! I don't know about you but this is where something clicked in me.

The realization

They are, in a very subtle way, entering new ground and conquering new market share that wasn't in their "yard" before.

Let me explain my hypothesis: The specific phrase "best museums Budapest" doesn't really mean (or signal directly) that people are looking to buy accomodation (their goal).

Which means, that if they are doing it, they are doing some "big mogul moves" on the market. If they are doing it, it means that they have amassed enough domination at the high-intent level (e.g: people who search for apartments, airbnb's, etc — directly) and are going for higher funnel intent keywords.

Quick side note, I'm not myself the ultimate Google Ads/SEO expert, just going through the hypothesis myself so I can prove a macro-strategy point.

Here's an example of a customer journey or funnel:

By the nature of it, the higher you go on that funnel (towards unaware, awareness, etc) the more expensive and complicated it is to acquire a new customer.

For example, if you want to bid on the keyword "Airbnb in Budapest" then that's a safe bet that the person who searches for that wants an Airbnb. That doesn't mean it's cheap — since with time, as competition comes in, more and more people will bet on the "obvious" keywords that signify intent and have short sales cycles.

So if they are going up, here's my hypothesis of why I believe they're doing this and why it's important:

Lifetime value

They have such a high lifetime value (how much money they make per customer, on average) in let’s say 12–24 months, that they can afford to gohigher on the funnel (towards unaware people, awareness, etc) and still make a profit. Here are two reasons they might have this:

1. This means they either have a lot of investment capital that's being spent (which doesn't mean anything about their business model's efficiency), in which case there's nothing really to worry about in the long term.
2. They have such an effective funnel/system that they can make a higher LCV.

My bet is on the 2nd or a combination of both. Either case, because of this, they can get into “trip planning” which is a pre-cursor for booking a trip for a lot of people, and therefore being the “helper” before people have a solution for their apartment — and establishing themselves as the top of mind solution when people get to that. Historically, this has been the space of TripAdvisor and other similar companies.

So, this means that they are coming for their market share. Interesting and exciting.

Action item - Focus on the magic metric: LCV

What does this also mean? For you, the reader? Here's a graph:

If you extrapolate revenue with time, lifetime value is one of the most important metrics that will drive long-term success. In the short term, you might find opportunities in terms of channels (underpriced attention such as Facebook, Instagram, etc) or operations (cheaper materials, labour, etc), but by nature of the free market system and capitalism, things will level out with time.

And the only thing that is left is your lifetime value, is your ability to put money into your business and get more money out after a period of time. And this marathon will be won, always, by the person who can run the longest, not by the fastest sprinter.

For example, analyst Michael S. Lavery of CLSA estimates the average “customer lifetime values” for the big three U.S. companies — Altria, Lorillard and Reynolds American — to range from $1,929 to $2,527 (U.S.) for traditional cigarettes (source). And that in a high-margin business.

So what can you do to focus more on the long-term lifetime value of your customers? You can think about it yourself. There's also a great article by a great Product Market that will help for sure, especially if you're in technology, even though the process works the same everywhere.

I'm Catalin Matei, an entrepreneur and founder of Increase Media, a hybrid social media agency for personal branding while working stealth-mode on a new agency model as well as Dancesport Life, which is the biggest media publication for ballroom dancers (ex pro-dancer myself), and other activities.

You can find/follow me at [email protected], Linkedin, Twitter, Facebook or Instagram. You can tune into my podcast as well which is for the problem-solvers of tomorrow.