Airbnb Marketing Plan

Jingyi Zhang

Laura Ginsberg

Oumaima Karimallah

Table of Contents

Executive Summary ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­2

Background ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­6

Chinese Market Analysis ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­6

Target Audiences ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­7

Competitors and Imitators ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­8

Challenges Facing Airbnb ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­10

Objectives and Strategies ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­11

Annual Objectives ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­14

Annual Tactics ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­14

Risk Management ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­20

Success Matrix ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­22

Investment Thesis ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­23

Next Step ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­23

Marketing Brief ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­24

Appendix ­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­­27

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Executive Summary

Chinese market: major growth potential

The market in China is ripe for growth in the hospitality sector. The Chinese economy has grown

at an annual rate of more than 7% between 2009 and 2014 and discretionary spending is forecast

to exceed 7 percent between 2010 and 2020. Almost every Chinese citizen travels at least twice 1

each year, with 107.9 million trips taken in 2014 alone and departures growing at a CAGR of

17.7% . The seeds of the sharing economy of personal living space have been planted in China, 2

as 56% of local people would be interested in posting their idle housing on websites such as

Airbnb. China currently has more than 36% living spaces that can be used for short­time rentals,

but only 2.6% idle housings have been developed. Despite this, the population is largely 3

unfamiliar with the concept. Language is one of the main barriers, in addition to travel booking

behaviors which, from one side, involves travel agencies and from another, Chinese websites to

book both the transportation as well as the accommodation. In order to address these issues, and

with the objective of achieving 30% of the hospitality sharing economy market share in China,

our strategy is to hone in on a specific target in order to be able to understand the customer, their

needs, as well as their behavior.

Millennial self­guided travelers are sharing economy pioneers

We will first focus on millennial, “self­guided travelers’’ who have at least basic English

speaking skills and seek adventurous experiences. Flexible, comfortable out of their comfort

zone and open to new experiences, they use social media to express themselves and to

consistently share their likes and dislikes with family, friends and peers, offering

recommendations when they feel fully satisfied. Based on our research, up to 70% of Chinese

travelers are what we call “self­guided travelers,” 44% rely on word­of­mouth when planning

trips, and 30% use social media as a source for tips and advice making this a compelling target 4

customer to set our sights on at the outset.

1http://www.mckinsey.com/business­functions/strategy­and­corporate­finance/our­insights/why­chinas­consumers­will­continue­to­surprise­the­world 2 http://www.cottm.com/news­center/news/travel­and­tourism­china­2019 3 http://finance.sina.com.cn/manage/mroll/2016­02­02/doc­ifxnzanh0606537.shtml 4 http://www.citm2015.com/pdf/hcom­citm­report­2015­inter.pdf

2

Competition leaves holes yearning to be filled

Airbnb is competing resources from two different industries. One is the travel industry and the

other is the hospitality industry in the sharing economy field. Competition is comprised of

websites that offer both travel booking in addition to accommodation as well as the Chinese

imitators of Airbnb. The biggest shortcoming of the first category is the rigid packages that only

allows the traveler to stay in one place during his entire trip, while a traveler prefers to spend his

trip of 12 days in 3 different places, with an average of 2 nights per city. Airbnb has 5 times

more followers in Chinese social media than its local competitors in total (Xiaozhu and Tujia),

which means Airbnb definitely has relative brand awareness in China even though we have not

officially launched there.

Objectives, Strategies & Tactics (From May 2016 to May 2019)

Market share objectives

Years Year1 Year2 Year3

Market Share (Listings/Hosts)

1%

10%

30%

Market Share (Guests)

5%

20%

45%

Financial objectives

Years Year 1 Year 2 Year 3

Host Revenue (3% $ million) 4.5 54 210.5

Guest Revenue (9% $ million) 13.5 162 631.5

Total Revenue 18 216 842

3­Year Strategies (From May 2016 to May 2019, based on importance)

3

S#1 Starting by targeting 18 million outbound Chinese self­guided travelers, followed by local self­guided Chinese travelers (140 million), and reaching local Chinese hosts thereafter (50 million).

S#2 Localize all Airbnb products and services to culturally speak to the local market and address the mindset of the Chinese people to have 50 million new users sign up in 3 years.

S#3 Develop 3 partnerships in the travel industry and sharing economy of short­term rental industry.

S#4 Create and execute digital marketing strategy to reach 250 million Chinese travelers and achieve a 20% conversion rate.

S#5 Expand the host offerings by 30%.

Annual Brand Objective (From May 2016 to May 2017): Increase Airbnb’s guest market

share in China to 5%. From the guest perspective, comprised mostly of travelers, we aim

to reach 18 million travelers and have 3.6 million individuals sign up and use Airbnb.

Annual Financial Objectives: Achieve $18 million revenue in China.

Annual Tactics Overview (From May 2016 to May 2017)

4

Value Proposition

Tactic Description Success Matrix (semester based)

Time Frame Budget ($ million)

Trust & Safety

#1 Xiaozhu acquisition ­­­­­­­­­­­­­­ 05/01/16­07/31/16

40

#2 Wechat Partnership ­­­­­­­­­­­­­­­­

06/01/16­08/31/16

0.2

#3 Financial company partnership

If the partnership

with “Wechat” is successful

06/01/16­08/31/16

0.1

#4 Local team establishment It’s a necessity (market pressure)

05/01/16­08/31/16

5

Special Travel

Experience

#1

Travel website partnership

Reach 2.2 million travellers

06/01/16­05/01/17

20

#2 Social influencer collaboration

Reach 10 million travelers

06/01/16­08/31/16

12/01/16­02/28/17

10

#3 Digital marketing campaign Reach 5.8 million travelers

06/01/16­08/31/16

12/01/16­02/28/17

5

#4 Product localization Major factor of success (customer pressure)

05/01/16­05/01/17

10

#5 Travel credit incentive Reach 5 million travelers

Before each break time in

China

250

5

Total 18 million (tactics have

overlap)

350.3

6

Background

We are opening up the world, connecting people and experiences one spare bed at a time. Last

June we opened our Auckland, New Zealand office to tap into the Kiwi holiday­home rental

community, which was set to double year­on­year. The endeavor has proven to be a huge

success and we are on course to meet our strategic and financial goals in the market. This year,

120 million Chinese travelers await us. The time is now to capture this booming market!

­Huge market potential in China

The market in China is ripe for growth in the hospitality sector, as the economy has grown at an

annual rate of more than 7% between 2009 and 2014 and discretionary spending figures continue

to rise. According to a 2014 McKinsey report, “Growth in spending on annual discretionary

categories in China is forecast to exceed 7 percent between 2010 and 2020, and growth of 6 to 7

percent annually is expected in a second category of ‘semi­necessities’.” (See Figure 1) Another 5

important measure of consumption, household income, has risen above $5 trillion a year in

China, another indication that the hospitality market, which is sensitive to the health of the

national economy, is ready for take­off. As a result of this increase in consumption and

discretionary spending, more and more Chinese citizens are looking to travel abroad, with 107.9

million trips taken in 2014 alone and departures growing at an impressive CAGR of 17.7% . 6

According to John Kestor, director of the tourist market trends program at the United Nations

World Tourism Organization (UNWTO), “China has been growing as a tourism source market

with "double digit growth" every year since 2014 and this growth was repeated in 2015.” The 7

growth of the economy, rise in the tourism market, and increase in discretionary spending figures

and household income are firm indications that there is serious market potential for us in China.

Chinese Market Analysis

­Outbound traveling in China is booming

5http://www.mckinsey.com/business­functions/strategy­and­corporate­finance/our­insights/why­chinas­consumers­will­continue­to­surprise­the­world 6http://www.cottm.com/news­center/news/travel­and­tourism­china­2019 7Ibid

7

The tourism industry in China is booming from both an inbound and

outbound perspective. Based on the latest statistics from the China National Tourism

Administration (CNTA), more than 120 million Chinese citizens travelled outside the mainland

in 2015, which makes China the number 1 outbound travel country for the third year in a row.

(Since traveling to Hong Kong, Macau and Taiwan counts as outbound travel, which accounts

for 70% of the total number, the actual number of outbound Chinese travelers is around 36

million.) China has maintained the fastest growing rate over the last five years. The CNTA also 8

announced that the outbound travel market in China is still in the fermentation stage in

comparison to China’s 1.4 billion population and its fast­growing middle class population.

­Gigantic market of local traveling and sharing economy

Tourism in China has been stable and robust and statistics show a significant local travel market

where almost every Chinese citizen will travel within the country twice each year. The sharing

economy of living space market is huge as well. Data from a local Chinese agency shows that

around 56% of local people who are familiar with the “sharing rentals + travel” concept would

like to post their housing on websites such as ours. China currently has more than 36% living

spaces than can be used for short­time rentals; however, only 2.6% idle housings have been

developed. Not only are Chinese people actively traveling, but they are also becoming 9

increasingly open to the concept of offering their homes to the sharing economy marketplace, as

they become more familiar and comfortable with the idea.

Target Audiences

­Overall Customer analysis

Demographics

Middle class and above

Average age: 35 years old

Most are from eastern cities such as Beijing, Shanghai, and Shenzhen (highest economic

growth)

8 http://www.ttgchina.com/article.php?article_id=4143 9 http://finance.sina.com.cn/manage/mroll/2016­02­02/doc­ifxnzanh0606537.shtml

8

Average travel time is 12 days

­Psychographics

Desire to spend money to increase their quality of life

Unlike their parents, they are not saving all of their money for the future and their kids.

They seek high­end products and services and spend more money on themselves. This

group of people can be considered as the mainstream for providing home resources

online.

People under 35 have grown up with the Internet and are more open to new concepts.

They have the curiosity to explore the world and to try new things. Since more and more

people under 35 are having stable income, they become the primary customers in the

outbound markets. They are also the strongest supporters of the sharing economy.

­Self­guided Chinese travellers are our primary target

Our target demographic within the Chinese market are millennial, “self­guided travelers” with at

least a basic level of English who seek new experiences. Our research has shown that up to 70%

of Chinese travelers are in fact “self­guided,” booking every aspect of their trip on their own,

without the help of an agent or service. They do their own research, seeking advice on travel

websites and booking lodging and accommodation through Chinese travel websites such as

ctrip.com. They are flexible, feel comfortable out of their comfort zone, and are open to new

experiences. They use social media to express themselves and to share their experiences with

their family, friends, and peers. They express their likes and dislikes, make recommendations

when they are satisfied, and use reviews and ratings to judge an experience before committing.

Competitors and Imitators

­Online booking website is Airbnb’s biggest competitor, but travel planning website can

become Airbnb’s partner.

With the development of the Internet, traditional travel agencies have been challenged by the

new tendency of travelers to book everything online. Online booking websites such as ctrip.com

9

and tongcheng.com and travel planning websites such as mafengwo.com 10

have become travelers’ priority and go­to, especially for self­guided travelers. On one hand,

travel agencies have teamed up with online booking websites providing vacation packages in

order to retain customers. On the other hand, those online booking websites also provide “flight

tickets + hotel” travel packages in a cheaper price for travelers who travel by themselves. As a

result, these online booking websites are our direct competitors from the consumer perspective.

In addition, websites where travelers can search for travel information and also leave suggestions

and reviews about the cities for the future travelers, such as “TripAdvisor,” can be considered as

a huge potential partner to let more travelers know about Airbnb.

­Shortcomings of Chinese online booking websites

After researching the entire spectrum of Chinese online booking websites, we discovered a

significant problem on the “flight tickets + hotel” travel packages which aim to attract

self­guided travelers. The total price is cheaper and attractive indeed; however, it doesn’t meet

all of self­guided travelers’ needs since the packages only provide hotels in one place for the

entire length of the trip. Few Chinese self­guided travelers would like to stay in the same place

for more than 4 days when they travel on an extended holiday. Most Chinese citizens travel

during holiday breaks, which are no more than 10 days, and the average time that they spend in

one city is two days. Clearly, the Chinese online booking websites are not comprehensively

meeting the needs of the Chinese travelers of today.

­Airbnb has better market potential than Airbnb’s Chinese imitators.

Product localization is the key to success in China. Almost every world­wide popular

product/website/social media platform is copied and grown into a Chinese version because of

political and regulatory issues. For instance, Twitter’s Chinese version is Weibo and YouTube’s

Chinese version is Youku. Likewise, the two pioneers of the sharing economy field, Airbnb and

Uber, of course have imitators in China as well. (Uber officially stepped into the Chinese market

in 2014 whereas we have not officially begun operating in the market.) The only difference is

10 Similar to Tripadvisor in the U.S.

10

that the local version of Uber, DiDi, has gained around 70% of the market

share in China, whereas the local versions of Airbnb, Xiaozhu, Tujia, etc are still in the very

beginning of the fermentation stage. DiDi’s success indicates that most of the Chinese people

have accepted and agreed to the concept of the sharing economy; therefore, the market is already

open. We need to educate customers and cultivate their habits to get used to another style of

travel (and of living). Even though Xiaozhu and Tujia are direct local competitors in China in

terms of products, they are not strong even in the local market. Since we haven’t officially

moved into China’s local market, Xiaozhu and Tujia’s numbers of local housing are currently

more than our’s, but in terms of the outbound market, Airbnb is definitely the market leader. For

example, Tokyo was one of the top 3 cities that Chinese outbound travelers chose to visit in

2015. Airbnb has more than 6,500 housings listed in Tokyo in comparison with only 92 listed on

Tujia. In addition, we have 5 times more followers on Chinese social media than its local

competitors in total, demonstrating our relative brand awareness in China.

Challenges Facing Airbnb

­Three major challenges facing Airbnb in China

We need to be prudent in establishing our business in China since the Chinese market is

large and complex. As such, as we move into China, we will first target outbound

Chinese travellers. After becoming familiar with and using our product, we will

encourage them to become opinion leaders, sharing their amazing living experiences and

stories with friends, which will in turn engage more local Chinese to become Airbnb

guests and hosts. However, based on our research, most of our primary target audiences

do not have their own living spaces in China. Especially in the most popular local travel

cities such as Shanghai and Beijing, many won’t be able to buy an apartment until they

are 40 years old. They either live with their parents or rent an apartment with friends.

Outbound Chinese travelers are more likely to become our guests than hosts, at least

initially. Since the age gap between hosts and guests is wider in China than in other

countries, in order to balance the number of guests and hosts, we need to make two

completely different strategies for the two groups of people.

11

Though Uber has opened the sharing economy in China, we need to put more effort

into educating customers and managing customers’ expectations towards our

products.

The biggest difference between Uber and Airbnb is the products. Uber provides a

standardized, mostly homogeneous product, which meets customers’ basic

needs­­­to arrive at their destination­­whereas ours is a customized product, which

impacts a person’s travel and living experience. The two needs themselves reflect

the two completely different products.

On our website, the host posts information about their housing offerings including

pictures, descriptions, price, and so on. We are then able to use that information

and the reviews to manage customers’ expectations.

For customers who live in other countries with different culture backgrounds, we

have to cultivate customers’ habits and understanding towards short­time rentals

and the concept of sharing their living space with others.

China has a completely different living environment than Western countries where

we have been developing really well. You can hardly find special places such as castle

or treehouse in China, and even if you could, the price would not be reasonable. There is

also no big difference in terms of living style and living experiences in different cities in

China, which works against our brand DNA. (See Figure 3)

Objectives and Strategies

­Move fast to take over China’s market.

China is a huge market and every company wants to take the cake, but the truth is “no Internet

technology company has ever succeeded in China.” Not only does China’s unique political 11

environment lead to the failures, but also the powerful imitation skills. It is remarkable to see

how fast an Internet company can be copied, localized, and accepted by Chinese people. Even

11http://venturebeat.com/2016/03/25/ubers­using­its­profits­from­elsewhere­to­support­sustainable­spending­in­china­says­ceo/

12

though the government tries to drive people to be innovative, China’s

growth rate doesn’t require people to have time for creativity. Therefore, what they can do right

now is grab good idea and adapt it. Uber is trying to make the impossible possible. They have

been unofficially launched in the Chinese market for seven years. “Uber’s Chinese version” DiDi

came out 3 years later but quickly became the market leader in China, while Chinese people

hardly know Uber.” Unlike social media platform such as Facebook and Twitter that have been

prohibited by the Chinese government, Uber doesn’t face such political issues. Uber aggressively

started its formal market expansion in China in 2014. According to the latest report, the

company’s market share in China has grown quickly, rising from about 1 percent to 2 percent in

January 2015 to about 30 percent now. 12

As mentioned above, and based on the latest data showing that ride hailing apps have more than

2 million users in China , the concept of the sharing economy has been accepted by more and 13

more Chinese people and the market is ready for take­off. In the hospitality sharing economy

space there are around twenty five imitators offering short­term housing rentals in China (See 14

Figure 2). They want to become the next Chinese version of Airbnb; however, positively

speaking for us, the sharing economy in the hospitality space doesn’t have a market leader right

now. We must seize the moment. In addition, “on a global scale, Airbnb has an absolute

advantage over its Chinese rivals,” but to expand to China, we need to not only translate our 15

global advantages but also adjust our business model and marketing plan to China’s unique

characteristics.

We have begun our movement to China. Having recently raised $1.5 billion in investment from

China Broadband Capital and Sequoia Capital among others, we are planning to select a CEO for

our China operations with the help of those two Chinese venture capital firms. After 16

12http://venturebeat.com/2016/03/25/ubers­using­its­profits­from­elsewhere­to­support­sustainable­spending­in­china­says­ceo/ 13http://it.people.com.cn/n/2014/1118/c1009­26047387.html 14http://36kr.com/p/5043951.html 15http://www.businessinsider.com/three­challenges­facing­airbnb­in­china­2015­8 16http://www.businessinsider.com/three­challenges­facing­airbnb­in­china­2015­8

13

establishing a local team in China, our objective over the next three years

(from May 1st 2016 to May 1st 2019) is to gain 30% market share in the Chinese market within

the hospitality sharing economy, becoming the market leader in that sector. From the consumer

perspective, our objective is to get 45% of Chinese travelers to use Airbnb when they travel

either locally or abroad. We need to move fast and strategically to achieve this ambitious

goal.

3­Year Strategies (From May 2016 to May 2019, based on importance)

S#1 Start by targeting outbound Chinese self­guided travelers, followed by local self­guided Chinese travelers, and reaching local Chinese hosts thereafter.

S#2 Localize all Airbnb products and services to culturally speak to the local market and address the mindset of the Chinese people.

S#3 Develop partnerships in the travel industry and sharing economy of short­term rental industry.

S#4 Create and execute digital marketing strategy to reach 100 million Chinese travelers and achieve a 20% conversion rate.

S#5 Expand the host offerings by 30%.

­Financial Objectives

Our financial objectives are based on the assumption that the Chinese market in the sharing

economy hospitality industry is currently worth $1.8 billion with a potential growth of 20% the

second year, followed by 30% the year after. The first year financial objective is to hold 1%

market share. The revenue business model is divided in two parts, ¼ of the revenue is generated

from hosts, and ¾ is generated from guests.

Years Year 1 Year 2 Year 3

Host Revenue (3% $ million) 4.5 54 210.5

Guest Revenue (9% $ million) 13.5 162 631.5

14

Total Revenue 18 216 842

Annual Objectives

­Annual Brand Objective (From May 2016 to May 2017): Increase Airbnb’s guest market

share in China to 5%. From the guest perspective, comprised mostly of travelers, we aim to

reach 18 million travelers and have 3.6 million individuals sign up and use Airbnb.

Explanation of the numbers:

"How many travelers we need to reach to achieve this market share" = 1.2 billion "the

number of total Chinese travelers” x 30% "self­guided travelers percentage” x 5% “target

market share” x 20% “conversion rate”

­Annual Financial Objectives: Achieve $18 million revenue in China.

Explanation of the numbers:

Based on the assumption that the Chinese market in the sharing economy hospitality

industry is worth $1.8 billion today, with a potential growth rate of 20% the second year,

followed by 30% the year after, the financial objective of the first year is to gain 1%

market share. Airbnb’s revenue model is divided into two parts: ¼ of the revenue is

generated from the hosts and ¾ is generated from the guests. The financial objective for

the first year is then to generate a revenue of $10 million with a market share of 1%.

Financial Objectives Year 1

Market Share 1%

Host Revenue (3%) 4,500,000

Guest Revenue (9% fee) 13,500,000

Total Revenue 18,000,000

Annual Tactics (From May 2016 to May 2017)

15

Our first­year tactics will mainly focus on two key components. One is to

help solve the concern of trust and safety in order to lower the entrance barriers for both guests

and hosts on our marketplace. The other is to communicate the message about special travel

experiences in terms of being local, social and diverse, which are connected with Airbnb’s

emotional benefits.

Value

Proposition

Tactic Description

Success Matrix

Time Frame

Budget ($

million)

Trust & Safety

#1 Xiaozhu acquisition Y/N 05/01/16­07/31/16

40

#2 Wechat Partnership Y/N 06/01/16­08/31/16

0.2

#3 Financial company partnership

Y/N 06/01/16­08/31/16

0.1

#4 Local team establishment Local teams in 10 cities

05/01/16­08/31/16

5

Special Travel

Experience

#1

Travel website partnership

Reach 2.2 million travellers

06/01/16­05/01/17

20

#2 Social influencer collaboration

10 million travelers

06/01/16­08/31/16

12/01/16­02/28/17

10

#3 Digital marketing campaign 5.8 million travelers

06/01/16­08/31/16

12/01/16­02/28/17

5

#4 Product localization Y/N 05/01/16­05/01/17

10

#5 Travel credit incentive Reach 5 million travelers

Before each break time in

China

250

16

Total 18 million (tactics have

overlap

350.3

­Trust & Safety

Tactic #1: Acquire Xiaozhu, one of Airbnb’s imitators in China, in order to get local data

and support.

Among all of the current imitators in China, Xiaozhu is the most explicit Airbnb imitator. Most

short term rental companies in China started in the sharing economy space around 2012. Some

have failed because the Chinese market was not ready to accept this new concept. Some have

changed their business models from C2C (like Airbnb) to B2C to solve the management and

security issues. Xiaozhu, established in 2012, has survived after 4­year exploration in travel

industry and sharing economy of hospitality industry in China. Xiaozhu become recognized by

more and more Chinese self­guided travelers. For example, Xiaozhu has built local teams in each

city it operates to help search for available hosts and housings. They assist hosts by installing

anti­theft locks at their homes and even help better organize the room to make it more attractive

to travelers. Xiaozhu now has more than 30,000 listings in around 200 cities in China. Since

being local, social, and diverse is our brand DNA, we will not change our C2C model.

Acquiring Xiaozhu will facilitate our move into the Chinese market, allowing us to obtain

local data as well as to build a strong local team who understands the cultural landscape.

Tactic #2: Partner with China’s biggest media platform—Wechat to help the ID

verification system.

The ID verification system is critical for users to trust Airbnb. Instead of asking users to input

their real name and national ID number, we will partner with Wechat, the biggest Chinese media

platform with more than 600 million Chinese users. Since Wechat has its own payment system,

in order to use Wechat Pay, users need to input their personal information and bank account

information, which means most of the Wechat users have already been verified. Once Airbnb

partners with Wechat, Airbnb’s users can login to the site via Wechat and choose whether to get

17

verified, giving them more credibility on the site. We would include

additional information about the benefits of getting verified to help users have a more successful

experience on our site. When they agree, Airbnb can simply extract users’ personal information

from Wechat’s database. Given the trust and safety concerns of the Chinese people, this

extra verification process will go a long way in making them feel more at ease when

transacting on the site as a user or guest.

Tactic #3: Partner with Ant Financial Services Group’s Sesame Credit to help build the

credit scoring system.

Airbnb’s exact imitator Xiaozhu has worked hard to solve users’ concerns about staying in a

stranger’s home. One of the ways they did this was by partnering with the online financial

service company Ant Financial Services Group. This financial service company, which belongs

to China’s biggest e­commerce company Alibaba Group, creates a credit scoring system for each

user. This credit scoring system acts as an additional level of screening since maintaining

good credit is important to Chinese people and would discourage negligent behavior on the

site. Furthermore, associating a person’s Airbnb ratings with their credit score would give

users additional confidence to interact on the site. The initial credit scoring system will be

based on users’ transaction history, but we will integrate more aspects such as ratings to better

improve the system over time.

Tactic #4: Establish local teams in the top 10 local travel destinations to find available

hosts and housing.

Based on our customer analysis, the average age of most potential hosts is above 35 years old.

Most are open­minded and would be likely to accept the idea of opening up their home to a

stranger after better understanding the concept and becoming more familiar with it. Therefore,

we need to build local teams in the 10 most popular travel cities to search for available

housing, connect with owners, help solve safety issues and concerns, educate them to use

our products and also provide information such as how to get verified, how to become a

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superhost, how to communicate with guests, etc. The skillset for each

team would include community outreach workers, photographers, decoration workers, and

perhaps designers.

­Unique Travel Experience

Tactic #1: Partner with travel planning website to create awareness of Airbnb’s special

travel experiences.

Our research has shown that, in the beginning, cooperating with booking websites­­even though

they are our biggest competitors in the travel industry­­is not necessary. Most of our primary

target audience use travel planning websites to find reviews and suggestions. There are several

ways to spread the word about Airbnb on travel planning websites:

1. Ask Airbnb’s Chinese users to leave reviews on the planning website to earn travel credit

on Airbnb.

2. Automatically transfer reviews on Airbnb to planning websites with an agreement from

the user.

3. Set up an additional comments section on the planning websites to leave reviews about a

destination’s accommodation and living experiences.

4. Advertise Airbnb on the website.

We need to discuss the solutions with travel planning websites to ensure the mutual benefits. Our

goal is to reach 2 million local travelers and 200,000 outbound travelers. (2.2 million total)

Tactic #2: Collaborate with social influencers in the travel industry such as Molly and

Dabin to share inspirational content about the Airbnb experience.

We will collaborate with“social celebrities” with a certain number of followers on social media

such as Weibo and Wechat public account to influence our target customers. Using “social

celebrities” to advocate products is more effective at reaching our target audience than just

advertising on different media or using celebrity endorsements. We will incentivize key

influencers who are famous for self­guided travel to use Airbnb while traveling and create

content about the Airbnb experience to share with their social media followers. Our team will

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also help to create posters, videos, and other content about the trip. This

tactic aims to reach 10 million customers. Most of our targeted media campaigns will be

conducted before holiday breaks.

Tactic #3: Develop digital marketing plan to build brand awareness in various popular

media platforms in China.

Our marketing team in China will write a local blog and generate creative, enticing, and inspiring

online content. We already have more than 10 million followers on Weibo. We will continue

posting about interesting Airbnb offerings, travel tips, and sharing unique, local

experiences. Most importantly, the marketing team will interact constantly with Airbnb’s

followers and turn 50% of our followers into actual product users (around 5.8 million). We

will focus on developing the digital marketing plan through using social media and videos.

Utilizing traditional media such as TV and magazine is another option, but we will only spend a

limited budget on other media platforms.

Tactic #4: Localize the Chinese Airbnb website and mobile app to appeal to locals.

We will not only hire professional translators to translate our website into Chinese (as an option

for outbound travelers who look at the site outside of China), but also will have the site switch to

a customized, Chinese version when a person looks at the site in China. For example, the current

Airbnb website shows listings in Boston and Philadelphia on the homepage as a default

recommendation. When users choose to translate to Chinese or go to Airbnb’s website in

China, Airbnb will recognize them as Chinese travelers. Instead of showing listings in

Boston, our website will recommend housing in the most popular travel cities for Chinese

travelers such as Tokyo, Hong Kong and Bangkok. It is necessary that the site not only be

written in Chinese, but also be localized to address the interests and concerns of the Chinese

market.

Tactic #5: Increase travel credit to guests and give discount code to hosts.

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While we don’t influence our users’ pricing in any way, in order to attract

more Chinese to join our marketplace, we will offer travel credit to users whose friends join

Airbnb and use the service as a guest or host. This travel credit can be used toward future travel

as a guest and will be applied toward the user’s next transaction on the platform. To be clear, the

host will still receive the same amount of money, but the guest will receive a discount from

Airbnb to be applied to their first stay following the successful onboarding of a friend to the

Airbnb community. We believe that this pricing strategy ties in well with our efforts to

mitigate trust and safety concerns, and effectively conforms with our brand DNA, since it is

a socially driven effort working in parallel with our strategy to identify ways to grow our

user base while addressing hesitations due to trust and safety. We will increase our $35

current travel credit to $50 in order to get more local Chinese travellers. The hosts can also get a

discount code from us to self­promote their housings by giving the code to guests. Again, the

hosts will still get the same amount of money as listed and the guests will get a discounted price.

Risk Management

As with entry into any new market, there are a number of risks that we may face and are actively

working to mitigate.

­Macroeconomic

There are always macroeconomic risks when entering a new market and China is no exception.

In order to reach our goal of achieving a guest market share of 5% in China, the economy needs

to be in a healthy enough state that the Chinese people have disposable income to use toward

travel. China is currently experiencing a unique economic period called the “New Normal” in

which economic growth has been slow, mainly due to changing industry trends and mounting

debt which has reached more than twice the size of the economy. While this downturn could

negatively impact Airbnb’s new entrant strategy and ability to acquire its market share goals, we

do not believe China’s “New Normal” will adversely affect our projections for two reasons.

Firstly, during this period of slow economic growth, the Chinese government is encouraging new

growth drivers less tied to debt, including services, consumer spending, and private

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entrepreneurship. The government’s backing in these areas, directly tied 17

to the health of the Chinese economy, gives us strong reason to believe that the slow economy is

of little negative concern to our plan. Moreover, though price isn’t our main value proposition,

our housing options inherently offer a wider range of pricing choices, many of which are more

economical than hotels, so even in an economic downturn or the Chinese “New Normal” with

slow economic growth and decreased consumer spending, we continue to believe that this

economic anomaly is not a serious concern for us and will not negatively impact our projections

and brand objectives.

­Trust and Safety

A key learning from this past year has been that Chinese users are skeptical of offering their

home or staying in the home of a stranger. Since the sharing economy in the hospitality space is

still a relatively new concept in China, they need to be encouraged by safety procedures and their

network of friends and acquaintances in order to overcome the mental barriers associated with

the trust and safety. Our objective to gain market share in the Chinese market is contingent upon

successfully alleviating these fears. We have aligned a number of our tactics around this issue in

order to address this concern for future guests and hosts. First, our partnership with Wechat,

China’s biggest media platform, will allow us to leverage their ID verification system and

provide an additional level of security for Airbnb users. Secondly, we our partnership with Ant

Financial Services Group’s Sesame Credit will help build the credit scoring system and offer

another level of security to our marketplace. Furthermore, our promotional strategy of offering

users a credit to use toward future travel when friends sign up and use Airbnb as a guest or host

will serve to further eliminate the roadblocks associated with trust and safety. In addition to these

tactics, to ensure that these concerns do not serve as a barrier to our growth strategy and

objectives, we will incorporate trust and safety in our messaging through all marketing vehicles.

We believe that the concept of trust within the sharing economy in the hospitality sector is one

that is increasing in a positive way in terms of awareness and perception. Between our efforts

17 http://www.wsj.com/articles/the­world­struggles­to­adjust­to­chinas­new­normal­1440552939

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and the efforts of other players in the market, consumers will continue to

become more comfortable with the concept which will further encourage new customers.

­Competition

China has two distinct types of Airbnb competitors: those who imitate the concept directly and

those who offer a completely different model that competes with Airbnb. We believe that our

robust, tried­and­true marketplace which successfully operates in 190 countries is superior to any

competitor who tries to imitate the concept directly. To mitigate the risk that a competitor will

directly and successfully copy our platform, we plan to take two distinct actions: acquire

Xiaozhu and localize the Chinese Airbnb website and mobile app. Xiaozhu, established in 2012,

is one of Airbnb’s biggest imitators in China. Though they are still small in comparison to

Airbnb, they have a sizeable database of local travelers and hosts and have built an infrastructure

dedicated to alleviating fears associated with trust and safety concerns. We feel that acquiring

Xiaozhu will allow us to leverage the infrastructure they have built while allowing us access to

local data and support that we feel will uniquely position us to successfully compete with other

local imitators that may arise. Furthermore, we plan to further weaken the risks associated with

imitators by localizing the Chinese Airbnb website and mobile app to allay any advantage these

imitators may have and to incorporate features that the Chinese market expects to see.

Success Matrix

The Xiaozhu acquisition, Wechat partnership, local team establishment, and product localization

are mandatory moves in order to be able to satisfy the market’s pressuring need of product

localization to the complex Chinese market.

The financial company partnership would occur if the Wechat Partnership attains the 6 months

objectives assigned to it. Travel website partnership will take place if we reach 2.2 million

travellers, while the social influencer collaboration will take place after reaching 10 million

travelers. The digital marketing campaign would take place after reaching 5.8 million travelers

The travel credit incentive would occur after reaching 5 million travelers.

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Investment Thesis

­Right team: Hire a local team in the most popular cities in China

­Right time: The sharing economy is currently rising, and competitors in China are growing; it is

the perfect timing to expand to the Chinese market

­Right plan: The Chinese market is promising, with specificities that must be taken into

consideration within a specific localized plan. We have raised $1.5 billion from Chinese

investors, two strategic partners — China Broadband Capital (CBC) and Sequoia China,

Hillhouse, Horizon Ventures, and GGV Capital to be advised by local venture capitalists on how

to adapt to sell to Chinese travellers.

Next Steps

After the 3 year expansion in China, once we achieve the market leader position, we will play

defense to the other imitators such as Tujia and Youtianxia who are utilizing the B2C business

model. We will try to acquire the rest of imitators who use the same C2C business model as us to

make sure there are no potential growth and competitors in this niche market. Our efforts will

remain dedicated to be the trust and safety issues and our strategies will revolve around

encouraging hosts by educating them on the safety measures we currently offer, as well as

developing and executing new, market­specific measures that serve to further assure our target

market. As the Chinese population becomes more familiar with the Airbnb brand image as well

as the sharing economy on a whole, there are endless opportunities to build out this market

which we will more actively address in the future. China will become our main market in 2020.

Airbnb will make huge profit from this market after the 3­year expansion. We want our Chinese

customers to feel like they “belong everywhere”.

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MKT Brief

1. Brief background of the company and brand (product and/or service) you offer.

We are the pioneer and market leader within the hospitality sharing economy industry, averaging

425,000 guests per night and more than 155 million guest stays annually. We offer customers 18

“the world at your fingertips.” Our personality can be described as an adventurous, open­minded,

male millennial wanting to experience other cultures while meeting new people and having an

off the beaten path travel experience. At the core of our value proposition is cheaper listings,

listings in different and more attractive neighborhoods, and the diversity of our offerings.

Corroborating these benefits are the emotional benefits of the brand, which include offering an

experience which allows customers to “live like a local” in a setting that is home­like, special,

and provides a social, intercultural interaction. We are opening up the world, one spare bed at a

time, and the market awaits us in China.

2. Reasons and objectives for marketing brief.

The purpose of this brief is to expand our global reach by gaining 30% market share within the

hospitality sharing economy space in the Chinese market, becoming the market leader there.

3. Communication objectives.

Our communication objectives are centered around conveying trust and ease, the two biggest

pain points in engaging the Chinese traveler. Our goal is to to encourage Chinese travelers to use

Airbnb for their travel experiences. Since 70% of Chinese travelers are self­guided and rely on

advice from their peers when booking travel, our messaging will alleviate fears they may have in

using Airbnb when traveling or opening up their home as a host. We also want to engage the

local community to be hosts and guests and will devise messaging to reach this segment as well.

4. Target market.

Our target market is Chinese millennials who enjoy self­guided, local and international travel.

18https://www.pwc.com/us/en/technology/publications/assets/pwc­consumer­intelligence­series­the­sharing­economy.pdf

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5. Execution plan.

Our marketing vehicles include engaging in social media marketing, developing relationships

with influencers and brand ambassadors, building local strategic partnerships, and

localizing/optimizing the Chinese Airbnb website and mobile app to appeal to the Chinese

traveler.

6. Marketing deliverable.

We need clear and consistent messaging across all of our marketing efforts listed above. We will

need a mockup of the localized Chinese Airbnb website written in Mandarin and optimized for

the Chinese traveler and host, including suggesting locations on the homepage that appeal to the

Chinese traveler and including tips that are helpful for a first time Chinese Airbnb user.

7. Mandatories.

The marketing deliverables must have a high emphasis on safety and security so as to address

and mitigate common fears in participating in the sharing economy and facilitating the

onboarding process.

8. Timeline considerations.

Our intention is to launch the marketing initiative as soon as the deliverables are ready. We

expect the messaging and website mockup to be developed within a couple of weeks, at which

point we can begin our marketing campaigns.

9. Tracking and goals.

We will track two separate goals: (a) guests (Chinese travelers) (b) listings/hosts. For guests, we

will track how many Chinese travelers we are attracting to the site, with the goal to gain 5%

market share within the first year, 20% within the second year, and 45% within the third year. On

the host side, we will track how many new listings have been created in China with the goal of

attracting 1% in the first year, 10% in the second year, and 30% in the third year.

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We will track our goals accordingly with our strategies, outlined below:

S#1 Start by targeting outbound Chinese self­guided travelers, followed by local self­guided Chinese travelers, and reaching local Chinese hosts thereafter.

S#2 Localize all Airbnb products and services to culturally speak to the local market and address the mindset of the Chinese people.

S#3 Develop partnerships in the travel industry and sharing economy of short­term rental industry.

S#4 Create and execute digital marketing strategy to reach 100 million Chinese travelers and achieve a 20% conversion rate.

S#5 Expand the host offerings by 30%.

10. Budget.

Having just raised $1.5 billion from Chinese investors, we have a strong base to carry out our

marketing objectives and a healthy lead from our closest competitor, Tujia.com, which is valued

at just over $1 billion and raised $250 million in its latest funding round in June 2015.

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Appendix

Figure 1

Figure 2

Listings are local companies beyond or in the A round. Other 16 companies are in the seed stage or pre­A

round. Among those similar competitors, Xiaozhu’s products are the most alike as Airbnb and Tujia gets

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the most market share currently. The last five columns show the number of

housings in the most popular travel cities among Chinese outbound travelers. Airbnb’s listings are the

most in each cities.

Figure 3

Areas Western Countries China

Style (Exterior) Diverse accommodations Similar accommodations

Locations Diverse locations Centralized places

Price (in comparison to

hotel)

Cost­efficient/price­friendly

Almost the same, sometimes even more

expensive

Experience Specialized Low­quality

The housings in most western countries match tightly with Airbnb’s emotional benefits. Airbnb needs to

put more effort into finding out the right products which reflect its brand DNA.

Figure 4

Years Year1 Year2 Year3

Market share (listings/hosts)

1%

10%

30%

Market share (guests)

5%

20%

45%

Airbnb’s annual objectives in terms of market share in listings and guests

Figure 5

S#1 Start by targeting 18 million outbound Chinese self­guided travelers, followed by local self­guided Chinese travelers, and reaching local Chinese hosts thereafter.

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S#2 Localize all Airbnb products and services to culturally speak to the local market and address the mindset of the Chinese people to have 3.6 million new sign up.

S#3 Develop 3 partnerships in the travel industry and sharing economy of short­term rental industry.

S#4 Create and execute digital marketing strategy to reach 100 million Chinese travelers and achieve a 20% conversion rate.

S#5 Expand the host offerings by 30%.

Figure 6

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Basic data about Airbnb in the global market.

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Figure 7 :

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