The Mission & Method of Evergreen: Why Airbnb is Strong and Uber is Weak

The Mission & Method of Evergreen: Why Airbnb is Strong and Uber is Weak

In today's fast-paced world, where information is available at our fingertips, it can be challenging to filter through the noise and find valuable knowledge. We often find ourselves clicking on recycled and repackaged content, wasting our time and effort. However, Evergreen believes in the importance of thoroughly learning and helping others gain knowledge. Their mission is to organize the vast amount of information available on the internet for personal use, making it easier for individuals to access and learn from. As the saying goes, "If you know how to learn, you know enough."

Similarly, Airbnb and Uber have both revolutionized their respective industries by leveraging the power of networks. However, while Airbnb has thrived with its global network, Uber has faced challenges in comparison. So, what sets them apart?

One of the key factors that contribute to Airbnb's success is the concept of network effects. By expanding its network on a global scale, Airbnb has created a model that relies on the interconnectedness of hosts and guests. Unlike Uber, which has faced competition from smaller players in various markets, Airbnb benefits from the advantages of scale, brand recognition, and high switching costs. These four elements - network effects, scale, brand, and high switching costs - have been instrumental in Airbnb's growth and dominance.

To build a massive network like GAFA (Google, Amazon, Facebook, Apple), entrepreneurs must consider two main strategies. Firstly, they need to select areas where they can establish a robust network. Companies like Google, Yelp, and Waze have successfully built data networks that form the foundation of their services. Secondly, entrepreneurs should analyze and learn from the four network effect strategies mentioned earlier. By studying past cases and applying these strategies, they can increase the chances of creating successful networks.

One strategy that sets Airbnb apart is the concept of network clusters. While Uber's network consists of various independent networks in different cities, Airbnb's network is built on the premise of having a vast number of listings in multiple travel destinations. This fundamental difference creates a higher barrier to entry for potential competitors and enables Airbnb to establish a strong presence in the market. However, it is essential to carefully evaluate the pros and cons of both network tendencies before deciding on a specific direction for network growth.

Another aspect that contributes to Airbnb's success is its ability to eliminate intermediaries and prevent user poaching. For example, Homejoy, a marketplace for home cleaning services, faced the risk of losing service providers to direct requests from users. In contrast, Airbnb takes a proactive approach to protect its network by not revealing the host's contact information until a reservation is confirmed. This not only safeguards user privacy but also acts as a deterrent to prevent poaching. Services that do not implement similar defense measures or have low-price points are more susceptible to losing their networks.

Interestingly, during its early stages, Airbnb adopted a strategy that turned Craigslist, a similar service, into an advantage. By listing properties from Craigslist on their platform, Airbnb aimed to expand its marketplace. However, as the company grew, it became more focused on protecting its own network, showcasing the intelligence behind its strategic decisions.

In addition to network clusters and user poaching prevention, two other strategies contribute to network effects. The first is multi-homing, which refers to the phenomenon of users simultaneously using competing services in real-time. The second is network bridging, where companies diversify their services and build networks in different markets to maximize network effects. Alibaba, a Chinese e-commerce company, is an excellent example of network bridging. By integrating their e-commerce platforms, Taobao and Tmall, with their payment service, Alipay, Alibaba created a synergistic effect that allowed them to gather valuable data.

To achieve global network expansion and break free from the multi-homing phenomenon, companies must also focus on building a strong brand. Brand power becomes a crucial factor in creating trust and attracting users. This, in turn, leads to high switching costs, making it more challenging for competitors to lure users away.

In conclusion, understanding and implementing the four network effect strategies - network clusters, user poaching prevention, multi-homing, and network bridging - can significantly impact a company's success in building a strong network. Additionally, entrepreneurs should prioritize brand development and consider the benefits of scale and high switching costs. By incorporating these strategies into their business models, they can increase the chances of creating a sustainable and competitive network.

To apply the insights from this article, here are three actionable pieces of advice:

1. Focus on building a robust network in a specific area or industry. By concentrating your efforts, you can establish a strong presence and create a high barrier to entry for potential competitors.

2. Implement measures to prevent user poaching and protect the integrity of your network. Consider privacy features, like Airbnb's reservation confirmation system, to safeguard user information and discourage poaching.

3. Strive to create a strong brand that instills trust and loyalty in your users. A powerful brand will make it more challenging for competitors to lure your users away and increase switching costs.

By following these pieces of advice and understanding the strategies behind successful networks like Airbnb, entrepreneurs can increase their chances of building a thriving and competitive network.