How Business Model Canvas May Have Helped Airbnb in Overcoming its Retention IssuesEstimated Reading Time: just 3 min

The Business Model Canvas (BMC) is the structure of a business plan on one single page.

The Canvas is popular with entrepreneurs and intrapreneurs for business model innovation.

Fundamentally it delivers three things:

• Focus: since it is more concise than a traditional business plan
• Flexibility: sitting on a single page itis a lot easier to tweak than a business plan
• Transparency: it makes a much easier to understand a business model

This business model design template is based on:

• Customer Segments
• Value Propositions
• Channels
• Customer Relationships
• Key Activities
• Key Resources
• Key Partners
• Revenue Streams
• Cost Structure
• Social & Environmental Benefits/Costs

An interesting case study of a successful BMC application is Airbnb.

A‌i‌r‌b‌n‌b‌ is a company based in San Francisco and it is one of the most famous online marketplace and hospitality service in the world.

The company does not own any of the real estate listings but, as a broker, it receives commissions from every booking.

The initial concept of the company was created by Brian Chesky and Joe Gebbia in October 2007 for the Industrial Design Conference held by Industrial Designers Society of America.

To pay the rent for their loft in San Francisco, they offered short-term living quarters, breakfast and a unique business networking opportunity for attendees who were not able to book a hotel during that period.

The idea worked so, together with Nathan Blecharczyk, they decided to launch the Airbedandbreakfast.com website in August 2008.

To raise enough money to sustain their business, Airbnb founders sold cereal boxes for Barack Obama and John McCain.

They sell 800 boxes at $40 each, netting $30,000 in funding for the company.

Airbnb then went big when it started posting its announces on Craiglist gaining visibility and being able to drive traffic to its website because the detail of the posts was available by clicking a link that redirected the users to airbnb.com.

Suddenly, with very little investment made, Airbnb had an audience and the quality of the service did the rest. In March 2009, due to the increasing popularity of the service, the site’s content expanded from air beds and shared spaces to a variety of properties including entire homes and apartments, private rooms, castles, boats, manors, tree houses, tipis, igloos, private islands and other properties.

At this point, Airbnb Business Model was as in the Canvas below.

At this point, the company started to experience issues in the Retention stage of its Funnel.

By segmenting their customers, Airbnb noticed that there were 2 groups of advertisers:

• Very active and happy ones
• Unhappy ones that left the service

Looking into the two groups, Airbnb found that the difference between the two was in the quality of the photos in their ads. In fact, properties with professional, verified photos were booked 2,5 times more than those without. Also, the revenues were higher since these hosts were able to generate an average of $1.025 per month more.

Therefore, the company decided to attempt something new and Airbnb started a free service of professional photographers that visited 13.000 properties in the first year.

Looking at Airbnb Business Model Canvas it is clear that the idea made sense because the increasing Salary Costs was more than balanced by the increase in Revenues Streams due to better Customer Relationship caused by a greater Retention.

The success of this initiative improved retention and helped to bring the company to an exponential growth.

In fact, in 2017, Airbnb hit:

• $2.6 billion in Revenues
• $450 million in Operating Income
• $93 million in Net Income
• Around 3.100 of employees