Max Brun compares how Uber and Airbnb build network effects differently. Uber relies on commoditized supply that scales fast but faces thin margins, while Airbnb's differentiated listings create stronger defensibility. Wimdu tried to compete with Airbnb but couldn't overcome these structural advantages.
Chapters
using some examples of just marketplaces that we all know of, right? So if we use like an Airbnb and Uber, could you maybe describe kind of like the network effects in play at both of those marketplaces and, you know, use that as a way to kind of point out how they might be different?
The basic construct of a marketplace and a network effect, both of them meet, right? So adding more drivers makes Uber more valuable for riders, vice versa. Adding more hosts makes Airbnb more valuable for guests and vice versa. So people sort of conflate the two sometimes. But if you actually look at the dynamics within each marketplace, Uber supply is very, very commoditized. So when I'm trying to book a ride, I don't care who the driver is. I just want him to get to me in 4 to 5 minutes. And below 4 to 5 minutes, rider behavior tends to not change. And so as a competitor, all you need to do is hit 4 to 5 minutes, a wait time of 4 to 5 minutes relative to the size and location of your customer base. Right. That's— it's challenging, but it's not that hard to do if you're willing to burn some money, which we saw happen in the case of Uber. Airbnb, on the other hand, the supply is highly differentiated. Every property is different by location, by price range, by quality, by the individual attributes it has. You know, some might have a fireplace, some might have parking, some might have high-speed broadband, the number of beds. Differs. And as a consumer, you care about each, if not each, many of those things. And so as a marketplace, Airbnb needs to have critical mass in each of those, you might say, category combinations, apartments within a certain price range in Paris that have 3 or 4 or 5 of those constraints depending on what their users are searching for. That's a huge amount of variability, really hard to solve the cold start problem, but also massively defensible once you get to scale. It is very, very hard to create a comparable experience, which is why even now Airbnb doesn't really have any direct competitors. Like it's never had any direct competitors outside of like Wimdu that tried to subsidize their way into getting a couple of apartments, could never match up to the experience and then flamed out. So that's one axis. The second axis is scalability. How easy is it for you to leverage the existing scale of the marketplace to expand into new locations? With Uber, insanely hard because it's a very hyperlocal marketplace. You need both demand and supply in the same location. So you bootstrap in one location, then you go into a new city, a new location, and start from scratch all over again. So your CAC starts out really high because you're subsidizing everyone. And as you start or successful in getting more people on, word of mouth spreads, CAC starts to decline. You move to a new location, goes right back up, right? So it's It's a challenging marketplace from a unit economic standpoint. Airbnb, once you have a host in New York who's attracting guests from everywhere, the next time those guys might want to go to Paris or Prague or London. And so you can leverage that demand to attract hosts in those regions as well. So a whole lot easier to scale. And you can see this in the unit economics of both Uber and Airbnb. Airbnb had a much easier time getting to profitability. In their case, it was actually something they could control. In Uber's case, it took a while. It took a CEO change. That was a challenging journey.
