Marketplaces like Airbnb will build more capabilities in-house instead of buying companies as AI makes software cheaper to develop. Airbnb is expanding into campgrounds and RV rentals rather than acquiring competitors. Most tech M&A deals fail anyway, so the era of constant acquisitions is ending.
Hey there. Thanks for doing this. This is awesome. Learning a lot. So Max, I'm from Epicurate and I was really wondering about, you know, as marketplaces vertically integrate, do you think that companies like Airbnb are going to start buying, you know, the property management systems that they, you know, their hosts rely on and we'll start to really see more acquisitions like that?
Yeah, it's interesting. I, I think my gut take right now is that you're going to see fewer and fewer acquisitions. That as AI is making software easier to develop, and that as companies are learning that copying their competitors is okay to do, which has not been part of the Silicon Valley culture for years, but is becoming increasingly normalized as Facebook and Google basically didn't invent anything. They just copied everybody. I think you're going to see fewer and fewer acquisitions. I think that, you know, there have been so few tech acquisitions that have actually worked out for the acquirer. Some of them are really big, like PayPal and Instagram, but most of them don't work out. So in general, I think you're going to see diminishment of M&A as software gets easier to develop with AI. And But do I think that you're going to have more and more vertical integration? Yes. I think you're going to have Airbnb expand out into campgrounds and they'll try to get into RVs and where Outdoorsy is getting into campgrounds and then they'll get into houses and everyone's going to expand horizontally and then they're also going to expand vertically either by building or buying. And I just think that the number of times that they decide that buying is the best option is going to diminish versus what it was 10 years ago.
Do you think that they'll look into more of the management system for the host?
I think they might. I think the general decision they're going to make is going to be, do we need to have them, you know, is that already sufficiently fractured and is there too much heterogeneity there? So we don't want to own one particular type of software. We actually want to create an API so that all of those can connect in. And we can serve different verticals more easily that way. Or do they find enough homogeneity? It's gonna come back to the heterogeneity homogeneity line. If the needs of what you're talking about are pretty homogeneous, then they might buy one and then try to crush everybody else. But if they find that those needs are heterogeneous, then they're gonna want to create an API and then have that be a third-party system and then suck as much value out of each of them as they possibly can because they own the distribution.
