
Airbnb Offers Unconditional Apology, And $50,000 Insurance Guarantee - sahillavingia
http://techcrunch.com/2011/08/01/airbnb-offers-unconditional-apology-and-50000-insurance-guarantee/
======
cletus
AirBnB reminds me a lot of early days of Ebay.

Ebay has a trust problem. The seller needs to trust the buyer will send
whatever is sold. The buyer needs to trust the seller to pay.

Part of this is handled by the transaction process where the seller doesn't
typically send something until paid but the buyer if unnscrupulous can always
do CC chargebacks, cancel checks or the like. The buyer just has to trust the
seller.

Reputation is the big part in this but is no guarantee. Actually what Ebay
needs is to show the total _value_ of buy and sell transactions _separately_ ,
not just the number of transactions.

AirBnB seeks to solve these same problems with reputation.

The problem? At worst on Ebay, the buyer or seller loses 100% of the
transaction's value. On AirBnB, the potential loss is many thousands time the
value and can include irreparable harm (eg murder, serious assault, rape,
etc).

What's more they're facilitating people doing something generally not allowed
by their leases (if they rent) or by legislation or regulation. That's
potentially a huge problem.

So it's fitting they set up this kind of insurance guarantee. Much like Ebay
securing transactions (to some degree at least), the extra confidence in the
system promotes its use.

I don't believe this is an end to AirBnB's problems however. They're simply
kicked the can further down the street.

Imagine this scenario: someone rents a house through AirBnB while the owner is
away. They set up a meth lab. The meth lab explodes, burning down the house,
burning down 2 neighbours' houses and kills three people, two of them
innocents. What a huge liability mess that would be. Who is responsible?
Clearly the person who set up the meth lab are responsible but a canny lawyer
will argue that AirBnB and the owner were negligent in their actions.

~~~
chrisbroadfoot
> The seller needs to trust the buyer will send whatever is sold. The buyer
> needs to trust the seller to pay.

ITYM "The buyer needs to trust the seller to send whatever is bought." etc.

------
tptacek
This is a story _about_ the #1 story on HN right now, and its only
contribution is the last sentence where Arrington continues to try to stir up
shit about the way Chesky wrote one sentence in the post.

I flagged it. Fuck this shit. I'm sure the story does a service to TechCrunch
readers, but it's a drag on HN.

~~~
hugh3
I thought it provided something new, in that it has a more useful headline. I
clicked on this one before "Our Committment To Trust And Safety", which was
_much_ less informative.

~~~
oasisbob
From <http://ycombinator.com/newsguidelines.html>:

 _Please submit the original source. If a blog post reports on something they
found on another site, submit the latter._

An arguably more-informative headline isn't worth bifurcating the discussion.

------
WordSkill
Okay, so, it's a major u-turn, so major that they're now denying they even
ever had the previous policy of simply denying all responsibility. But the
past is the past and the $50,000 is, well, $50,000 more reassurance than their
users had before.

It's just a pity that in this final coming clean with their customers that
they couldn't, you know, come clean.

"... we weren’t prepared for the crisis and we dropped the ball".

How is it possible that no-one predicted that something like this might
happen?

With multiple founders and employees thinking about the business day and
night, this never occurred to anyone? Really?

And what about the investors? Not one single investor, these Gods of fine
detail, raised the question of what contingency plans were in place for just
such an event?

I don't buy it.

Airbnb had a plan, and that plan was to boldly deny all responsibility, to
flat out ignore the human consequences of their flawed model - a flaw that
affects only a tiny fraction of their hundreds of thousands of users but one
that, nonetheless, has massive, life-changing consequences for the unlucky few
who get caught beneath the wheels of statistical inevitability.

Brian Chesky knew this, every employee knew it, every investor new it and Paul
Graham damn well knew it too.

Unfortunately for all of them, they didn't think about the possibility that
one of the unlucky few might have the communication skills and, more
importantly, the sheer tenacity to tear down the illusion that they have so
carefully crafted. In the past few days, she became a victim again as a
panicked company and horrified investors, watching $1.3bn start to swirl down
the drain, launched a concerted slur campaign against her, casting aspersions
on her sanity, as if that had any bearing whatsoever on the tragedy that
befell her - they owe her a quite separate apology for that nasty, mean-
spirited assault.

Hilariously, they also owe Michael Arrington an apology, but you shouldn't
hold your breath waiting for that one.

So, yesterday is yesterday, we stride bravely into the future with a somewhat
more humane policy in place. What hasn't changed is that the model is still
fatally flawed and, sorry to be crude, but how is $50,000 meant to be applied
to a serious beating or, God forbid, a rape?

We all hope that won't happen but, again, I look at this whole concept and I
know in my heart that, eventually, it will. Does anyone really believe that
this model has a future? Are we in that much of a bubble?

P.S. Just for the record, and Brian Chesky take note, this comment "reflects
my true feelings".

~~~
drink
Have you ever tried to collect a claim against insurance? They will find any
loophole possible to avoid a payout. Have fun trying to turn that $50,000
guarantee into something real.

~~~
JamesNK
Going to the press looks like an effective way to get results.

~~~
WordSkill
Sadly, not everyone has the determination, tenacity or communication skills to
drum up the necessary attention.

Corporations have learned that, with the vast majority of people, you just
have to fob them off until inertia kicks in.

The irony is that the victim in this case probably wouldn't have been a
problem if they hand handled here a little more professionally in the first
24hrs. Given all that was at stake as they entered a funding round that valued
them at $1.3bn, Chesky should have gone to see her in person the minute he
became aware of the situation and put her straight into a five star hotel
while he organized and paid for a complete deep clean, fumigation,
redecoration, refurnishing and whatever else it took to soften her. Then he
should have tactfully proposed that he give her a reasonable sum, perhaps ten
grand, in return for her signing an NDA.

In three or four days he would have saved his company from $100m in longterm
damage, possibly much more if this starts a meme of wariness about Airbnb that
derails their IPO plans.

------
Cushman
And _there_ it is. That thing that Airbnb could do to not only fix the
problem, but turn it into a spectacular value add for relatively little cost
to themselves, and something which absolutely cannot be matched by their
competitors.

Well done.

~~~
Powells
really? how is this not going to be matched by their competitors? Wimdu has
tons of funding and it is scaring the hell out of Airbnb

~~~
Cushman
Hey, I could be wrong. But every day that goes by without announcing the Wimdu
Guarantee is distance between them.

------
callmeed
I think this is progress, but I'm still wary. The following 3 things are still
question marks for me:

1\. Who is underwriting this insurance and–most importantly–is it still valid
for hosts who are technically breaking the law of their city/county/state?

2\. Are we sure this policy wont make these situations _more common_ or
targets for fraud? I'm thinking of bank heist movies where they always say
"don't worry, your money is insured by the federal government" ...

3\. What about guests? If I were to guess, I'd say the next big AirBnB scandal
will be "guest attacked by host's dog" or "guest slips in host's shower,
breaking rib". Who's going to cover that?

------
redthrowaway
Well that settles the matter for me. Wish they'd done it sooner, but better
late than never. Hopefully EJ is satisfied with the outcome.

------
barredo
Almost a perfect response. Only a week after. But being this their first
"defcon 1". It's pretty great.

The AirBNB guarantee is spot on. Buen trabajo

~~~
eli
A week and a _ton_ of negative press later.

I still give them credit for doing the right thing, but it'd be a lot more
impressive if they did it back when it was just the "right thing to do" and
not "the quickest way to end this crisis that threatens to destroy the
company"

~~~
Cushman
That negative press means nothing anymore. They haven't just fixed it, they've
come around spectacularly and destroyed their competitors. From now on this is
a story about what could happen if you go with a service that doesn't have
Airbnb's $50,000 Guarantee.

~~~
eli
I respectfully disagree.

For one, the fix will not get nearly as much coverage as the initial problem.
Many people will not hear about it and will be left with a negative impression
of the company.

Second, for those carefully following the story, I think it's clear that
they've handled this very badly up until now. Maybe I'm being unfair, but I
award only partial credit for doing the right thing only when your back's
against the wall.

The Guarantee would have been spectacularly more powerful had they announced
it _before_ the story got picked up by CNN and USA Today. I think it's silly
to argue otherwise.

Finally -- and this is just my personal opinion -- I think even with the new
insurance policy it's a net loss for Airbnb. This episode has highlighted just
how bad the worst case is for someone using the service. The personal value of
my home and safety is considerably higher than it's appraised dollar value.
Bottom line, I am less likely to use Airbnb today than I was last month.

~~~
Cushman
I pretty much agree with your first three points. As to the last, though, I
think it's pointed out a problem with the _industry_. Airbnb has separated
themselves with a huge reason to go with them over craigslist, and that market
is not going to go away.

~~~
eli
I agree with you, but it's not a zero sum game. Airbnb (and its competitors)
are counting on people who wouldn't previously have participated in short term
P2P rentals. Hotels and hostels are at least as much their competition as is
craigslist.

------
staunch
They did what every great startup should do: respond to user problems with
solutions that make the product better for every user. Most startups don't
have products that interact with the real world so directly, so their learning
is more painful, but the concept is always the same.

I'm rooting for Airbnb. I hope this incident will just spur them on to do a
better job and move even faster.

------
curt
Great response but there's still going to be a ton of damage done to the brand
that will really hurt their long-term growth. How many millions of people are
hearing about Airbnb for the first time in a negative light. That's hard to
overcome. They raised their round to fight off any potential competitors, but
they just made a huge opening for one of them to exploit.

------
andrewcooke
so they pivoted to insurance fraud detection?

[you can downvote this to your little gung-ho-yc heart's desire, but the
problem won't go away as easily]

~~~
pemulis
The guarantee is probably handled by pure insurance companies, who have been
dealing with fraud successfully since before the Code of Hammurabi.

~~~
hugh3
Are you sure?

In a low-fraud world, it's probably cheaper for airbnb to insure against it
themselves than to outsource that to somebody else. You don't insure against a
large number of small losses, you insure against the possibility of one big
loss -- this is why _you_ buy car insurance but Avis doesn't.

~~~
gst
At least in the short-term there is one big risk for them: They don't know how
many users will claim that there have been damages. So they don't really know
how much this insurance will cost them.

By outsourcing the insurance to an insurance company it's not their problem.
It's the task of the insurance company to assess the risk and Airbnb knows
beforehand how much it has to pay.

------
flocial
They did what they had to do to turn this around. I think it came out a lot
more expensive had they been more prepared and $50,000 is one whopper of a
liability. Hopefully, they did some simulations for worst case scenarios.

One thing is, you have to require due diligence on the part of renters and
vary coverage accordingly. Otherwise you just encourage carelessness now that
the illusion of trust and safety is tarnished.

This fiasco might have dented their velocity but I'd say overall, better now
than later. They now have a major asset, getting through a crisis. Now they
need to bullet-proof it like PayPal's epiphany that their main business is not
digital money transaction but fraud detection (because it can rock their
bottom line and tank the business). For this you need hardcore engineers who
can apply rigorous analysis to the problem of shady renters not more community
guidelines.

------
jeremyarussell
I'd like to think that AirBnB is founded by decent people that wanted to make
money making something as complicated and common as house renting an easy to
do thing for many people. I'd like to think that EJ will get some financial
help. I'd also like to think that AirBnB did a good job admitting their
wrongdoings and responding to the situation at hand. Years of experience have
told me I'd like to think of a fantasy world :).

That said I really do hope it works out, but it's to soon to tell how this
will all turn out. For now I'm content with the fact that they are trying to
make things right.

------
pseudonym
>>>It’s never too late to fix bad press with a straightforward, unconditional
apology.

I'd debate that.

That said, given that the snail-news services like CNN have picked up on this
fiasco, it'll be interesting to see if they also pick up on this follow-up, or
if it's already outside of the news cycle and, as such, too late for an
apology to anyone who follows CNN but not HN or Techcrunch.

------
charlieok
It would be nice to be able to use an "internet-wide" reputation on sites like
Airbnb, instead of recreating it on each site.

If I can easily prove to Airbnb things like, "this is my identity on
couchsurfing, that is my identity on ebay, this is my identity on [wherever]".
Airbnb could provide the service of verifying those claims and presenting a
summary to the seller.

~~~
SkyMarshal
They already integrate with Facebook, just not prominently enough imho. And I
don't know why Couchsurfing would cooperate since they're pretty much a
competitor.

~~~
charlieok
I guess I'm hoping for standards in this area to hurry up. Then you could do
it between any major site and any other major site.

Kinda like linking accounts for easier sign-in (one site becomes the identity
provider, the other becomes the relying party). But in this case, the purpose
is to satisfy another end user of the validity of the claims, not the site a
user is signing into.

------
ibejoeb
Wow, I would have liked to listen to them come up with this plan. Nobody else
is concerned at this announcement? Good for being aggressive, but retroactive
$50k pseudo-insurance? That seems like a bit much to commit to right now.

edit: the new customer service operation sounds fantastic, btw. Nice assembly
in just a few days.

------
jcc80
This is all very disappointing. What am I supposed to read about now? Where is
the drama, intrigue and scandal? Oh well, guess I will do some actual WORK.

------
gfaremil
That which does not kill us makes us stronger. So it seems AirBnb is stronger
than ever after this.

------
BasDirks
Bravo.

------
dmlevi
well done Airbnb. However que the fraudulent charges team...

------
shareme
hmm you do something illegal according to your lease..Airbnb now going to give
out $50,000 for doing some illegal?

Read the fine print folks..it does not match..

~~~
nkassis
They are not giving any money yet, just offering in case something happens and
there was always making money on it so this doesn't change much. Also, i'm not
a lawyer but subletting is a breaching of your contract (lease) not something
illegal it's just something between the renter and his landlord. And it's not
even clear to me that it's really subletting as you still live there and have
stuff there you are just not present at the time.

------
lclaude01
One week later ! a sign of weak leadership...it may be time to shop for a new
CEO and let the founders enjoy life (step aside)

------
lhnn
I must be the only one who thinks this isn't Airbnb's fault.

~~~
wccrawford
It's partially their fault because they prevent owners from doing proper
background checks on tenants, and don't offer the service themselves.

But it's also partially on the owner for not watching their place carefully
enough, and not being prepared for people who are less than honest. You can't
do business with the public without having a plan for that.

------
jpdoctor
$50K is not even close to the right number.

------
drgath
Original: <http://news.ycombinator.com/item?id=2834334>

Please post comments there.

------
dasht
I think they need to sharply pivot to some very different products or else
fold and return investor money.

What is their guarantee to guests? What prevents them from being a target for
scams to collect host insurance? What statistics can they provide us about the
wellbeing of all past guests and hosts?

If I'm going to rent out a room or a flat for the prices they advertise -- but
apparently I better have an extra $50K of insurance before doing so -- is the
two or three digit per night rent really worth it? This new guarantee sounds
like an admission of failure.

