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How AirBnB Became a Billion Dollar Company (davegooden.com)
654 points by cabinguy on May 31, 2011 | hide | past | favorite | 186 comments

Is anybody else slightly disturbed by all of the 'attaboy!' comments here on a post exposing unscrupulous and probably illegal business tactics?

Think the response here would be the same if it was MicroSoft or the RIAA caught in something like this and not a YC alum?

Anyway, great investigation and great analysis here, I think.

I am slightly disturbed. I don't mind startups using Craigslist to market and heck, they might even be allowed to do this if they have an option on AirBnB to "market my property on my behalf" to just post the properties on CL every two weeks but what bothers me is this:

1) They explicitly violated the posters request to not receive "commercial" mail of any kind. This is basically the same thing as SPAMing. Would HN condone any type of unsolicited SPAM from a YC startup? I think not. The intent of the poster was to receive only credible inquiries from people interested in renting their property, not from competing services or people wanting to sell them on services, etc.

2) They tried to hide the fact that it was SPAM by using fake Gmail aliases and pretending to be normal folk just trying to help that vacation rental owner out. If you're going to push your service out there to people, be transparent about who you are and allow people to tell you to not contact them anymore.

I think startups are held to a looser standard and of course we all love to be "hustlers" but the idea that this behavior should be applauded regardless of it's ethnical nature seems wrong.

The analysis seemed to be from 2009, perhaps things are much different now.

What bothers me more is that Craigslist is one of the great Silicon Valley stories of something that grew from nothing (an email list that one person created). They weren't always big. Long ago they were a small, scrappy startup. It took years of perseverance, hard work and providing a useful service.

It's a story startups should aspire to. Instead AirBnb seems to get a pass because they are a YC company. I can't wait for irony to strike when another startup does this to AirBnb.

This. I used to think they were clever, but now we know they're such repellent scumbags willing to abuse public resources for private gain that it's actually a black mark against Y Combinator to have been partly responsible and holding dirty money.


Of course. Email is the main immediate worldwide communication medium that isn't under the arbitrary control of one private owner. Spam is an existential threat to that, which makes it pretty much unforgivable. It's the price of a free society (and here's where I try to remind myself that really is worthwhile) that we can't impose an http://www.catb.org/jargon/html/I/Internet-Death-Penalty.htm..., but if we had some legitimate way to pull the plug on these douches today I surely would.

How is spam an existential threat to email? Spam filters have gotten exceptionally good, to the point where I find it hard to believe that anyone using a decent filter receives enough true spam in their inbox to make them stop using email altogether.

The spam filters today are good not because of magic, but because billions of dollars have been spent securing email.

What a complete and utter waste of resources.

Unseen cost of all that filtering. And for how long is it going to keep up with spammers?

Oh and all the false positives that are a nightmare for so many legit uses.

If you don't think so, please post your email here for us.

Multiple of my email addresses posted online unmasked multiple times, so I certainly get spam. My point is that filters are quite effective.

I still get spam in my inbox regularly. I'm using google postini to do the filtering, in my situation I wouldn't classify it as "quite effective".

Are there better alternatives I am not aware of?

I use the default GMail filters - perhaps I'm just lucky and receive easily filtered spam. I get hundreds of spam messages per day, and none break through on the average day.

Hundreds a day sounds plausible. So with that much crap to wade through, how long does it take to finally discover and rescue false positives from the spam folder?

It's hard to say. Microsoft can push out new products with splashy announcements, TV ads, etc. Similarly, they can afford to do "proper engineering" these days. But Microsoft as a startup, and as a growing company, was extremely unscrupulous. Likewise, the majority of the "scrappy" web startups cheat on their tech and cheat on their marketing, in the hope that they can find traction before they lose goodwill, and get profitable so that they can go back and fix the system before it blows up.

On a personal level this is very frustrating, because we like everyone we know to behave in a honest and straightforward fashion. But from a business standpoint there is a huge tradition of using some amount of misdirection to push new products to people. Parallels can be made with the animal kingdom and the use of camouflage, bright colors, and social interactions. Sometimes your business is in a position to strut your stuff, because you're the lion in the room. Other times you have to sneak around or be deceptive. Sometimes, fragile, trust-breaking tactics work - at least for a time.

In the end, the real condemnation for this behavior has to come from yourself, not from others. The market sees what is in front of it at the moment; it rarely knows the truth.

I agree the 'attaboy' comments are way out of place, but there is also an over the top reaction the other way with the criticism being heaped onto the AirBNB guys in my opinion.

It was technically wrong of them to leverage craigslist by circumventing the community's own "no commercial email" request, and they should get dinged for it.

But in the grand scheme of things, when you are a tiny start up struggling to survive, this is a relatively benign grass roots attempt at marketing which the AirBNB guys even probably regret doing.

Comparing RIAA's scare tactics to this seems a little out of place, but it is right in line with Microsoft's shady attempts at astroturfing.

"But in the grand scheme of things, when you are a tiny start up struggling to survive, this is a relatively benign grass roots attempt at marketing which the AirBNB guys even probably regret doing."

Hmm. Maybe. If you built a billion dollar business would you look back and regret a part of it that may have been instrumental to your success?

I'm definitely not excusing them for their actions but if I were in their position, I don't know if I could honestly say I would've regretted the past.

Well, as long as the spammer vaguely regrets it later, it's okay for them to spam me!

Can we all agree that a $1Bn valuation stops you being "a tiny start up struggling to survive"?

Sure, but the story is from a year and half ago.

AirBNB didn't become 'ramen profitable' until April 2009.


"Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men."


I agree. Likening this to spammers sending out millions of wholly untargeted emails is incorrect. These were extremely well-targeted communications likely sent out one-by-one by humans who had done some research.

I started my own company to get away from the do-anything-for-a-sale attitude of corporate america. I do not admire or respect AirBnb for this behavior. I don't care that it worked. I don't care if it was legal or not, it was dishonest. I know it's common, but it takes a fundamental lack of respect to lie directly to another human being.

I'll just continue to toil in obscurity; self-respect intact.

I am not being facetious by this question, but did you make a product that you are selling ?

If so, how did you get your first set of customers ?

Please share.

If you have not made a product that you need to sell yet, I think you will find when you do it, it's MUCH, MUCH more difficult than you ever thought it would be.

Also, selling a service - i.e. web development/design is very different than selling a product.

I've sold products.

I didn't spam. I talked with customers before the product was even finished to make sure we were solving a real problem, to make sure they understood our marketing message, and to make sure we really understood the space.

This led naturally to a situation where I had paying beta customers, and even more customers who signed up and started paying as soon as we launched.

There's a fundamental difference between building a product that doesn't depend on others for its functioning, and a marketplace, where the core function is access to other users.

It is about impossible to get a marketplace going from a standing start. I've commented on it before elsewhere: picking off Craigslist users was always critical for Airbnb to get going. There are dozens of startups trying to build companies off the back of what Craigslist doesn't provide.

I'm sure the Airbnb guys probably started with the honest approach, realized it got them nothing but cease and desist notes, so switched to the craftier fake emails from girls interested in the well-being of vacation renters everywhere. I bet it felt icky at the time, but here they are. And "you know what's cool....?"

There are two-sided networks that have launched without spam, or deceit.

The standard approach would be to pick a city like NYC, and pound the pavement selling the site to every high-influence group you can possibly identify, do that to get a decent inventory built up and then launch with that inventory and start proving the model.

Then, pound the pavement in other high-influence cities, work to get inches in the media, do biz-dev deals with travel/vacation sites, get yourself interviewed on local radio and tv, find every possible way to insert AirBNB into the news stories of the day And frankly, with the real estate crash, there were a lot of possible ways to insert themselves into the news.

Or they could just spam craigslist.

That said, my big question continues to be 'did they disclose this behavior to their investors'.

I have not released the product I am building. I have been supporting myself doing contract work.

My bad experience came when I was the first employee (not founder) at a VC backed startup. I was originally a developer but was promoted to be the technical liason in sales. My job was to sell the incomplete product. We went back and forth between government and enterprise sales while I was there. The company is still around but is doing something completely different now.

In the interest of not burning any bridges, I'll only say that when we would bid on contracts, every vendor from big guys to the other pre-product startups were stretching the truth beyond what I consider simply being optimistic about delivery schedules and ROI.

So yes, I do know what I'm getting into. My plan this time is to build a product that has obvious value to the customer on day 1, and leave selling by 'hustle' to someone else.

If it's niche enough and it works well, it might sell itself. Word of mouth is extremely powerful these days.

This is a FAQ: for your first sale, you sacrifice the price (all the way down to free if you have to). For the next sales, you show your reference customer.

Free is not a sale. You have to charge something to claim them as a customer.

You know what I mean. Even in EDA, having a reference "user", as long as they are using the product, is a major achievement that will be leveraged [to death] with future [paying] customers.

I am not trying to be pedantic. In my experience there is an enormous difference between having a user and having a paying customer. They may be a user before they are a paying customer, but there is a very significant difference.

But you don't have to tell that you first customer doesn't pay you ;).

It's interesting...seems this comment is pretty controversial. Went up a few points, then went back to 1, then went up again, then went down again.

Can anyone explain why this is so controversial ? If you downvoted it, mind explaining why ?

This is the same thing spammers do to steal money from people, and it's the same thing that dating sites do to pretend to have women interested in meeting dudes. Either way, it's fraudulent.

I don't hate that they did this, but I hate that they tried to pretend they were anonymous women that happened to really like AirBnB. Why be so shady about it and instead why not just be honest?

"Hey, we noticed your rental and thought you might like something we built. It's helped a lot of people fill vacancies and make money; check it out - url"

I assume they couldn't be honest because it would've violated Craiglist's Terms of Use, namely:

You agree not to post, email, or otherwise make available Content:

k) that constitutes or contains "affiliate marketing," "link referral code," "junk mail," "spam," "chain letters," "pyramid schemes," or unsolicited commercial advertisement;

l) that constitutes or contains any form of advertising or solicitation if: posted in areas of the craigslist sites which are not designated for such purposes; or emailed to craigslist users who have not indicated in writing that it is ok to contact them about other services, products or commercial interests.

m) that includes links to commercial services or web sites, except as allowed in "services";

I wonder if Craigslist could legitimately sue Airbnb.

Sue them for what, exactly? Coincidence?

While it doesn't take a rocket scientist to figure out what's happening here, it takes a bit more than connecting the dots to make a legal case stick.

[EDIT] Just to be clear I'm certainly not a fan of this. It strikes me as unethical and a little low on the "sleazy marketer" scale. I don't however beleive that this is illegal unless you can somehow prove that JillSmith03@gmail.com is professionally connected to AirBnB, and that this was done under corporate directive.

It's actually very easy to prove, because the same email was sent from several different accounts: you go after AirBnB directly and shoot for discovery, get them under oath to answer whether they did this or not.

If you have ever been questioned under oath, you know how tough it is to lie (ping me offline for details).

No point in chasing the gmail accounts themselves, that would be a dead-end.

I assume AirBnB have received many cease and desist letters from craigslist. Craigslist is just waiting for AirBnB to get bigger so they can get big chunk of money.

I doubt it. I worked at a company that aggregated job listings from Craigslist. We actually didn't do anything insidious; in fact, we served up their jobs with attribution and if the job was clicked, it would take the user to the Craigslist site. So basically we were feeding them extra traffic.

They sent a cease and desist relatively early on (not waiting until we got bigger).

It's likely that they didn't know and have either just sent them a cease and desist or AirBnb has chosen to ignore it.

this is correct - I've tried to reach out to CL ads to obtain early customers for a web app that would seem to solve their problem (and I'm very honest about it, saying it's our app), but it gets flagged as solicitation, with a note to post it elsewhere.

It's interesting that a lot of the recent billion dollar internet companies have some sort of gray/black hat streak. Off the top of my head:

Groupon: "we've already seen businesses complaining that the Groupons didn't make them money, or that Groupon sales people suggested they raise their prices substantially just before the Groupon 'discount'." http://www.theatlantic.com/business/archive/2011/05/why-does...

Zynga: "I Did Every Horrible Thing In The Book Just To Get Revenues" http://techcrunch.com/2009/11/06/zynga-scamville-mark-pinkus...

Is this something the the AirBnB guys would put on their YC app form if they were applying again? And then what would PG & co make of it? In fact, did pg know about this or encourage it in the first place?

Answers to these questions might be a good test of whether they should have done it or not.

Everyone's focused on the ethics here, but if this is indeed what AirBnB was doing, isn't it a massive (and repeated) violation of Federal laws on unsolicited emails (for one thing, you're required to identify yourself properly) and likely other rules as well? What this article alleges isn't just questionable marketing practices, it's potentially deceptive / illegal marketing.

Yes. It's a violation of the CAN-SPAM act.

Do you drive 66 MPH in a 65 MPH zone? This is hardly breaking the law. This would have been perfectly legal in CAN-SPAM if they added three things: an unsubscribe link, a physical mailing address, and mentioned it was an ad. It probably would have been even more effective.

If you want to stop spam, don't rely on bureaucratic processes to resolve it through legislation. Build a spam filter, or do some simple pattern recognition so you know that the same message sent 100 times isn't a legitimate inquiry to a posting.

So... they didn't do the things required to make it legal, but you claim it's legal?

"Acquit my client, your honour! It wouldn't have been murder if he hadn't have killed them, so he did nothing illegal!"

No, unsolicited email is never legal, CAN-SPAM only allows you to send email to people you have a prior business relationship with e.g. they signed up for your service/mailing list. Someone who posted a property to Craigslist hardly fits the profile.

I already wrote a spam filter. We stop about 4 billion spams a day with it. What are YOU doing to stop spam?

I understand your point but suggesting that it "would have been perfectly legal if..." does not make it any less of a violation.

Clearly the unethical part of this discovery is that Airbnb used 'shell' gmail accounts to do their work. Instead they should have found a way to present themselves with honesty and integrity to future members.

What are the good reasons for Airbnb's success and valuation? Are there any stories about their actions that inspire both confidence and congratulations. (aside from their Obama O's and Capt'n McCain flash success).

I agree. As if they're fooling anyone pretending to be an anonymous stranger from gmail who just happens to love promoting airbnb.

Didn't they fool pretty much everyone? Even the author only had a suspicion and resorted to some (impressive) tests to verify.

Do real humans send out advertisements to strangers on behalf of websites? Making sure to cite pageviews?

Don't get me wrong, I'm glad he confirmed his suspicion before blogging about this. But even one e-mail like that is suspicious.

> After harvesting email addresses (I only grabbed real email addresses, not anonymous craigslist addresses) I did one email blast to people that were advertising vacation rentals on craigslist...My results: 1,000+ vacation rental owners signed up and listed their properties on my test site.

He's missing a few steps... How many email addresses did this dude harvest and blast to get 1,000+ people to sign up for his special vacation rental site? What did the email say that he sent out? Was he also sending them from throwaway gmail accounts? What were his tactics?

This guy needs to follow up with more details. All he's shown is that at some point he posted 4 vacation rentals to Craigslist and he got 5 emails linking to AirBNB.

His findings rely on the fact that he got 1,000+ people to sign up their vacation rentals on his site after spamming some number of emails he admits to harvesting.

The "test" site he made (he's since edited it out), but google cached it http://bit.ly/iOPWi5 is www.mimbeo.com.

A quick look at the press page (http://mimbeo.com/vacation-rentals/press) and they have press releases announcing they got 1,000+ properties in one month: http://www.prlog.org/10408565-mimbeocom-reaches-1000-vacatio...

Here's a quote:

> "It's a no-brainer" said one of the founders. "We are offering owners and managers the same great service they receive from the pay-for-placement sites like VRBO & Homeaway. Not only that, but we broadcast our members listings to Facebook, Twitter, Myspace and more - and we do it all at no cost. We like to think of ourselves as the 'craigslist' of vacation rentals - with the added bonus that the listings do not expire - which is the main complaint we have heard from craigslist users."

Seems odd to go through all that for a weekend project "test" website. What's this guy's deal? This seems weird...

True this guys methods are questionable, as well as his objective.

But if his claims are true than both and AriBnB was faking user recommendations to gain users than they should get criticized for it. Even more so if they systematically violate Craiglist ToS.

Good research. I don't think this is anything new. I'm familiar with a few YC companies that use CL as a method to get their supply (in this case vacation rentals).

This is unethical.

And illegal. It is email advertising in violation of the CAN-SPAM act.

though successful.

Though unethical. If growing a billion dollar company means setting aside what makes me a good person, then I wouldn't want a billion dollar company.

Nor would I want to work there.

Curious which ones and how?

I wonder if this is the tenacity of founders that pg speaks of.

One day someone will come along and scrape the data from that "clunky and expensive AirBnB" to start an XX million dollar startup.

can we please get a response from one of the AirBnB founders?

I second that. What scares me the most is that no one from AirBnB came on that thread to strongly deny this article. And you know they read HN a lot and post often.

So I'm sad.

I'm sure that their attorneys have let them know that acknowledging that they sent out spam would expose them to massive damages under the CAN-SPAM laws. So AirBnB can't really acknowledge what they did and try and move on... financially, it would be ruinous for them. They are probably hoping that the controversy will blow over, until the statute of limitations expires at which point they can apologize and blame the previous regime.

Since this has been on the front page of HN long enough, I expect more in-depth coverage from TechCrunh really soon. That's usually how it works. That could get the ball rolling.

(I know TC has its critics, but they are exactly what's needed for this kind of story)

Seems to be happening for over a year so far.

> It never fails that I get at least 20 marketing emails a day from airbnb when I post a property on craigslist. I hope they do more of these PR stunts than filling up my inbox with unsolicited messages.


Is this 'grey' ? In the sense that it can be interpreted as 'shady' ? Hell yes. But is it "wrong" ? I don't think so.

I always thought that getting that first set of customers that will take you to product/market fit was going to be easy. What with the Twitterverse, Facebook and all and sundry. But let me tell you, from experience, it is DAMN HARD!

I guess the true test of whether or not this is 'unethical' is whether those people that signed up felt scammed after using the service.

If I were one of those people that got that email, sure I might feel a bit 'weird' that they presented themselves as 'Jill D' and not AirBnB, but after going through what I have been doing the last few weeks - trying to get customers - I can't say I would be upset.

"Is this 'grey' ? In the sense that it can be interpreted as 'shady' ? Hell yes. But is it "wrong" ? I don't think so."

I post a listing on Craigslist specifically saying it's not "ok for others to contact me about other services, products or commercial interests" (an option in Craigslist) and then a business tries to convince me to use their site using a disguise DESPITE clearly stating that I don't want to be contacted?

No, I'd say the true test of whether something is ethical or not is whether it violates rules and/or the choices of a user. Then again, I'm the type that actually wants businesses to respect my decision.

But wouldn't you say that's a bit unreasonable given that if you listed your apartment/house for rental on Craigslist - it can be safe to assume that you are interested in renting your house/apartment, no ?

I think every 'savvy' user always checks those boxes, but if there is an option that allows you to actually fulfill your original intent - i.e. you got no hits on Craigslist, but with AirBnB you have tons of requests and make a ton of money, wasn't that a win/win - even though they used a 'grey' tactic to reach you.

You say you don't want to be contacted, but that's to protect you from emails from the Nigerian prince and the blatantly obvious annoying spam. But things that are targeted at you, and can add value - I think it would be safe to say it makes sense in those cases.

They said they didn't want to be contacted. It isn't up to others to decide that they are a special case. Any marketer would find the wiggle room to make their email a special case.

This is spam pure and simple the seller can't decide their product is so in line with what you need that they can spam you. Who is then the judge of what is spam. Contacting user that haven't specified they don't want to be contacted by commercial interest is OK, but not someone who said no.

This is probably why the post is only interesting now (after a huge valuation).

I expect lots of the CL folks were perfectly happy to list their places on AirBnB and so far I've not heard complaints from users about they were approached (although I've not been looking for them either).

It is both "wrong" and WRONG: if you have to fake the real fans and the real efficiency of your startup, no matter how good your idea you think it is, it's just a bubble. Your startup sux, big time. As did and does Microsoft's (someone mentioned MS took quite the same savage approach when they launched).

Perfectly in line with what I was thinking, thanks!

I lead a group of guys trying make money online with the rental business, so they can travel. Each one is responsible for an area and it's hard to get new owners and apartments, believe me, but we never resorted to spamming. Instead we contact the Owners directly and openly, then we go to meet them personally and see the apartments, when possible. This way is much slower, but at the end we have much better listings for our customers. We'll never be a billion dollars company of course.

I do not want to argue if this type of stuff is good or bad. But I do want to point out to you all that list of tech gods is full of similar stories. Off the top of my head:

MySpace started out purely through spam...Tim Ferris started out in online supplement sales...People complained about Plaxo doing black hat stuff... they sold ok. People complained about Zynga ripping off other games and about breaking every Facebook platform rule there was... look at Mark Pincus now. People complained about Facebook's Mark Zuckerberg stealing their idea... he does not care.

"Everyone's doing it" isn't a valid excuse.

you did not read the first line of my post. My point is just that this is nothing new...

So and your point is now, that it's okay to be unethical like the people you mentioned, just to get rich?

not here to discuss ethics. Just making the point that this is extremely typical and far more common than you may think.

i think people would have a much different view if this wasn't airbnb and was a less reputable company. The things described in the post definitely constitute as spam and violate CAN-SPAM...but these types of tactics do work (if they didn't we wouldn't have spammers) and there wasn't anything malicious about it.

If there were nothing malicious about what they did, then why didn't they advertise as fake men, instead of as fake women?

AirBnB is less reputable, and this incident is why.

If you were an investor, would you feel lied to, or is this a cause and not an effect?

There's no such thing as a generic investor. Every investor is different, with unique values and tolerances.

Some investors would reward this; many would encourage it. It depends on why they are investors, right? Those looking for a significant return would take a fairly hard-lined "and the problem is?" position.

Good read, although, I wouldn't necessarily consider advertising your services to people already listing vacation rentals as "blackhat".

Blackhat insinuates that someone is being gamed, in this case, both the home owners and AirBnB are benefiting (maybe craigslist is losing out?).

Of course it's blackhat. They're sending unsolicited, automated spam to people who explicitly stated that they didn't want emails regarding commercial interests. There is a big difference between advertising and spam.

"explicitly stated" = "did not change the default"

You still have to respect opt out, even if it's the default.

I think it counts as "blackhat", but I'm not really outraged. To me, its equivalent to cruising the singles section of Craigslist and responding as a sock puppet recommending a particular dating site. Not a huge deal, but its not 100% above board either.

"Advertising your services" via faked emails is pretty black hat.

Curious to know PG's opinion on this.

AirBnB is not a "Billion Dollar Company." Investment is not revenue or profit. The revenue numbers I heard are in the 5-10 million range.

When AirBnB posts a billion dollars in revenue, then it will be a "Billion Dollar Company."

Sorry, you're absolutely wrong.

The value of X, for any X at all, is what someone else is willing to pay for it. That is how markets work. Any kind of market. And it works for everything from pricing apples to pieces of art to companies.

If people are willing to pay $1 billion for your company, it is a billion dollar company. If nobody is willing to pay you a dime for it, it is worth nothing. Your revenue is an input factor into what people are willing to pay, but doesn't determine the price.

If you study financial theory, the theoretically correct price for a company is the "expected present value of future revenue". Meaning that if you look at all future revenue that it should ever make, divide that revenue by a discount factor for the fact that a dollar tomorrow is not worth a dollar today (and further discounts for risk), that number should be the present value of the company.

So a company with little revenue and good growth prospects may be worth much more than a company with great revenue which is going off of a cliff. It is worth this both in practice and in theory. And anyone who says otherwise simply doesn't understand how to value companies.

Note that in practice, in illiquid markets (which stock in privately held companies always is) the variance of market value from the theoretical relationship becomes wider. We still price companies based on what someone, somewhere, was willing to invest in it. We do that because someone educated people, who is paid to get this right, with possession of more facts than we probably are, decided that this was a reasonable price after doing research. They may be wrong, but the last price paid is the best market indicator of the value of the company.

All this is true, but has no bearing on the common use of language. When a trader refers to Acme corporation as an $N company, he is indicating that $N is its annual revenue, not its market capitalization.

Citation needed

Common usage that I've seen is to refer to the market cap as the value of the company. For a random example http://www.fool.com/investing/general/2010/03/19/how-does-ap....

The other common usage that I've seen is to refer to a company as being worth X billion a year. In that usage the a year bit is not dropped, because dropping it would introduce confusion with the first common usage.

I have no horse in this race, but $x billion company has traditionally referred to revenues. The usage of "___ company" to mean valuation is new (last five years), rare among traditional press outlets, and overrepresented among the startup/Silicon Valley crowd. The idiom may be changing in meaning, but if so, it's in the early stages.

Hmm, that doesn't fit with my recollection.

But when I Googled for "billion dollar company" then "million dollar company" the first usage I found that wasn't in some way tied to startups was http://www.goodnewsnetwork.org/most-popular//red-mill-goes-t... where it clearly refers to revenue.

Ah well. Around here there is no question which usage is more common.

PS You may be amused that the top hit for "x billion dollar company" is http://hackerne.ws/item?id=2033232 which involves you.

AirBnB has a history of clever and aggressive PR, and this title is probably deliberate in that regard.

The first three google results for "billion dollar company" all refer to companies with billions in revenue.

According to Google and every economics class I ever took, people assume it refers to revenue. In common vernacular, "billion dollar company" means a company that actually generated a billion dollars in revenue, not speculative investment.

I mean come on... why is it fair to refer to AirBnB as a billion dollar company when there are actually companies generating a billion in revenue?

Nobody's paid $1B for AirBnB. The investors paid a price for a % of AirBnB that equates to a valuation of $1B. In other words, they've placed a bet that AirBnB will be worth more than $1B.

This is no different than how we calculate the market cap for any company.

And nobody's paid nearly $325B for Apple. But someone just bought a bit under 1 billionth of the company for about $350, so that's what the market cap works out to be.

I do understand what you're saying. However, the fact that AAPL shares are more liquid than AirBnB shares makes a difference to the way I think about valuations. APPL could be up or down tomorrow based on the example you just described but the same won't be true of AirBnB. If they IPO'd tomorrow, would they get a valuation of $1B? I don't know.

I'm not disagreeing with the definition. I'm trying to point out that even though the maths might be the same, I see a difference between startup valuations (based on funding rounds) and market caps (shares * share-price) of listed companies.

Unethical? possibly. Does it piss me off? Sometimes. Do I care? No.

I generally expect to receive spam from CL when posting or responding to ads.

If you don't care, why would it ever piss you off?

Do I ultimately care? No. Lots of other things to focus on.

When someone says "Craigslist spam!", is the first you think of a) spam posted to craigslist as listings, or b) emails advertising something (surreptitiously) to people that have listed their property on craigslist?

Not that the latter isn't "spam" of a sort, but it doesn't feel quite like "craigslist spam".

Although it is spam of some sort, a better description would probably be "using sock puppets".

Why doesn't and didn't craigslist check for the almost identical emails if they are going through their servers? They could likely dig them out if they keep archives by searching on airbnb, nicest, largest, page, views. Airbnb have the funds now to cough up.

Probably for safe-harbor laws. As soon as they start inspecting things for content instead of server abuse, they are then way more involved and become liable for a lot more shit. They already got a lot of heat from their adult services section, they don't need any more. It's the same reason banks do not want to know what is in your safe deposit box, even if it's mundane.

I hear you, however this is a competitive issue. It's an offense to craigslist by airbnb on craigslist, not an offence from person A to person B via craiglist. I suppose the first issue to look at is whether harvesting and then spam is against the terms of service. The content of those emails isn't genuine, Jill and Sarah aren't real people, they cannot judge the beauty of the properties they proclaim to have seen. It wouldn't be completely Winklevossing for craiglist to be pissed off.

If they turked each property one-by-one, I think that might be fair game.

I wonder what nickb thinks of this.

Blackhat or not, this is a great example of how there are very viable alternatives to SEO in terms of internet marketing. The ever changing rules and laws of search engines unfortunately make or break a vast majority of online businesses.

I agree. What AirBnB did is the modern version of creating thin content farms to spam Google search results.

For the record, I don't think this is that bad of a thing. If all of this is actually true (I'm not 100% sure it is), then it's certainly not on the level "actual spammers" perform at. Spam is basically unwanted and harmful advertising, and nobody complains when someone gets e-mailed an actual useful relevant thing out of nowhere. If the thing you're being e-mailed is more relevant than the ads GMail is showing you then I'm not sure you have a right to complain too much. Sure it may feel slightly off, but calling them "completely unethical" is going slightly too far.

When you go against the Terms of Service, the CAN-SPAM act, and the wishes of the classified ad creator, I'd say that's pretty unethical.

"Some very famous investors have alluded to the fact that they look for a dangerous streak in the entrepreneurs they invest in…and while those investors will never come out and tell you what they mean, this kind of thing is probably what they mean."

Eg, be naughty, not evil. Whether they crossed the line or not, dunno. It's a far cry from Microsoft intentionally leveraging their OS monopoly to destroy companies and corner industries back in the day.

In Startups Open Sourced, he says Airbnb "tried everything" but he says that press is the single best source of their growth. Having the happy customers came in second, but would be interested to hear if this helped them much. It's hard to believe that Craigslist is the reason why they'd be so successful when the product is so easy to spread by word of mouth and press.

Nobody here knows how much of Airbnb's growth is driven by Craigslist, it's purely speculative. Until Airbnb confirms, you'll never know but you'd have to be naive to believe that you can build a company up to $1 billion by firing off a bunch of emails. Nobody here has even suggested the possibility that "Airbnb became a billion dollar company" by suggesting how many Craigslist rentals are posted each day, along with a standardized conversion rate.

I'm surprised to see how negative the comments are on this. This is like Yelp paying people to write reviews. Shady? Sure. Illegal? The only part of the CAN-SPAM Act Airbnb broke was (1) not including a physical mailing address, (2) not mentioning it was an ad, and (3) not including an unsubscrive link. Otherwise, CAN-SPAM is laughable at best. It's hardly enforced. Don't expect Craigslist to come at Airbnb with a lawsuit, it'd probably not hold up in court.

I see this instead as one of Airbnb's many tactics to try and reach out to users. If you look at this logically, they've been covered by the press a lot. The amount of growth they might (or might not) have reached doing this would hail in comparison to how much they obtained by press and simple product and customer development.

I see the astroturfers are coming out in their defense.

Saying "the only part" of the law airbnb broke and then listing 1,2,3 violations is laughable.

Also I quite enjoy the irony that an account name of throwaway is defending the practice of using throwaway gmail accounts to spam people. Warms the cockles.

"It is a story of pure unadulterated hustle. And I love it." - Fred Wilson talking about the AirBNB team's Obama cereal hustle.

I'd like to borrow his words in regard to this post.

Fred's original post - http://www.avc.com/a_vc/2011/03/airbnb.html

'unadulterated hustle' and 'unscrupulous behavior' are surely not synonymous.

It's true. It's the difference between 'hustle' and 'hustler'. I think most confuse 'hustling' in the sports sense, with 'being a hustler' in the black-market sales sense.

I think Fred Wilson's quote is referencing entrepreneurs who 'hustle' and try very hard/use alot of energy in the sports analogy --- and NOT entrepreneurs who are 'hustlers' and use shady means to fulfill their needs.

In this context I think it's become a blend of the two.

The cereal was great, scrappy, creative hustle.

The spam is the opposite of all that. The spam destroyed a wonderful founding story. The spam destroyed their professional and ethical credibility.

definitely not "hustle". Sorry.

Not that I'm against what they're doing and if I was a VC I probably wouldn't care too much - but it's somewhat illegal in this case... Certainly against CL ToS as well.

Illegal how? I get the ToS violation, but not sure about legality ...

Are you saying it's a violation of the CAN-SPAM act? Or something else?

CAN-SPAM, sending from a fake address (illegal headers). CA has a specific law that pre-empts CAN-SPAM that definitely makes this illegal if sent from CA (don't ask how I know).

>CA has a specific law that pre-empts CAN-SPAM

A state law cannot pre-empt a federal law; when a federal law and a state law are in conflict, the federal law takes precedence over the state law. (U.S. Constitution, Article VI, Clause 2.) Notably, the CAN-SPAM Act expressly pre-empts any state law that "expressly regulates the use of electronic mail to send commercial messages, except to the extent that any such statute, regulation, or rule prohibits falsity or deception in any portion of a commercial electronic mail message or information attached thereto" (15 USC 7707). (So, a CA law against fraudulent email would survive pre-emption by CAN-SPAM, but a CA law against simple bulk spamming would be pre-empted by the federal law.)

Business & Professions Code § 17529

Pre-empts it. www.DanHatesSpam.com

I think you misunderstood my comment. It is legally impossible for a state law to pre-empt a valid federal law. However a state law may, in certain situations, enact additional regulations on types of conduct already covered by federal law.

I thought according to the article, AirBnB was posting from their own real gmail accounts they made, and the article writer was the one misusing others' email addresses.

Man oh man, there are a lot of (very bad) armchair lawyers on HN.

You might consider AirBnB's actions unethical, but they certainly aren't illegal - which would be obvious to anyone who bothered reading the CAN-SPAM wikipedia page. It's not illegal to violate Craigslist's TOS, and AFAICT the "spam" messages were sent from a legitimate Gmail account.

For those of you claiming "I'd rather be poor than violate craigslist's terms of service": Bullshit.

I'm not a lawyer but I am an anti-spam expert.

They most certainly are illegal. They are unsolicited advertising (which is fine under CAN-SPAM, sadly), and contain none of the requirements of CAN-SPAM - a legitimate business address, and a clear unsubscribe link.

Just because they come from gmail accounts does not exempt AirBnB from the law.

It's commercial email 100%. Probably a fake sender name (illegal), against gmail ToS, against CL ToS and no unsubscribe link and no one even subscribed in the first place. 100% against CAN-SPAM.

Does the new "illegal hotels" law have any effect on AirBnB?


I hadnt heard about anything like this from the airbnb folks, but I do know they have had successful advertising campaigns since over a year ago. So the basic premise of this article, that their growth source is a big mystery, is false.

Interesting amount of negative feelings towards AirBnB, and as a disclaimer I am a big proponent of "Do, and ask for forgiveness". This is what startups are all about, using available resources to their advantage and getting out their and hustling (even if it involves bending the rules a bit). Obviously rental owners (their target) were not to upset about being told of another resource to list their site on otherwise they would not have continued this approach. I can see where some of you are coming from in feeling violated/disturbed by this but given that a.) it appears to have worked b.) they informed users of something they wanted c.) no one complained (until now). I this that it was a very effective/creative way to solve their supply problem and it obviously worked.

Supposing Dave Gooden is correct...

The method seems risky at first, but when you think about the risk and how they solved the problem, it is perfectly acceptable.

To catch danger from unsolicited email (from the end recipient), the mail must first be reported. A complaint must be made. If the recipient doesn't report it, there is no action taken. Most of the time, it doesn't take but a few reports and then there are people digging into the scheme trying to figure out who is abusing the end users. This is because most people sending unsolicited email are not able to directly target their market. Viagra spammers have to send out boat loads of messages just to hit their market of old men with erectile disfunction who are too embarrassed to get the pills through traditional means AND not web savvy enough to realize that giving out their credit card information to a fly by night company selling drugs isn't the smartest idea.

Simply put - if you can directly target your market AND you have something that is game changing to those people - eg a superior product / experience / service compared to their current business efforts, you won't get flagged for spam. They'll check out your site, think it's the greatest, and become your customer because you make them money.

The problem for AirBnB was that Craigslist has evolved to try and prevent unsolicited mail of all kind - because most people or companies are NOT able to hit the sweet spot where they are sure that what they have to offer is exactly what the recipient wants, but doesn't know it until the email is received.

Having interns, family, friends, or other people who are genuinely excited about your business send email recommending it to exactly who will want it, without revealing their relationship to the business, is an acceptable, if temporary solution.

But you only need to build momentum, because if your product is amazing, the recipients of the previously unsolicited email will do all the word of mouth marketing for you.

So before you go and try and repeat this alleged successful route, make sure you have all the pieces to the puzzle before giving the mission a green light.

[cite: personal past experience at an ESP watching and doing the digging in resolving spam/fraud complaints]

It really shouldn't shock anyone that very few people follow the rules.

AirBnB raided Craigslist for users. Those users made more money and had a far better user experience on AirBnB to boot. Not exactly your traditional Viagra/Nigeria type spam.

When the end doesn't justify the means, sure, complain about the means. But this is not such a case.

We shouldn't forget that Craigslist is an evil monopoly

Bullshit. Citations please!

"It is a literal gold mine for black hats that learn how to exploit its millions of users and curtail its terms of service."

Either he doesn't know what "literal" means or I need to get a pickaxe and head on over to Craigslist.

Modern English speakers really need to sort out their usage of 2 words: literally and physically.

I think we need a movement against improper use of these such as "do I have to physically login and chage the details" rather than manually, and this "literal gold mine" which is clearly metaphorical.

What can we call it? How can we stem the tides before the dystopian precitions of Idiocracy become a reality?!?

Since I've already derailed this, also what's up with everyone saying "I could care less" when they mean "couldn't"?

You missed the "obligatory" xkcd. http://xkcd.com/725/

just wondering what s/w do you use for mass mailing and craiglist email harvesting? without getting sandboxed / blacklisted ...

You don't.

These types of messages definitely appear to fit the CAN-SPAM Act, which covers "any electronic mail message the primary purpose of which is the commercial advertisement or promotion of a commercial product or service".

Airbnb may be spending that $100M sooner than they thought: "Each separate email in violation of the law is subject to penalties of up to $16,000, and more than one person may be held responsible for violations. For example, both the company whose product is promoted in the message and the company that originated the message may be legally responsible."


Nobody will ever be able to legally prove the gmail accounts were created for and by AirBnB. Actually, I don't think those accounts were created by AirBnB guys, but by a third party, for AirBnB use. Ad extremis, the AirBnB founders might as well plead they never knew what was the exact method this third party will use to generate traffic and users.

Nobody? Get the IP addresses that access those accounts from GMail. You're going to find them all coming from one IP or a small number of American IP addresses. Ask the ISPs who they are. Job done, culprit found.

You think they'll be using anonymous proxies or something? I doubt it.

I think google won't let you bind an email to an ip

Glad you did all that testing to find something so damn obvious. Look at how they rank on google - they don't. It was really obvious they were spamming craigslist.

If it is/was that obvious, care to share any other 'obvious' practices that may not be common knowledge?

blackhatworld.com > everything you need to know.

Whether or not it's wrong or right doesn't matter.. what matters is are there consequences? If not, then the guys at AirBnB probably could care less, and are laughing and enjoying cocktails in rooftop bars while the rest of us are toiling away at jobs...

Remember, we only got 1 life to live.. think about it. Arguing right or wrong makes little sense

I believe, PG spammed more than what the two ladies did in CL.

great writeup. AirBnB may not be wrong, but what this means, it that anyone else can do the same thing .

this definitely reduces their valuation.

alluded, not eluded

Welcome to The Mesh!

I assume that you are talking about this? http://meshing.it/ the new sharing society?

While this is clearly not the most ethical behavior, how many of us wouldn't do the exact same? You gotta do what you gotta do.

Do you know what else is scummy? Writing a smear webpage about a competitor complete with intrigue involving leet "black hat software" and linking that page to your for-profit clone (mimbeo.com). For all we know this dude falsified the AirBnB e-mails himself just to make them look bad.

The author already claims he has access to professional spamming tools. All he has to do is spam people on craigslist pretending to be AirBnB in a way that can't be traceable to AirBnB. Then he writes an article complaining about AirBnB and asks "why would they hide behind shady tactics?"

You get maximum impact if you wait two years and post when your competitor gets really big so everything is forgotten and really untraceable.

Your comment is ridiculous. Can you really imagine someone making a two and a half year plan to set a competitor up like that? And in the meantime you're giving the competitor customers like crazy? Pull the other one.

Sorry, I didn't mean to go all conspiracy theory here. I just felt a sleazy linkbait vibe from the article and wanted to provide my "fair and balanced" opinion.

With all your suspicion, did you bother to check out any listings on mimbeo.com? I've opened about 20 from various states and they were all listed in 2009. The site is not current.

Sounds like a lot of people on here are jealous. Obviously they weren't being ethical, but I think just about every popular web startup does what they need to do to solve the chicken and the egg problem. I think every single dating site puts up fake profiles, sends fake msgs, winks and flirts to get started.

The author uses the term "black hat" way too much and very loosely.

Spam is black hat.

I love this. Being scrappy is one of the best qualities among entrepreneurs. The attitude of "do anything" to succeed usually results in success not to mention it is one of the characteristics that PG looks for in founders.

Even when it's illegal? Is this an action that you consider moral but illegal (re: CAN-SPAM and various state laws)? Should AirBnB's investors be worried about the potential liability of lawsuits?

> Each separate email in violation of the CAN-SPAM Act is subject to penalties of up to $16,000

- http://business.ftc.gov/documents/bus61-can-spam-act-complia...

I'm very curious if they misrepresented the nature of their growth to their investors. If they did, they could be in violation of securities laws, in addition to CAN-SPAM.

"do anything to succeed" - Isn't that also a hallmark of sociopathy?

I agree - maybe I'm just drinking the YC gatorade here, but to me it shows scrappiness and dedication and does not seem especially immoral. Who did it hurt? For the people who were annoyed by the spam, it took 30 seconds out of their life to read and delete the email. For the ones who went ahead and posted their rental on airbnb, it probably led to more business plus the added benefit of getting to use airbnb's elegant interface instead of trying to keep track of dozens of craigslist emails. The only money that airbnb made from this lie was by finding people additional renters for their homes, which seems like an everybody wins scenario.

If it was outright illegal then they'll have to face the repercussions of that, but I doubt they'll lose much sleep feeling bad about what they've done.

Well, I'll be sure to include you along with AirBnb on my list of "People you cannot trust to be ethical".

"I love this."

Really? Personally, I hate spam.

Have you been on craigslist? I fully expect to be spammed about anything I post on the site, it seems like a natural price to pay for being able to get the attention of hundreds of interested buyers instantly. And at least in this case the spam was a useful offer that was in line with what the posters were trying to do anyway.


"This wasn't illegal in any sense but it could have backfired on them by pissing the wrong people off."

This was illegal in the "this was illegal" sense.

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