Interesting read and thoughts on it. Besides their great exploitation of direct/indirect network effects airbnb has simply a superior quality which gave them such scale. As Elizabeth pointed out, there had been similar offerings such as craigslist and also in Europe we had several multi sided platforms to offer rooms for “short term rent”. Nevertheless, Airbnb seemed to be the first one offering insurances for both parties, having a clear website with all information needed, ratings etc.
I am wondering if superior quality and the right use of network effects (including a large network) is enough to stay the dominant player over the next 15 years? The network seems to be the biggest barrier to entry, but what if Facebook or Google start to get into this market ? Facebook has a large user base, strong network effects, is connected with Airbnb anyhow and could even support the financial transactions itself. Even though it does not seem to fit their business model and strategy nowadays, it might do so in the future.
Thank you for you post. In my opinion, Skype has network effects without login-effect which might be its downfall. I love Skype and used it regularly but since Facebook/Whatsapp introduce it´s “VoIP-call” function my usage declined rapidly. The low switching costs to another VoIP provider enables Facebook to leverage its existing network, add a new application and might take over market dominance soon – everyone of my friends is on Facebook but only a small percentage of them is on Skype (or I added only a small percentage).
When switching costs are low you might have to compete with quality – but can Skype provide a better experience/connection quality or scale than Facebook and its messaging app everyone has on his phone ? I doubt it and I think that Skype will face hard times in the future.
Thank you for your answers. Jon, interestingly in the beginning Groupon made use of direct network effects on the consumer side: Before a special deal was “active”, 500 customers had to purchase it. This lead people to share this deal with others to get the deal over its “tipping point” – in some way more users increased the customer´s value. I am wondering if they should have sticked to this “deal tipping mechanism”. Nevertheless, I agree that Groupon‘s business model has additional flaws as you’ve mentioned which add to my doubts about its sustainability.
In my opinion, Blockbuster really did make some terrible management mistakes and had wrong judgement about the changes the industry would go through. They did not see that expensive retail stores/distribution are not competitive resources anymore and that creation of value for the customer changes dramatically. In fact, Blockbuster could have adapted to it and e.g. bought Netflix: In early 2000s, Netflix Co-founder Reed Hastings offered Blockbuster to buy Netflix for $50 million dollar – a sum which would have been nothing for Blockbuster at that time.