Airbnb: Crisis Management Fail

There are so many things disappointing about this story regarding an Airbnb customer and Airbnb.

Customer's blog posts:

http://ejroundtheworld.blogspot.com/2011/06/violated-travelers-lost-faith-difficult.html

http://ejroundtheworld.blogspot.com/2011/07/airbnb-nightmare-no-end-in-sight.html

I hope the victim is able to eventually find peace as this incident certainly appears to have left her in an extremely vulnerable state.  What's disappointing is that Airbnb had several opportunities to turn this horrible situation into something better for both the victim and Airbnb.

They only had to do the right thing. By doing the right thing, Airbnb could have made the incident a non-issue. They should have taken care of the victim: provided accomodation, resources, and support. The cost? Some phone calls, a personal visit, and some nominal costs. The downside for not doing so? Alienation of its current and future community members and hundreds of millions of dollars in valuation.

A lot of people argue that by doing the right thing Airbnb is setting a precedent and opening the door for future fraud claims. That is a short-sighted and misinformed judgement. Just because Airbnb provides support to this customer doesn't mean they are setting a precedent for how they treat all cases. And even if they are extremely concerned about setting a precedent, they can take mitigating steps.

If this situation were handled correctly, the victim's blog post never would have been written and none of us would even be having this conversation.

This is Crisis Management 101 for Airbnb and they failed.  They failed not just once, but multiple times.  Each stage of this crisis elevated the stakes of the game, and each time Airbnb mishandled the situation.

Stage 1. Victim contacted Airbnb
Stage 2. Victim writes blog post
Stage 3. Victim writes 2nd blog post

People familiar with crisis management know that the minute a story about a relatively unknown company hits mainstream media in a negative light, the negative brand cost is tremendous. For the millions that are for the first time hearing about Airbnb through mainstream media outlets, they are leaving with a horrible first impression.

There is little Airbnb can do now to change those people's impression.  They read the news story, remembered "Airbnb = not trustworthy", and moved on.  Tomorrow their attention will turn to something else.

The best thing Airbnb can do is take advantage of its current airtime to broadcast:
1. What its doing to prevent future situations like this from happening
2. How it plans on supporting community members
3. An honest apology

The climb out of a ditch is always more difficult than the fall in. It's up to the Airbnb team to figure out if they make things right. At the very least I hope they make community management priority #1 (it certainly is not right now).

Why PayPal is interested in Where

Yesterday, eBay and PayPal announced its acquisition of Where and many felt the reason was to strengthen PayPal's play in the mobile commerce space.

While that is certainly true, the strategic play is to expand PayPal's customer base to include small offline merchants--a much larger market than its current customer base consisting primarily of small online merchants. PayPal's growth and differentiation has been driven by small merchants who were selling online--either on eBay or their own website. Yet the ecommerce industry has begun to be dominated by large players such as Amazon who can provide consistent and simplified buying experiences. Luckily with the recent stunning growth of companies like Groupon, a completely new opportunity opened up for PayPal.

One way to conceptually think about a company like Groupon, which is driving online sales to offline experiences, is as a bank. Groupon is collecting money from online consumers and sending money to its offline merchants. PayPal wants to be that online-offline bank for every small merchant.

The Where acquisition is a great extension of how PayPal will to continue to serve its core customers, small merchants, but in a whole new (and much larger) market -- the offline world.

China = FAIL?

I've been thinking about things and I'm believe that China's economy is in a bubble. I don't know exactly when, but I'm predicting a bubble burst in the next 3 years.

Unfortunately, my economic prediction in 2007 that our economy was going to crash proved true. Again...I am not an economist, but I'm getting the same sense about China's economy.

Why would I make such a prediction when everyone else is saying China is the growth engine for the world's economy?

1. I don't disagree that China will become the world's largest economy over time. "Over time" to me means in the next 25 years.

2. This is China. Everything is China is not what it seems. You can't trust anyone that might have a financial motivation. All the economic data coming out of China comes from the government. Q: Do they have a financial motivation? A: Yes. Conclusion: You can't trust the #s.

3. There are 1.3 BILLION people in China. That is over 4x bigger than the US. China's government says it's unemployment rate is 4.2%. Again, this information comes from the government. So my guess is that unemployment is actually 3x that and is somewhere between 10-15%. China's working age population is around 900 million. Assume, conservatively, that half of those are looking for jobs and you get 45M-68M people looking for jobs. Uh oh.

4. All the shortcuts that is and have been happening in China over the past 20 years will catch up. Whether that is the health effects of pollution, unregulated and widespread food safety issues, poor worker conditions and pay, or low construction quality throughout the building boom...all of these elements point towards an evitable collapse. It's a house of cards that's been built to demonstrate the power of a Chinese economy.

China has built up a tremendous amount of intangible "debt" in the last 20 years. While even if the #s look good, at some point the government's command-and-control will be unable to juggle all the moving pieces and things will tumble.

And following this train of thought, a Chinese economic bubble burst is bad news for the rest of the world and especially for the US. China is the biggest loaner to the US government. Without China's ability to loan to the US, the US economy will grind to a halt (again).

Cross your fingers.

Startups are the future...

It's been a while since my last post, but I have a little down time and decided to share a thought.

I was thinking about what the world would be like without startups...and it wasn't pretty. And the reason was that startups are one of the biggest driving forces of progress in our society. Hence, without startups, society loses a lot of momentum.

Why is that? Well basic economics. A startup by its nature has few resources. So to survive, it needs to do 2 things:

1. address a need

2. address the need in a way that is more efficient than how that need is currently being addressed

(1) is pretty obvious. And to serve a need, but with the limited resources that comes with being a startup, (2) must happen.

It's disruptive innovation. And it can happen on a small scale or a large scale. But in the end, startups that survive end up delivering something more efficiently that had been before. And it's their brilliant execution of improved efficiency which is the key to how they survive. No startup can deliver something more inefficiently and survive. The economics just don't work.

The next step...

A lot has happened in the past month.  Most importantly, I accepted a position as Senior Product Manager at Simply Hired and started a couple weeks ago.

It was a very difficult decision for me, especially having spent a lot of time, effort, and money on CoNotes.  However I came to a point where I realized CoNotes was not headed in the direction I needed it to be going, and finding income was a priority.

A couple months ago I mentioned I was job hunting to a few people and a couple friends, Amit and Victor, mentioned that Simply Hired was hiring.  Although neither worked there, they had contacts in the company and both referred me to the company.  Luckily they weren't put off by the fact that I wrote "Wikipedia" as an interest and I went in for interviews.  What I found was a set of talented people that were passionate about their mission (to make job search simple) and really down to earth.  It was pretty much the trifecta of work environments...plus In-N-Out and Costco are both less than a 5 minute walk away.  That made it a grand slam.

Nevertheless, after I received an offer to join Simply Hired, I still struggled to make my decision.  At what point as an entrepreneur, do you stop?  For me, it was a gut level decision.  With the current fundraising and economic situation, the future of CoNotes was not too bright.  I could struggle along and keep things alive for a while, but I wasn't feeling the motivation.  And coming to grips that I had lost a lot of the motivation behind CoNotes was the deciding factor.

Since I had made the decision to start job searching, I was putting in much less hours on CoNotes and starting to just become much less emotionally attached to it.  This kickstarted a growing level of detachment, which eventually led to a lack of motivation.  It wasn't that I didn't believe in CoNotes anymore...it was just that I didn't think I had the energy or stamina to push it over this hump.

So has the startup dream died?  I don't think that dream will ever die.  But right now I am motivated to make a big difference at Simply Hired.  It's only been a couple weeks and I love what I am doing.  So lets see where this journey takes me...

YCombinator dilemma

So I am in a little bit of a dilemma as I applied to YCombinator's program on a whim (literally throwing together an application in 30 minutes on the day of the application deadline).  Then I just received a request yesterday to present.  The idea behind my application isn't CoNotes, but an idea that came to mind as I was having a discussion with an administrator at the San Francisco Unified School District--the idea had to do with education technology.  I guess I thought of the application as my (free) first market validation study.  Haha.

I wasn't really expecting anything out of the application because unlike most applicants:

1. I have not started development
2. I have no demo

However, I do have 11 years of experience in startups, 4 years of experience in the education technology world, several high level contacts in the education industry, and know how to code. I'm assuming these traits are why the YCombinator folks are a little intrigued.

Now I have to make a decision as to what to do.  I certainly do not want to waste anyone's time listening to me ramble about a business idea I haven't really thought through.  I also don't know if I have the time to prepare something reasonable to present.

Any thoughts?

Facebook Redesign is all about $$$!

I have a few thoughts on the new Facebook Redesign.

1. Although the redesign adds some new functionality and encourages more interaction among members via commenting, it is a step backward in usefulness.  I now find it more difficult to find out what people I care about are doing.
2. Facebook clearly has Twitter envy.
3. Facebook looks to be repositioning itself for monetization via the Twitter model.

This 3rd point is the one I want to focus on.  Recent news is that Facebook is facing some cash flow issues unless it finds a new influx of capital or revenues.  Facebook has been around for 5 years now, and it has yet to find it's business model.  It is clear that the business model will be some form of advertising, but how?  Twitter, in its short lifespan, has already positioned itself as a new advertising channel for advertisers.  Although Twitter has not yet implemented its business model, it is fairly evident that it will be in the form of charging advertisers for use of its communication infrastructure.

My guess is Facebook now envies Twitter's position with a clear path to monetization, and to reposition itself in a Twitter fashion.  Evidence:

1. Facebook's redesign strongly refocuses user attention on the real-time feed and interactions with the feed.
2. Corporate pages (e.g. fan pages) now take the exact same form as user profiles.  This will enable corporations to act more like people on Facebook--just like how there is no distinction between people and companies on Twitter.
3. The sudden prominence of stupid quizes.  There is no reason why these quizes have sudden increased in prominence of feeds unless they are an unfortunate side-effect of increased prominence of advertiser communication in the feed.

Facebook is a smart company and knows why its users love Facebook.  I bet they know their UI changes would have this kind of backlash as well.  And I bet they weighed the pros and cons of delaying a path to monetization, and decided in favor of a quicker path to monetization in lieu of consumer desire.

The Riskiness of Starbucks Bathrooms

It's now been a little over half a year since I moved out to the Bay Area and have been working on CoNotes. One thing I've noticed is that within 5 minutes of any conversation with a stranger, I am asked what I do. I always give the same response--that I am working on a startup--and inevitably I am asked what my startup does (that question is often quickly followed with an apologetic "if it's ok for me to ask.") Once it is clarified what CoNotes does, 95% of the time I am asked where my office is...and that is what I wanted to write about today.

I work in one of there locations:

1. Home
2. Coffee Shop
3. Library

It is pretty awesome actually to not have a fixed office location. It provides me with a great deal of flexibility for scheduling meetings and for meeting up with people. The main requirements for picking where I work for the day are: free wireless internet and outlet availability. Since Starbucks started offering free wireless, I have become a huge fan of their shops. While the coffee is average, the ubiquity and standardization of stores makes it too easy to work in a Starbucks. My second favorite (quickly becoming my preferred) work location is the library.

However, I have one big complaint about not having an office: bathrooms. Coffee makes me go to the bathroom. Now I don't have any problems with public bathrooms, but going to the bathroom means leaving my stuff unattended. Ever since I had my stuff stolen from me in college when I fell asleep studying at the library, I have been paranoid about people stealing my stuff. However it would be too simple if the only factor was a fear of theft. If any of you work in coffee shops, you know there is prime real estate. The value of a particular seating location can be calculated by a formula like (proximity to an outlet) + (non-wobbly table) + (size of table) + (next to a window) + (far from stanky bathroom). So when you get a high value table, you don't want to lose it. Furthermore, since the economy crashed, I've seen a lot more people at coffee shops than before; I'm assuming these people were all laid off and looking for jobs online at coffee shops. That means if I pack up all my stuff to go to the bathroom, the likelihood of someone taking my prime table is very high (especially now with all these jobless people). So thus is my daily dilemma. Is the risk of losing my table more costly than the risk of someone stealing my stuff?

More often than not, I end up running to the bathroom, doing my business, and running back to my table. But that time in the bathroom is high stress time for me. Luckily nothing has been stolen and I've started to employ a simple trick I learned from the book, Influence: The Psychology of Persuasion (great book, by the way). I just ask whoever is sitting next to me to watch my stuff--as long as they look like they won't steal my stuff themselves, which was an issue when the guy next to me confessed he just recently got out of jail.

Other than that, I have to say I enjoy my flexible work location. It's even better when you overhear other people's conversations that are really interesting...like the lady who is recently divorced after a 20 year marriage and is now chasing a younger man.