28 ways to grow supply in a marketplace — by Lenny Rachitsky, ex-Airbnb

Hi readers,

The growth teams at Uber and Airbnb occasionally met over the years to share best practices, brainstorm ideas, and share observations on the startup world. I’ve had folks over to 1455 Market St, the headquarters of Uber, and I’ve reciprocated with visits to the Airbnb offices too. I’ve learned a ton from these conversations, and met awesome people along the way!

While both consumer marketplaces are very different – one is a city-by-city transportation service, the other a global network of homes – they also share a lot of similarities too: Both were founded within a year of each other, quickly found network effects, made major design innovations that made the consumer experience 10X better, and much more. Importantly, both companies are tremendous growth stories, and have needed to grow both demand but especially supply in all of their markets globally.

Today, I have a wonderful guest essay to share by Lenny Rachitsky (@lennysan) – he’s recently left Airbnb after 7 years, much of his recent years as the product leader on Supply Growth. We’re all lucky that he’s now sharing his wisdom more widely!

This discussion is critical because the supply side – homes/hosts for Airbnb and drivers for Uber – are the most important aspect of most consumer marketplace startups, which I’ve written about this in my previous essay, ” Why Uber for X Startups Failed: The Supply Side is King.” Lenny’s essay below discusses a comprehensive list of tactics and ideas around growing this critical side of the market. It’s fantastic, and I hope you enjoy it.

Thanks,
Andrew

Twenty Eight Ways to Grow Supply in a Marketplace

By Lenny Rachitsky

Airbnb now seems like an unstoppable juggernaut, but early on it was so fragile that about 30 days of going out and engaging in person with users made the difference between success and failure.
– Paul Graham, founder of YC

Deciding to open your home to strangers is a complex decision. Over the course of the seven years that I spent at Airbnb, my work centered around helping people all over the world make this decision. As the number of homes on Airbnb scaled from around 100,000 in 2012 to over 6 million today, I led teams tackling everything from supply growth, to guest booking conversion, to marketplace quality. As a result of this experience, I’m often asked what I’d recommend startups do to grow supply in their marketplace. The truth is that at the root of Airbnb’s success was a very good idea - affordable and unique travel experiences for guests, and great income for hosts. That being said, an idea is nothing without execution.

Below is an overview of every tactic and strategy I’ve seen used to bootstrap and accelerate supply growth, both at Airbnb and other successful marketplaces. Though some of these worked at Airbnb, and some didn’t, every marketplace has different challenges - my advice is to pick a few tactics that resonate, experiment with them, learn, and adjust.

Tactic #1: Nail the value prop on your site/app 👌

Understanding the context and expectations of your audience is vital to engaging them. At Airbnb we tailored the value props all the way from ad creative to landing pages.
– Dan Hill, ex-Airbnb Growth Lead, CEO of Alma

What: You need to convince visitors why they should become “hosts” on your platform when they visit your site (and then deliver on that promise). This may be obvious, but this is a foundational piece that enhances every other tactic below. It’s especially impactful for marketplaces that primarily grow organically because you’ll end up converting a significantly larger portion of your traffic.

Stage: Start on day 1, and continue iterating

Cost: Small

Impact on Airbnb supply growth: X-Large

Examples:

At Airbnb, the earnings estimate was an order of magnitude more effective than any other value prop. Any time we hid or obscured it, growth dipped. However, it’s critical that this estimate is realistic, both for legal reasons and to set the right expectations for your users.

Tips:

Question: What has worked when pitching your existing “hosts”? Make sure your site/app says the same thing boldly and directly.

Tactic #2: Add entry points to the value prop 👉

What: Drive your site visitors towards your “host” pitch. This includes call-outs in the top level nav, in the footer of every screen, and sprinkled throughout the user experience. Do not assume your visitors know this exists, or why they should ever consider it.

Stage: Start on day 1, and continue iterating

Cost: Small

Impact on Airbnb supply growth: Large

Examples:

Tips:

Question: Where else can you include a call-out to consider becoming a “host”?

Tactic #3: Offer a referrals program 👭

If your product requires word-of-mouth to convince most people to start using it, you can engineer more growth by building an incentivized referrals program. The incentive will be fuel that pushes people over the edge to tell their friends about something they love using
– Gustaf Alströmer, ex-Airbnb Growth Lead, Partner at YC

What: Incentivize word-of-mouth by paying existing members for every new member they refer to the platform.

Stage: Start early with a scrappy version, and get smarter over time

Cost: Medium

Impact on Airbnb supply growth: Large

Examples:

At Airbnb, the host referral program became the single most efficient and effective growth lever for consumer supply, cost efficiently driving both the largest share of attributable supply AND the highest quality supply

Tips:

Question: What’s the simplest way you can test a referrals offering?

Tactic #4: Run direct sales ☎️

After calling and activating 100 listings in a market, we then drove demand there to see what converted. We then called these hosts to help them convert their requests into bookings. This was all manual, but super effective, all the while we were getting direct market feedback.
– Georg Bauser, ex-International Expansion at Airbnb

What: Call, email, or go door-to-door to pitch potential “hosts” on joining your platform. Sometimes this includes convincing them to switch from a different platform, sometimes it includes teaching them how to do it in the first place. This tactic is one of the more complex and operationally heavy, but also often the most effective at bootstrapping a marketplace.

Stage: Early-stage for B2C, an evergreen lever for B2B

Cost: Medium

Impact on Airbnb supply growth: Medium-Large

Examples:

Tips:

Question: What’s stopping you from cold-calling potential “hosts” today?

Tactic #5: Piggy-back off of existing networks 🔌

Initially, the Etsy team were freelance web designers and one of their clients was a craft forum called getcrafty.com. Throughout the redesign process, the Etsy team interacted with the website’s 10,000 users to best understand their needs. They began to notice that there was a large number of users who were looking for a platform to sell their handmade wares. While they were building Etsy, they also found out about Crafster.org, this time a message board with 100,000 users and were able to tap into another willing market. We extended an accommodating bridge to a preexisting online community, and they jumped aboard happily.
– Chris Maguire, co-founder of Etsy

What: Go to the place your existing supply is distributed and convince them to switch.

Stage: Early-stage

Cost: Small

Impact on Airbnb supply growth: Large

Examples:

Tips:

Question: Where do people currently find what you are offering, and is there a way you can piggy-back off of that channel?

Tactic #6: Hold meetups 👋

To launch a city, we’d travel there and hold a meetup. Here in San Francisco, it’s not a big deal to meet a founder. In other places, that’s pretty novel. They would get so excited that they met us that they’d tell their friends. The markets started turning on, and we religiously focused on making sure customers loved us.
– Brian Chesky, CEO of Airbnb

What: Bring “hosts” and anyone considering become a host together in person. This can be small intimate gatherings or large’ish events.

Stage: Early-stage

Cost: Small

Impact on Airbnb supply growth: Medium early-stage, Small late-stage

Example:

Tips:

Question: Where is your early community most concentrated? Why aren’t you there right now?

Tactic #7: Leverage events and PR 🎪

In the early days we targeted a lot of events: the DNC, the Presidential Inauguration, music festivals, the World Cup, Olympics, etc. Events and PR were the main way we bootstrapped the network in the early days.
– Brian Chesky, CEO of Airbnb

What: Leverage a specific event to pitch potential “hosts” and seed PR stories about how your service is helping people.

Stage: Early-stage

Cost: Small

Impact on Airbnb supply growth: Medium

Examples:

Tips:

Question: Are there punctuating moments where your offering is most beneficial for your supply?

Tactic #8: Run performance marketing 💰

Performance marketing is about reaching people where they are, inspiring them to take action and doing so cost effectively. You quickly learn that it’s a unique blend of art and science, and we were most effective at scaling this powerful lever when we had a dedicated cross-functional team sitting together - product, marketing, engineering, data science, design, content, and finance.
– Fatima Husain, ex-Airbnb host paid growth lead, Principal at Comcast Ventures

What: Run Facebook, Google, Twitter, etc. ads.

Stage: Early-stage for some businesses, late-stage for others

Cost: Medium/Large

Impact on Airbnb supply growth: Medium

Examples:

Tips:

Question: Where do your potential “hosts” spend time online?

Tactic #9: Convert demand to supply 🙃

Converting travelers to hosts definitely moved the needle when we launched a new market. Plus, these new hosts were the most empathetic as they remembered the guest’s needs.
– Kati Schmidt, ex-Head of B.D., Airbnb Germany

What: Convince users to become “hosts” on the platform. This builds on Tactic #2 - go deeper into the user experience and find moments when it makes sense to pitch “hosting” (e.g. after a great experience).

Stage: Start early, and continue iterating

Cost: Small

Impact on Airbnb supply growth: Medium early-on, Small later-stage

Examples:

Tips:

Question: What percentage of your demand could potentially be the supply? If it’s in double digits, see if you can suggest or even incentivize this behavior.

Tactic #10: Invest in SEO ⛓

What: Drive organic search traffic to your site.

Stage: Early for some businesses, late-stage for others

Cost: Small

Impact on Airbnb supply growth: Small

Tips:

Question: What job are you solving for potential “hosts”, and what does that translate to when they search for solutions?

Tactic #11: Acquire supply 🤑

We needed to move fast and acquiring companies with inventory in these competitive markets provided an immediate benefit. Often times the expense of the acquiring the company that had the inventory was cheaper than the cost to go about acquisition in an organic way. The key is to understand the migration percentage that would come through. We aimed for 60-80% to migrate over.
– Jonathan Golden, first PM at Airbnb, partner at NEA

What: Acquire companies that currently have the supply you want.

Stage: Always

Cost: Large (but strategic)

Impact on Airbnb supply growth: Small globally, Large in key markets

Examples:

Tips:

Question: Are there small players with a strategic foothold you can acquire or merge with?

Tactic #12: Partner with supply aggregators 👋

What: Plug-in a partner’s supply into your marketplace, through partnerships, licensing, or even scraping.

Stage: Always

Cost: Small

Impact on Airbnb supply growth: Small

Examples:

Tips:

Question: What would be the biggest upside of adding 3rd party supply to your marketplace?

Tactic #13: Build your own supply 💪

One of the smartest things we did in the early days of Udemy was produce our own courses. Production (i.e. filming & editing video content) is a huge friction point in our supply-side process. So, we produced a few of our own courses in the beginning and then marketed the heck out of them. This wasn’t scalable, but it did allow us to build powerful social proof points which were critical to our long-term success.
– Dinesh Thiru, VP of Marketing at Udemy

What: In some marketplaces, you can either bootstrap supply by creating it yourself (e.g. videos), pay early users to become supply (e.g. Uber/Lyft paying drivers a salary), or your build your entire business on your own supply (e.g. Sonder).

Stage: Depends on business

Cost: Medium/Large

Impact on Airbnb supply growth: Small

Examples:

Tips:

Question: What would it cost to build your own supply, and how does that compare to customer acquisition costs?

Tactic #14: Run broadcast and out-of-home ads 📺

What: TV commercials, podcast ads, movie ads, etc.

Stage: Always

Cost: X-Large

Impact on Airbnb supply growth: Small

Examples:

Tips:

Question: Are your potential “hosts” watching the same (ideally not super-popular) media or passing through the same physical parts of town?

Tactic #15: Run affiliate marketing 📝

What: Incentivize content producers to send you traffic by paying them for every member they refer.

Stage: Mid/Late

Cost: Small/Medium

Impact on Airbnb supply growth: Small

Examples:

Tips:

Question: Are your competitors doing affiliate marketing?

Tactic #16: Send direct mail 📬

What: Send potential “hosts” physical mail, pitching them on your platform.

Stage: Always

Cost: Medium

Impact on Airbnb supply growth: Small

Example:

Tips:

Question: Is this a channel your competition hasn’t tried yet?

Tactic #17: Optimize conversion 📈

All conversion optimization should start with user research. The biggest gains in optimization don’t come from brute-force A/B tests, but from trying to understand the real barriers to people using your product. For example, early at Airbnb we realized that the biggest hurdle for new hosts was knowing how much to charge for their space. So we built price guideance into the flow.
– Dan Hill, ex-Airbnb Growth Lead, CEO of Alma

What: Improving the percentage of people that start publishing that actually finish it.

Stage: Start early, and continue iterating

Cost: Small

Impact on Airbnb supply growth: Medium

Tips:

Question: Which part of the funnel is most important to improve, and what are three things you do to improve this?

Tactic #18: Send re-engagement emails/pushes 📩

What: Emailing users that didn’t complete publishing, encouraging them to finish.

Stage: Always

Cost: Small

Impact on Airbnb supply growth: Small/Medium

Tips:

Question: What’s one helpful thing you can suggest to bounced users to re-inspire them?

Tactic #19: Make re-engagement calls 📞

What: Calling users that didn’t complete publishing, encouraging them to finish.

Stage: Early-stage for B2C, an evergreen lever for B2B

Cost: Medium

Impact on Airbnb supply growth: Small

Tips:

Question: Which bounced users appear to be the most valuable and worth a call?

Tactic #20: Optimize activation

When I think about the ROI of things that you can do in a business, make certain that your customer is safely handed from acquisition to the activation. Make certain that they are activated and you have done everything in your power in order to make certain they have found their “Aha” moment and they have began habit forming.
– Shaun Clowes, CPO at Metromile

What: Getting new users to a key milestone that you believe is important for long-term retention. This is sometimes called the “aha” moment.

Stage: Early/Mid-stage

Cost: Small

Impact on Airbnb supply growth: Small/Medium

Examples:

Tips:

Question: What’s the one most impactful thing a “host” can do to improve their chances of getting booked?

Tactic #21: Optimize retention 🔐

Retention is the core of your growth model and influences every other input to your model. This is important because if you improve retention, you’ll also improve the rest of your funnel.
– Brian Balfour, Founder/CEO of Reforge

What: Increasing the percentage of new users that stick around for at least X months.

Stage: Always

Cost: Small

Impact on Airbnb supply growth: Medium early-stage, Small late-stage

Examples:

Tips:

Question: What is the single most common theme in why “hosts” leave, and what can you do about it?

Tactic #22: Expand existing supply 🤲

What: Convince existing successful “hosts” to increase the number of units they offer.

Stage: Always

Cost: Small

Impact on Airbnb supply growth: Small

Examples:

Tips:

Question: Have you actually talked to your successful “hosts” about adding additional supply?

Strategy #1: Increase benefits, reduce costs ⚖️

What: Potential “hosts” will do mental calculus when considering signing up: is the cost (e.g. work, risk) worth the benefits (e.g. money, status). Make a list of ways to increase the benefits and reduce the costs, do them, and share this clearly.

Stage: Start on day 1, and continue iterating

Examples:

• Airbnb - Reduce costs: Host Guarantee, free photography
• Airbnb - Increase benefits: Guaranteed revenue, online payments
• Uber - Reduce costs: Car leasing, guaranteed income
• Uber - Increase benefits: Choose when to get paid, flexible hours

Tips:

Building it won’t be enough, make sure to make it clear what you do for your users to increase benefits and reduce cost.

Strategy #2: Single-player mode

OpenTable sold software to restaurants that created value for them without requiring any diners on the “buyer” side of the marketplace. They built a unique table management and CRM product (the “Electronic Reservation Book”) and charged a subscription fee for the service. The initial benefit to restaurant customers was the software. Once OpenTable acquired hundreds of restaurants in a city, they started to have a compelling diner value proposition.
– Eli Chait, ex-Director of PM at OpenTable

What: Make the platform to “hosts” useful even when there is no demand.

Stage: Early-stage

Examples:

Tips:

• In most marketplaces, supply is king, so your single-player-mode should generally be focused on the supply side.
• This won’t be possible for every marketplace.

Strategy #3: Get to critical mass 💥

Our co-founder Nate Blecharczyk is highly quantitative and had determined that 300 listings, with 100 reviewed listings, was the magic number to see growth take off in a market. Observing New York, Paris, and a few other top markets, we saw a step-function change in the rate of bookings growth at 300 listings, the point at which guests had enough options to find a listing that matched their tastes and their travel dates.
– Jonathan Golden, first PM at Airbnb, partner at NEA

What: There is a point at which you have enough supply that you see an inflection point in demand conversion - estimate it and get your supply to that number.

Stage: Early-stage

Examples

Tips:

Don’t overthink it. Figure out a milestone enough people believe within the org, and use it until you can figure out something better. It’s more important to have something good-enough than to have nothing.

Strategy #4: Bootstrap trust 🤝

We looked at people’s willingness to trust someone, based on how similar they are in age, location, and geography. The research showed, not surprisingly, we prefer people who are like us. The more different somebody is, the less we trust them. That’s a natural social bias. What’s interesting is what happens when we add reputation to the mix - in our case with reviews. When you have less than three reviews, nothing changes. But if you’ve got more than ten, everything changes. High reputation beats high similarity. The right design can actually help us overcome one of our most deeply rooted biases.
– Joe Gebbia, Co-Founder of Airbnb and CPO

What: At first all you have is new supply, but users have no reason to trust it. Give them reasons to trust.

Stage: Early-stage

Examples:

Airbnb: Early employees were given credit to travel for free as long as they left reviews for new hosts.
Airbnb: Make the supply look great, e.g. free photography, structured data with limited customization.
Airbnb: Reduce risk, e.g. Handle payments online, Host Guarantee, 24/7 support.
Uber and Airbnb: https://firstround.com/review/How-Modern-Marketplaces-Like-Uber-Airbnb-Build-Trust-to-Hit-Liquidity/

Strategy #5: Internationalization ⛩

Internationalization is a challenge and risky. But tech companies need to be global to win. It’s about the right strategy and answering the right questions at the right time. Not going international is a wasted growth opportunity.
– Georg Bauser, ex-International Expansion at Airbnb

What: Make your site and experience work outside of initial native language/culture. This includes building out translations, local payment types, customer support in those languages, and often people on the ground getting things rolling.

Stage: Mid-stage

Examples:

Tips:

Strategy #6: Segment supply 👩‍🌾 👩‍✈️👩‍🔬

Early on Airbnb presented only one image of itself to hosts. Many types of hosts deemed the platform unsuitable, but opening ourselves and marketing to business travel hosts and luxury home hosts gave those hosts a message they wanted to hear. They could host the types of guest they felt were suitable for their property. This allowed us to onboard inventory we previously couldn’t, and gave existing hosts more optionality in how they marketed to and serviced those guests.
– Marc McCabe, ex-Head of Airbnb for Business

What: Determine what categories of supply you have and/or want, and dedicate teams to growing that type of supply. Generally, different categories require very different tactics, skills sets, and operating cadences.

Stage: Mid/Late-stage

Examples:

Tips:

Final thoughts

Looking back at my time at Airbnb, a few things become clear. One, there were no silver bullets - success came from many wins building on each other. Two, most things we tried didn’t have an impact - but enough did. Three, it all only made sense in hindsight. My advice to you as you navigate scaling your marketplace is above all else, stay focused on providing value to your users. Their success will make or break you. Beyond that, avoid spreading your team too thinly across many tactics (aka focus), double down on the things that show promise (aka focus), and never lose sight of your north star (aka focus). Also, focus.

For more writings about growth, product, management, and related topics, make sure to subscribe to my new newsletter and hit me up on twitter.

Sincerely,

Lenny

Thank you Gustaf Alströmer, Andrew Chen, Jonathan Golden, Fatima Husain, Marc McCabe, Dan Hill, Kati Schmidt, and Georg Bauser for reviewing early drafts of this post and contributing great ideas. 🙏

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