Technology of the Week – Airbnb’s Disruption of the Traditional Hospitality Industry

6

October

2017

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Airbnb was founded in 2008 by Joe Gebbia, Brian Chesky, and Nathan Blecharczyk and was originally only intended for renting out their private residence (Fortune, 2015). Airbnb has grown into an online platform which brings together homeowners who are willing to rent out their accommodation, with individuals who are looking for a temporary place to stay. This way Airbnb provides an alternative to expensive hotels, which has proven to be a popular option thus far. Currently, approximately 4 million accommodations in 191 countries and 65,000 cities all around the world are offered through the platform (Airbnb, 2017).

Before Airbnb entered the market, the hospitality industry was a relatively consistent market where large players co-existed with numerous small hotels.  Airbnb did not follow the standards set by the hotels or the online travel agencies (OTAs) but sidestepped them by directly connecting customers with homeowners through a platform network instead of owning the offered accommodation as hotels did.

Despite this, Airbnb differentiated itself from traditional players in the industry by offering comparably cheap accommodation that enables customers to ‘live’ in the destination instead of just visiting it. The disruption of the hospitality industry by Airbnb is also supported by research, which has estimated that hotels are currently losing $450 million of direct revenue per year to Airbnb. The actual impact is even bigger if you consider potential losses of hotels due to selling less secondary products such as beverages, food, and holiday services (Fortune, 2017).

Airbnb provides value to its users in different ways: For hosts, Airbnb offers the opportunity to generate additional income, convenience and a form of insurance for their risks. Guests can conveniently choose from a variety of different types of accommodations, which are mostly cheaper and more authentic than regular hotels. Both user groups benefit from the included rating system, dispute resolution, and the overall safety and trust Airbnb as a platform provider is offering. For its services, Airbnb charges a fee from rental guests (5-15%), from rental hosts (3-5%) and event hosts (20%) (Uenlue, 2017)

Unlike pipelines, platform business models such as Airbnb are multi-sided markets where users are actively co-creating content and value. By offering their accommodation on the platform, users can become producers. Only the platform and the network are assets for Airbnb and offers become products only through interaction. Airbnb makes use of network effects and hence would have no value without their user base. In the future we expect Airbnb to face increased pressure from competitors, governments, as well as their customers, and other external entities.

In conclusion, Airbnb has clearly disrupted the hospitality industry. Airbnb deployed an innovative business model and made great use of new technologies and network effects. While facing various challenges over the next years, we are confident that Airbnb will continue to grow their market share and we are curious to see if the hospitality industry has what it takes to successfully adapt to the disruption that has taken place within their industry.

References:

Airbnb.com. (2017). About Us – Airbnb. [online] Available at: https://www.airbnb.com/about/about-us?locale=en [Accessed 5 Oct. 2017].

Gallagher, L. (2015). The education of Airbnb’s Brian Chesky. [online] Fortune. Available at: http://fortune.com/brian-chesky-airbnb/ [Accessed 3 Oct. 2017].

Juggernaut- Powering On Demand Apps. (2015). How Airbnb Works | Insights into Business &   Revenue Model – Juggernaut. [online] Available at:    http://nextjuggernaut.com/blog/airbnb-business-model-canvas-how-airbnb-works-revenue-insights/ [Accessed 2 Oct. 2017].

Gallagher, L. (2017). Here’s How Much Airbnb’s Management Believes the Company’s Profit      Will Grow. [online] Fortune. Available at: http://fortune.com/2017/02/15/airbnb-profits/           [Accessed 3 Oct. 2017].

Osterwalder, A. and Pigneur, Y. (2013). Business model generation. Hoboken, N.J.: Wiley.

Uenlue, M. (2017). Business Model Canvas Airbnb. [online] Innovation Tactics. Available at: http://www.innovationtactics.com/business-model-canvas-airbnb/ [Accessed 1 Oct.          2017].

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How to survive the attention war?

2

October

2017

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„Technology has turned human distraction into its metric of profit.“ (The Economist, 2017)

According to the article, big entertainment companies such as Disney, Facebook (Instagram) and Google (YouTube) are fighting for our limited time and attention, using different well-known methods as recommendation algorithms, digital rankings and an ever-growing amount of choices. Worldwide, the usage of social media increased by 21% in the last year, reaching almost 2.8bn people (Hootsuite, 2017). For many of us, a life without social media is not possible or at least not imaginable.

This TED talk highlights the experience of the computer scientist Dr. Cal Newport who had never had a social media account and who invalidates the standard arguments speaking against quitting social media. Before doing so, he states “I think that I’m actually better off, I think I’m happier, I think I find more sustainability in my life, and I think I’ve been more successful professionally because I don’t use social media”.

So how does he tackle the three most common objections to social media?

  1. Objection: Social media is one of the fundamental technologies of the 21. Century, to reject social media would be an act of extreme bloodism.

Here, the speaker highlights that social media is not a fundamental technology, it leverages some key technologies. Due to the public usage of attention engineering, he categorizes social media as an unsavory source of entertainment with a high addiction potential through which companies such as Facebook try to maximize their advertising profits.

  1. Objection: “I can’t quit social media because it is vital to my success in the 21st-century If I do not have a well-cultivated social media brand, people won’t know who I am, people won’t be able to find me (…), and I will effectively disappear from the economy.”

The speaker states that the market values the ability to produce rare and valuable things and dismisses activities that are easy to replicate and only provide a small amount of value. Consequently, he underlines that the market will reward deep, concentrated work required to build and apply real skills need to produce or create things.

  1. Objection: Social media is harmless, fun, interesting to try, I don’t use it that much, I’m a first adopter, and I might miss out something if I don’t use it.

Finally, Newport emphasizes that social media leads to several, well-documented and significant harms such as the permanent reduction of concentration abilities, increasing psychological damages (e.g., feelings of loneliness, isolation, and depression) and further anxiety-related disorders.

In consequence, he indicates that quitting social media leads to more productivity caused by a higher concentration.

Personally, I agree with his three explanations made above and support the general movement to decrease our usage of social media technologies. Nevertheless, he fails to mention which alternative methods he uses to stay for example in contact with his international friends and connections. Similar to my previous blog post, I think that the usage of any kind of technology (including social media) depends on the individual estimation of personal cost and benefit. Personally, the aspect of cost which he mentions in his third point was not that clear to me before. Moreover, I’m determined that concentration is one of our most important assets and we should be aware how and where we employ it. But what do you think about that? How would you evaluate the cost and the benefits of your personal social media usage?

tl;dr: The success and profit of social media platforms heavily depend on its user’s attention, resulting in the construction of addictive attraction schemes on the platform. Despite the common perception, an (apparently even better) life without social media is possible resulting in a more concentrated, productive and happier lifestyle. Overall this post calls attention to a more conscious use of social media and being aware of its costs.

Sources

Hootsuite. (2017). New Research Reveals Global Social Media Use Increased by 21 Percent in 2016. Retrieved 2 October 2017, from https://hootsuite.com/de/newsroom/press-releases/digital-in-2017-report

The Economist. (2017). The battle for consumers’ attention. Retrieved 2 October 2017, from https://www.economist.com/news/special-report/21716460-forget-long-tail-battle-consumers-attention

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Straight or Gay? AI probably knows it

27

September

2017

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When speaking of AI, we probably think of finding patterns in large data sets such as Google and Facebook are already doing it. Nevertheless, this construction of patterns can also be applied to faces, more precisely “research at Stanford University […] has shown that machine vision can infer sexual orientation by analysing people’s faces” (The Economist, 2017a). So, before you start hiding your faces and come to class wearing masks, let me briefly explain how they did it and what it means.

Research Approach

Primary, the two researchers collected face images and information of public profiles of an American dating website, evenly representing gay, straight, male and female users. Afterwards, those images were inserted into a “software called VGG-Face” (The Economist, 2017a) which converts the face images into actual, numeric data. Finally, the researchers applied a predictive model (logistic regression) to analyze the correlation of the face data and the sexuality (as stated on the dating site). The result: “when shown five photos of each man, it attributed sexuality correctly 91% of the time” (The Economist, 2017a). Overall, this algorithm assigns sexuality correctly 81% of the time, compared to humans being correct 61%.

Meaning

Although dating profile images represent a “special” kind of picture, these findings have some crucial implications. The primary goal of the researchers was to show that it is possible to set up a software recognizing sexuality based on face structures. Moreover, they did not apply specialized new technologies or techniques but rather proved that it’s possible to determine based on current technologies (relatively accurately) one of the most intimate characteristics of humans, namely sexual orientation.

Given the rise of facial recognition technologies (e.g., iPhone X), the acceptance of consumers will probably increase (The Economist, 2017b). Although there are several advantages of using such technologies, such as creating the bridge between online and offline shopping behavior (e.g., identifying the non-purchasing customers in the offline store & target online ads after the customer leaves the offline store), there are also disadvantages associated with it. Especially related to politics, facial recognition could identify political “opponents” (e.g., during a political strike) and punish them. Personally, I think that the acceptance curve of facial recognition technologies will behave in the same way as fingerprint scanners (yes the one you currently use to unlock your phone) did. As long as the overall benefits (such as convenience) outweigh the cost of privacy, we will start and continue using it.

But do you see the problem here? If so, how should we “face” that problem? ?

Sources

The Economist. (2017a). Advances in AI are used to spot signs of sexuality. Retrieved 27 September 2017, from https://www.economist.com/news/science-and-technology/21728614-machines-read-faces-are-coming-advances-ai-are-used-spot-signs

The Economist. (2017b). Ever better and cheaper, face-recognition technology is spreading. Retrieved 27 September 2017, from https://www.economist.com/news/business/21728654-chinas-megvii-has-used-government-collected-data-lead-sector-ever-better-and-cheaper

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