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

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 () — 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.

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 👌

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.

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.

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

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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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).

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.

What: Drive organic search traffic to your site.

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

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

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

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

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

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

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).

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

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

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

Question: Are your competitors doing affiliate marketing?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

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

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

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.

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

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/

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.

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.

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.

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. 🙏

I write a high-quality, weekly newsletter covering what's happening in Silicon Valley, focused on startups, marketing, and mobile.

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