(Chinese Version)

Airbnb (Air Bed and Breakfast), founded in 2008, is now a $10 billion-valued platform to connect travelers with homeowners who have idle rooms for rental. Airbnb and Uber are both regarded as standouts of sharing economy. Many Chinese copiers of Uber have succeeded as proven by the $10B merger of DiDi and Kuaidi. While for those replicating Airbnb, the story is totally different.

1. Chinese Uber is valued at $10 billion, why is not the copiers of Airbnb?

On July 2013, Airizu, the replication of Airbnb in China, was shut down after burning $20 million, which indicates that simply copying Airbnb is likely a dead end in China.

(1) Lack of Trust

There is no mutual trust between Chinese house-owners and renters. Owners are unwilling to share their rooms with unfamiliar guests, and guests have yet to form such a habit.

One of the managers in a Chinese Airbnb startup has learnt quite a lesson. In charge of a branch, he once paid several visits to house-owners with his team. According to the sharing agreement, house-owners could earn three times as much if they agreed to cooperate, but they didn't. House-owners are concerned about the completeness and safety of their houses because renters are mobile and mixed.

Later on the team conducted a survey on the lodging options for those who go on a half-month or month-long trip for business or sightseeing.

Most of the answers are hotels or staying at a relative's. There is barely a concept of short-term rental among Chinese consumers as is found in the survey. Besides, low price is nearly synonymous with insecurity and unhealthiness for them.

On the other hand, a sound credit system is already in place among western countries. Even so, Airbnb still had to deal with the safety issue in the early age, as the public concern on Airbnb's beingmisused for theft or robbery could hinder its further growth.

To solve this, Airbnb startedto open up its networking chain in summer 2011, which allowed its users to access their social network accounts like facebook, as well as introducing other relationships such as schoolmates. Based on this, Airbnb is able to filter and recommend house-owners to renters who are already connected through social network, so that they will no longer feel unfamiliar with each other.

However, lack of trust couldn't be solved in China without such a real-name social network like facebook.

(2) Inadequate Market Education

The reason for Airbnb' success lies partly in the fact that Bed & Breakfast is already very popular in the United States, Japan and Taiwan, and that the mature infrastructure and high-quality house-owners in Europe require little market education. As for China, the only form of short-term rental in the travel market might be farm tourism.

Besides, single-family houses are common in foreign countries, which make it possible to rent separate rooms to different guests. It provides a hotel-like private space for renters who prefer not to share a two-room flat or sleep on a couch.

(3) Economy Hotels are highly Developed in China

In Europe, if you want to find a cheap hotel, you need to go to the suburbs far from downtown, which presents Airbnb as a better option.

I was staying in a four-star hotel near Charles de Gaulle airport, which is far away from central Paris while travelling with a European tourist group in March. It was like endless darkness outside the train when we took the subway back to the hotel from brightly-lit downtown.

But in China, economy hotels like Home Inn and Super 8 are all over cities and rural areas, which better satisfy Chinese consumers' needs than Airbnb does.

(4) Dividend Brought by Rising House Price

As mentioned above, house-owners and guests are reluctant to share a two-bedroom pigeonhole apartment, especially when they are unfamiliar with each other. In fact, there are also a lot of single-family houses across first-tier cities like Beijing, Shanghai, Guangzhou and Shenzhen, let alone the famous real estate speculators from Wenzhou who have twenty to thirty idle houses on hand. But why haven't they registered to be Airbnb landlords?

First of all, if you could afford a villa, I seriously doubt that you would need extra cash. Secondly, for those who are enjoying the soaring house price at a growth rate of 30 to 40 percent YoY, it is doubtable whether they are willing to register their houses online and serve the renters patiently, not to mention the extra taxes imposed on American house-owners. Tapping into this potential demand, Tujia introduced a new model in which the landlords can authorize the platform to manage their houses in an easier way.

In general, there are two major models in Airbnb’s Chinese business, one is Chinese landlords for overseas guests, and the other is foreign houses for Chinese tourists. Currently it is rare to see a Chinese landlord connected with a Chinese guest, which means that Airbnb is yet to become the mainstream in the competition with economy hotels.

2. The Chinese Copiers of Airbnb

Since it was founded in 2007, there have been a bunch of ’Chinese students’ inspired by Airbnb. Some are total replication of its Taobao-like model, such as Airizu and Xiaozhu; the others are more like JD or Tmall, such as Tujia and Zhubaijia.

(1) Airizu: (Global Tourists + Global Houses) + Taobao

Founded in June 2011 in Beijing, Airizu was a complete replication of Airbnb, which died in 2013 after burning millions of dollars and received no more investment.

The controlling shareholders of Airizu are the three Samwer brothers, founders of Rocket Internet, who are alsoviewed as King of Internet Copycat in Europe. They will invest heavily in a blank market to replicate the successful business model as a new company and sell it to the copied entity or other buyers at high premium once it grows big enough in scale.

So it was not strange that Samwer-invested Airizu totally ignored the difference between these two markets and finally found that the C2C model (couch surfing) has no rental demand or house resources on both ends after just two-month operation since the official go-live in April, 2011.

The shortage of housing resource and its model not being recognized caused a relatively high education cost for Airizu. While its acquisition cost rose to as high as 150 Yuan per order, its ARPU stayed at around 500 Yuan. With a commission rate of 10% to 15%, Airizu can receive 50 to 60 Yuan from each order, which means that every three orders can level up one order's cost.

Besides, due to the diversity of housing resource, Airizu is unable to standardize the products and service so as to enhance user experience, which resulted in a mere 20% of repeated use, compared to a 40% to 50% average rate of other hotel websites.

Generally speaking, if the potential market is huge, the loss caused by early-stage marketing can be covered by the subsequent scale effect. However, it was discovered that the market can hardly be scaled up in short time, which makes it the best way to draw back money and shut down the website as early as possible.

To some extent, the failure of Airizu proved that the total replication of Airbnb is not workable in China. After that, another group of ‘Chinese Airbnb’ has launched products such as Xiaozhu, Youtx and Mayi, but again, they can barely compare with Airbnb in terms of business scale, user base and growth rate, or enter a mainstream market.

(2) Tujia: (Real Estate Resource + Chinese Tourists) + JD model

Before founding Tujia in 2011, Luo Jun once served as a senior manager in Sina Leju and Leju China, who is very familiar with the real estate market.

Housing resource: Mainly from real estate developers and mostly located in tourist resort. It is common that most of the houses here are occupied seasonally with a very long vacancy period. Tujia will decorate, operate and manage the houses in a unified way after take-over. In cooperation with real estate developers, Tujia is able to take into inventory dozens or hundreds of houses in a mere residential district.

Users: Since houses run by Tujia are mostly located in tourist resorts like Hainan Island, their main purpose is to serve the tourist groups, which is also different from that of Airbnb.

Tujia’s project is now targeted mainly at domestic market as the houses and guests are both in China. Its ARPU could be higher than that of economy hotels due to its standardized products.

In a word, Tujia has improved the Airbnb model to better suit the local demands in two ways - one is the housing resources, the other is the self-operating model so as to provide more standardized services. If Airbnb is Taobao, then Tujia should be JD.

(3) Zhubaijia: (Foreign Houses + Chinese Guests) + Tmall model

Zhang Hengde, founder of Zhubaijia and former deputy general manager of 5i5j, once operated the biggest property service company for Airbnb. Back in 2011, he rented more than 20 apartments in Hong Kong and put them on Airbnb after a unified decoration and renovation, which helped increase competiveness due to the cleanness and safety of his houses.

He was once an Airbnb guest. During his vacation in Hawaii, he was asked for a high compensation after accidentally sprinkling the shower curtain with water. Without a timely response from Airbnb, he had to pay $200 to the landlord.

The experience of being a landlord and a guest helped Zhang to discover a material weakness in Airbnb’s market-based rating system used to filter houses and landlords, which can also be discovered in Taobao’s open system that naturally resulted in the abundance of counterfeit goods.

Besides, Airbnb hired more than 2000 freelance photographers to take pictures of the houses, which makes them look very clean and appealing. The marketing is so effective as to draw a large amount of orders, but the absence of a basic verification on the houses (in decoration, sanitation and service) might cause a troublesome inconsistency.

Housing resource: Through the three-level filters of online data comparison, phone and video interview and on-spot examination, Zhubaijia will take out those houses with poor decoration and sanitation, bad service or strong bias towards Chinese guests from house owners.

For example, Zhubaijia took over a few thousand houses from Airizu’s parent company, Windu, and retained only several hundred of them after strict screening process. With such a high standard, Zhubaijia has over a million houses in its inventory.

Users: Zhubaijia is firmly targeted at the independent travelers going abroad, which is different from Airbnb aiming to attract and serve global landlords and tourists. It is fair to say that Zhubaijia only serve part of Airbnb’s customers.

According to statistics, the total number of Chinese independent travelers going abroad reached 77.57 million in 2014 at a yearly growth rate of 20%. Furthermore, over 60% of the independent travelers are young people aged from 21 to 30, most of which are more sensitive to the quality than the price. They are the key customers Zhubaijia are focusing on.

Airbnb is an asset-light company due to its platform model, while Zhubaijia is heavier so as to provide more targeted service to its users. To remove the language barriers and enhance the feeling of safety for overseas tours, Zhubaijia is offering a 24-hour customer service and virtual receptionist in Chinese. On the contrary, Airbnb has hardly any post-sale service; you might even wait for a couple of days for a response to your email request.

If Airbnb is like Taobao, then Zhubaijia shares more similarity with Tmall.

Since the Internet surged to its climax in 2000, China remains as an exception in globalization. Almost all foreign Internet companies failed to compete with local ones, as Taobao beat Ebay, Baidu outrun Google, Tmall defeated Amazon and its Chinese student, JD.

It can be attributed to the fact that China is too big, and highly different in policies, market environment and economy levels. Therefore, a complete replication of any Silicon Valley model can lead to a dead end in China. The‘good students’arelikely to neglect the vast difference between these two countries, which could be very fatal for them.

[The article is published and edited with authorization from the author @Chen Jiying, please note reference and hyperlink when reproduce.]

Translated by Chen Bin (Senior translator at Echo)