(Chinese Version)

Editor’s Note:

The San Francisco-based house-share and rental platform Airbnb announced on Aug 19th that it would team up with Sequoia Capital China (SCC) and China Broadband Capital (CBC) and to expand into Chines market. While SCC and CBC, two of its strategic partners, will provide capital for Airbnb’s business adventure in China, it remains to see who Airbnb will cooperate with to better localize in the country. The following is an in-depth analysis on this issue by our journalist Li Beichen:

Voilà, Airbnb, the first online apartment-sharing service provider around the world, finally announced that it would expand into Chinese market with the support of Sequoia Capital China (SCC) and China Broadband Capital (CBC). Yet, it’s hardly surprising, because Airbnb will tap into China’s rapidly-growing market sooner or later, and it is just a matter of time.

For sure, Airbnb is going to, as did other American Internet companies, face great challenges here in China, especially in the O2O market, where Airbnb has to compete with its Chinese copycats.

Will Airbnb fight on its own and repeat Ebay’s failure a decade ago, or will it find a good partner and play a key role in Chinese online apartment-sharing market? If Airbnb choose to find a partner, then who will Airbnb turn to?

Airbnb’s challenges & Uber’s lessons

“If Airbnb’s ultimate goal is to connect the world, then China is the most important market for Airbnb to conquer in the process,” Brian Chesky, co-founder and CEO of Airbnb, once said. However, there are only several thousand houses for rent on Airbnb’s platform up till now, less than 1% of the total number around the world. In fact, the number of houses for rent in Asia is also less than 1/10 of the total number. The harsh fact is that most Chinese users open Airbnb only when they are planning to travel abroad. One can now tell the difficulty of Airbnb to integrate Chinese market to its global platform.

There’s no doubt that Airbnb has to first expand its user base and attract more house-owners to rent out their houses on its platform. While a wide user base is the foundation for Airbnb’s future development, an adequate number of houses for rent is the indicator of a good relationship between Airbnb and Chinese local authorities. Different from car-hailing service providers, online apartment-sharing service providers have to deal with a lot more problems and forge a good relationship with government departments such as The Bureau of Industry and Commerce, The Fire Department, Tax Bureau, Public Security Bureau, etc.

As a well-known foreign online apartment-sharing service provider, Airbnb should hurry up and get to know Chinese market as soon as possible. More importantly, Airbnb should avoid making the same mistakes of American Internet companies, who fought alone in Chinese market and ended up in failure. The lesson is quite clear: to survive in the Chinese market, foreign Internet companies should ally with Chinese Internet companies and try as best as they could to cater to Chinese users and meet their demands.

Even though Airbnb’s Chinese copycats seem to be well-prepared to compete with Airbnb (Xiaozhu.com even released an open letter to Airbnb on Chinese Valentine’s Day, saying that: welcome to our American “friend” coming from afar.), Airbnb’s entry still is going to stir up competition in the Chinese online apartment-sharing market. However, Airbnb should be aware that its Chinese copycats, including Xiaozhu.com, Tujia.com and Mayi.com, have been exploring the potential of this market for a while and have wrapped up a series of financing. How to promote itself among Chinese users in a more down-to-earth manner? How to compete with its Chinese copycats? How to defeat them elegantly? These are all harsh questions for Airbnb’s managers to think about.

If we look back at the past business wars between Chinese and foreign Internet companies in the last decade, we may find that Chinese companies won most of them: eBay conceded defeat and essentially withdrew from China after Taobao managed to capture almost 70 per cent market share. No matter how high-end it is, Amazon also was defeated by JD, whose market campaign turned out to be more popular among Chinese consumers. Uber China, however, is the exception. After addressing the regulation from authorities and competition from Chinese car-hailing apps and carrying out cheaper People's Uber service, Uber wins a number of Chinese users and gets to take roots in Chinese market, whose success could be a great lesson for Airbnb to learn.

Personally, I believe Uber’s success is the result of a good price strategy, marketing campaign and the support from a Chinese Internet giant, Baidu, who not only invests in Uber, but also shares its huge user base, technology and other resources with Uber.

Baidu Map, which grabs 70% of Chinese map and navigation market and has over 400 million registered users, is a natural marketing platform for Uber. Every time a Chinese user opens Baidu Map, he or she will see Uber’s commercial. Imagine the huge publicity out there. No foreign company has enjoyed such convenience previously. To some extent, Uber’s cooperation with Baidu not only help it promote itself, but also make Chinese users feel more comfortable and homey with Uber.

As the CEO of Airbnb, Brian Chesky must know well of how to strike a good balance between cooperation and competition. I am confident that he will soon follow Uber’s strategy and team up with a Chinese Internet giant, whose huge resources will spare Airbnb lots of efforts.

Which Internet giant is Airbnb most likely to team up with?

Let’s look at the possible challenges of Airbnb to see if Airbnb is really in need of a partner:

First of all, Airbnb needs money to both set up local management teams in major cities and give users as many discounts and red envelops as possible to attract more Chinese users in the subsidy battle in online apartment-sharing market, so did Uber in online car-hailing market.

Secondly, Airbnb also needs adequate technological support to reach more users. For example, Airbnb could integrate its online apartment-sharing service into other platforms, such as car-hailing apps, mapping and navigating apps, groupon service apps etc., so that users on those platforms get to know Airbnb and have a try of Airbnb’s service. Imagine the huge publicity those platforms can bring to Airbnb.

Thirdly, Airbnb will be forced to choose sides. This may sound weird but is crucial in Chinese O2O market. Companies from different sides might get into fight easily, while companies of the same side tend to cooperate with each other more in Chinese O2O market. For example, Didi chooses to keep in line with Alibaba, so many of its employees are from Alibaba. To avoid competition, video service providers should choose Tencent as their partner since Tencent’s talents are everywhere in this market. It follows that Airbnb should choose the right side and recruit employees from this side, so that it can have more partners and avoid unnecessary fights.

So which company exactly will Airbnb choose?

Baidu? If so, what benefits can Baidu bring to Airbnb?

Above all, Baidu Map can repeat its cooperation model with Uber and eDaijia and provide Airbnb’s service in Baidu Map. Since the need for car-hailing, designated driving and accommodation comes always together, many Baidu Map’s users will be attracted to use Airbnb to rent apartments. To some extent, the combination of navigation and online apartment-sharing service will even pose a huge threat to hotels.

Moreover, Baidu has always been working on big data and artificial intelligence technology so as to better predict users’ need and preference. Such technology is exactly what Airbnb dreams to have.

Last but not least, Baidu is willing to cooperate with other Internet companies and share its resources with its allies. If Airbnb teams up with Baidu, then Airbnb will also be able to cooperate with other Baidu’s allies, such as Qunar.com. By the way, Baidu once cooperated with Sequoia and invested into another car-hailing app TianTian, so it is probable that Baidu will again invest together with Sequoia into Airbnb.

Then, how about Alibaba?

In fact, Alibaba has been working with Airbnb for a while in the e-payment sector. Since last summer, Airbnb has begun to allow Chinese tenants to pay for the apartment they rent in China via Alipay, yet the house-owners have to wait for a couple of days to receive their rent in US dollars from foreign tenants, who prefer to pay the rent via Paypal. House-owners will have to go to banks to exchange the rent from US dollars to RMB. What a mess! Theoretically, Alipay can work closely with Airbnb and make the payment process easier both for tenants and houe-owners. Yet, Alibaba needs to jump out of the box and figure out more opportunities for Airbnb and Alibaba to cooperate besidesthe  e-payment sector.

Nathan Blecharczyk, CTO and co-founder of Airbnb, once suggested that:

“China has its own rule governing the Internet and technology industry, so we will do everything we could to localize ourselves in China. At present, we are working with Alipay and UnionPay to provide better payment service, with social networking apps such as Weibo and WeChat to make signing-up and information-filling process easier. There remains a lot for us to do cater to Chinese users and provide better service.”

And Tencent?

Some insiders might argue that it would be harder for Airbnb to penetrate the Chinese market since, different from Western societies, there is a lack of trust among Chinese people. Some house-owners once attempted to build up trust among house-owners by adopting ID card recognition system, but failed at last.

How come? Even in the US, house-owners may worry if their tenants will mess up their houses and even steal things, let alone in China, where personal credit checking system is not widespread yet. As can be told from the history of technological advance, it is human nature to fear the unknown. To build up trust, Airbnb allows users to sign for with their Facebook or LinkedIn account, so that house-owners get to know tenants better through their social networking pages.

However, Airbnb only allows Chinese users to sign up with their Weibo account. Some people suggests that Alipay and WeChat should team up and produce a credit report for each user, so that house-owners on Airbnb gets to know their tenants better and tell beforehand if they are reliable or not based on their credit report. Sounds impractical? As far as I know, however, Baidu is able to do so like a piece of cake.

In conclusion, Airbnb is more likely to team up with Baidu, whose strength is exactly what Airbnb is in dire need of. If I am right about Airbnb, then more and more foreign Internet companies are going to eye on the Chinese market and “connect users and services” along with Baidu. Since Li Yanhong, CEO and founder of Baidu, has always been showing his willingness to share its resources with other companies, Airbnb might as well team up with not only Baidu, but any other companies in the O2O ecosystem of Baidu.

[The article is published and edited with authorization from the author @Li Beichen, please note source and hyperlink when reproduce.]

Translated by Levin Feng (Senior Translator at ECHO), working for TMTpost.