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At 4 years old, Airbnb grows out of start-up role

May 12, 2013 at 11:01 AM ET

Airbnb room
Airbnb.com screenshot
Airbnb offers funkier rooms than most hotels, often at rates cheaper than hotels, from characters you'd never meet behind the concierge's desk.

Airbnb is growing up. The site recently announced a plan to ensure its users are who they say they are.

The company's Verified ID program prompts members to scan their photo ID or answer specific questions matched to offline identity records. For now, only 25 percent of Airbnb's users will be required to use the program.

"We believe that when you remove anonymity, it brings out the best in people. It creates more accountability and gives our users more confidence when they’re booking a trip," Airbnb CEO Brian Chesky told NBC News.

Four years ago, Airbnb launched as a revolutionary, quirky start-up that let people list, discover and book lodging options in private residences. Today, the company is a maturing alternative for travelers worldwide who want to stay somewhere besides a hotel and see cities through the eyes of a local.

Among Airbnb's other recent changes: The site offers a $1 million property damage guarantee for hosts, 24/7 global customer service, and has an internal team for manually reviewing suspicious activity. It also hired a new head of global policy as it works to both navigate and change local laws. And hosts can set filters to exclude users who don't fully identify themselves, and vice versa.

Airbnb screenshot
Airbnb.com screenshot
Users can now verify their offline identity by scanning their photo ID or answering questions matched to offline identity records.

"Alternative lodging offerings at favorable prices will provide a different product/service/experience, which can generate incremental demand and could shift market share," said Dr. Bjorn Hanson, head of Tisch Center for Hospitality, Tourism, and Sports Management.

In other words, by offering cheaper and more interesting rooms than the big hotel chains, Airbnb threatens to snag some of their business.

"To scale, they have to become recognized for being trustworthy and effective," Dr. Bill Carroll, a senior lecturer at Cornell University's School of Hotel Administration, told NBC News.

That trust has taken a few dings on Airbnb's rise to the top. In 2011, an Airbnb host blogged about her apartment being ransacked by a guest who, among other damages, stole her electronics, passport and grandmother's jewelry, burned the guest sheets in the fireplace, and left the place covered in Comet cleaning powder. That story surfaced another, from a man who said his Airbnb guest stole his birth certificate, left slash marks in his walls, and his apartment littered with drug paraphernalia.

In 2012, a New York member faced the possibility of over $40,000 in fines after his landlord reported him for violating a city law banning rentals under thirty-days when the primary occupant isn't present. The office of New York State Senator Liz Krueger, who sponsored the 2010 bill prohibiting short-term rentals, has said most of the site's listings are from corporate entities running illegal hotels in multiple residential properties. Meanwhile, within the site's terms of service that members click to agree to is a clause mandating users will comply with all local laws, but that Airbnb assumes no responsibility for making sure they do so. And in August 2012, an Airbnb user's Stockholm apartment was allegedly used by a pair of prostitutes and their clients.

"They've clearly taken these issues to heart with changes how they do business and different procedures so they don't happen again," Henry Harteveldt, a travel analyst for Hudson Crossing, told NBC News. "Airbnb needs properties in more cities ... the only way they're going to do that is by bringing in good quality guests.

"You don't want someone coming over and setting up a meth lab or renting your unit and the unit next to it and having a raucous party," said Harteveldt.

In 2010, a year after its launch, Airbnb reported 1 million nights booked. A year later, it had 2 million, and by February of this year, it had 10 million, the most up-to-date figure released by the site. (Airbnb no longer uses this metric, but instead looks at total guests, said spokeswoman Melissa Newman.)

Free to view and list properties, the site makes money is by charging a booking fee between 6 and 12 percent. Airbnb boasts over $119 million in venture capital funding,and, according to a Financial Times report, is valued at $1.3 billion.

"When you see the wind coming -- and they do -- it's a good time to look around and see where they can improve performance and security," said Lisa Gansky, a San Francisco-based angel investor.

Chesky spoke with NBC News about trust and security.

NBC NEWS: How does anonymity erode trust?

CHESKY: We believe that when you remove anonymity, it brings out the best in people. It creates more accountability and gives our users more confidence when they’re booking a trip.

NBC: How do you design trust?

Video: Brian Chesky, founder of Airbnb, explains the inspiration for his online service, which helps travelers save money by matching them up with “hosts” who offer them lodging in their private homes. “Why not share the space you have with other people?” Chesky asks. Ryan Seacrest reports.

CHESKY: The first wave of the web was all about getting online. The second wave was about connecting online (social media, Facebook). Now, we’re on the precipice of a third wave, one that’s about taking those online connections and manifesting them in the real world. Airbnb is unique because it links online interactions with offline experiences. The ways that we build trust in our marketplace have to do the same. Verified ID is innovative because of the way it links online identity with offline identification. Imagine confirming your Facebook account when you checked in a hotel. That's the direction we're headed.

NBC: When you talk about trust, are you talking not just about trust between users, but also how external parties -- landlords, regulators, legislators and media -- trust your service and those who use it?

CHESKY: Airbnb is about access. We provide access to meaningful experiences in local places all over the world -- places that weren’t easily accessible before. Trust is the currency that powers those experiences, and when you build more trust, you can provide more access. As pioneers of the sharing economy, our community expects us to innovate at a speed that matches our growth.

NBC: The last big round of trust-enhancing service additions in 2011 were reactive, borne out of crisis control. Is it fair to say that the latest move is an attempt to lock the service down more before blowing the scale out?

CHESKY: The fundamentals of trust on Airbnb have existed since the beginning of the company: our secure payment structure, detailed profiles, and authentic review system. In 2011 we added the $50,000 Host Guarantee, 24/7 Customer Service, and over 40 trust features. In 2012 we upped the Host Guarantee to $1 Million. Verified ID is the latest innovation in our ongoing commitment to trust.

Airbnb
Airbnb.com screenshot
In NBC News' run through, answering Airbnb's identity questions took less than a minute.

NBC: Of the reservations that now require offline identity verification, what percentage have been abandoned due to incomplete ID registration?

CHESKY: The early feedback from our community has been very positive. Our team worked hard to make the Verified ID product as seamless and easy-to-use as possible.

NBC: What is your current number of 24/7 support reps?

CHESKY: We have built a dedicated Trust team that works to protect our community from fraud and build trust in the user experience.

NBC: If Verified ID is the foundation, what are the next steps, or categories of steps, towards increasing trust?

CHESKY: Trust isn’t static -- it’s built over time. We’re always working to innovate new products that build trust on Airbnb. In the early days of the Web, anonymity was prevalent, but we feel the Web is moving away from that. Real identification will eventually become the standard. There is no place for anonymity in the future of Airbnb or the sharing economy.

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