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Several answers here point to finding a customer's need. How do we precisely define what a need is? Taking airbnb, the model I'm closely modeling, people traveling do need a place to stay, but there's was already numerous hotel options. I like the business and it was fun to use it to stay on a sailboat when I had a conference in Portland. But I didn't need to use airbnb to find place to stay.

Also, presumably the sailboat owner didn't need to rent it out to keep it. But even if she did, does a need on the supplier side even count?

So what are the needs being met by airbnb in particular?

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in general it's much, much cheaper to use airbnb in cities like San Francisco or NYC than to find a hotel. Good luck finding a hotel in Manhattan under $220/night that isn't a fleabag. – smcg Aug 25 '14 at 13:47
Don't assume too much. I recently had to travel to Austin and was finding all hotels booked or ridiculously overpriced. I turned to Airbnb and found a great affordable room to stay. So Airbnb can definitely become the only alternative when some major event overtakes a city and taps out the hotels. – Michael Lang Aug 25 '14 at 20:02
Never assume businesses run off only needs. I look around the U.S. and I mostly see purchases driven by wants. If you are unconvinced: The Duck Dynasty Christmas album ("Duck the Halls") made #1 on the charts. – Chelonian Aug 27 '14 at 23:06
up vote 7 down vote accepted

This is a very interesting question. Forewarning, there will definitely be an amount of personal opinion I reference here, but it is my experience and I believe it to be valid.

You're talking about the classic problem of improving a service. As humans, we've been inventing and improving our lives for centuries.

Ask yourself this one question - what would happen if we never re-invented the wheel.

Personally, I didn't know much about Airbnb except that they were basic travel rental locations. A short big of research leads me to their slogan

Start Your Adventure

Discover destinations that travelers love.

The need here that was not being met could have been a variety of things, but most likely was the unique services in each location. This was confirmed when I tried to click a listing:

With Airbnb, you can find unique accommodations in people's homes—from houses and apartments, to tree houses and igloos. The listing details below explain what you'll find in this space. If you have any questions, you can contact the host directly.

Clearly, Airbnb prides itself on unique, creative travel lodging that really gives the traveler a dive into culture with a sense of security and reliability. You get to see how people live in different cultures.

Furthermore, it seems to me Airbnb is somewhat of a luxury good - meaning people might not need it, but they want it badly enough to pay for it as if they needed it.

I hope that addresses your question. Luxury goods can often be harder to think about, given that people don't really need them (I mean, come on, commercial flights to the moon?), yet they still can be actively traded as if they were necessities.

From the startup sense, that's about as far as I need to go, but you may want to look into some economic theory if you want to learn more about the behavior of different goods.

EDIT: Apparently Airbnb also operates to reduce the costs between the home space seller (getting cash for unused space) and the costs paid by the person looking for a place to stay. In that sense, it's taking the concept of arbitrage and giving a smaller margin (the big companies love big margins!) such that everybody is still happy (except for the big companies, clearly).

This is the same concept as being used by the crowd-sourcing taxi services (like Uber and Lyft) - effectively causing the same damage with the large-margin security of taxi drivers.

In reality, though, it's competition at its best. Play the game or become useless. Or complain to the government until they make an extremely poor decision to prolong a bad system).

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I like your answer but I think that most people (certainly people I know) find that it meets the Need for cheaper accommodations. Certainly there are multiple Needs it is meeting, and I think cheaper-accommodations is one fo them. – Clay Nichols Aug 25 '14 at 16:13
Thanks @ClayNichols, very valuable and relevant info - I've edited my answer. – jdero Aug 25 '14 at 20:47

Air bnb connects the needs of renters with needs of owners.

Owners need: Generate income from property that's lying unused (boats, rooms etc).

Renters need: Lower cost, more personal service etc.

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