Airbnb: Turning Air Mattresses into a Global Business

Two Designers and a Rent Problem

In 2007, Brian Chesky and Joe Gebbia were designers living in San Francisco, and they were struggling to pay their rent. That fall, a design conference came to the city, and its hotels ran out of rooms. The two roommates noticed that their problem and the visitors’ problem might solve each other: conference-goers needed a place to sleep, and Chesky and Gebbia needed cash. They set out air mattresses in their apartment, advertised them on a blog, and called the idea Airbed & Breakfast. In October 2007, they hosted their first three guests.

The guests surprised them. The founders had expected budget backpackers, but most of the people who booked were a lot like themselves. Some even sent résumés and LinkedIn profiles to show they were safe to host. Chesky and Gebbia offered more than a mattress, too — they showed their guests around the city. The timing also mattered. The company was getting started during the Great Recession, when many people were looking for cheaper ways to travel.

An Idea Few People Believed In

A few months later, software engineer Nathan Blecharczyk joined as the company’s chief technology officer. Few outsiders were convinced. In June 2008, a friend named Michael Seibel introduced the founders to seven well-known Silicon Valley investors. The founders hoped to raise $150,000 in exchange for 10% of the company, which would have valued the whole business at $1.5 million. Five of the investors said no, and the other two never replied. Some investors would not even meet with the founders, and those who did called the plan crazy, warning that it could lead to a murder in someone’s home.

Customers arrived in bursts. Demand jumped during the 2008 Democratic and Republican national conventions and then dropped once the conventions ended. As its first year neared its end, the startup had no profits, no growth, and no venture capital, and the founders were piling up credit card debt. To stay afloat, they designed cereal boxes themed on the two presidential candidates — Obama O’s and Cap’n McCain’s — and sold them for $40 each. The stunt brought in about $30,000, which helped pay down their debt.

Learning From the People Who Used It

The cereal boxes opened another door. Paul Graham, a co-founder of the startup program Y Combinator, doubted that anyone would want to stay in a stranger’s home. After Gebbia showed him a box of Obama O’s, Graham decided the founders were resourceful enough to back. Y Combinator invested $20,000, and in early 2009 the founders began its 13-week program. The three founders agreed that if they did not make major progress by the end, they would go their separate ways.

Graham’s advice was blunt: go to your users. Most of the company’s small group of users were in New York City, so the founders traveled there and sat down with hosts. They helped hosts write better descriptions, set better prices, and make their listings more appealing. After that, the numbers began to climb. In March 2009, the company shortened its name to Airbnb. Within about three months of Y Combinator’s investment, it raised a $615,000 seed round, and about a year later it raised $7 million more.

How Airbnb Gets Paid

Airbnb does not own the homes on its site. It runs a marketplace that connects guests with places to stay, and in May 2025 it added services and redesigned experiences. Hosts get tools for scheduling, pricing, payments, and reviews, plus AirCover for Hosts, which includes up to $3 million in property damage protection per stay and up to $1 million in liability coverage. Guests get search and map tools, flexible ways to pay, and AirCover for guests, which helps if a host cancels, a guest can’t check in, or a listing isn’t as described. Guests can also reach a 24-hour safety line.

Airbnb’s revenue comes from service fees. It collects the fees when a guest books but counts them as revenue when the guest checks in. Under the older split-fee setup, most hosts paid 3%, and guests paid a service fee of about 14.1% to 16.5% of the booking subtotal. Airbnb is now moving most hosts to a single host-only fee — 15.5% for most hosts — taken entirely out of the host’s payout. In 2024, guests booked $81.8 billion worth of stays and experiences. Airbnb’s revenue that year was $11.1 billion, and its net income was $2.6 billion (Exhibit 1).

Where Things Stand

Growth has come with setbacks. When COVID-19 spread in early 2020, Airbnb’s business dropped sharply, and in May 2020 the company decided to cut about 1,800 jobs, roughly a quarter of its workforce. Within two months of the drop, the business began to rebound, even with little international travel, and on December 10, 2020, Airbnb’s shares began trading on the Nasdaq stock exchange. Airbnb has also faced regulation and pushback in places where residents oppose short-term rentals. In 2025, for example, Spain’s Ministry of Consumer Affairs proposed a fine of about €65 million over alleged violations of the country’s short-term rental listing rules.

As of May 2026, Airbnb reported more than 5.5 million hosts, more than 9 million active listings in over 220 countries and regions, and more than 2.5 billion guest arrivals since it began. Hosts had earned more than $380 billion on the platform since it began, and the typical U.S. host earned $15,600 in 2025. Chesky is Airbnb’s CEO, and Blecharczyk is its chief strategy officer. The business that started with air mattresses on an apartment floor still depends on the same thing it did in 2007: guests and hosts both deciding the service is worth what it costs them.