On June 29, 2011, as Airbnb was growing rapidly, it was hit by a bombshell. An Airbnb host named “EJ” wrote a long blog post about how a renter spent an entire week carefully robbing and trashing her home. In an instant, the trust that hosts had in renting their homes to total strangers was gone. Brian Chesky, the CEO of Airbnb, responded immediately and worked with the authorities to track down the person who had ransacked the home. However, at that time, Airbnb had no insurance to protect the homeowner. Fortunately, after some time, Airbnb agreed “to assist financially, find new housing for the host, and anything else she can think of to make her life easier.” Airbnb then implemented several new measures to build trust in its system:
- Doubling the size of the customer support staff
- Creating a dedicated Trust & Safety Department
- Creating a Host Education Center where hosts can find safety tips
- Designing enhanced tools to verify user profiles
- Facilitating richer communication between guests and hosts before booking, including experimentation with VOIP and video chat
- Offering insurance options to hosts
Airbnb now offers host insurance covering $1,000,000 in damages to their home.
Trust is a critical issue that most marketplaces need to deal with from the get-go. Without sufficient trust, consumers may be reluctant to consummate transactions on your marketplace, leading to mediocre growth and network effects. There are several strategies that marketplaces can adopt to build robust, enduring trust in the system.
Community Policies
The first thing you need is to create a code of conduct for your marketplace, including penalties that will be assessed if the code of conduct is not followed. It is hoped that this will create a standard of conduct that most users will follow and thus engender trust within your community. Airbnb, for example, has created a set of community policies that its hosts and renters are expected to follow, including host and guest safety, illegal and prohibited activities, and health and safety requirements.
Reputation System
eBay was the first marketplace to implement a reputation system, which was essential to its success. It engendered trust that you would not receive a defective item and that sellers would get paid for their item. The reputation system has been copied by other marketplaces like Uber and Lyft, which they use to weed out lower-performing drivers on their systems. The user also does not have to scroll through driver profiles to select highly-rated drivers. The system automatically selects a highly rated driver that’s closest to you and assigns the driver to your ride. When the ride is complete, the rider immediately gets a notification asking them to rate the driver.
Reviews are another element of the reputation system that is widely utilized in most marketplaces. With reviews, care must be taken to weed out fake reviews or revenge reviews where one party leaves a bad review for the person who left a bad review for them. There should be an opportunity for the reviewer to respond to a review—perhaps the situation can be corrected or a refund issued in the case of a bad review. To prevent revenge reviews, Airbnb discloses the host and user reviews at the same time.
Amazon has perhaps done the best job of implementing reviews and ratings for products sold on its marketplace. Users can include pictures and videos in their reviews. The review system also identifies the top keywords that people are using, which can be useful in quickly identifying a recurring issue with the product. There is also a crowdsourced question-and-answer section where you can ask questions and receive responses from others who have purchased the product.
Curating Content/Supply
Providing high-quality content or supply that is easy to access is critical to establishing trust in a marketplace. As mentioned earlier, Uber and Lyft only surface drivers who are highly rated. Similarly, while on Airbnb, there might be apartments that are shady, the Airbnb algorithms will not surface them in user searches as they would have received poor reviews. Only the highly rated homes will show up at the top of user searches. Most search algorithms for marketplaces will utilize ratings to surface highly rated content first.
GOAT is a marketplace for iconic sneakers and clothing. One of its founders had an experience of spending several hundred dollars for an Air Jordan 5, only to find out that it was fake. The founders resolved to build a marketplace that weeded out fakes and ensured the highest quality experience.
In an interview with INPUT magazine, GOAT CEO Eddy Lu said: “If you want to sell sneakers or any apparel on GOAT, for instance, you first have to be approved by a team that looks into your personal Twitter or Instagram account to ensure you’re an actual person and that you have a history of selling goods online. Then, before someone posts an item for sale, they have to send pictures to GOAT, which uses a combination of image recognition and machine learning to spot details that will ensure its authenticity. The final step in the process comes when the sneakers or clothes arrive in one of GOAT’s authentication centers across the world when they’re inspected one last time by a human before they get shipped to the buyer if there are no issues with the product.”
Rover conducts extensive reviews of its dog sitters, including background checks and manual profile reviews. They make sure that the dog sitter’s home does not have many dogs and is conducive to taking care of a dog.
How to Make $500K Per Month in AirB&B with Max Khaghan(Opens in a new browser tab)
Shirish Nadkarni is a serial entrepreneur with proven success in creating multiple consumer businesses that have scaled to tens of millions of users worldwide. Shirish was the co-founder of Livemocha, the world’s largest language learning site with 15+ million registered members from over 200 countries, which was acquired by RosettaStone in 2013. Prior to Livemocha, Shirish was the founder of TeamOn Systems, a mobile wireless email pioneer that was acquired by BlackBerry in 2002. He is also the author of Winner Takes All: Case Studies in How Online Marketplaces Are Creating Modern Monopolies and From Startup to Exit: An Insider’s Guide to Launching and Scaling Your Tech Business.
This piece is adapted from “Winner Takes All: Case Studies in How Online Marketplaces Are Creating Modern Monopolies” by Shirish Nadkarni