When Airbnb announced its app redesign to include local services and curated experiences, industry watchers immediately recognised the strategic playbook. This move mirrors the growth framework we outline in Platform Strategies, which identifies two core paths (see Figure 1). On the one hand, platforms can densify their value proposition by deepening value in existing markets). On the other hand, they can diversify their value proposition by expanding into adjacent markets.
Figure 1. Growth strategies for platforms (source: Belleflamme and Neysen, 2023)
Let us unpack how Airbnb is executing both strategies simultaneously.
Densification: Supercharging the core
Airbnb is doubling down on its $100B+ accommodations market through three densification tactics:
o Feature expansion. The new “Airbnb Services” (personal chefs, massage therapists) directly enhance the traveller experience. As we note, one helpful way for platforms to grow is to “add features that increase transaction frequency”. By letting users book services without needing an Airbnb stay, the company mirrors, for instance, Uber Eats’ strategy of adding group ordering features to boost engagement. Another example is Bumble adding BFF/Bizz modes when users suggested ways to repurpose its dating app.
o User group expansion. Airbnb now courts local consumers (not just travellers) through services like spa treatments. The idea here is to create new sources of network effects by linking a new group of users to the existing ones (namely, hosts and guests). This can also generate new streams of revenue. In the book, we describe how LinkedIn successfully implemented this step-by-step multisided approach.
o Geographic reach. While not explicitly stated, Airbnb’s global Experiences catalogue (650+ cities) applies the “cost-saving from existing operations to new geographies” principle—similar to the geographical expansion of European food-delivery platforms.
Diversification: The envelopment strategy
Airbnb’s boldest move is its push into adjacent markets—a classic platform envelopment strategy (see Eisenmann, Parker, and Van Alstyne, 2011):
o Value-Added bundling. By combining homes, services, and experiences, Airbnb reduces the friction of using multiple apps (e.g., Viator for tours, Yelp for services) and creates one-stop convenience that justifies premium pricing. This mirrors how Uber bundles boat rides with car trips in an increasing number of European cities.
o Data-driven cost advantage. Airbnb’s decade of accommodation data gives it unique insights into: (i) Local demand spikes (e.g., predicting surge needs for cleaners in tourist hubs), and (ii) experience preferences (e.g., recommending vineyard tours to Champagne renters). This aligns with Meituan’s success in China, where ride-sharing expansions leveraged existing restaurant delivery data.
Risks and tradeoffs
Now, mind you, these strategies are not without pitfalls. In the book, we warn about:
o Complexity costs. Managing quality across 100+ service categories could strain operations.
o Provider backlash. Like artists protested Spotify’s podcast deals, Airbnb hosts may resent competing with platform-vetted professionals.
o Brand dilution. As with Spotify’s podcast backlash, adding unrelated services (e.g., personal training) risks alienating users who loved Airbnb’s original “belong anywhere” ethos.
Why does this matter?
Airbnb’s dual approach illustrates how a mature platform adapts in a competitive market. On one side, expanding its offerings helps protect its core from rivals like Booking.com and Vrbo. On the other hand, diversifying its services positions it against players like Tripadvisor and Expedia.
Airbnb thinks that its over 150 million users will prefer having everything travel-related in one place instead of turning to a mix of specialised competitors. Over the next few months, we will see if this approach works or if Airbnb bites off more than it can chew. And if it succeeds, you can bet that antitrust regulators will closely monitor what happens next.
(During the preparation of this post, the author used GenAI tools to collect ideas and improve the expression. After using these services, the author reviewed and edited the content as needed. The author takes full responsibility for the publication's content. Photos by author or royalty-free photos from Pexels.com.)
