How Airbnb can defeat the regulators - From CNBC


Published in CNBC

Airbnb is a remarkable company with an incredibly bright future – the company just raised $555 million in financing, reports say. It's also run up against a buzz saw of political opposition and regulatory challenges in key markets across the country. 

Airbnb has proved that it can be a successful business even while facing a tough regulatory environment, but the potential to lose its ability to effectively operate in markets like New York and San Francisco could be a real problem, no matter how you try to spin it.

To change its streak of bad political luck, Airbnb has looked to the playbook used by Uber, FanDuel and Draft Kings and other startups to rally customers to advocate on their behalf, even recently organizing clubs where hosts gather for grassroots political meetings.

But this approach is unlikely to work for Airbnb because of the structure of its network, the challenge of getting hosts to speak up when they're not sure if they're operating legally, and because its opponents -- affordable housing advocates and hotel workers -- are sympathetic.

Rallying hosts to advocate politically is challenging for several reasons, the worst of which is because Airbnb's scale occurs on the guest side, not the host side. And the guests, almost by definition, are not registered voters in the jurisdiction they're staying in. So they could advocate but no one would care.

And in jurisdictions where Airbnb's legal status is unclear, it's going to be difficult to get a lot of hosts to raise their hands to advocate and invite scrutiny into whether or not they're obeying the law.

However, there is a solution. Airbnb can turn this into a much broader fight about property rights, rather than the narrower interests of Airbnb hosts. Americans don't like being told what they can and can't do (that's how our country got started in the first place). If only Airbnb hosts are invested in this fight, there will never be enough ammunition or sympathy to succeed. But if renters and homeowners generally start to think "don't tell me what I can do with my couch," Airbnb could then mobilize a portion of them to make that case to legislators and regulators (via email, twitter, etc…). That changes everything.

This is what suburban community leaders have done across the country on local property tax issues to great effect. It's what the choice movement has done ever since Roe v. Wade. And to use a more corporate example, it's what Walmart has done in fighting unfair zoning restrictions in cities. The polling has been clear that while consumers may or may not want to shop at Walmart, they almost universally feel that the decision should be theirs, rather than their City Council prohibiting Walmart from opening in the first place.

Doing this effectively means aligning with other groups and movements who champion economic liberty (on the right, usually) and with tenants advocacy groups (on the left - and getting their support will be challenging). It means working with think tanks across the ideological spectrum to develop the concept of a new property right. It means identifying, through smart research and targeting, which voters are most likely to respond to a "don't tell me what I can and can't do" argument, beyond people who participate in Airbnb.

Creating a new property right would require both a multi-year political battle across the country and a lengthy legal battle. It will cost tens of millions of dollars (if not more), but the cost pales in comparison to what Airbnb stands to lose in its valuation if it can't operate in markets like New York.

It will also take a different approach and thought process by Airbnb's leadership than they've employed to date (more creative, less afraid of politics, less wedded to what they already know). But if they want to ensure their ability to operate freely for decades to come, it's also their best route, by far. Hopefully they'll take it.

UncategorizedBradley Tusk