The Digital Skeptic: Airbnb Pumped Full of Investor Hot Air
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
NEW YORK ( TheStreet) -- If you're dying for the insider perspective on billion-dollar social room-swapping service Airbnb -- yes, friends, the hipsters really do call it "airbeeandbee," as if a bed-and-breakfast were falling out of a plane -- you might want to sit down for a chat with Marty Bauer.
Bauer is no high-profile insider with ties to Paul Graham's Y Combinator , the next-gen biz incubator in Mountain View, Calif., that spawned Airbnb. His name will not be found in last week's SEC filing that confirmed the service raised more than $117 million. And the 27-year-old is definitely not among the A-list investors such as Ashton Kutcher and Peter Thiel swirling up a monstrous $2.5 billion valuation for the company.
But Bauer is willing to share something far more important: the reality of running a social market similar to Airbnb.
Bauer is the founder of itty-bitty RidePost, a four-person Greenville, S.C.-based online app that's doing for car rides what Airbnb does for lodging.
"We are trying to create a new form of public transportation," Bauer explains to me over the phone. "There are 2.3 billion road trips each year. And 80% of them have empty seats."
When I tested the service (honestly as part of finding some way to move around after Hurricane Sandy closed local gas stations) I found the process of matching those with spare space in their cars and those looking for rides to be reasonable. RidePost does a good job of managing the relationship, finding a fair price for the fare and taking a cut of every ride.
The more I spoke with this bright, earnest entrepreneur, the more I realized that despite the hype behind Airbnb, the service faces a long flight before it reaches the investor stratosphere.
"It is a challenging market, for sure," he tells me flatly.
No direct flight to riches
Bauer's critical insight into Airbnb is this: Sure, matching those who have spare rooms with those who have spare change is sexy as all get-out. But the business boils down to the intricate process of managing trust between strangers. Bauer, like Airbnb, is betting the reputation-building technologies at the heart of social media can be adapted to make folks feel safe. He can't succeed unless users are sure when they climb into a RidePost booked ride that they're not climbing in beside a psycho.
"We are trying to provide low-cost rides, but without the sketchiness factor," he said.
And for such social bartering markets, small turns out to be a beautiful thing.
Bauer is conscious to target his operation to those under 35, who are comfortable in social media, making it easy to provide a sense of service and safety. The idea is not his. He recalls hearing how Mark Zuckerberg, CEO of Facebook (FB) , said he bet his social media service on the .edu email domain early on, limiting the service mainly to those in college or at least in academia.