How would you measure the success of Airbnb? [PM Interview Question]
Interviewer: How would you measure the success of Airbnb?
Shailesh: I will start by asking a few clarifying questions. First I would like to clarify my understanding of Airbnb. Then we will discuss what the value proposition of Airbnb is and what is the business model of Airbnb so that we are on the same page about the product.
Interviewer: Sounds good.
Shailesh: Airbnb is a Marketplace that connects people who want to rent out their property with people who are looking for some accommodation for a shorter duration. Airbnb aims to provide a homelike and local experience to the people so that they get a flavour of the place.
Interviewer: That’s well explained.
Shailesh: Now that we know what’s the goal of Airbnb, it’s important for us to know about its main stakeholders and what’s the value Airbnb is providing to them. Unless we are not able to identify the value provided to the stakeholders, it’s very difficult to define the metrics for the success.
So there are three stakeholders involved-
Guests
Hosts and
Airbnb itself.
For Guests, getting successful accommodation with their preferences or needs is the most important value.
For Hosts, being able to successfully rent out their property to a lot of guests so that they can make money out of it is the most important value they are seeking form Airbnb.
For Airbnb, getting a lot of successful bookings on their platform is of utmost importance because they will get a cut or commission out of it.
These are the values that are provided to different stakeholders.
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| Stakeholders of Airbnb |
Interviewer: That’s well defined. What is the intersection of value for all?
Shailesh: The Intersection of the value or that one thing that is of interest to all of the stakeholders be it Guests, Hosts or Airbnb is Successful Bookings.
Successful bookings is something which all the stakeholders will care about because More bookings means more earnings to Hosts, More earnings to Airbnb and Guests getting timely accommodation according to their preferences.
Interviewer: So, What do you think our Northstar Metric should be?
Shailesh: The Northstar Metric should lie in the intersection of the value provided to them.
Now I think it’s pretty clear, that the North Star Metric would be the Number of Successful Night Bookings completed per day.
Interviewer: So, What do you think our Northstar Metric should be?
Shailesh: The Northstar Metric should lie in the intersection of the value provided to them.
Now I think it’s pretty clear, that the North Star Metric would be the Number of Successful Night Bookings completed per day.
This is the North Star Metric right, but we need to break it down into different L0 metrics which would be levers of this North Star Metric. These levers will help us to come up with some other L1 Metrics which are important.
Interviewer: Sure, why don’t you cover them as well.
Shailesh: North Star Metric can be broken down into:
Number of Successful Night Bookings completed per day = Daily Active Users (Guests) * Listings browsed per User * Successful Night completion per Listing (i.e. conversion)
First term i.e. Daily Active Users tells us about the Demand side of things
Second term i.e. Listings browsed per User tells us about Supply side of things
Final term i.e. Successful Night completion per Listing tells us about the conversion
These will define the Success of Airbnb, uptick in these Metrics will move the needle in the North Star Metric.
Interviewer: How do you break this further?
Shailesh: Once we identified the L0 metric as a lever of North Star Metric, let’s break down L0 Metrics further into L1 Metrics.
For the demand side of things, we will see some of the metrics like
Month-on-month user growth.
Repeat users which will tell if users are finding the value compelling enough to repeat.
User churn, that means users who have once used but are not using now.
For the supply side of the things, we will see some of the metrics like
Active hosts on the platform.
Active listings per hosts.
Active Listings Growth.
Host churn rate.
For the conversion aspect, we will see some of the L1 Metrics like
Average fare per night.
Average user ratings for the listing. It is important because if it is going down month on month that means users are not liking it.
User's cancellation rate or host’s cancellation rate.
Interviewer: Anything else to add?
Shailesh: Now let’s see some of the counter metrics to check. These are also some of the negative metrics to track so that we can improve user experience in the future.
Number of Reported Bookings for Negative Experience.
Number of Bookings or Number of listings with less than 2 ratings.
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| Metrics for Airbnb |
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